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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, 16 September 12
GLOBAL LOW DEMAND ; INDONESIA COAL AND CFR SOUTH CHINA COAL SWAPS DIP
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for November 2012 delivery lost 1.345 percent W-O-W on Friday, 14 September 2012, closing but gai ...
Sunday, 16 September 12
THE FREIGHT RATES FROM INDONESIA TO INDIA EXPECTED TO BE STEADY - VISTAAR
COALspot.com - The freight market was mixed with most indices closing positive except for the Panamax index.
The main sentiment seems to be ...
Saturday, 15 September 12
FINANCE MINISTRY OPPOSES TAX INCENTIVE PLAN FOR COAL MINERS - JP
The Jakarta Post reported that, the Finance Ministry has turned down the idea of providing a fiscal incentive to the country’s coal mining ind ...
Friday, 14 September 12
DRY BULK MARKET LOOKS TOWARDS CHINA FOR SOME POSITIVE NEWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the dry bulk market freight rates submerged underwater for a large part of the year, dry bulk owners are looking for some positive enhancement ...
Friday, 14 September 12
GOVT OFFERS CONDITIONAL TAX HOLIDAY TO AILING COAL MINERS - JP
The Jakarta Post, one of the leading English news paper in Indonesia reported that, acknowledging difficulties encountered by coal miners due to a p ...
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- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- CNBM International Corporation - China
- Latin American Coal - Colombia
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Edison Trading Spa - Italy
- Heidelberg Cement - Germany
- Mercator Lines Limited - India
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Ministry of Finance - Indonesia
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- GMR Energy Limited - India
- Vedanta Resources Plc - India
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- Global Business Power Corporation, Philippines
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- Ministry of Transport, Egypt
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Timah Investasi Mineral - Indoneisa
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- New Zealand Coal & Carbon
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Sree Jayajothi Cements Limited - India
- Central Electricity Authority - India
- Posco Energy - South Korea
- Aboitiz Power Corporation - Philippines
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Anglo American - United Kingdom
- MS Steel International - UAE
- Tata Chemicals Ltd - India
- Alfred C Toepfer International GmbH - Germany
- The State Trading Corporation of India Ltd
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Indika Energy - Indonesia
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Toyota Tsusho Corporation, Japan
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Malabar Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Globalindo Alam Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Sindya Power Generating Company Private Ltd
- Makarim & Taira - Indonesia
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Indonesian Coal Mining Association
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Trasteel International SA, Italy
- Romanian Commodities Exchange
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- PowerSource Philippines DevCo
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kobexindo Tractors - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- McConnell Dowell - Australia
- SN Aboitiz Power Inc, Philippines
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- Kartika Selabumi Mining - Indonesia
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- PTC India Limited - India
- The Treasury - Australian Government
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- Meralco Power Generation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- VISA Power Limited - India
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Ambuja Cements Ltd - India
- Semirara Mining Corp, Philippines
- Siam City Cement - Thailand
- Tamil Nadu electricity Board
- Mjunction Services Limited - India
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- Energy Link Ltd, New Zealand
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Bhushan Steel Limited - India
- Planning Commission, India
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Grasim Industreis Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- Attock Cement Pakistan Limited
- Riau Bara Harum - Indonesia
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Oldendorff Carriers - Singapore
- Gujarat Sidhee Cement - India
- Electricity Authority, New Zealand
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
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