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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, 25 August 12
INDONESIAN COAL SWAP REMAINS STABLE AT LOW LEVEL
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for October 2012 delivery gain 0.804 percent W-o-W on Friday (24 August 2012) closing but lost 0. ...
Thursday, 23 August 12
INDONESIA-INDIA, LARGE ECO SUPRA FIXED AT USD 6K FOR DELIVERY SOUTH CHINA - FEARNLEYS AS
Handy
The market continued the same trend as last week, low activity and holidays in some countries.
Rate wise unchanged, with US Gulf/Continent ...
Thursday, 23 August 12
EGCO GROUP EXPANDS TOWARDS INTEGRATED ENERGY BUSINESS WITH INVESTMENT IN INDONESIAS COAL MINE
Electricity Generating Public Company Limited or EGCO Group, the Thailand’s first Independent Power Producer has continually invaded foreign m ...
Thursday, 23 August 12
EGCO GROUP ANNOUNCES 2 BILLION BAHT PROFITS IN Q2/2012
Successfully Establishes Integrated Energy Business and Strengthen Investments in ASEAN
Mr. Sahust Pratuknukul, President of Electri ...
Monday, 20 August 12
CHINESE COAL SWAPS RISE, INDONESIAN COAL CONTRACTS SOFT
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for October 2012 delivery lost -2.05 percent W-o-W on Friday (17 August 2012) closing but gained ...
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- Leighton Contractors Pty Ltd - Australia
- Xindia Steels Limited - India
- Singapore Mercantile Exchange
- Directorate Of Revenue Intelligence - India
- Planning Commission, India
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Videocon Industries ltd - India
- Savvy Resources Ltd - HongKong
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Independent Power Producers Association of India
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- Larsen & Toubro Limited - India
- Siam City Cement - Thailand
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Banpu Public Company Limited - Thailand
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- Straits Asia Resources Limited - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- Heidelberg Cement - Germany
- Billiton Holdings Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Central Java Power - Indonesia
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- White Energy Company Limited
- Aditya Birla Group - India
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Renaissance Capital - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ambuja Cements Ltd - India
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Medco Energi Mining Internasional
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- Iligan Light & Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Bahari Cakrawala Sebuku - Indonesia
- Coal and Oil Company - UAE
- Electricity Generating Authority of Thailand
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- Eastern Coal Council - USA
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Africa Commodities Group - South Africa
- Metalloyd Limited - United Kingdom
- ICICI Bank Limited - India
- Australian Coal Association
- ASAPP Information Group - India
- Anglo American - United Kingdom
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Bayan Resources Tbk. - Indonesia
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Jindal Steel & Power Ltd - India
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Mjunction Services Limited - India
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CNBM International Corporation - China
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- Makarim & Taira - Indonesia
- Orica Mining Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- Global Business Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- Uttam Galva Steels Limited - India
- SMC Global Power, Philippines
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Antam Resourcindo - Indonesia
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Indian Oil Corporation Limited
- Grasim Industreis Ltd - India
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- Meenaskhi Energy Private Limited - India
- PTC India Limited - India
- Petron Corporation, Philippines
- Commonwealth Bank - Australia
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Salva Resources Pvt Ltd - India
- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- Pendopo Energi Batubara - Indonesia
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- San Jose City I Power Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dalmia Cement Bharat India
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Thai Mozambique Logistica
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Parliament of New Zealand
- Gujarat Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indian Energy Exchange, India
- Power Finance Corporation Ltd., India
- TeaM Sual Corporation - Philippines
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- The University of Queensland
- Sindya Power Generating Company Private Ltd
- Mintek Dendrill Indonesia
- Energy Link Ltd, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Krishnapatnam Port Company Ltd. - India
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- Bukit Makmur.PT - Indonesia
- Lanco Infratech Ltd - India
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Australia Pty. Ltd.
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- Mercator Lines Limited - India
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
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