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Thursday, 13 September 12
FUEL EFFICIENT SHIPS MAY BE MORE EXPENSIVE, BUT THEY MAKE FINANCIAL SENSE SAYS ANALYSIS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
 The latest trend in shipbuilding is the so called "Eco" ship, i.e. ships which offer much better fuel consumption and are more cost-effective in that sense. On the plus side, they help ship owners who order meet the latest regulations on shipping emissions, which are becoming ever so demanding. But, these vessels come at a heftier price tag, as much as 25% premium over regular ones. So one has to wonder, if the ship owners will his money back?
According to a relative analysis by Bimco's chief shipping analyst Peter Sand, this premium is financially and commercially viable. According to Sand, "our calculations show that, should you choose to invest in an ECO MR2-tanker, you could pay up to 25% more for your vessel before settling for a non-ECO MR2-tanker”. BIMCO has been looking at the basic economics of this development and can conclude that a fairly large premium can be paid on newbuildings to operate ECO ships instead of traditional ships. The calculations that are based on our assumptions, disclose that a 15% savings on fuel, potentially enables the owner of the ECO ship to charge extra up to the amount that is saved in fuel – which is USD 2,197 more per day than what a regular vessel can ever get obtain. The extra income means that a ship-owner can pay up to USD 8.31 million more for an ECO ship, for the investment to be equally good or better off as compared to a standard tanker. That is a premium of 25% when the standard vessel is priced at USD 33 million" he said.
Peter Sand also mentioned that "in the same way and based on the same fuel consumption and fuel prices assumptions, a ship-owner can pay up to USD 5.5 million more for an ECO ship for every 10% of fuel savings – or 17% more when a standard vessel is priced at USD 33 million. An obtainable premium to the market-given time charter rate (USD per day), where the charterer pays the fuel, is implied to be equal to an obtainable cost deduction on a market-given voyage charter rate (USD per tons) where the owner pays for the fuel".
So, what happens when one factors in the effect of fuel prices? "If the bunker prices go up the fuel-savings premium increases, making investments in ECO ships more viable. For each increase of USD 100 per tons in bunker prices the premium goes up by USD 338 per day, improving the net present value (NVP) of the investment by USD 1.3 million. A change to the fuel price tends to affect time-charter rates directly, but we fix the rate at USD 12,750 per day in the following calculations, which is the latest 1-year time-charter rate for a 47-48k products tanker according to CRSL. If the bunker price stays on the current level of USD 651 per ton the fuel-savings premium will not be high enough to make investment in an ECO ship profitable for a ship-owner; even the psychological barrier of USD 1,000 per ton will not make the investment sustainable with a negative net present value of USD 0.7 million. The bunker price has to exceed USD 1,060 per tons to make a new ECO ship an investment, with a positive NPV, if the ECO ship is priced at USD 33 million. In other words, bunker prices would have to increase by two-thirds ceteris paribus to make the investment viable under the circumstance of a fixed time-charter rate and OPEX level going forward" said the report.
It continued by mentioning that "at the current 1 year time-charter rate of 12,750 USD/day, a standard vessel does not meet its cash-breakeven rate making the investment unprofitable with an NPV loss of USD 13.5 million – more than the initial equity outlay. Even if we were able to secure the ECO ship at a cost of USD 33 million the investment will still be unprofitable, despite being able to charge a fuel-savings premium of 2,197 USD on top of the time-charter rate, making an NPV loss of USD 5.2 million.
The cash-breakeven cost for a vessel priced at USD 33 million is USD 13,928 a day covering the daily operating and financial expenses, but not return to equity, which explains why the time-charter rate plus the fuel-savings premium is not enough to make the investment in an ECO ship profitable in the current environment.
The effect of new-building prices
As stated above the current time-charter rates at a fixed level for the next 20 years are not high enough to sustain investments in new vessels at present new-building prices.
Returning to the benchmark case of 15% fuel savings and time-charter rates of 12,750 USD/day for a standard vessel, an ECO ship must not cost more than USD 27.8 million to be a profitable investment for a ship-owner. Comparably a standard vessel must cost as little as USD 19.5 million to be profitable in today’s market. “The current newbuilding prices reflect some optimism in the shipping industry. Higher freight rates are expected to be part of not too distant future. From our calculations two results are striking; Firstly, newbuilding prices are not as closely related to the present market condition as they normally are – and secondly, ECO ships seem to be the best profitable choice for the future fleet” adds Peter Sand.
