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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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Friday, 31 August 12
ADVERSE SHIPPING MARKET CONDITIONS SHORTENS LIFE SPAN OF VESSELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The adverse conditions which have been put in place in the world's freight markets, means that ship owners are forced to scrap vessels of a much yo ...
Thursday, 30 August 12
INDO-INDIA, LARGE ECO SUPRA NOW FIXED AT USD 7K FOR DELIVERY SINGAPORE - FEARNLEYS AS
Handy
The Supra market continued its negative trend with little fresh business entering the market. Continent positions fixed around USD 4k for tri ...
Thursday, 30 August 12
DRY BULK MARKET STILL LOOKING OUT FOR BETTER DAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With things in China moving slowly this week, as a result of holidays, it’s no surprise that the latest positive trend in the dry bulk market ...
Wednesday, 29 August 12
COLOMBIA'S MINING BOOM: PART TWO - JOSEPH KIRSCHKE
One of the most prominent casualties of Canada's entry into the Colombian mining sector has been a priest named Jose Reynal-Restrepo. Last Septembe ...
Wednesday, 29 August 12
COLOMBIA'S MINING BOOM: PART ONE - JOSEPH KIRSCHKE
COALspot.com - Colombia stands before one of the potentially largest, most diversified mining booms in the world. Untold reserves of gold, coal, cop ...
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- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- Malabar Cements Ltd - India
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Formosa Plastics Group - Taiwan
- Planning Commission, India
- Power Finance Corporation Ltd., India
- Dalmia Cement Bharat India
- Marubeni Corporation - India
- Commonwealth Bank - Australia
- New Zealand Coal & Carbon
- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Iligan Light & Power Inc, Philippines
- Heidelberg Cement - Germany
- SMC Global Power, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
- Electricity Generating Authority of Thailand
- The University of Queensland
- Thai Mozambique Logistica
- Sical Logistics Limited - India
- Wood Mackenzie - Singapore
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Eastern Coal Council - USA
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Maharashtra Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Posco Energy - South Korea
- London Commodity Brokers - England
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Ministry of Finance - Indonesia
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Timah Investasi Mineral - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- Global Green Power PLC Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Bhatia International Limited - India
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Madhucon Powers Ltd - India
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- PTC India Limited - India
- CNBM International Corporation - China
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Bukit Makmur.PT - Indonesia
- Coalindo Energy - Indonesia
- Petron Corporation, Philippines
- Xindia Steels Limited - India
- Attock Cement Pakistan Limited
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- Miang Besar Coal Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Goldman Sachs - Singapore
- Antam Resourcindo - Indonesia
- White Energy Company Limited
- Orica Australia Pty. Ltd.
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Kumho Petrochemical, South Korea
- Georgia Ports Authority, United States
- Trasteel International SA, Italy
- Tata Chemicals Ltd - India
- Lanco Infratech Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Port Waratah Coal Services - Australia
- Minerals Council of Australia
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Indogreen Group - Indonesia
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Kartika Selabumi Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- Sree Jayajothi Cements Limited - India
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Kaltim Prima Coal - Indonesia
- Rio Tinto Coal - Australia
- Africa Commodities Group - South Africa
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Australian Commodity Traders Exchange
- Medco Energi Mining Internasional
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Essar Steel Hazira Ltd - India
- Ind-Barath Power Infra Limited - India
- Wilmar Investment Holdings
- Neyveli Lignite Corporation Ltd, - India
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Australian Coal Association
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Globalindo Alam Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- VISA Power Limited - India
- Carbofer General Trading SA - India
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Anglo American - United Kingdom
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Makarim & Taira - Indonesia
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Star Paper Mills Limited - India
- Mintek Dendrill Indonesia
- Bhushan Steel Limited - India
- SN Aboitiz Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- GMR Energy Limited - India
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
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