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