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