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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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Wednesday, 11 May 16
MARKET INSIGHT - KATERINA RESTIS
On Saturday 7th May, Riyadh replaced the long-serving oil minister of more than two decades, Ali-Al-Naimi, as part of a major government overhaul, ...
Tuesday, 10 May 16
VOLATILITY? VARIATION NO ENIGMA TO SHIPPING..... - CLARKSONS
Along with cyclicality, the other characteristic of the shipping markets which receives frequent mention is volatility. This is so evident that the ...
Monday, 09 May 16
INDONESIAN CS COAL INDICES UP CONTINUES; POSITIVE DIRECTION
COALspot.com: Average 5000 GAR coal index of Indonesian origin up 0.10 percent week over week to averaging $38.82 per ton on this past Wednesday, a ...
Monday, 09 May 16
DRY BULK SHIPPING TO WITNESS STEADY PROGRESS MOVING FORWARD ON THE BACK OF GROWING TRADE VOLUMES - BIMCO
In its latest short-term analysis of the shipping markets, BIMCO reiterated its optimism on the prospects of the dry bulk market moving forward. Ac ...
Monday, 09 May 16
BALTIC DRY INDEX ENDS WEEK ON A NEGATIVE NOTE
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities decline this week.
The freight market was weak and a ...
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Globalindo Alam Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Australian Commodity Traders Exchange
- Global Business Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Planning Commission, India
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- International Coal Ventures Pvt Ltd - India
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Georgia Ports Authority, United States
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bharathi Cement Corporation - India
- Xindia Steels Limited - India
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- GVK Power & Infra Limited - India
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- Africa Commodities Group - South Africa
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- Metalloyd Limited - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- Meralco Power Generation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Minerals Council of Australia
- TeaM Sual Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Bukit Baiduri Energy - Indonesia
- Petron Corporation, Philippines
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- Lanco Infratech Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Central Java Power - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Mercuria Energy - Indonesia
- The University of Queensland
- Ind-Barath Power Infra Limited - India
- Orica Australia Pty. Ltd.
- Therma Luzon, Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Kaltim Prima Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- PowerSource Philippines DevCo
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Bangladesh Power Developement Board
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Semirara Mining and Power Corporation, Philippines
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Indika Energy - Indonesia
- Medco Energi Mining Internasional
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Parliament of New Zealand
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Thai Mozambique Logistica
- Alfred C Toepfer International GmbH - Germany
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Aditya Birla Group - India
- Tamil Nadu electricity Board
- TNB Fuel Sdn Bhd - Malaysia
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- Mjunction Services Limited - India
- Marubeni Corporation - India
- Wilmar Investment Holdings
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sindya Power Generating Company Private Ltd
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Trasteel International SA, Italy
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Heidelberg Cement - Germany
- Kobexindo Tractors - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Edison Trading Spa - Italy
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- Videocon Industries ltd - India
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Madhucon Powers Ltd - India
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Borneo Indobara - Indonesia
- GMR Energy Limited - India
- VISA Power Limited - India
- Renaissance Capital - South Africa
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- European Bulk Services B.V. - Netherlands
- Electricity Authority, New Zealand
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- Simpson Spence & Young - Indonesia
- Central Electricity Authority - India
- Rio Tinto Coal - Australia
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- Ministry of Mines - Canada
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Grasim Industreis Ltd - India
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining Corp, Philippines
- Meenaskhi Energy Private Limited - India
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