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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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Thursday, 03 December 15
PANAMAX BUSINESS REMAINED UNDER PRESSURE LAST WEEK
COALspot.com: Following the new record lows the Dry Bulk market witnessed the week prior, the BDI took a much needed breath during the past days.
...
Wednesday, 02 December 15
Q3' 16 FOB RICHARDS BAY COAL SWAP SLIGHTLY UP FOR THE THIRD STRAIGHT WEEK
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 up month over month and fell week over week.
The Q1’ 2016 &nbs ...
Wednesday, 02 December 15
MARKET INSIGHT - VASSILIS LOGOTHETIS
Boom and bust cycles in commodity prices are not something rare, yet they have important implications both for the world economy in general and for ...
Tuesday, 01 December 15
FOB NEWCASTLE COAL SWAP UP THIS PAST WEEK
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $3.75 per ton (9.26%) month over month to US$ 36.75 per ton. The swap ...
Tuesday, 01 December 15
TANKERS VERSUS BULKERS - JUST PLAYING CATCH UP? - CLARKSONS
It’s now more than a year since the tanker market took off. In mid-2014 tanker earnings picked up and since then have been in the $30-$40,000 ...
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- White Energy Company Limited
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- South Luzon Thermal Energy Corporation
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- GMR Energy Limited - India
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- Indian Oil Corporation Limited
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- Economic Council, Georgia
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- Sindya Power Generating Company Private Ltd
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- Planning Commission, India
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- Jindal Steel & Power Ltd - India
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- Bhoruka Overseas - Indonesia
- Siam City Cement - Thailand
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- Gujarat Electricity Regulatory Commission - India
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- Star Paper Mills Limited - India
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- Eastern Energy - Thailand
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
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- GVK Power & Infra Limited - India
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Minerals Council of Australia
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- Therma Luzon, Inc, Philippines
- PTC India Limited - India
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- Attock Cement Pakistan Limited
- Australian Commodity Traders Exchange
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- Oldendorff Carriers - Singapore
- Metalloyd Limited - United Kingdom
- The University of Queensland
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- Krishnapatnam Port Company Ltd. - India
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
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- IHS Mccloskey Coal Group - USA
- Sical Logistics Limited - India
- The State Trading Corporation of India Ltd
- Australian Coal Association
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- LBH Netherlands Bv - Netherlands
- Tata Chemicals Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Toyota Tsusho Corporation, Japan
- Neyveli Lignite Corporation Ltd, - India
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Deloitte Consulting - India
- Vijayanagar Sugar Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Malabar Cements Ltd - India
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Indogreen Group - Indonesia
- Bangladesh Power Developement Board
- International Coal Ventures Pvt Ltd - India
- Cement Manufacturers Association - India
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Price Waterhouse Coopers - Russia
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
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- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Globalindo Alam Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
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- Larsen & Toubro Limited - India
- Chamber of Mines of South Africa
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- Petrochimia International Co. Ltd.- Taiwan
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- Global Green Power PLC Corporation, Philippines
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