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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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Saturday, 08 September 12
RIO TINTO COMPLETES ACQUISITION OF BHP BILLITON'S INTERESTS IN RICHARDS BAY MINERALS
Rio Tinto has doubled its holding in Richards Bay Minerals (RBM) following the completion of its acquisition of BHP Billiton’s entire inte ...
Friday, 07 September 12
HBA GAINS $ 1.56 PER MT IN SEPTEMBER
COALspot.com - The Indonesian government’s declared coal reference price has gained US$ 1.56 per MT M-o-M. This is the first gain ...
Thursday, 06 September 12
SOME ANCHORED PANAMAX VESSELS WAITING FOR CARGOS TO COME
Handy
According to Fearnleys weekly report, in the smaller segments Fearnleys sees little to no changes since last week. There are still entering s ...
Thursday, 06 September 12
DRY BULK CARRIERS STILL IN HIGH DEMAND AMONG SHIP OWNERS, BUT NEWBUILDING ACTIVITY SLIDES IN AUGUST - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The slide of the dry bulk market this year hasn't abated ship owners' appetite for dry bulk carriers, as evidenced by the steady interest expresse ...
Tuesday, 04 September 12
SHIP OWNERS' COMPETITION LEADS TO TANKER FIXTURES BELOW OPERATING COSTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Ship owners operating in the VLCC tanker markets are increasingly finding it difficult to obtain even breakeven rates for their vessels, as competit ...
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- Directorate Of Revenue Intelligence - India
- Altura Mining Limited, Indonesia
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Sakthi Sugars Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- Meenaskhi Energy Private Limited - India
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Electricity Authority, New Zealand
- Mintek Dendrill Indonesia
- Bhushan Steel Limited - India
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- Gujarat Sidhee Cement - India
- ICICI Bank Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- Romanian Commodities Exchange
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Larsen & Toubro Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Chettinad Cement Corporation Ltd - India
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Carbofer General Trading SA - India
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Thai Mozambique Logistica
- The University of Queensland
- Planning Commission, India
- Borneo Indobara - Indonesia
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Ambuja Cements Ltd - India
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SN Aboitiz Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- LBH Netherlands Bv - Netherlands
- Sree Jayajothi Cements Limited - India
- Timah Investasi Mineral - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- White Energy Company Limited
- Bangladesh Power Developement Board
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- TNB Fuel Sdn Bhd - Malaysia
- European Bulk Services B.V. - Netherlands
- Attock Cement Pakistan Limited
- MS Steel International - UAE
- Bhatia International Limited - India
- Indian Energy Exchange, India
- PTC India Limited - India
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Australian Commodity Traders Exchange
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Kohat Cement Company Ltd. - Pakistan
- Ind-Barath Power Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Banpu Public Company Limited - Thailand
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- Medco Energi Mining Internasional
- Toyota Tsusho Corporation, Japan
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Metalloyd Limited - United Kingdom
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Energy Development Corp, Philippines
- Port Waratah Coal Services - Australia
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- Mjunction Services Limited - India
- Kapuas Tunggal Persada - Indonesia
- Anglo American - United Kingdom
- Bhoruka Overseas - Indonesia
- Bukit Baiduri Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Vizag Seaport Private Limited - India
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- London Commodity Brokers - England
- Straits Asia Resources Limited - Singapore
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- SMG Consultants - Indonesia
- Ministry of Finance - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- Eastern Energy - Thailand
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Parry Sugars Refinery, India
- Sindya Power Generating Company Private Ltd
- Eastern Coal Council - USA
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- PNOC Exploration Corporation - Philippines
- San Jose City I Power Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- PetroVietnam Power Coal Import and Supply Company
- Bulk Trading Sa - Switzerland
- Kartika Selabumi Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- CNBM International Corporation - China
- International Coal Ventures Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Intertek Mineral Services - Indonesia
- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Oil Corporation Limited
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- Parliament of New Zealand
- Chamber of Mines of South Africa
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Vedanta Resources Plc - India
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Posco Energy - South Korea
- Australian Coal Association
- Salva Resources Pvt Ltd - India
- Rio Tinto Coal - Australia
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