The effect of time-charter rates
"Instead of changing the new-building prices, we now examine how high the time-charter rates must go before the purchase becomes profitable. For a standard vessel priced at USD 33 million, time-charter rates must be as high as USD 16,328 per day for the purchase to be sustainable – but rates have not been this high since mid-2009. If the ECO ship costs USD 33 million, the ship also needs to make USD 16,328 per day before the purchase is profitable; but a portion of the rate reflects the fuel-savings premium. By deducting the premium of USD 2,197 per day, we can compare the rate to the historical values observed by a standard vessel. This means that the base rate needs to be USD 16,328-2,197=14,131 per day before an ECO ship becomes a profitable investment. By looking at historical freight rates, this is achievable. The 10-year average for 2003-2012 is USD 19,214 per day for a 1-year TC for a 47,000-48,000 DWT products tanker. It should be noted that we have assumed that the whole advantage of the investment would go to the ship owner" the report concluded.
Source: Nikos Roussanoglou, Hellenic Shipping
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Tuesday, 06 November 12
NOVEMBER 2012 HBA $35.21 LOWER THAN A YEAR AGO
COALspot.com - The Indonesian government’s declared coal reference price for November’ 12 has lost US$ 4.60 per MT M-o-M.
...
Sunday, 04 November 12
SUB-BIT INDONESIA COAL SWAPS FOR DECEMBER' 12 DELIVERY FALLS TO $ 59.78
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for December 2012 delivery fell -1.02 percent on WoW but gained 0.08 percent on D-D on Friday, 2 ...
Saturday, 03 November 12
THE SUPRAMAX FREIGHT EXPECTED TO BE SOFT NEXT WEEK - VISTAAR
COALspot.com - This week the market remained soft with all the sectors soft.
The BDI and was down by 6 pct closing at 986 points. The cape index ...
Saturday, 03 November 12
DEMOLITION IS THE KEY FOR DRY BULK SHIPPING'S RECOVERY SAYS SHIPBROKER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
With the number of new building deliveries so far in 2012 already having surpassed the total of 2011, it's more than clear that the dry bulk sector ...
Thursday, 01 November 12
INDONESIA HAS REVISED DOWN ITS 2012 DOMESTIC MARKET OBLIGATION REQUIREMENT FOR COAL
COALspot.com - Minister of Energy and Mineral Resources of Indonesia has revised down its 2012 domestic market obligation requirement due to lower d ...
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- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- Vizag Seaport Private Limited - India
- Deloitte Consulting - India
- Marubeni Corporation - India
- IEA Clean Coal Centre - UK
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Ministry of Transport, Egypt
- Videocon Industries ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Antam Resourcindo - Indonesia
- PNOC Exploration Corporation - Philippines
- Energy Link Ltd, New Zealand
- SN Aboitiz Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- The University of Queensland
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Banpu Public Company Limited - Thailand
- Trasteel International SA, Italy
- Kaltim Prima Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Malabar Cements Ltd - India
- Vedanta Resources Plc - India
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Independent Power Producers Association of India
- Formosa Plastics Group - Taiwan
- Parliament of New Zealand
- Savvy Resources Ltd - HongKong
- White Energy Company Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wilmar Investment Holdings
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Attock Cement Pakistan Limited
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Directorate General of MIneral and Coal - Indonesia
- India Bulls Power Limited - India
- Economic Council, Georgia
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Australian Coal Association
- Standard Chartered Bank - UAE
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- OPG Power Generation Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Coastal Gujarat Power Limited - India
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Therma Luzon, Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Heidelberg Cement - Germany
- Dalmia Cement Bharat India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- Chamber of Mines of South Africa
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- Leighton Contractors Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jorong Barutama Greston.PT - Indonesia
- Romanian Commodities Exchange
- Alfred C Toepfer International GmbH - Germany
- Siam City Cement - Thailand
- CIMB Investment Bank - Malaysia
- Siam City Cement PLC, Thailand
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Port Waratah Coal Services - Australia
- Gujarat Sidhee Cement - India
- VISA Power Limited - India
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Bangladesh Power Developement Board
- PTC India Limited - India
- Thai Mozambique Logistica
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Riau Bara Harum - Indonesia
- Kumho Petrochemical, South Korea
- Bukit Makmur.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Tamil Nadu electricity Board
- Energy Development Corp, Philippines
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Global Green Power PLC Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- Agrawal Coal Company - India
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Tata Chemicals Ltd - India
- Sindya Power Generating Company Private Ltd
- Bhatia International Limited - India
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- San Jose City I Power Corp, Philippines
- Parry Sugars Refinery, India
- Semirara Mining Corp, Philippines
- Indika Energy - Indonesia
- Eastern Coal Council - USA
- MS Steel International - UAE
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Coal and Oil Company - UAE
- Gujarat Mineral Development Corp Ltd - India
- Bayan Resources Tbk. - Indonesia
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- Rio Tinto Coal - Australia
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Commonwealth Bank - Australia
- Chettinad Cement Corporation Ltd - India
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