[D33-PAC]

Not sure how many are aware, but as someone well versed in the oil business I know quite about about Reliance and the big ships they have.

This is the Ethane Crystal, the world's largest ethane carrier purchased by RIL.

Pic 1: Ethane Crystal in Houston, Texas. She'll be transporting ethane back to India from Texas, USA.
Pic 2: Ethane Crystal in South Korea, where she was built.

For those of you know business and finance, that isn't a ship. That's an arbitrager ! They'll buy X for $Y in location Z, then it's brought to India, where X is converted into F and sold for $L ! (Given $L> $Y).

As I write this, she's somewhere near the coast of Florida in the Caribbean , headed towards South Africa from where she'll head to Gujarat.

[alpha1]

Reliance had plans of moving their feed-stock from Naphtha to Ethane due to change in prices and economics. They are already doing the dahej-nagothane pipeline to evacuate this ethane from dahej port and feed it to their various petrochemical plants in India.

[D33-PAC]

Originally Posted by alpha1

Reliance had plans of moving their feed-stock from Naphtha to Ethane due to change in prices and economics. They are already doing the dahej-nagothane pipeline to evacuate this ethane from dahej port and feed it to their various petrochemical plants in India.

Is it feedstock for plant power or will they use it as intermediate product raw material ?

[searchingheaven]

Originally Posted by D33-PAC

For those of you know business and finance, that isn't a ship. That's an arbitrager ! They'll buy X for $Y in location Z, then it's brought to India, where X is converted into F and sold for $L ! (Given $L> $Y).

Can you please explain this arbitrager thing once more? And with an example if possible.

[D33-PAC]

Originally Posted by searchingheaven

Can you please explain this arbitrager thing once more? And with an example if possible.

Not sure if my statement is true anymore because it seems it's not used to make a value added product due to poster #2.

But RIL is a known arbitrager and is one of the world's greatest arbitragers.

For example, every month there are at least 20 to 30 ships that start from far flung places like Mexico, Venezuela and head to Gujarat . They carry crude oil at $50 a barrel.

RIL refines these and ships them back to the world and sells refined products like gasoline and diesel at $80 a barrel.

This is arbitrage. Simply buying something for cheap in one market and selling it for higher in another market.

[Jeroen]

Originally Posted by D33-PAC

Not sure if my statement is true anymore because it seems it's not used to make a value added product due to poster #2.

But RIL is a known arbitrager and is one of the world's greatest arbitragers.

For example, every month there are at least 20 to 30 ships that start from far flung places like Mexico, Venezuela and head to Gujarat . They carry crude oil at $50 a barrel.

RIL refines these and ships them back to the world and sells refined products like gasoline and diesel at $80 a barrel.

This is arbitrage. Simply buying something for cheap in one market and selling it for higher in another market.

Not sure, but I think in order for it to be called arbitrage the exact same product is bought in one country/market and sold at a higher price in another country/market.

If you buy crude oil and sell refined oil products, I don't think that would be called arbitrage as it is two completely different products. Refining is a pretty high tech production and added value process.

Crude oil does get bought and sold whilst in transit on ships. Not only crude, but all sort of bulk product including grains etc. My eldest son works at Glencore and its part of of what they do and how they make money.

Jeroen

[aargee]

Originally Posted by D33-PAC

For those of you know business and finance, that isn't a ship. That's an arbitrager ! They'll buy X for $Y in location Z, then it's brought to India, where X is converted into F and sold for $L ! (Given $L> $Y).

I'm not into finance or business. Please help understand in simpler terms or if this is some kind of "secret" , please provide links or foundation to understand how this works. Thanks

[varunsangal]

Originally Posted by aargee

I'm not into finance or business. Please help understand in simpler terms or if this is some kind of "secret" , please provide links or foundation to understand how this works. Thanks

Our prof had possibly the easiest definition for arbitrage. "Anybody with 2 phones can do arbitrage, say BUY in phone#1 and SELL in phone#2".

Simply, if you are able to buy a something for a lesser price and sell it for a higher price in another market, it is arbitrage. For e.g. Glencore would buy crude oil in Saudi Arabia for $60 and sell it to say Reliance for $65 adding in a profit and shipping cost.

Refining oil would make it a value addition activity and would rightly earn a profit to Reliance.

[aargee]

Originally Posted by varunsangal

Simply, if you are able to buy a something for a lesser price and sell it for a higher price in another market, it is arbitrage

So will there be a difference if I buy vegetables at wholesale market & sell it with little profit at a local market in my locality? Would that also be categorized as arbitrage or will that still be called as doing business with vegetables?

[varunsangal]

Originally Posted by aargee

So will there be a difference if I buy vegetables at wholesale market & sell it with little profit at a local market in my locality? Would that also be categorized as arbitrage or will that still be called as doing business with vegetables?

This would constitute a business, as you are adding value by bringing in vegetables from a wholesale market to a local market.

The example for the vegetable market would be, e.g. Buying 2 tonnes of potato in Nashik mandi for Rs.2/kg and Selling 2 tonnes of potato in Mumbai mandi for Rs.2.2/Kg. (NOT because he could negotiate a better price in Mumbai, but because the market rate was 2.2 in Mumbai)

Bear in mind the person doesn't have physical possession of the goods, he/she is only taking advantage of the price differential in the 2 markets. If Mumbai mandi's rate was Rs.2/kg, the person would not have an arbitrage opportunity, and will not make the trade.

Might be easier to think this out in terms of the stock exchanges, e.g. if 1 share of Infosys is Rs.995/share on BSE and Rs.1100/share on NSE, you would be able to buy on BSE and sell on NSE, netting yourself a neat Rs.105.

Hope the above long ramble makes some sense. Try reading on Investopedia.

[Zappo]

A major portion here are folks from IT. And arbitrage (or rather labor arbitrage) is/was a big thing in IT. Many companies simply picked up guys in India for comparatively lesser salary in USD as compared to in US and then send them to US and employ them at much higher rates with various client firms.

[green_ninja]

In layman's terms this is called brokering. Person X has something to sell and Person Y wants to buy that something but cannot do so directly due to some reason. In comes Person Z and completes the deal for X and Y getting a commission or profit in the process.

e.g. In the textile business we have cotton as well as cloth brokers. They negotiate a price with the producers and sell to the customers. In the process, they get a commission if the seller price and buyer price are the same. Sometimes, they don't get a commission but do price arbitrage to make a profit (difference between seller and buyer price).

[D33-PAC]

The ship arrived in Gujarat . 26 days from Houston, USA to Gujarat, India.

Everything about RIL is mind boggling - the journeys their vessels traverse, the size of the vessel, blah blah!

[D33-PAC]

Being a financial analyst, I was going through RIL's annual report recently when I found out that they have more than one VLEC (Very Large Ethane Carrier).

A while back I posted a thread about how RIL bought the world's largest ethane carrier (Ethane Crystal). But only today I found out RIL has a lot more big boy toys in its fleet !



These vessels are made in South Korea by Samsung. Now they traverse the leg from Gujarat to Houston, Texas via the Suez Canal, Mediterranean and finally to the USA or directly underneath South Africa .

As for the FPSO (Floating Production Storage and Offshore ) vessel Dhirubhai 1 goes, you can spot her off the coast of Andhra Pradesh at KG-D6 where the Mogul of Mumbai has made significant investment.

And no, that's not two different pictures of the same drilling rig, RIL owns two !