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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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Thursday, 09 December 10
DRY BULK MARKET LOOKING FOR DIRECTION THIS WEEK, AS CAPESIZE SHIPS END THEIR MISFORTUNES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk has began the week on a positive note capitalizing on the positive sentiment which finally prevailed during the last days of the previo ...
Monday, 06 December 10
NTPC MAY OPT FOR INDONESIA OVER AFRICA, OZ FOR COAL MINES
Country's largest power producer NTPC, which is scouting for coal properties abroad to fuel its power plants back home, may zero in on Indonesia fo ...
Saturday, 04 December 10
INDONESIA TO INDIA AND CHINA SEA FREIGHT UP BY ABOUT US$ 2.50 PMT - CAPT. REDDY
COALspot.com - The freight market even though remained weak, but towards end of the week the market seemed to firm up.
The BDI was almost at sam ...
Saturday, 04 December 10
OFF WEST COAST OF INDIA TONNAGE IS SEEMINGLY QUITE SPARSE - FEARNBULK
Handy
The Atlantic markets are weak and remained unusually calm after the Thanksgiving ...
Friday, 03 December 10
INDONESIAN LOW RANK COAL IS ATTRACTING COAL BUYERS FROM INDIA AND CHINA
COALspot.com - Bhakti Energi Persada has sold out its whole coal production until the end of 2011, Jeffry Mulyono said during McCloskey Asia P ...
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- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Agrawal Coal Company - India
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Indian Energy Exchange, India
- GAC Shipping (India) Pvt Ltd
- CNBM International Corporation - China
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- Coalindo Energy - Indonesia
- Makarim & Taira - Indonesia
- Orica Australia Pty. Ltd.
- Bukit Asam (Persero) Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Mjunction Services Limited - India
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- Heidelberg Cement - Germany
- San Jose City I Power Corp, Philippines
- Trasteel International SA, Italy
- Australian Coal Association
- Medco Energi Mining Internasional
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- Vizag Seaport Private Limited - India
- Bangladesh Power Developement Board
- White Energy Company Limited
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Eastern Coal Council - USA
- Ceylon Electricity Board - Sri Lanka
- Kaltim Prima Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- Parry Sugars Refinery, India
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- PTC India Limited - India
- Coal and Oil Company - UAE
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- Commonwealth Bank - Australia
- Siam City Cement PLC, Thailand
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Sinarmas Energy and Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Global Green Power PLC Corporation, Philippines
- Aditya Birla Group - India
- Thai Mozambique Logistica
- Offshore Bulk Terminal Pte Ltd, Singapore
- SN Aboitiz Power Inc, Philippines
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- ASAPP Information Group - India
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- European Bulk Services B.V. - Netherlands
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- GVK Power & Infra Limited - India
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Energy Link Ltd, New Zealand
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- Australian Commodity Traders Exchange
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Dalmia Cement Bharat India
- The University of Queensland
- Miang Besar Coal Terminal - Indonesia
- Bhushan Steel Limited - India
- Meenaskhi Energy Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- MS Steel International - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Singapore Mercantile Exchange
- Planning Commission, India
- Bhoruka Overseas - Indonesia
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- Mercator Lines Limited - India
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Merrill Lynch Commodities Europe
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Electricity Generating Authority of Thailand
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Anglo American - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- VISA Power Limited - India
- Baramulti Group, Indonesia
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