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Thursday, 13 September 12
FUEL EFFICIENT SHIPS MAY BE MORE EXPENSIVE, BUT THEY MAKE FINANCIAL SENSE SAYS ANALYSIS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
 The latest trend in shipbuilding is the so called "Eco" ship, i.e. ships which offer much better fuel consumption and are more cost-effective in that sense. On the plus side, they help ship owners who order meet the latest regulations on shipping emissions, which are becoming ever so demanding. But, these vessels come at a heftier price tag, as much as 25% premium over regular ones. So one has to wonder, if the ship owners will his money back?
According to a relative analysis by Bimco's chief shipping analyst Peter Sand, this premium is financially and commercially viable. According to Sand, "our calculations show that, should you choose to invest in an ECO MR2-tanker, you could pay up to 25% more for your vessel before settling for a non-ECO MR2-tanker”. BIMCO has been looking at the basic economics of this development and can conclude that a fairly large premium can be paid on newbuildings to operate ECO ships instead of traditional ships. The calculations that are based on our assumptions, disclose that a 15% savings on fuel, potentially enables the owner of the ECO ship to charge extra up to the amount that is saved in fuel – which is USD 2,197 more per day than what a regular vessel can ever get obtain. The extra income means that a ship-owner can pay up to USD 8.31 million more for an ECO ship, for the investment to be equally good or better off as compared to a standard tanker. That is a premium of 25% when the standard vessel is priced at USD 33 million" he said.
Peter Sand also mentioned that "in the same way and based on the same fuel consumption and fuel prices assumptions, a ship-owner can pay up to USD 5.5 million more for an ECO ship for every 10% of fuel savings – or 17% more when a standard vessel is priced at USD 33 million. An obtainable premium to the market-given time charter rate (USD per day), where the charterer pays the fuel, is implied to be equal to an obtainable cost deduction on a market-given voyage charter rate (USD per tons) where the owner pays for the fuel".
So, what happens when one factors in the effect of fuel prices? "If the bunker prices go up the fuel-savings premium increases, making investments in ECO ships more viable. For each increase of USD 100 per tons in bunker prices the premium goes up by USD 338 per day, improving the net present value (NVP) of the investment by USD 1.3 million. A change to the fuel price tends to affect time-charter rates directly, but we fix the rate at USD 12,750 per day in the following calculations, which is the latest 1-year time-charter rate for a 47-48k products tanker according to CRSL. If the bunker price stays on the current level of USD 651 per ton the fuel-savings premium will not be high enough to make investment in an ECO ship profitable for a ship-owner; even the psychological barrier of USD 1,000 per ton will not make the investment sustainable with a negative net present value of USD 0.7 million. The bunker price has to exceed USD 1,060 per tons to make a new ECO ship an investment, with a positive NPV, if the ECO ship is priced at USD 33 million. In other words, bunker prices would have to increase by two-thirds ceteris paribus to make the investment viable under the circumstance of a fixed time-charter rate and OPEX level going forward" said the report.
It continued by mentioning that "at the current 1 year time-charter rate of 12,750 USD/day, a standard vessel does not meet its cash-breakeven rate making the investment unprofitable with an NPV loss of USD 13.5 million – more than the initial equity outlay. Even if we were able to secure the ECO ship at a cost of USD 33 million the investment will still be unprofitable, despite being able to charge a fuel-savings premium of 2,197 USD on top of the time-charter rate, making an NPV loss of USD 5.2 million.
The cash-breakeven cost for a vessel priced at USD 33 million is USD 13,928 a day covering the daily operating and financial expenses, but not return to equity, which explains why the time-charter rate plus the fuel-savings premium is not enough to make the investment in an ECO ship profitable in the current environment.
The effect of new-building prices
As stated above the current time-charter rates at a fixed level for the next 20 years are not high enough to sustain investments in new vessels at present new-building prices.
Returning to the benchmark case of 15% fuel savings and time-charter rates of 12,750 USD/day for a standard vessel, an ECO ship must not cost more than USD 27.8 million to be a profitable investment for a ship-owner. Comparably a standard vessel must cost as little as USD 19.5 million to be profitable in today’s market. “The current newbuilding prices reflect some optimism in the shipping industry. Higher freight rates are expected to be part of not too distant future. From our calculations two results are striking; Firstly, newbuilding prices are not as closely related to the present market condition as they normally are – and secondly, ECO ships seem to be the best profitable choice for the future fleet” adds Peter Sand.
