CIF Sales Terms as a mean to derive additional competitive advantage - Perspective from a trader focusing on commodity requiring MR tanker tonnage

• Main Author: Quek, Qin
• Other Authors: Soh Woei Liang
• Format: Final Year Project
• Language: English
• Published: 2018
• Subjects: DRNTU::Engineering
• Online Access: http://hdl.handle.net/10356/75161
• Institution: Nanyang Technological University

With rising profile of industry leaders, growing global profit pools and lower barriers to entry, commodity trading has thus enticed a huge number of new players into the market. The landscape for commodities traders has since changed drastically over the past decades and profit margins were hence eroded because of the increasing competitive intensity and price transparency. As a result, it is necessary for traders to maximize his margins by obtaining the lowest cost and the highest return. Hence, the objective of this project is to examine if a trader is able to gain profits by exploiting the use of incoterms specifically FOB and CIF sales terms and arranging his own transportation. Due to the statistical nature of this research where it utilizes large amount of data published by Clarkson Research Services (CRS), Baltic Exchange and Bloomberg, a quantitative statistical approach was adopted. Formulas such as the Coefficient of Variance (CV) was used to determine the risk-adjusted earnings generated across the period of 10 years from 2006 to 2015. Overall, the findings were conclusive in proving the hypotheses and it was found that a trader is able to potentially gain positive returns and improve his competitive advantage when he purchases on FOB and sell on CIF sales terms and by the use of these incoterms, it allows him to minimize his freight cost, thereby generating even greater profits.