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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, 14 October 10
COAL PRICES AT QINHUANGDAO PORT UP - CAPITALVUE
Capitalvue reported that, prices of steam coal yielding 5,500 kilocalories per kilogram (kcal/kg) in Qinhuangdao Port have risen five yuan to 715-72 ...
Thursday, 14 October 10
DRY BULK MARKET MAINTAINS POSITIVE TREND ON FIRMER CHINESE IRON ORE DEMAND
The dry bulk market has kept its upward trend set since last week, with the industry’s main benchmark, the Baltic Dry Index (BDI) rising to 2, ...
Tuesday, 12 October 10
DRY BULK MARKET LOOKING FOR DIRECTION AFTER WEEK OF CAPESIZE GROWTH
The dry bulk market ended Monday unchanged from Friday’s closing, today standing at 2,695 points. In summary, the capesize and the supramax se ...
Tuesday, 12 October 10
COAL SPOT TRADING MAY SOOTH PRICING CONFLICTS - GLOBAL TIMES
Global Times reported that, Tianjin-based Bohai Commodity Exchange launched steam coal for spot trading for the first time Monday. Steam coal is mai ...
Monday, 11 October 10
INDONESIAN POWER PLANTS AND OTHER INDUSTRIES TO BURN 78.97 MLN TONS OF COAL IN 2011
COALspot.com: The Minister of Energy and Mineral Resources of Indonesia has issued a ministerial degree 2360 K/30/MEM/ 2010 related to Domestic mark ...
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- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Sojitz Corporation - Japan
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- European Bulk Services B.V. - Netherlands
- Bhoruka Overseas - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Tata Chemicals Ltd - India
- Mercator Lines Limited - India
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Mercuria Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- IEA Clean Coal Centre - UK
- Coastal Gujarat Power Limited - India
- Eastern Energy - Thailand
- Metalloyd Limited - United Kingdom
- Manunggal Multi Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- Eastern Coal Council - USA
- Global Green Power PLC Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- Alfred C Toepfer International GmbH - Germany
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- Vedanta Resources Plc - India
- Energy Development Corp, Philippines
- Attock Cement Pakistan Limited
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Makarim & Taira - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Pendopo Energi Batubara - Indonesia
- Oldendorff Carriers - Singapore
- Globalindo Alam Lestari - Indonesia
- Wilmar Investment Holdings
- White Energy Company Limited
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Energy Link Ltd, New Zealand
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- Karaikal Port Pvt Ltd - India
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The Treasury - Australian Government
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- VISA Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Parliament of New Zealand
- Thai Mozambique Logistica
- Sree Jayajothi Cements Limited - India
- Sindya Power Generating Company Private Ltd
- Central Electricity Authority - India
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kaltim Prima Coal - Indonesia
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
- SMG Consultants - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- Bulk Trading Sa - Switzerland
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Australian Coal Association
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Bayan Resources Tbk. - Indonesia
- Bukit Makmur.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Australian Commodity Traders Exchange
- GN Power Mariveles Coal Plant, Philippines
- Orica Mining Services - Indonesia
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- The University of Queensland
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- PetroVietnam Power Coal Import and Supply Company
- Siam City Cement PLC, Thailand
- Georgia Ports Authority, United States
- Deloitte Consulting - India
- Medco Energi Mining Internasional
- Sinarmas Energy and Mining - Indonesia
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Larsen & Toubro Limited - India
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- Malabar Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Global Business Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Rashtriya Ispat Nigam Limited - India
- McConnell Dowell - Australia
- CNBM International Corporation - China
- Africa Commodities Group - South Africa
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- Romanian Commodities Exchange
- Siam City Cement - Thailand
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- London Commodity Brokers - England
- Parry Sugars Refinery, India
- Minerals Council of Australia
- Planning Commission, India
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Indika Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Carbofer General Trading SA - India
- Altura Mining Limited, Indonesia
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
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