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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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Wednesday, 15 December 10
SMALLER DRY BULK VESSELS ARE LOOKING UP, LARGER ONES FAIL TO DELIVER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market lost further ground at the beginning of the week, in what could prove one of the slowest periods ship owners have been faced. Ye ...
Tuesday, 14 December 10
COAL IMPORTS MAY INCREASE 78% TO CHINA, INDIA: ENERGY MARKETS - BUSINESS WEEK
Business Week reported that, China and India may increase imports of coal by 78 percent to 337 million metric tons next year, further driving up pri ...
Tuesday, 14 December 10
BANPU PLANNING PRODUCTION BOOM - BANGKOK POST
Australian, Indonesian output to lead growth
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, wants to nearly double its coal ...
Tuesday, 14 December 10
THE FREIGHT RATES FROM INDONESIA TO INDIA AND CHINA REMAINED FIRM - CAPT. REDDY
COALspot.com - The freight market continued to be soft with the Cape sector most effected which was down by 289 points and closed at 2,694 poi ...
Monday, 13 December 10
ICE FUTURES EUROPE TO LAUNCH IHS MCCLOSKEY INDONESIAN SUB-BITUMINOUS FOB MARKER COAL CONTRACTS - MONDOVISIONE
Mondovisione reported that, IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges, clearing houses and over ...
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- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Kumho Petrochemical, South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Kepco SPC Power Corporation, Philippines
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Australian Coal Association
- Baramulti Group, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Kideco Jaya Agung - Indonesia
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
- India Bulls Power Limited - India
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Semirara Mining and Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- ASAPP Information Group - India
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Standard Chartered Bank - UAE
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- Therma Luzon, Inc, Philippines
- Wilmar Investment Holdings
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- Borneo Indobara - Indonesia
- McConnell Dowell - Australia
- Gujarat Sidhee Cement - India
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Minerals Council of Australia
- Cigading International Bulk Terminal - Indonesia
- Singapore Mercantile Exchange
- Savvy Resources Ltd - HongKong
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Essar Steel Hazira Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Siam City Cement - Thailand
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Bayan Resources Tbk. - Indonesia
- VISA Power Limited - India
- SMG Consultants - Indonesia
- Latin American Coal - Colombia
- Antam Resourcindo - Indonesia
- Iligan Light & Power Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Vizag Seaport Private Limited - India
- Jindal Steel & Power Ltd - India
- Simpson Spence & Young - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- New Zealand Coal & Carbon
- Indo Tambangraya Megah - Indonesia
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Commonwealth Bank - Australia
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Bhoruka Overseas - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Merrill Lynch Commodities Europe
- London Commodity Brokers - England
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Bukit Baiduri Energy - Indonesia
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Tata Chemicals Ltd - India
- TeaM Sual Corporation - Philippines
- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Planning Commission, India
- Xindia Steels Limited - India
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- Gujarat Mineral Development Corp Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Tamil Nadu electricity Board
- Directorate General of MIneral and Coal - Indonesia
- Malabar Cements Ltd - India
- Eastern Coal Council - USA
- Independent Power Producers Association of India
- Grasim Industreis Ltd - India
- OPG Power Generation Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pendopo Energi Batubara - Indonesia
- ICICI Bank Limited - India
- Parry Sugars Refinery, India
- IEA Clean Coal Centre - UK
- Coal and Oil Company - UAE
- Jorong Barutama Greston.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Lanco Infratech Ltd - India
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Energy Link Ltd, New Zealand
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- GN Power Mariveles Coal Plant, Philippines
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- PowerSource Philippines DevCo
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Sical Logistics Limited - India
- Renaissance Capital - South Africa
- Global Green Power PLC Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Global Business Power Corporation, Philippines
- Makarim & Taira - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ministry of Mines - Canada
- PTC India Limited - India
- IHS Mccloskey Coal Group - USA
- Uttam Galva Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Medco Energi Mining Internasional
- Star Paper Mills Limited - India
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- MS Steel International - UAE
- The University of Queensland
- GAC Shipping (India) Pvt Ltd
- International Coal Ventures Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Power Finance Corporation Ltd., India
- San Jose City I Power Corp, Philippines
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