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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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Saturday, 20 November 10
ITALIAN STEAM COAL MARKET HAS RECOVERED - ITALIAN COAL ASSOCIATION
Press Release - This year Italy will import 17 million tons of steam coal, up 3% from 2009, and 5.5 million tons of coking coal and PCI, up 37% over ...
Friday, 19 November 10
WE'LL THINK ABOUT COAL TOMORROW - ANALYSIS
The future of coal generation in Russia is in question. The largest energy companies have abandoned their initial plans to switch their therma ...
Friday, 19 November 10
DRY BULK MARKET ON THE ROPES WITH BDI PLUNGING TO 2,164 POINTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the panamax markets suffering the most this week, but a ray of hope for the capesize market, which appears to be stabilizing after days of fall ...
Thursday, 18 November 10
WORLD COAL ASSOCIATION WELCOMES NEW CHAIRMAN & SHENHUA GROUP AS NEW MEMBER 17 NOVEMBER 2010
Press Release – The premier global coal industry association marks its 25th anniversary with a new Chairman and welcomes China’s lar ...
Thursday, 18 November 10
MUNDRA PORT AWARDED BEST PRIVATE PORT - COMMODITY ONLINE / HELLENIC SHIPPING
Adani Group owned, Mundra Port has been awarded the Annual Indian Maritime Gateway Award for the Best Private Port of the Year for the third consecu ...
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- LBH Netherlands Bv - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Jaiprakash Power Ventures ltd
- ASAPP Information Group - India
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- Chamber of Mines of South Africa
- Therma Luzon, Inc, Philippines
- Electricity Generating Authority of Thailand
- Karaikal Port Pvt Ltd - India
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Economic Council, Georgia
- Billiton Holdings Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- Indian Energy Exchange, India
- Parliament of New Zealand
- Bukit Baiduri Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- New Zealand Coal & Carbon
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Leighton Contractors Pty Ltd - Australia
- Xindia Steels Limited - India
- Indonesian Coal Mining Association
- AsiaOL BioFuels Corp., Philippines
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Port Waratah Coal Services - Australia
- Manunggal Multi Energi - Indonesia
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thiess Contractors Indonesia
- The University of Queensland
- Madhucon Powers Ltd - India
- Essar Steel Hazira Ltd - India
- Planning Commission, India
- Africa Commodities Group - South Africa
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Minerals Council of Australia
- Carbofer General Trading SA - India
- Cement Manufacturers Association - India
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Edison Trading Spa - Italy
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Attock Cement Pakistan Limited
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Medco Energi Mining Internasional
- Jorong Barutama Greston.PT - Indonesia
- CNBM International Corporation - China
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Power Finance Corporation Ltd., India
- European Bulk Services B.V. - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Commonwealth Bank - Australia
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Georgia Ports Authority, United States
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Aditya Birla Group - India
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- ICICI Bank Limited - India
- Ind-Barath Power Infra Limited - India
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Bhoruka Overseas - Indonesia
- Coastal Gujarat Power Limited - India
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Standard Chartered Bank - UAE
- Altura Mining Limited, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Chettinad Cement Corporation Ltd - India
- Indogreen Group - Indonesia
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Bharathi Cement Corporation - India
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- London Commodity Brokers - England
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Meralco Power Generation, Philippines
- Posco Energy - South Korea
- Sojitz Corporation - Japan
- Holcim Trading Pte Ltd - Singapore
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Makarim & Taira - Indonesia
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Borneo Indobara - Indonesia
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Mjunction Services Limited - India
- VISA Power Limited - India
- Kideco Jaya Agung - Indonesia
- Australian Commodity Traders Exchange
- Trasteel International SA, Italy
- Salva Resources Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- Sical Logistics Limited - India
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