The effect of time-charter rates
"Instead of changing the new-building prices, we now examine how high the time-charter rates must go before the purchase becomes profitable. For a standard vessel priced at USD 33 million, time-charter rates must be as high as USD 16,328 per day for the purchase to be sustainable – but rates have not been this high since mid-2009. If the ECO ship costs USD 33 million, the ship also needs to make USD 16,328 per day before the purchase is profitable; but a portion of the rate reflects the fuel-savings premium. By deducting the premium of USD 2,197 per day, we can compare the rate to the historical values observed by a standard vessel. This means that the base rate needs to be USD 16,328-2,197=14,131 per day before an ECO ship becomes a profitable investment. By looking at historical freight rates, this is achievable. The 10-year average for 2003-2012 is USD 19,214 per day for a 1-year TC for a 47,000-48,000 DWT products tanker. It should be noted that we have assumed that the whole advantage of the investment would go to the ship owner" the report concluded.
Source: Nikos Roussanoglou, Hellenic Shipping
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Sunday, 23 September 12
AN ANOTHER UNSTABLE WEEK FOR INDONESIAN COAL SWAPS
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for November 2012 delivery lost 1.10 percent and 0.916 percent WOW and DOD respectively ...
Sunday, 23 September 12
INDIA IMPORTED 11.40 PERCENT MORE INDONESIAN COAL IN AUGUST
COALspot.com: Indonesia, the world largest multi grade coal exporter, shipped 26,451,565* tons of coal in August 2012, compared to 27.88* mill ...
Saturday, 22 September 12
SOFT BUNKER PRICES KEEP INDONESIA TO INDIA FREIGHTS STABLE - VISTAAR
COALspot.com - The freight market overall remained buoyant with all indices up except for Panamax index. The main effect seems to be increased shipm ...
Friday, 21 September 12
SHIP BREAKING ACTIVITY REACHES NEW RECORDS, AS ALREADY 2012 LEVELS HAVE SURPASSED THE WHOLE OF 2011 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The vast oversupply of vessels, most notably in the dry bulk shipping sector, has forced ship owners to intensify their efforts towards recycling th ...
Thursday, 20 September 12
SUPRAMAX : INDO-INDIA ROUNDS WERE AROUND USD 12K - FEARNLEYS
Handy
Not a bad week for Supramax tonnage, if we compare Supramax developments to the bigger size tonnage. The rates have basically remained unchan ...
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- Wood Mackenzie - Singapore
- San Jose City I Power Corp, Philippines
- Orica Mining Services - Indonesia
- Sical Logistics Limited - India
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- Petron Corporation, Philippines
- Borneo Indobara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- The University of Queensland
- Indian Energy Exchange, India
- Electricity Generating Authority of Thailand
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
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- Mintek Dendrill Indonesia
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- Semirara Mining Corp, Philippines
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Parry Sugars Refinery, India
- TNB Fuel Sdn Bhd - Malaysia
- Sojitz Corporation - Japan
- MS Steel International - UAE
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- PowerSource Philippines DevCo
- Samtan Co., Ltd - South Korea
- Coalindo Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate General of MIneral and Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Australian Coal Association
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- Vijayanagar Sugar Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Oldendorff Carriers - Singapore
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Ministry of Finance - Indonesia
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- PTC India Limited - India
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- Port Waratah Coal Services - Australia
- Kalimantan Lumbung Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- Deloitte Consulting - India
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- Planning Commission, India
- Pipit Mutiara Jaya. PT, Indonesia
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- Kobexindo Tractors - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Minerals Council of Australia
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Australian Commodity Traders Exchange
- Energy Development Corp, Philippines
- Salva Resources Pvt Ltd - India
- Independent Power Producers Association of India
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Mjunction Services Limited - India
- Economic Council, Georgia
- Bukit Baiduri Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- New Zealand Coal & Carbon
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- McConnell Dowell - Australia
- Cement Manufacturers Association - India
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Antam Resourcindo - Indonesia
- Tata Chemicals Ltd - India
- Altura Mining Limited, Indonesia
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- Aboitiz Power Corporation - Philippines
- The Treasury - Australian Government
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Transport, Egypt
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- Kartika Selabumi Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
- Sree Jayajothi Cements Limited - India
- The State Trading Corporation of India Ltd
- Sakthi Sugars Limited - India
- Meenaskhi Energy Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Bharathi Cement Corporation - India
- Uttam Galva Steels Limited - India
- Banpu Public Company Limited - Thailand
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Siam City Cement - Thailand
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bukit Asam (Persero) Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
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