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Wednesday, 11 March 15
MARKET INSIGHT : NEWBUILDINGS - PANOS TSILINGIRIS
 From a cost-based, buy-low perspective, there is currently a buying opportunity in the second-hand dry bulk market. I am an anti-cyclical (buy-low) investor as bulk shipping has been cyclical throughout its history because of the inherent delay in supplying and using up the underlying assets (ships). E.g., shipyards currently quote deliveries 2-3 years later while there is intrinsic uncertainty in the duration of the ‘useful life’ of a vessel; the overage trading vessels at the 2007-08 peak of the previous cycle contrast with the recent scrapping of the 2000-built Capesize ‘Cape Flora’.
The cost component is rather obscure. Theoretically, if demand and supply were always balanced, then shipbuilding prices would be the construction cost plus some realistic profit margin for the yard, thus, eventually converging to the true cost. If one knew this, he could determine whether he buys low or not. But having a transparent measure of shipbuilding cost is difficult because it is confidential information and depends on several factors.
We take a shortcut and concentrate on 1986, 1999 and 2012, when it is acknowledged that shipbuilding prices were low. We also resort to the U.S. Consumer Price Index as a proxy for the value of money over time. Then, some beautiful patterns emerge: the 1986 low of $13.5m for the construction of a Panamax Bulker corresponds to $20.45m in 1999 dollar terms, while the actual (nominal) low in 1999 was $19m. This, in turn, corresponds to $26.2m 2012 dollars, with the actual low in late 2012 being rgn $26m, or xs $27m in today’s terms.
This time is different from late 2012 when shipyards were desperate for orders as they were flirting with idleness. We have not this time hit bottom since yards have substantial orderbooks, the incentives for new orders are weaker (low fuel price, poor freight market) and cost components (weaker Yen, lower steel prices) result in a cheaper construction breakeven. Fortunately, although one cannot order today below cost, he can instead buy low a similar asset that already exists in the S&P market. Second-hand values are hovering close to 15-year lows, even in nominal terms, and only in the 1980s crash they were lower in today’s dollars. Meantime, the second-hand to newbuilding price ratios are today the lowest post-1980s.
To conclude, we identified certain points in history (1986, 1999, 2012) when shipbuilding prices were below cost and realized these lows converged to each other in same-year denominated dollars. We then implicitly inferred that ordering newbuildings today is sub-optimal due to the current depressed S&P values which are south of the respective lows in 1999 and 2012. To complete, a buy-low, sell-higher investment strategy, there needs to be substantial trading time ahead for the acquired tonnage. Given that shipping cycles generally do not last longer than 10 years and we have already entered the 7th year of the ongoing cycle, acquiring now modern second-hand tonnage offers the promise for asset play.
By Panos Tsilingiris
Newbuildings / SnP Broker
Compiled by:
Intermodal Research & Valuations
Analysts:
Ms. Eva Tzima
Disclaimer and legal disclosure: For any further queries please do not hesitate to contact our Research & Valuations Department. The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without making guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no re-producing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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Monday, 16 March 15
MAKING THE WORLD GO ROUND - SEABORNE TRADE! - CLARKSONS
Money, or even love if you prefer, are claimed to make the world go round. For the shipping world, however, it’s trade that sets things spinn ...
Monday, 16 March 15
API 5 FOB NEWCASTLE COAL SWAPS: DECLINED
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 2.48 per MT (-4.77%) month over month and US$ 0.93 (-1.84%) we ...
Monday, 16 March 15
CFR SOUTH CHINA THERMAL COAL SWAP DECLINED 3.74% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 2.17 (-3.74%) per MT month over month and US$ 0.67 (-1 ...
Sunday, 15 March 15
BDI DECLINED LESSER THAN 1% WEEK OVER WEEK; INDO-INDIA FIRM
COALspot.com: The most of indices, including bulk dry index were falling this week. The BDI has been down by just 0.53 points and closing at 562 po ...
Saturday, 14 March 15
CAPESIZE DRY BULKERS TO AVERAGE BETWEEN $3,000 AND $9,000/DAY IN THE COMING WEEKS SAYS BIMCO
BIMCO issued its latest short-term estimates for the dry bulk market. For March/May: BIMCO assesses that the Capesize time charter (T/C) average ra ...
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- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- IHS Mccloskey Coal Group - USA
- Bhushan Steel Limited - India
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Siam City Cement PLC, Thailand
- Bhoruka Overseas - Indonesia
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Grasim Industreis Ltd - India
- Australian Coal Association
- Standard Chartered Bank - UAE
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Indika Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Meralco Power Generation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Energy Development Corp, Philippines
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Mercator Lines Limited - India
- Meenaskhi Energy Private Limited - India
- Mercuria Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- London Commodity Brokers - England
- AsiaOL BioFuels Corp., Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rio Tinto Coal - Australia
- Alfred C Toepfer International GmbH - Germany
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- The University of Queensland
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Cement Manufacturers Association - India
- PetroVietnam Power Coal Import and Supply Company
- Simpson Spence & Young - Indonesia
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Trasteel International SA, Italy
- Kobexindo Tractors - Indoneisa
- Intertek Mineral Services - Indonesia
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Port Waratah Coal Services - Australia
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bahari Cakrawala Sebuku - Indonesia
- Tata Chemicals Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Toyota Tsusho Corporation, Japan
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- Manunggal Multi Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- CIMB Investment Bank - Malaysia
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Semirara Mining and Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- PTC India Limited - India
- Interocean Group of Companies - India
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Coalindo Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- Economic Council, Georgia
- Maharashtra Electricity Regulatory Commission - India
- Parliament of New Zealand
- McConnell Dowell - Australia
- Sarangani Energy Corporation, Philippines
- Orica Mining Services - Indonesia
- Formosa Plastics Group - Taiwan
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Indonesian Coal Mining Association
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- Australian Commodity Traders Exchange
- Uttam Galva Steels Limited - India
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- Global Business Power Corporation, Philippines
- GMR Energy Limited - India
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- Indogreen Group - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- Coal and Oil Company - UAE
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- Banpu Public Company Limited - Thailand
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Jaiprakash Power Ventures ltd
- Marubeni Corporation - India
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- Medco Energi Mining Internasional
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- San Jose City I Power Corp, Philippines
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- Electricity Authority, New Zealand
- Posco Energy - South Korea
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Ministry of Mines - Canada
- Renaissance Capital - South Africa
- Wood Mackenzie - Singapore
- Goldman Sachs - Singapore
- Krishnapatnam Port Company Ltd. - India
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