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Wednesday, 15 December 10
LARGE ORDERBOOK TO HINDER 2011 DRY BULK MARKET REBOUND DESPITE INCREASED DEMAND SAYS PARAGON SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
 A large orderbook which currently stands at 53% of the existing fleet is expected to render 2011 another challenging year for the dry bulk market. According to Mr. Michael Bodouroglou, Chairman and CEO of Paragon Shipping Inc., in an interview with Hellenic Shipping News Worldwide,
“we believe that 2011 should be a challenging year due to the amount of new vessels that are expected to hit the water during the year”. Providing with an explanation on the flurry of newbuilding orders this year, Mr. Bodouroglou said that current newbuilding prices are 12% below where the prompt resale values are, “so we do believe that the newbuilding market offers the best value in the drybulk sector” he said.
Paragon Shipping recently posted its third quarter and nine-month results. Which were the key performance figures you would highlight?
Despite the turbulence in the markets of the past two years, our chartering strategy enabled us report our 13th straight profitable quarter since we went public in 2007. This past quarter, there was a lot of activity, and we diversified into the containership market, and expanded our fleet without risking our balance sheet and maintaining our dividend. In addition, our adjusted EBITDA was $19.6 million in the third quarter, which was a $3 million improvement over the previous quarter, and our leverage remains at a moderate 57%.
What about your stock’s valuation? Do you think that there is enough room for an increase?
Absolutely, we feel our stock is undervalued. With our current charter coverage at 98% for 2011, our revenues are insulated from any market fluctuations that may occur next year and our stock price doesn’t properly reflect this. Our time charter coverage makes us feel our stock price should be higher.
Do you think that this volatility of the market will continue in 2011 or will things be more stable going forward?
We believe that 2011 should be a challenging year due to the amount of new vessels that are expected to hit the water during the year. Our outlook on the demand side is very positive, and we expect to see increased demand for iron ore and coal from the Asian markets during 2011.
However, the orderbook remains very large with 53% of the existing fleet on order, and even with most analysts’ predictions that continued slippage should be in the range of 30%-40% of the expected deliveries, we expect an oversupply of vessels in 2011, which should create a more volatile market next year.
Oversupply issues have plagued the dry bulk market this year. Are you more optimistic about 2011 or not, especially with regards to the Panamax segment where Paragon has an increased presence?
As I mentioned above, we remain concerned about the orderbook for 2011, and while the orderbook is the largest for Capesized vessels, at 60% of the current fleet, Panamaxes also have a large orderbook at 50% of the current fleet, so we expect to feel some pressure on rates in 2011. This is why we have been proactive in locking up 98% of our revenues for 2011, so that we are protected against a decline in freight rates next year.
This year we witnessed a strong rebound of newbuilding orders which are difficult to justify given the already huge orderbook. Are valuations really that low? What’s your opinion on the matter?
In today’s market, you can see that current newbuilding prices are 12% below where the prompt resale values are, so we do believe that the newbuilding market offers the best value in the drybulk sector.
That is also why you continue to see newbuildings being ordered despite the large orderbook. We ordered seven newbuildings earlier this year, to be delivered between October 2011 and December, 2012, so we have backed up our view with action.
New building cancellations and scrapping of older bulkers seem to be the best chance that shipping has to improve freight rates. How is each of these solutions progressing since the beginning of the year?
Cancellations are very hard to measure, because neither the yards nor the shipowners have an incentive to announce them. This year, it appears cancellations have stalled as the markets were much stronger than expected. There have also been many new orders, which may have been new owners taking over someone else’s order, but these types of deals may never become clear. We continue to see a high amount of slippage, which will push the current orderbook out further, and hopefully extend the orderbook far enough out into the future so that demand will have time to catch up with supply. In addition, vessel scrapings have decreased this year and unless rates are depressed for an extended period, there is no incentive to scrap older tonnage. We would need a market where rates remain depressed for six to nine months before scrapings would be significant enough to offset new deliveries. This is also more pronounced with the smaller tonnage, as over 50% of the handysize fleet is older than 20 years of age, compared to only 16% for the capesize fleet.
How would you characterize the current market for second hand vessels? Are asset values corresponding to current freight rates?
We believe asset values are artificially inflated at current levels, and it is shown by the fact that the price of a five-year old Panamax is 11% above its 10-year historical average, compared to the one-year T/C rate that is 8% below its 10-year historical average. To us, this signifies that second hand values are higher than they should be and that there is a disconnect in the current market between vessel values and freight rates.
Would you see investment opportunities in today’s market conditions?
We have struggled looking for investment opportunities in today’s markets, although we believe that in the drybulk sector, the Handysize vessels are the most attractive at the moment. As we mentioned, over 50% of the fleet is older than 20 years of age, and it also has the smallest orderbook at the moment with 33% of the current fleet on order. We feel Handysize vessels maintain stable earnings, even in declining markets and have the best supply/demand dynamic of the drybulk sector.
