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