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Wednesday, 15 December 10
LARGE ORDERBOOK TO HINDER 2011 DRY BULK MARKET REBOUND DESPITE INCREASED DEMAND SAYS PARAGON SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
 A large orderbook which currently stands at 53% of the existing fleet is expected to render 2011 another challenging year for the dry bulk market. According to Mr. Michael Bodouroglou, Chairman and CEO of Paragon Shipping Inc., in an interview with Hellenic Shipping News Worldwide,
“we believe that 2011 should be a challenging year due to the amount of new vessels that are expected to hit the water during the year”. Providing with an explanation on the flurry of newbuilding orders this year, Mr. Bodouroglou said that current newbuilding prices are 12% below where the prompt resale values are, “so we do believe that the newbuilding market offers the best value in the drybulk sector” he said.
Paragon Shipping recently posted its third quarter and nine-month results. Which were the key performance figures you would highlight?
Despite the turbulence in the markets of the past two years, our chartering strategy enabled us report our 13th straight profitable quarter since we went public in 2007. This past quarter, there was a lot of activity, and we diversified into the containership market, and expanded our fleet without risking our balance sheet and maintaining our dividend. In addition, our adjusted EBITDA was $19.6 million in the third quarter, which was a $3 million improvement over the previous quarter, and our leverage remains at a moderate 57%.
What about your stock’s valuation? Do you think that there is enough room for an increase?
Absolutely, we feel our stock is undervalued. With our current charter coverage at 98% for 2011, our revenues are insulated from any market fluctuations that may occur next year and our stock price doesn’t properly reflect this. Our time charter coverage makes us feel our stock price should be higher.
Do you think that this volatility of the market will continue in 2011 or will things be more stable going forward?
We believe that 2011 should be a challenging year due to the amount of new vessels that are expected to hit the water during the year. Our outlook on the demand side is very positive, and we expect to see increased demand for iron ore and coal from the Asian markets during 2011.
However, the orderbook remains very large with 53% of the existing fleet on order, and even with most analysts’ predictions that continued slippage should be in the range of 30%-40% of the expected deliveries, we expect an oversupply of vessels in 2011, which should create a more volatile market next year.
Oversupply issues have plagued the dry bulk market this year. Are you more optimistic about 2011 or not, especially with regards to the Panamax segment where Paragon has an increased presence?
As I mentioned above, we remain concerned about the orderbook for 2011, and while the orderbook is the largest for Capesized vessels, at 60% of the current fleet, Panamaxes also have a large orderbook at 50% of the current fleet, so we expect to feel some pressure on rates in 2011. This is why we have been proactive in locking up 98% of our revenues for 2011, so that we are protected against a decline in freight rates next year.
This year we witnessed a strong rebound of newbuilding orders which are difficult to justify given the already huge orderbook. Are valuations really that low? What’s your opinion on the matter?
In today’s market, you can see that current newbuilding prices are 12% below where the prompt resale values are, so we do believe that the newbuilding market offers the best value in the drybulk sector.
That is also why you continue to see newbuildings being ordered despite the large orderbook. We ordered seven newbuildings earlier this year, to be delivered between October 2011 and December, 2012, so we have backed up our view with action.
New building cancellations and scrapping of older bulkers seem to be the best chance that shipping has to improve freight rates. How is each of these solutions progressing since the beginning of the year?
Cancellations are very hard to measure, because neither the yards nor the shipowners have an incentive to announce them. This year, it appears cancellations have stalled as the markets were much stronger than expected. There have also been many new orders, which may have been new owners taking over someone else’s order, but these types of deals may never become clear. We continue to see a high amount of slippage, which will push the current orderbook out further, and hopefully extend the orderbook far enough out into the future so that demand will have time to catch up with supply. In addition, vessel scrapings have decreased this year and unless rates are depressed for an extended period, there is no incentive to scrap older tonnage. We would need a market where rates remain depressed for six to nine months before scrapings would be significant enough to offset new deliveries. This is also more pronounced with the smaller tonnage, as over 50% of the handysize fleet is older than 20 years of age, compared to only 16% for the capesize fleet.
How would you characterize the current market for second hand vessels? Are asset values corresponding to current freight rates?
We believe asset values are artificially inflated at current levels, and it is shown by the fact that the price of a five-year old Panamax is 11% above its 10-year historical average, compared to the one-year T/C rate that is 8% below its 10-year historical average. To us, this signifies that second hand values are higher than they should be and that there is a disconnect in the current market between vessel values and freight rates.
Would you see investment opportunities in today’s market conditions?
We have struggled looking for investment opportunities in today’s markets, although we believe that in the drybulk sector, the Handysize vessels are the most attractive at the moment. As we mentioned, over 50% of the fleet is older than 20 years of age, and it also has the smallest orderbook at the moment with 33% of the current fleet on order. We feel Handysize vessels maintain stable earnings, even in declining markets and have the best supply/demand dynamic of the drybulk sector.
