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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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Wednesday, 17 November 10
DRY BULK MARKET LOOKING FOR SUPPORT IN COAL TRADES AND INDIAN IRON ORE EXPORTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Nikos Roussanoglou, Hellenic Shipping reported that, the dry bulk market is lacking support to end its 13-day slide, as evidenced by Monday’s ...
Tuesday, 16 November 10
'VALLAR PLC' TO BECOME 'BUMI PLC' POST DEAL - THE JAKARTA POST
The Jakarta Post reported that, The United Kingdom’s Vallar Plc will change its name to Bumi Plc following a cash and stock transaction with t ...
Tuesday, 16 November 10
ROTHSCHILD BUYS INDONESIAN COAL STAKES FOR $3 BILLION - BLOOMBERG
Bloomberg reported that, Nathaniel Rothschild, the only son of U.K. financier Jacob Rothschild, agreed to invest $3 billion in two Indonesian coal c ...
Sunday, 14 November 10
THE FREIGHT MARKET CONTINUED ITS DOWN FALL - VISTAAR SINGAPORE
COALspot.com: The freight market continued its down fall with BDI down by 7.29 pct and closed at 2,313 points.
All other segments were also under ...
Saturday, 13 November 10
INDONESIA SHIPPED 8.73 % MORE COAL IN OCTOBER THAN A MONTH EARLIER
COALspot.com: Indonesia, the world largest coal exporter, shipped 23.55 mln mt of coal in October 2010, which is 8.73 percent more compared to Septe ...
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- GAC Shipping (India) Pvt Ltd
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Independent Power Producers Association of India
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Jaiprakash Power Ventures ltd
- Sical Logistics Limited - India
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
- Agrawal Coal Company - India
- Kalimantan Lumbung Energi - Indonesia
- Vizag Seaport Private Limited - India
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Australian Commodity Traders Exchange
- Malabar Cements Ltd - India
- Planning Commission, India
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Essar Steel Hazira Ltd - India
- The University of Queensland
- Edison Trading Spa - Italy
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Videocon Industries ltd - India
- Meralco Power Generation, Philippines
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- Orica Australia Pty. Ltd.
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
- Sinarmas Energy and Mining - Indonesia
- SMC Global Power, Philippines
- Ministry of Transport, Egypt
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Grasim Industreis Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- VISA Power Limited - India
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Dalmia Cement Bharat India
- European Bulk Services B.V. - Netherlands
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- PTC India Limited - India
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- Leighton Contractors Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Posco Energy - South Korea
- Directorate Of Revenue Intelligence - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- OPG Power Generation Pvt Ltd - India
- Mercuria Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Petron Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Central Electricity Authority - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Gujarat Mineral Development Corp Ltd - India
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Kartika Selabumi Mining - Indonesia
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- Uttam Galva Steels Limited - India
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- ICICI Bank Limited - India
- TeaM Sual Corporation - Philippines
- Cement Manufacturers Association - India
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Metalloyd Limited - United Kingdom
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Standard Chartered Bank - UAE
- Makarim & Taira - Indonesia
- CNBM International Corporation - China
- Bhushan Steel Limited - India
- ASAPP Information Group - India
- Bangladesh Power Developement Board
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
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