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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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- Maharashtra Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Transport, Egypt
- Mercator Lines Limited - India
- Karbindo Abesyapradhi - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Star Paper Mills Limited - India
- London Commodity Brokers - England
- GMR Energy Limited - India
- IEA Clean Coal Centre - UK
- Global Green Power PLC Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- Central Electricity Authority - India
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Commonwealth Bank - Australia
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Semirara Mining Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- Neyveli Lignite Corporation Ltd, - India
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Alfred C Toepfer International GmbH - Germany
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Sical Logistics Limited - India
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Interocean Group of Companies - India
- Tamil Nadu electricity Board
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Xindia Steels Limited - India
- Economic Council, Georgia
- Kideco Jaya Agung - Indonesia
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- Jindal Steel & Power Ltd - India
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- International Coal Ventures Pvt Ltd - India
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- IHS Mccloskey Coal Group - USA
- CIMB Investment Bank - Malaysia
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sindya Power Generating Company Private Ltd
- AsiaOL BioFuels Corp., Philippines
- Orica Mining Services - Indonesia
- Global Coal Blending Company Limited - Australia
- CNBM International Corporation - China
- ICICI Bank Limited - India
- Mercuria Energy - Indonesia
- Coal and Oil Company - UAE
- Kapuas Tunggal Persada - Indonesia
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Siam City Cement - Thailand
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Marubeni Corporation - India
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Metalloyd Limited - United Kingdom
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- Singapore Mercantile Exchange
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Gujarat Electricity Regulatory Commission - India
- The Treasury - Australian Government
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Romanian Commodities Exchange
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- European Bulk Services B.V. - Netherlands
- Parliament of New Zealand
- Iligan Light & Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Coalindo Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Karaikal Port Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Simpson Spence & Young - Indonesia
- Essar Steel Hazira Ltd - India
- LBH Netherlands Bv - Netherlands
- Timah Investasi Mineral - Indoneisa
- Planning Commission, India
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Sinarmas Energy and Mining - Indonesia
- Dalmia Cement Bharat India
- Kohat Cement Company Ltd. - Pakistan
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- PTC India Limited - India
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Aditya Birla Group - India
- Vedanta Resources Plc - India
- Grasim Industreis Ltd - India
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Lanco Infratech Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Madhucon Powers Ltd - India
- Videocon Industries ltd - India
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Wilmar Investment Holdings
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- SMC Global Power, Philippines
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Latin American Coal - Colombia
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
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