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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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Monday, 13 December 10
NALCO TO START WORK ON RS 18K CR ($ 4,010,695,091) INDONESIAN PROJECT BY JUNE - MSN
MSN reported that, State-owned NALCO today said it has selected UAE-based RAK Minerals as JV partner for its Rs 18,000 crore (US$ 4,010,695,091 ...
Monday, 13 December 10
DEUTSCHE BANK RAISES COAL FORECASTS ON MARKET SHORTAGE - BLOOMBERG
Deutsche Bank AG raised price forecasts for thermal coal by as much as 17 percent on expectations that a shortage of the fuel will widen over the ne ...
Monday, 13 December 10
K SERA SERA TO SPEND RS325CR TO BUY COAL,OIL & GAS FIRMS STAKE - LIVE MINT
The company might have to dole out around Rs 225 crore (US$ 50,122,522) for picking up the majority stake in the coal mine in Indonesia and around R ...
Thursday, 09 December 10
OVERSUPPLY OF SHIPS BOUND TO KEEP DRY BULK FREIGHT RATES SUBDUED DURING 2011 SAYS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
An oversupply of vessels is expected to keep freight rates from flying as high as in recent years said a relative shipping report from BIMCO’s ...
Thursday, 09 December 10
INDONESIAN COAL PRICE REFERENCE REACHED US$ 103.41 PMT FOR DECEMBER DELIVERY
COALspot.com: The Directorate General of Mineral, Coal and Geothermal of Indonesia has been publishing a monthly coal price reference (HBA) since Fe ...
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- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Thai Mozambique Logistica
- Gujarat Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Chettinad Cement Corporation Ltd - India
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- CNBM International Corporation - China
- Kideco Jaya Agung - Indonesia
- Cigading International Bulk Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- Karaikal Port Pvt Ltd - India
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Oldendorff Carriers - Singapore
- Miang Besar Coal Terminal - Indonesia
- Power Finance Corporation Ltd., India
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- Antam Resourcindo - Indonesia
- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- India Bulls Power Limited - India
- London Commodity Brokers - England
- Sarangani Energy Corporation, Philippines
- San Jose City I Power Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- Vijayanagar Sugar Pvt Ltd - India
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Parliament of New Zealand
- Posco Energy - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Interocean Group of Companies - India
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Merrill Lynch Commodities Europe
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- White Energy Company Limited
- Independent Power Producers Association of India
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- Planning Commission, India
- Manunggal Multi Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Energy Development Corp, Philippines
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- McConnell Dowell - Australia
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Bharathi Cement Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Carbofer General Trading SA - India
- Australian Commodity Traders Exchange
- Economic Council, Georgia
- Alfred C Toepfer International GmbH - Germany
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Jaiprakash Power Ventures ltd
- Marubeni Corporation - India
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Siam City Cement - Thailand
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Central Java Power - Indonesia
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Lanco Infratech Ltd - India
- Port Waratah Coal Services - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Siam City Cement PLC, Thailand
- Madhucon Powers Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- GVK Power & Infra Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Africa Commodities Group - South Africa
- Sojitz Corporation - Japan
- Meralco Power Generation, Philippines
- Indian Energy Exchange, India
- Kepco SPC Power Corporation, Philippines
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- IEA Clean Coal Centre - UK
- PTC India Limited - India
- Commonwealth Bank - Australia
- Bulk Trading Sa - Switzerland
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Attock Cement Pakistan Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- OPG Power Generation Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Generating Authority of Thailand
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- Cement Manufacturers Association - India
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- Agrawal Coal Company - India
- MS Steel International - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- Mercuria Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Global Green Power PLC Corporation, Philippines
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Price Waterhouse Coopers - Russia
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- Petron Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Globalindo Alam Lestari - Indonesia
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- Rio Tinto Coal - Australia
- International Coal Ventures Pvt Ltd - India
- PowerSource Philippines DevCo
- Iligan Light & Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Kumho Petrochemical, South Korea
- SMC Global Power, Philippines
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
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