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Wednesday, 19 August 20
MARKET INSIGHT - GEORGE LAIOS | INTERMODAL
 Since the Covid-19 outbreak, governments and central banks around the globe have been using their ammunition and stimulus packages to keep their economies running. Trillions have been injected into global economies to fight unemployment and minimize recession. Apart from the central banks of EU, Japan, Switzerland, Sweden and Denmark, who have been offering negative rates for the past five years – a handful of central banks have now reduced their policy rates to near-zero values. Regardless of how successful or not the above mentioned five banks’ “experiment’’ has been, negative rates have undoubtedly made hedging strategies more complicated.
When it comes to the US Dollar, the Fed Chair has made it clear that negative rates are not part of its policy tools for the time being and that it is highly unlikely that rates will be pushed below zero. However, the US President has openly expressed that he views such a tool favourably. Although market experts do not expect negative Libor rates in the imminent future, no one can rule out the possibility of this happening.
These developments have had numerous effects on shipping companies who typically borrow using USD-Libor floating loans. The first and obvious outcome of lower Libor is the reduced borrowing cost. Whilst average 3-month LIBOR rates were 0.69%, 0.74% and 0.95% during the 2009, 2016 and 2020 (to date) recessions respectively, the 3-month LIBOR rate in July closed at 0.3% and has decreased approximately 6-fold since January (0.25%, as of 17/8). USD Libor loans have a zero lower bound limit which is incorporated by banks in their loan documentation (LMA) language: if Libor is less than zero “it will be deemed to be zero’’. This wording is also included in proposed documentation by the Alternative Reference Rates Committee, who is responsible for the development of Libor’s successor.
Low interest rates have also resulted in increased enquiries from bank clients who want to exploit their interest rate hedging options. Most shipping borrowers have decided not to hedge owing to the consensus that USD interest rates will not increase significantly over the next couple of years. Nevertheless, the number of shipping companies (mainly listed) that have engaged in hedging derivatives remain significant.
Under “normal” circumstances, a Cap or a SWAP for protection against an upward movement of interest rates would be the norm. However, nowadays it is essential to provision for negative interest rates. The borrower who hedges should bear in mind that USD Libor can also turn negative. Some banks even “encourage” clients to include a Floor in their SWAPS which will prevent base rates on their loans from dropping below zero. This limits the extent to which their derivatives can fall “out of the money”. Such protection comes at a premium. Indicatively, a 5 year SWAP is priced at 0.37 %, while the cost of a Floor is [10-30] bps. With rates expected to remain close to zero, the SWAP protection premium will continue to rise for as long as there are statements in favour of negative rates such as that of President Trump. However, whether the cost of protecting of a company’s future cash flows through the xyz premium is high or not is also a matter of perception and is reflective of one’s risk profile.
By George Laios
Deputy CEO, Intermodal Group
Compiled by:
Intermodal Research & Valuations
Analysts:
Ms Eva Tzima
Mr.George Panagopoulos
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, 19 August 20
COAL INDIA TRADE UNIONS DEFER DAY-LONG STRIKE: PTI
The unions had decided to go on strike against the commercial mining and the proposed divestment or buyback of shares of Coal India Ltd (CIL).
...
Wednesday, 19 August 20
MISC MARKS ITS MAIDEN FORAY INTO MAJOR DEEP-WATER PROJECT IN LATIN AMERICA WITH MERO 3 FPSO
MISC Berhad (MISC) is pleased to announce its acceptance of Letter of Intent (LOI) from Petróleo Brasileiro S.A. (Petrobras) for the provisi ...
Wednesday, 19 August 20
INDIA SAW A SHARP DECLINE IN ENERGY COAL IMPORTS IN JANUARY - JUNE 2020; –27 PER CENT YOY - BHP
Energy coal prices were weak in the second half of financial year 2020, BHP says in its Economic and Commodity Outlook FY20.
Accordi ...
Wednesday, 19 August 20
COAL PRICES TO REMAIN SUBDUED THIS FISCAL AMID WEAK DEMAND, HIGH INVENTORY - THE HINDU BUSINESS LINE
Coal offtake is improving gradually as lockdown eases
Coal prices are expected to remain subdued to weak demand and high inventory l ...
Tuesday, 18 August 20
BLACKBALLED: WILL COAL BOUNCE BACK FROM SLUMP OR IS IT TERMINAL? - SYDNEY MORNING HERALD
Even by the standards of this miserable year, 2020 has been a shocker for the global coal industry.
As the lockdown kicked in demand ...
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- Billiton Holdings Pty Ltd - Australia
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Standard Chartered Bank - UAE
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Samtan Co., Ltd - South Korea
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Metalloyd Limited - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- Lanco Infratech Ltd - India
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- SMG Consultants - Indonesia
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Global Coal Blending Company Limited - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- Ambuja Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Singapore Mercantile Exchange
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- ASAPP Information Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Star Paper Mills Limited - India
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Posco Energy - South Korea
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Kartika Selabumi Mining - Indonesia
- Australian Coal Association
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Simpson Spence & Young - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bhoruka Overseas - Indonesia
- Thai Mozambique Logistica
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- Sindya Power Generating Company Private Ltd
- Commonwealth Bank - Australia
- Economic Council, Georgia
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Latin American Coal - Colombia
- Edison Trading Spa - Italy
- Salva Resources Pvt Ltd - India
- London Commodity Brokers - England
- Romanian Commodities Exchange
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Chamber of Mines of South Africa
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Bayan Resources Tbk. - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- Wood Mackenzie - Singapore
- India Bulls Power Limited - India
- Indonesian Coal Mining Association
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- Ministry of Mines - Canada
- Grasim Industreis Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Deloitte Consulting - India
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Heidelberg Cement - Germany
- Trasteel International SA, Italy
- Bhatia International Limited - India
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Altura Mining Limited, Indonesia
- Xindia Steels Limited - India
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Tamil Nadu electricity Board
- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
- Binh Thuan Hamico - Vietnam
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- IHS Mccloskey Coal Group - USA
- Siam City Cement PLC, Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- PowerSource Philippines DevCo
- Makarim & Taira - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- Jorong Barutama Greston.PT - Indonesia
- Indian Oil Corporation Limited
- Formosa Plastics Group - Taiwan
- Energy Link Ltd, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- LBH Netherlands Bv - Netherlands
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- AsiaOL BioFuels Corp., Philippines
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Miang Besar Coal Terminal - Indonesia
- Gujarat Sidhee Cement - India
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- Eastern Coal Council - USA
- Anglo American - United Kingdom
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- SMC Global Power, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Kaltim Prima Coal - Indonesia
- The University of Queensland
- Savvy Resources Ltd - HongKong
- Chettinad Cement Corporation Ltd - India
- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Riau Bara Harum - Indonesia
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
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