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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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Tuesday, 04 September 12
ORPHEUS SECURES ADDITIONAL SIGNIFICANT KINTAP COAL PROJECT IN SOUTH KALIMANTAN
COALspot.com - Indonesian coal producer, Orpheus Energy (ASX:OEG) has announced that it has secured a 50% equity ownership in an additional tenement ...
Monday, 03 September 12
SHIPOWNERS TO WAIT FOR FURTHER PRICE REDUCTIONS IN THE SECOND HAND VESSEL MARKETS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With September now upon us, shipbrokers are looking towards an interesting winter season, as ship owners are looking to capitalize on more second ha ...
Sunday, 02 September 12
ADAROS COAL ROYALTIES TO THE GOVERNMENT INCREASED BY 10.5 PERCENT Y-O-Y TO US$196.8 MILLION
COALspot.com - PT Adaro Energy Tbk (IDX: ADRO), the second largest power plant coal producer in Indonesia, announced its consolidated auditor-review ...
Saturday, 01 September 12
FALLING PRICES; BLEEDING MINERS
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for October 2012 delivery lost 4.070 percent and 0.422 percent respectively on W-o-W and D- ...
Saturday, 01 September 12
PANAMAX FREIGHT RATES UNDER PRESSURE FROM LOW DEMAND - VISTAAR
COALspot.com - This week the freight market was weak with mixed results.
The BDI was down by 1.95 pct closing at 703 points, however there was so ...
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- Karaikal Port Pvt Ltd - India
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- Straits Asia Resources Limited - Singapore
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- PowerSource Philippines DevCo
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- Toyota Tsusho Corporation, Japan
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- Parliament of New Zealand
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- Indian Oil Corporation Limited
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- Bulk Trading Sa - Switzerland
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- Australian Commodity Traders Exchange
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- Energy Link Ltd, New Zealand
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- Wood Mackenzie - Singapore
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- Global Green Power PLC Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- Thai Mozambique Logistica
- Eastern Coal Council - USA
- Economic Council, Georgia
- Intertek Mineral Services - Indonesia
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
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- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Power Finance Corporation Ltd., India
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- Maheswari Brothers Coal Limited - India
- Samtan Co., Ltd - South Korea
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Medco Energi Mining Internasional
- Manunggal Multi Energi - Indonesia
- Minerals Council of Australia
- Central Electricity Authority - India
- Bukit Baiduri Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- ICICI Bank Limited - India
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Coastal Gujarat Power Limited - India
- Star Paper Mills Limited - India
- Salva Resources Pvt Ltd - India
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- Kaltim Prima Coal - Indonesia
- Sakthi Sugars Limited - India
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Semirara Mining and Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
- Ind-Barath Power Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Java Power - Indonesia
- Agrawal Coal Company - India
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
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- Essar Steel Hazira Ltd - India
- CIMB Investment Bank - Malaysia
- SMG Consultants - Indonesia
- PTC India Limited - India
- Madhucon Powers Ltd - India
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Cigading International Bulk Terminal - Indonesia
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
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- The University of Queensland
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- AsiaOL BioFuels Corp., Philippines
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- Kohat Cement Company Ltd. - Pakistan
- Singapore Mercantile Exchange
- Global Business Power Corporation, Philippines
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- Metalloyd Limited - United Kingdom
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- Kapuas Tunggal Persada - Indonesia
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- Therma Luzon, Inc, Philippines
- Ministry of Transport, Egypt
- IHS Mccloskey Coal Group - USA
- Ministry of Finance - Indonesia
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Formosa Plastics Group - Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Vizag Seaport Private Limited - India
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
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- Renaissance Capital - South Africa
- MS Steel International - UAE
- Vedanta Resources Plc - India
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- PNOC Exploration Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Global Coal Blending Company Limited - Australia
- Chamber of Mines of South Africa
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- Indika Energy - Indonesia
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Australian Coal Association
- Africa Commodities Group - South Africa
- London Commodity Brokers - England
- Kobexindo Tractors - Indoneisa
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- White Energy Company Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
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- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
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- Deloitte Consulting - India
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
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