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Wednesday, 27 April 16
THE OCEAN SHIPPING EXPERIENCED DRAMATIC VOLATILITY IN THE BEGINNING OF 2016 - PANOS TSILINGIRIS
 Shipping’s new (ab)normal
The global economy and ocean shipping experienced dramatic volatility in the beginning of 2016 and as the global economy undergoes structural changes, so does the derived ocean shipping activity, principally epitomized by the following abnormal trends:
(i) Constrained financing,
(ii) Deflation in asset prices, and
(iii) Shift in demand growth.
Constrained financing
First, ship financing in all of its forms is very restricted and will remain so in the years to come. There has been just one shipping IPO this year raising a mere $7m! Following the 2008 financial crisis, the excessively detailed banking legislation enacted, has forced bankers to spend more time filling out forms for regulators rather than understanding better their clients and the industry.
Despite monetary expansion, banks are not lending the excess supply of money but rather hoarding it. If you think this scarcity of financing is temporary and that the implications of Basel III have already been felt, you are simply wrong. In 2018 we also anticipate the IFRS 9 to take effect contributing to earlier recognition of credit losses, making it more expensive and difficult for banks to lend. So, via upcoming regulations, deleveraging will intensify both in the west and in emerging markets. Only the best buyers will receive money, good luck to smaller companies!
Deflation in asset prices
Second, the cost of creating new shipping assets, i.e., shipbuilding prices, are low, will get lower and will remain low for some time. Shipping deflation is due to vast manufacturing overcapacity from the previous cycle and technological change. We will experience newbuilding prices lower than the 2012 ones which at the time represented multi-year lows.
The Japanese shipbuilding prices, the premium in the sector, are correcting thanks also to the Yen now standing at 111 a dollar vs. 76 in 2012, while Chinese Builders, the floor of shipbuilding values, offer aggressive pricing assisted by the Yuan devaluations.
In S. Korea, we expect consolidation and further correction of prices following the recent elections. The abovementioned lack of financing will keep newbuilding appetite subdued for long. This will further drive prices down. And since newbuilding prices are in a sense an upper bound for second-hand prices in normal freight conditions, asset prices will stay deflated endangering the plans of opportunistic asset players.
Shift in demand growth
Third, there is a shift in growth as we transition from an industrial into a services and consumer economy. GDP growth per se, especially if anemic as it stands today, will not suffice to generate strong seaborne demand. However, with limited financing we can’t anticipate anything exciting on the physical side. The historical correlations and >1 multipliers between GDP and seaborne trade documented over several decades have been broken the last years and specifically last year seaborne trade growth was outnumbered by GDP growth. There are fears that outsourcing and globalization are reaching their limits and there are early signs of near sourcing and nationalization. Fighting pollution will remain a long-term driver, with its implications on coal, oil and regulations. Gas is coming catalyzed by shale developments!
We have indeed a new shipping abnormal -with constrained financing, assets deflation and shift in demand- and it is likely to stay with us for long. On the rosy side, the first two trends, will alleviate the two major causes of the ongoing crisis: exogenous money and excessive yard capacity.
By Panos Tsilingiris
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 reproducing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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Friday, 20 May 16
U.S COAL PRODUCTION FOR THE WEEK ENDED 14 MAY TOTALED 11.4 MMST; UP 3.8% W/W
COALspot.com – U.S the world’s second largest coal producer has produced approximately totaled an estimated 11.4 million short tons (mm ...
Thursday, 19 May 16
AUSTRALIAN IRON ORE CARGOES PUSHED UP THE FREIGHT RATES FOR CAPE THIS WEEK - FEARNLEYS
Cape
It has been a big jump in the freight rates for Cape size this week, says Fearnleys in its latest weekly report. All of the Australian iron ...
Thursday, 19 May 16
DISPUTE OVER VAT ON COAL DRAGS ON, CAUSING DOUBLE-BLOW TO MINERS - JP
The dispute over the value-added tax ( VAT ) mechanism between coal miners operating under third-generation contracts and the Finance Ministry&rsqu ...
Wednesday, 18 May 16
DRY BULK OUTLOOK REMAINS GLOOMY SAYS DANISH SHIP FINANCE, AS SHIPPING NEEDS TO RETHINK BUSINESS MODEL - HELLENIC SHIPPING
Our Shipping Market Review – May 2016 is devoted to the fourth industrial revolution. To understand the truly disruptive nature of the fourth ...
Wednesday, 18 May 16
LONG TERM FUNDAMENTALS ARE SLOWLY IMPROVING FOR THE DRY BULK MARKET - INTERMODAL
As we are approaching the end of the first half of the year, there is a number of market participants over at the dry bulk sector that have started ...
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- Formosa Plastics Group - Taiwan
- Larsen & Toubro Limited - India
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Economic Council, Georgia
- Wood Mackenzie - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- Ministry of Mines - Canada
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Sarangani Energy Corporation, Philippines
- Intertek Mineral Services - Indonesia
- CNBM International Corporation - China
- Standard Chartered Bank - UAE
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Tata Chemicals Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Indian Oil Corporation Limited
- Singapore Mercantile Exchange
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- White Energy Company Limited
- Gujarat Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- Gujarat Mineral Development Corp Ltd - India
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- The Treasury - Australian Government
- Independent Power Producers Association of India
- GN Power Mariveles Coal Plant, Philippines
- Georgia Ports Authority, United States
- VISA Power Limited - India
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Minerals Council of Australia
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Electricity Authority, New Zealand
- Vizag Seaport Private Limited - India
- MS Steel International - UAE
- Petron Corporation, Philippines
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Billiton Holdings Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Medco Energi Mining Internasional
- Offshore Bulk Terminal Pte Ltd, Singapore
- GMR Energy Limited - India
- Metalloyd Limited - United Kingdom
- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
- Africa Commodities Group - South Africa
- Barasentosa Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- ASAPP Information Group - India
- IEA Clean Coal Centre - UK
- Sical Logistics Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Rio Tinto Coal - Australia
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- New Zealand Coal & Carbon
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- ICICI Bank Limited - India
- GAC Shipping (India) Pvt Ltd
- Neyveli Lignite Corporation Ltd, - India
- Directorate Of Revenue Intelligence - India
- International Coal Ventures Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Latin American Coal - Colombia
- Malabar Cements Ltd - India
- Trasteel International SA, Italy
- Simpson Spence & Young - Indonesia
- Carbofer General Trading SA - India
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GVK Power & Infra Limited - India
- The University of Queensland
- Iligan Light & Power Inc, Philippines
- Commonwealth Bank - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
- Bayan Resources Tbk. - Indonesia
- Ministry of Finance - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhatia International Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wilmar Investment Holdings
- Maheswari Brothers Coal Limited - India
- Coalindo Energy - Indonesia
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
- Goldman Sachs - Singapore
- Thai Mozambique Logistica
- Central Electricity Authority - India
- Energy Development Corp, Philippines
- Mercuria Energy - Indonesia
- Aditya Birla Group - India
- Australian Coal Association
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- Borneo Indobara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Dalmia Cement Bharat India
- Anglo American - United Kingdom
- Planning Commission, India
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Savvy Resources Ltd - HongKong
- Agrawal Coal Company - India
- Vedanta Resources Plc - India
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- TeaM Sual Corporation - Philippines
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- Kideco Jaya Agung - Indonesia
- Siam City Cement - Thailand
- PTC India Limited - India
- Coastal Gujarat Power Limited - India
- Antam Resourcindo - Indonesia
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