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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, 25 November 10
JSW ENERGY BUYS CANADIAN COAL FIRM FOR $411 MN - NDTV PROFIT
NDTV Profit reported that, Sajjan Jindal-owned JSW Energy on Wednesday said it has entered into an agreement to buy out British Virgin Islands-based ...
Thursday, 25 November 10
DRY BULK MARKET STILL GOING STRONG THIS WEEK, CAPESIZE SECTOR LOSING STEAM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market kept its upward momentum yesterday, with the industry’s benchmark, the Baltic Dry Index (BDI) gaining a further 0.64% to e ...
Wednesday, 24 November 10
COAL PRODUCTION PREDICTED TO CLIMB IN SUNNIER 2011 - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesia’s coal producers are expected to increase output by 13 percent in 2011, thanks to predicted better ...
Monday, 22 November 10
RUSSIA'S KTK HAS PRODUCED 4.59 MLN TONNES OF COAL IN FIRST 9 MONTHS OR AN INCREASE OF 5% YEAR-ON-YEAR
COALspot.com (Press Release) - KTK has produced 4.59 mln tonnes of coal in first nine months or an increase of 5% year-on-year.
Kuzbasskaya Topli ...
Sunday, 21 November 10
THE FREIGHT MARKET MAY SLIGHTLY FIRM UP NEXT WEEK - CAPT. REDDY
COALspot.com: The freight market continued its down fall with BDI down by 6.83 pct and closed at 2,155 points.
According to Vistaar Shipping of S ...
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- Lanco Infratech Ltd - India
- Global Business Power Corporation, Philippines
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- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Aditya Birla Group - India
- Goldman Sachs - Singapore
- Altura Mining Limited, Indonesia
- Pendopo Energi Batubara - Indonesia
- Maheswari Brothers Coal Limited - India
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- Australian Coal Association
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- VISA Power Limited - India
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- MS Steel International - UAE
- Minerals Council of Australia
- Bayan Resources Tbk. - Indonesia
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Wilmar Investment Holdings
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Pipit Mutiara Jaya. PT, Indonesia
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- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
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- Orica Australia Pty. Ltd.
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- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Australian Commodity Traders Exchange
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indonesian Coal Mining Association
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- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
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- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Global Coal Blending Company Limited - Australia
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- Bhushan Steel Limited - India
- Sical Logistics Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Uttam Galva Steels Limited - India
- McConnell Dowell - Australia
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Karaikal Port Pvt Ltd - India
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- Port Waratah Coal Services - Australia
- Ceylon Electricity Board - Sri Lanka
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- Kumho Petrochemical, South Korea
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- Thiess Contractors Indonesia
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- Chamber of Mines of South Africa
- Rio Tinto Coal - Australia
- Marubeni Corporation - India
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Larsen & Toubro Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Kohat Cement Company Ltd. - Pakistan
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- Electricity Generating Authority of Thailand
- Coastal Gujarat Power Limited - India
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Samtan Co., Ltd - South Korea
- Sindya Power Generating Company Private Ltd
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- The University of Queensland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- OPG Power Generation Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Madhucon Powers Ltd - India
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- Indo Tambangraya Megah - Indonesia
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- GVK Power & Infra Limited - India
- Ministry of Transport, Egypt
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Cigading International Bulk Terminal - Indonesia
- Bangladesh Power Developement Board
- Bukit Asam (Persero) Tbk - Indonesia
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Parliament of New Zealand
- Eastern Coal Council - USA
- ASAPP Information Group - India
- TeaM Sual Corporation - Philippines
- Indika Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bhoruka Overseas - Indonesia
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