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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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Thursday, 20 September 12
DRY BULK INCHES FORWARD AFTER WEEKS OF BELOW PAR PERFORMANCE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has started to revive from its ashed, as the past couple of days, traders have reported an increased activity from China, result ...
Wednesday, 19 September 12
CHURCHILL STRENGTHENS LITIGATION TEAM WITH APPOINTMENT OF NICHOLAS SMITH AS MANAGING DIRECTOR
COALspot.com - Churchill Mining PLC (AIM: CHL) has announced that, Mr Nicholas Smith has joined the board of the Company and has been appointed as t ...
Wednesday, 19 September 12
DRY BULK TERMINALS SINGAPORE
Press Release - Dry bulk terminals are used all around the world to handle large quantities of bulk materials, like minerals, grains, etc. In today& ...
Tuesday, 18 September 12
JORC CODE REVISION - EXPOSURE DRAFT RELEASED FOR COMMENT
COALspot.com - The Australasian Joint Ore Reserves Committee (JORC) has today released for public comment the exposure draft of the JORC Code (2012) ...
Monday, 17 September 12
YEAR TO DATE, BUMA PRODUCED 231.1 MILLION BCM OF OVERBURDEN
COALspot.com - PT. Delta Dunia Makmur Tbk has removed 31.5 million bcm (+6.0 percent YoY) overburden in August 2012 totaled 31.5 million bcm ( ...
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- Bahari Cakrawala Sebuku - Indonesia
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- Pipit Mutiara Jaya. PT, Indonesia
- Lanco Infratech Ltd - India
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Borneo Indobara - Indonesia
- Dalmia Cement Bharat India
- Indo Tambangraya Megah - Indonesia
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- GMR Energy Limited - India
- Madhucon Powers Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Minerals Council of Australia
- Star Paper Mills Limited - India
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Aditya Birla Group - India
- Economic Council, Georgia
- London Commodity Brokers - England
- Kalimantan Lumbung Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Grasim Industreis Ltd - India
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- Bharathi Cement Corporation - India
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Mjunction Services Limited - India
- Posco Energy - South Korea
- CNBM International Corporation - China
- Bukit Makmur.PT - Indonesia
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- Rio Tinto Coal - Australia
- Meenaskhi Energy Private Limited - India
- Ministry of Finance - Indonesia
- Global Coal Blending Company Limited - Australia
- New Zealand Coal & Carbon
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Thiess Contractors Indonesia
- Maharashtra Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Romanian Commodities Exchange
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Australian Coal Association
- Kaltim Prima Coal - Indonesia
- Commonwealth Bank - Australia
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- PNOC Exploration Corporation - Philippines
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Manunggal Multi Energi - Indonesia
- Port Waratah Coal Services - Australia
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- SMC Global Power, Philippines
- Toyota Tsusho Corporation, Japan
- Malabar Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Intertek Mineral Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- AsiaOL BioFuels Corp., Philippines
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- VISA Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Singapore Mercantile Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indonesian Coal Mining Association
- CIMB Investment Bank - Malaysia
- Coal and Oil Company - UAE
- Kumho Petrochemical, South Korea
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Sojitz Corporation - Japan
- Indika Energy - Indonesia
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Videocon Industries ltd - India
- Miang Besar Coal Terminal - Indonesia
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GVK Power & Infra Limited - India
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- TNB Fuel Sdn Bhd - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Global Green Power PLC Corporation, Philippines
- Oldendorff Carriers - Singapore
- Essar Steel Hazira Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Eastern Coal Council - USA
- Goldman Sachs - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Mines - Canada
- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Makarim & Taira - Indonesia
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Karaikal Port Pvt Ltd - India
- The University of Queensland
- Indogreen Group - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- India Bulls Power Limited - India
- Gujarat Sidhee Cement - India
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Salva Resources Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Parliament of New Zealand
- Bayan Resources Tbk. - Indonesia
- Planning Commission, India
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