What about cargo demand in the future? Is a booming China enough on its own to sustain the global fleet growth?
While China continues to be the primary driver for the drybulk market, other Asian Countries, most notably, India, have also been growing at a significant pace, and it is no longer demand for Iron Ore alone that drives freight rates, it is also the increased demand for Coal. The combined demand for Coal imports from India and China has helped boost the markets in 2010, and we expect this to continue for the next several years. As these Countries continue to build up their infrastructure, there will be an increased demand for energy, which should continue to drive increases in coal imports into China and India. So while China alone may not be able to utilize new tonnage that is expected to enter the market in the coming years, the combination of China, India and the rest of the Asian markets should be able to absorb this tonnage over time. We don’t expect this to happen in 2011, although we expect the market to be stabilized by 2013.
Interviewed by : Nikos Roussanoglou, Hellenic Shipping
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Friday, 07 January 11
SRI LANKA NEW PORT TO OFFER SHIP FUEL IN MAY - LBO
LOB reported that, The Sri Lanka Ports Authority (SLPA) plans to start bunkering or ship fuel operations at a new port in southern Hambantota in May ...
Friday, 07 January 11
DRY BULK MARKET ON A FREEFALL, AS THE NEW YEAR EARLY DAYS DONT BRING MANY CHEERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market is facing its worst slump in more than two years, falling by 4.75% yesterday to reach 1,544 points, on top of an additional 4.2% ...
Thursday, 06 January 11
OVERSEAS & GENERAL SIGNS AGREEMENT TO EXPAND FOOTPRINT ON COAL LEASE IN INDONESIA - PROACTIVE INVESTORS
Proactive Investors reported that, Overseas & General (ASX: OGL) has entered into a joint operating agreement on the Jambi Coal Lease in Sumatra ...
Thursday, 06 January 11
BANPU EXPECTS ROSY 2011 AS COAL PRICES SKYROCKET - BANGKOK POST
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, expects minimal impact from the production stoppage at its Daning mine in China ...
Thursday, 06 January 11
COKING COAL CONTRACT PRICE MAY RISE 33% ON AUSTRALIAN FLOODS - BLOOMBERG
Bloomberg reported that, Steelmakers in Asia may be forced to pay as much as 33 percent more for hard coking coal after the worst floods in 50 years ...
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- Savvy Resources Ltd - HongKong
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Central Java Power - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Wilmar Investment Holdings
- Bhatia International Limited - India
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- PTC India Limited - India
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Mjunction Services Limited - India
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Pendopo Energi Batubara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Renaissance Capital - South Africa
- Jaiprakash Power Ventures ltd
- Bayan Resources Tbk. - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Posco Energy - South Korea
- Bharathi Cement Corporation - India
- Banpu Public Company Limited - Thailand
- Larsen & Toubro Limited - India
- Bangladesh Power Developement Board
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- Leighton Contractors Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Singapore Mercantile Exchange
- Minerals Council of Australia
- Ministry of Finance - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Coalindo Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Sakthi Sugars Limited - India
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- The Treasury - Australian Government
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Siam City Cement - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Petron Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Marubeni Corporation - India
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Star Paper Mills Limited - India
- Planning Commission, India
- Georgia Ports Authority, United States
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Lanco Infratech Ltd - India
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Australian Commodity Traders Exchange
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Ministry of Mines - Canada
- Semirara Mining Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Parry Sugars Refinery, India
- CNBM International Corporation - China
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Bulk Trading Sa - Switzerland
- Thai Mozambique Logistica
- LBH Netherlands Bv - Netherlands
- Gujarat Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Mintek Dendrill Indonesia
- ASAPP Information Group - India
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Oldendorff Carriers - Singapore
- Sindya Power Generating Company Private Ltd
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Neyveli Lignite Corporation Ltd, - India
- Interocean Group of Companies - India
- Kohat Cement Company Ltd. - Pakistan
- PetroVietnam Power Coal Import and Supply Company
- Vizag Seaport Private Limited - India
- SMC Global Power, Philippines
- Attock Cement Pakistan Limited
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Power Finance Corporation Ltd., India
- European Bulk Services B.V. - Netherlands
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Karaikal Port Pvt Ltd - India
- Bhushan Steel Limited - India
- Directorate Of Revenue Intelligence - India
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- ICICI Bank Limited - India
- Merrill Lynch Commodities Europe
- Carbofer General Trading SA - India
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- Economic Council, Georgia
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- The University of Queensland
- Sree Jayajothi Cements Limited - India
- IHS Mccloskey Coal Group - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- New Zealand Coal & Carbon
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Goldman Sachs - Singapore
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- Commonwealth Bank - Australia
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Electricity Authority, New Zealand
- Uttam Galva Steels Limited - India
- Gujarat Sidhee Cement - India
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
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