What about cargo demand in the future? Is a booming China enough on its own to sustain the global fleet growth?
While China continues to be the primary driver for the drybulk market, other Asian Countries, most notably, India, have also been growing at a significant pace, and it is no longer demand for Iron Ore alone that drives freight rates, it is also the increased demand for Coal. The combined demand for Coal imports from India and China has helped boost the markets in 2010, and we expect this to continue for the next several years. As these Countries continue to build up their infrastructure, there will be an increased demand for energy, which should continue to drive increases in coal imports into China and India. So while China alone may not be able to utilize new tonnage that is expected to enter the market in the coming years, the combination of China, India and the rest of the Asian markets should be able to absorb this tonnage over time. We don’t expect this to happen in 2011, although we expect the market to be stabilized by 2013.
Interviewed by : Nikos Roussanoglou, Hellenic Shipping
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Friday, 17 December 10
NALCO SHORTLISTS COAL FIRMS FOR INDONESIA PROJECT - BUSINESS-STANDARD
Business-Standard reported that, State-owned NALCO today said it has shortlisted two firms for supply of coal for its Rs 18,000-crore (US$ 3,953,003 ...
Thursday, 16 December 10
LANCO BAGS AUSTRALIAN COAL MINER GRIFFITH - DNA
As part of its strategy to secure coal supplies for meeting its needs in expanding power generation capacities, infrastructure major Lanco Infratech ...
Thursday, 16 December 10
COAL INDIA IN TALKS WITH INDONESIAN CO TO BUY ITS COAL MINES - APN NEWS
APN News reported that, World’s largest coal producer Coal India is in talks with Indonesia’s Sinar Mas Group for acquiring coal mines i ...
Wednesday, 15 December 10
GOVT SETS NEW MINIMUM LEVEL FOR DOMESTIC MARKET SALES - THE JAKARTA POST
The Jakarta Post reported that, Indonesian coal producers are required to sell at least 24.17 percent of their production to the domestic market nex ...
Wednesday, 15 December 10
CAPESIZE RATES ARE NOW AT THEIR LOWEST LEVEL SINCE AUGUST
It was a repeat performance for the market this week, with another increase in earnings for the small sizes but a sharp drop for the Capes. Overall ...
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- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- OPG Power Generation Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- Leighton Contractors Pty Ltd - Australia
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- The Treasury - Australian Government
- Semirara Mining and Power Corporation, Philippines
- Mintek Dendrill Indonesia
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Krishnapatnam Port Company Ltd. - India
- SMC Global Power, Philippines
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Planning Commission, India
- Australian Commodity Traders Exchange
- White Energy Company Limited
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- Siam City Cement - Thailand
- Merrill Lynch Commodities Europe
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sakthi Sugars Limited - India
- PTC India Limited - India
- Cigading International Bulk Terminal - Indonesia
- Meralco Power Generation, Philippines
- Bulk Trading Sa - Switzerland
- GVK Power & Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- MS Steel International - UAE
- Sical Logistics Limited - India
- Central Java Power - Indonesia
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Australian Coal Association
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Timah Investasi Mineral - Indoneisa
- Thai Mozambique Logistica
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Tamil Nadu electricity Board
- Intertek Mineral Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- Wilmar Investment Holdings
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SN Aboitiz Power Inc, Philippines
- Central Electricity Authority - India
- Meenaskhi Energy Private Limited - India
- Grasim Industreis Ltd - India
- Globalindo Alam Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Gujarat Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Agrawal Coal Company - India
- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Videocon Industries ltd - India
- Sindya Power Generating Company Private Ltd
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- Minerals Council of Australia
- Cement Manufacturers Association - India
- Oldendorff Carriers - Singapore
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Malabar Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Ambuja Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Heidelberg Cement - Germany
- Kumho Petrochemical, South Korea
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Marubeni Corporation - India
- Ministry of Transport, Egypt
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Maheswari Brothers Coal Limited - India
- Bangladesh Power Developement Board
- Vedanta Resources Plc - India
- Bahari Cakrawala Sebuku - Indonesia
- Bhatia International Limited - India
- TeaM Sual Corporation - Philippines
- Coalindo Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Standard Chartered Bank - UAE
- Xindia Steels Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Commonwealth Bank - Australia
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- Jaiprakash Power Ventures ltd
- Jorong Barutama Greston.PT - Indonesia
- Larsen & Toubro Limited - India
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Aboitiz Power Corporation - Philippines
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Kapuas Tunggal Persada - Indonesia
- Medco Energi Mining Internasional
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Interocean Group of Companies - India
- London Commodity Brokers - England
- McConnell Dowell - Australia
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