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Wednesday, 24 February 16
THIRTEEN - NOT ALWAYS AN UNLUCKY NUMBER? - CLARKSONS
 Back in early 1999 the price of a 5 year old Panamax bulkcarrier dipped to $13.5m, and ever since analysts have hailed purchase decisions made at that time as some of the most lucrative shipping deals ever seen. Today, with the price back at $13m, perhaps it’s a good time to reflect on how successful investors were back in 1999 and whether there are similar opportunities once again.
What Was The Deal?
The graph shows for each year since 1990 the return that would have been generated by the purchase of a 5 year old Panamax bulkcarrier at the start of the year, the subsequent operation for ten years at the prevailing one year timecharter rate and then the sale of the unit at the end of that period as a 15 year old (for units purchased in 2007 and later, disposal at start 2016 was assumed). At the end of 1999 investors could pick up a 5 year old Panamax bulker for $14m. Trading that vessel at the start year one year timecharter rate for 10 years would have generated estimated earnings of $66.5m (after opex), and then as a 15 year old unit in 2009 the vessel could have been sold for $12.5m. That’s a small loss of $1.5m on the asset but still a total return of $65m, and an impressive internal rate of return (IRR) of 26%.
Playing Snap
A few years later, 5 year old Panamax bulkcarrier purchases did perhaps even better. Buying a 5 year old in 2002, once again at $14m, trading at the timecharter rate and selling as a 15 year old would have generated total returns of $73.2m and an IRR of 41%, whilst the equivalent project in 2003 would have generated $66.1m and an IRR of 44%. These vessels would have generated boom earnings earlier in the project period, subject to a heavier weighting in terms of the internal rate of return calculation.
Not Always A Good Hand
However, not all investors are so lucky. In this example, 5 year old ships purchased since 2008 (and sold this year, so admittedly with less time to hit upon a period of boom earnings) generated negative returns, and those purchased pre-1995 an average IRR of 7%. Buyers in 2008 would have lost a whopping $82.1m on the asset. Nevertheless, there was clearly a golden period; in the years 1998-2006 investors would have achieved an IRR ranging between 20% and 44%.
Unlucky (Or Lucky) 13?
So for those who have had the stomach to buy in at difficult times, there have been more than ample rewards. Today the price of a 5 year old Panamax is back at $13m. Dry bulk fundamentals, particularly on the demand side with the Chinese economy maturing, don’t look helpful at all (see SIW 1207), but with the 5 year old price at almost half that of a newbuild, who really knows what the longer-term opportunity might be?
Fortune favours the brave, but they also say that fools rush in. The outlook seems scary but investors might also have half an eye on their peers who invested at low points in the price cycle in the past. That’s the beauty of volatile and cyclical sectors, but it’s tricky food for thought for shipping investors. Are they willing to party like it’s 1999? Have a nice day.
Source: Clarksons
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Friday, 22 January 16
WEEKLY US COAL PRODUCTION ESTIMATES ALMOST FLAT
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.3 million shor ...
Friday, 22 January 16
COAL PRICES TO REMAIN UNDER PRESSURE THIS YEAR
COALspot.com: Indonesian coal swap delivery Q1 2016 declined month on month and week over week. The falling trend of prices for coal was continuing ...
Friday, 22 January 16
Q3' 16 FOB RICHARDS BAY COAL SWAP CLOSED AT $ 40.80; DECLINE $ 2.80 M-O-M
COALspot.com: Q1’ 2016 API4 FOB Richards Bay Coal swap up month over month and decline week over week.
The Q1’ 2016 FOB Richards B ...
Wednesday, 20 January 16
Q3'16 FOB NEWCASTLE COAL SWAP CLOSED $ 2.40 LESSER THAN Q1'16 CLOSING PRICE OF $ 38.10
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery rose another $0.77 per ton (2.06%) this past week compared to the sam ...
Wednesday, 20 January 16
SHIPPING MARKET INSIGHT - NASOS SOULAKIS
If you believe in the “January effect”, the theory according to which the beginning of a new year has a positive effect on financial in ...
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- Deloitte Consulting - India
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- Tamil Nadu electricity Board
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- Siam City Cement PLC, Thailand
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- Economic Council, Georgia
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- Metalloyd Limited - United Kingdom
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- Bukit Makmur.PT - Indonesia
- Port Waratah Coal Services - Australia
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- Chettinad Cement Corporation Ltd - India
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- Planning Commission, India
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- Heidelberg Cement - Germany
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
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- Global Business Power Corporation, Philippines
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- Parliament of New Zealand
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- Thai Mozambique Logistica
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- European Bulk Services B.V. - Netherlands
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- GAC Shipping (India) Pvt Ltd
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- GN Power Mariveles Coal Plant, Philippines
- Indonesian Coal Mining Association
- Goldman Sachs - Singapore
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- Coalindo Energy - Indonesia
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- Bhatia International Limited - India
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- Sical Logistics Limited - India
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- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Vizag Seaport Private Limited - India
- Minerals Council of Australia
- Global Coal Blending Company Limited - Australia
- Kapuas Tunggal Persada - Indonesia
- Commonwealth Bank - Australia
- Banpu Public Company Limited - Thailand
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Price Waterhouse Coopers - Russia
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Attock Cement Pakistan Limited
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- Edison Trading Spa - Italy
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Wood Mackenzie - Singapore
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- Coal and Oil Company - UAE
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- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
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- The University of Queensland
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- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
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- Eastern Coal Council - USA
- Global Green Power PLC Corporation, Philippines
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