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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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Monday, 04 April 16
CAPE INDEX JUMPED 70% WEEK ON WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities continued to rose this week.
The freight market was ...
Friday, 01 April 16
ASSESSING THE DRY BULK MARKET AT ROCK BOTTOM - CLARKSONS
While the opening months of the year are typically a weak period for the dry bulk market, the downturn so far this year has been severe. Earnings h ...
Friday, 01 April 16
NINE AM - TIME TO GET AN INDONESIAN LANGUAGE VERSION OF YOUR CHARTERPARTIES - CLYDE & CO
KNOWLEDGE TO ELEVATE
For several years, Indonesian law (Article 31, Law Number 24 of 2009) has required that memoranda of understanding (" ...
Friday, 01 April 16
U.S. COAL PRODUCTION UP SLIGHTLY WEEK OVER WEEK - EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 11.6 million shor ...
Thursday, 31 March 16
CAPE: ANOTHER UNEVENTFUL WEEK WITH FIXTURES CONCLUDED AT LAST DONE LEVELS - FEARNLEYS
Cape
Another uneventful week with fixtures concluded at last done levels, CS levels remain around the USD 3 mark, whilst C3 is still just short o ...
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- ICICI Bank Limited - India
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- Parliament of New Zealand
- Leighton Contractors Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Medco Energi Mining Internasional
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- Parry Sugars Refinery, India
- Coal and Oil Company - UAE
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- Electricity Authority, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Altura Mining Limited, Indonesia
- Pendopo Energi Batubara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- CNBM International Corporation - China
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- Tamil Nadu electricity Board
- Antam Resourcindo - Indonesia
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- The Treasury - Australian Government
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Manunggal Multi Energi - Indonesia
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- GN Power Mariveles Coal Plant, Philippines
- Directorate Of Revenue Intelligence - India
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Economic Council, Georgia
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- Larsen & Toubro Limited - India
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Binh Thuan Hamico - Vietnam
- Sakthi Sugars Limited - India
- Sindya Power Generating Company Private Ltd
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- India Bulls Power Limited - India
- Ministry of Transport, Egypt
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Formosa Plastics Group - Taiwan
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Aditya Birla Group - India
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Edison Trading Spa - Italy
- ASAPP Information Group - India
- Makarim & Taira - Indonesia
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Global Business Power Corporation, Philippines
- Petron Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Grasim Industreis Ltd - India
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- Gujarat Sidhee Cement - India
- Jorong Barutama Greston.PT - Indonesia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Australian Coal Association
- Trasteel International SA, Italy
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- GAC Shipping (India) Pvt Ltd
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- San Jose City I Power Corp, Philippines
- IEA Clean Coal Centre - UK
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- SMG Consultants - Indonesia
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Attock Cement Pakistan Limited
- Globalindo Alam Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Cement Manufacturers Association - India
- Directorate General of MIneral and Coal - Indonesia
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Thiess Contractors Indonesia
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Salva Resources Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- PTC India Limited - India
- Xindia Steels Limited - India
- Renaissance Capital - South Africa
- Tata Chemicals Ltd - India
- Bukit Makmur.PT - Indonesia
- Vedanta Resources Plc - India
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- Barasentosa Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- VISA Power Limited - India
- Indian Energy Exchange, India
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Indian Oil Corporation Limited
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- Indika Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Savvy Resources Ltd - HongKong
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Posco Energy - South Korea
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