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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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Friday, 12 November 10
BANPU'S NET PROFIT HAS INCREASED 249 PERCENT IN 3Q 2010 COMPARED TO THE SAME PERIOD LAST YEAR
COALspot.com: Banpu Public Company Limited (BANPU) reports its financial performance for the third quarter 2010, posting a net profit of THB 13,293 ...
Friday, 12 November 10
DRY BULK MARKET STILL ON A FREEFALL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market failed to show any signs of life this week, with the Baltic Dry Index (BDI) still being on the red, now stretching more than 11 ...
Thursday, 11 November 10
KOMIPO WANTS 400KT OF SUB BITUMINOUS COAL
COALspot.com : Korea Midland Power Co. Ltd. (KOMIPO) is looking for 400,000 MT of sub bituminous coal through International open bidding. The delive ...
Wednesday, 10 November 10
NTPC TO IMPORT 12 MILLION TONS OF COAL IN 2011
COALspot.com: India's State Trading Corp Ltd a public sector Govt of India co. is looking for 12 million tones (+/- 2%) of imported coal for NTPC. ...
Tuesday, 09 November 10
NOBLE GROUP APPOINTED AS THE EXCLUSIVE MARKETING AGENT FOR PT. BERAU COAL
COALspot.com: Noble Group Limited has recently been appointed as the exclusive marketing agent for PT. Berau Coal production exported to internation ...
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- Globalindo Alam Lestari - Indonesia
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- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining and Power Corporation, Philippines
- PowerSource Philippines DevCo
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- Pipit Mutiara Jaya. PT, Indonesia
- San Jose City I Power Corp, Philippines
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- Miang Besar Coal Terminal - Indonesia
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- Minerals Council of Australia
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- Planning Commission, India
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- Commonwealth Bank - Australia
- Australian Coal Association
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- Indian Energy Exchange, India
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- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- Electricity Authority, New Zealand
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- Bulk Trading Sa - Switzerland
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- Madhucon Powers Ltd - India
- Singapore Mercantile Exchange
- SMC Global Power, Philippines
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- Ministry of Transport, Egypt
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- South Luzon Thermal Energy Corporation
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- Grasim Industreis Ltd - India
- Barasentosa Lestari - Indonesia
- London Commodity Brokers - England
- Kideco Jaya Agung - Indonesia
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- Intertek Mineral Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMG Consultants - Indonesia
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Mercuria Energy - Indonesia
- Africa Commodities Group - South Africa
- Cigading International Bulk Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Leighton Contractors Pty Ltd - Australia
- OPG Power Generation Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Romanian Commodities Exchange
- Sarangani Energy Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- Economic Council, Georgia
- Indogreen Group - Indonesia
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- Medco Energi Mining Internasional
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- VISA Power Limited - India
- CIMB Investment Bank - Malaysia
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Manunggal Multi Energi - Indonesia
- Chamber of Mines of South Africa
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- Ambuja Cements Ltd - India
- The University of Queensland
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Riau Bara Harum - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- Indonesian Coal Mining Association
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- White Energy Company Limited
- New Zealand Coal & Carbon
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- Trasteel International SA, Italy
- The Treasury - Australian Government
- International Coal Ventures Pvt Ltd - India
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Latin American Coal - Colombia
- Standard Chartered Bank - UAE
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- Central Electricity Authority - India
- Videocon Industries ltd - India
- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
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- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Wilmar Investment Holdings
- Parry Sugars Refinery, India
- Siam City Cement - Thailand
- Posco Energy - South Korea
- Directorate Of Revenue Intelligence - India
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement PLC, Thailand
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- McConnell Dowell - Australia
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Thai Mozambique Logistica
- Bayan Resources Tbk. - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Renaissance Capital - South Africa
- GAC Shipping (India) Pvt Ltd
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- Alfred C Toepfer International GmbH - Germany
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- Aboitiz Power Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- ASAPP Information Group - India
- Sical Logistics Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Pendopo Energi Batubara - Indonesia
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Independent Power Producers Association of India
- Marubeni Corporation - India
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Ministry of Finance - Indonesia
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