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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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Sunday, 08 March 15
FREIGHT RATES FROM INDONESIA TO INDIA IS TRENDING UP
COALspot.com: The freight market continued to see gains this week and all the indices were rose except for Cape index. The BDI was increased 4.62 p ...
Friday, 06 March 15
BALTIC DRY INDEX: IS THIS POWERFUL INDICATOR SIGNALING A GLOBAL RECESSION? - STREET AUTHORITY
Although memories of the Great Recession linger, a case can be made that better days lie ahead.
That’s because central banks around the ...
Friday, 06 March 15
U.S. WEEKLY COAL PRODUCTION ROSE 3.5% WEEK ON WEEK
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.1 million short tons (mmst) of coal ...
Thursday, 05 March 15
PANAMAX : THE ATLANTIC ROUND IS NOW PAYING AROUND US$ 5K PER DAY
COALspot.com: Handy - The activity in the handy/supra segment is back. “ We see more fresh cargo in the market for 2nd half March dates ...
Thursday, 05 March 15
INDIA WILL BE THE LARGEST DRIVER OF GLOBAL SEABORNE COKING COAL DEMAND GROWTH IN 2015 - WOOD MACKENZIE
Global demand growth will remain weak because of China’s negative demand growth.
COALspot.com: At Coaltrans India, Wood Mackenzie says I ...
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- Kalimantan Lumbung Energi - Indonesia
- Power Finance Corporation Ltd., India
- Salva Resources Pvt Ltd - India
- Cement Manufacturers Association - India
- Coastal Gujarat Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Coal Association
- Indian Energy Exchange, India
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- Kideco Jaya Agung - Indonesia
- Latin American Coal - Colombia
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Meenaskhi Energy Private Limited - India
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Economic Council, Georgia
- Samtan Co., Ltd - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Georgia Ports Authority, United States
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Price Waterhouse Coopers - Russia
- PowerSource Philippines DevCo
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- Vizag Seaport Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- Wood Mackenzie - Singapore
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Thai Mozambique Logistica
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Ministry of Transport, Egypt
- Metalloyd Limited - United Kingdom
- Ministry of Mines - Canada
- Borneo Indobara - Indonesia
- San Jose City I Power Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- Indonesian Coal Mining Association
- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Heidelberg Cement - Germany
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- Planning Commission, India
- International Coal Ventures Pvt Ltd - India
- Indian Oil Corporation Limited
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Wilmar Investment Holdings
- Xindia Steels Limited - India
- Rio Tinto Coal - Australia
- Minerals Council of Australia
- Sical Logistics Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- OPG Power Generation Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Attock Cement Pakistan Limited
- Meralco Power Generation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- SN Aboitiz Power Inc, Philippines
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- Barasentosa Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Singapore Mercantile Exchange
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- Coal and Oil Company - UAE
- Independent Power Producers Association of India
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Agrawal Coal Company - India
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Karaikal Port Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- IHS Mccloskey Coal Group - USA
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Semirara Mining Corp, Philippines
- Marubeni Corporation - India
- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
- New Zealand Coal & Carbon
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- Bharathi Cement Corporation - India
- India Bulls Power Limited - India
- SMG Consultants - Indonesia
- Timah Investasi Mineral - Indoneisa
- Edison Trading Spa - Italy
- Iligan Light & Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- Energy Link Ltd, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Chamber of Mines of South Africa
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Malabar Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Commonwealth Bank - Australia
- Bukit Baiduri Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sree Jayajothi Cements Limited - India
- Bangladesh Power Developement Board
- PTC India Limited - India
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Carbofer General Trading SA - India
- Grasim Industreis Ltd - India
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- Baramulti Group, Indonesia
- Central Electricity Authority - India
- GAC Shipping (India) Pvt Ltd
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Pendopo Energi Batubara - Indonesia
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