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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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Sunday, 23 September 12
AN ANOTHER UNSTABLE WEEK FOR INDONESIAN COAL SWAPS
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for November 2012 delivery lost 1.10 percent and 0.916 percent WOW and DOD respectively ...
Sunday, 23 September 12
INDIA IMPORTED 11.40 PERCENT MORE INDONESIAN COAL IN AUGUST
COALspot.com: Indonesia, the world largest multi grade coal exporter, shipped 26,451,565* tons of coal in August 2012, compared to 27.88* mill ...
Saturday, 22 September 12
SOFT BUNKER PRICES KEEP INDONESIA TO INDIA FREIGHTS STABLE - VISTAAR
COALspot.com - The freight market overall remained buoyant with all indices up except for Panamax index. The main effect seems to be increased shipm ...
Friday, 21 September 12
SHIP BREAKING ACTIVITY REACHES NEW RECORDS, AS ALREADY 2012 LEVELS HAVE SURPASSED THE WHOLE OF 2011 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The vast oversupply of vessels, most notably in the dry bulk shipping sector, has forced ship owners to intensify their efforts towards recycling th ...
Thursday, 20 September 12
SUPRAMAX : INDO-INDIA ROUNDS WERE AROUND USD 12K - FEARNLEYS
Handy
Not a bad week for Supramax tonnage, if we compare Supramax developments to the bigger size tonnage. The rates have basically remained unchan ...
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Planning Commission, India
- GN Power Mariveles Coal Plant, Philippines
- MS Steel International - UAE
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Global Green Power PLC Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Banpu Public Company Limited - Thailand
- SMC Global Power, Philippines
- Bukit Baiduri Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Larsen & Toubro Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- The University of Queensland
- Wilmar Investment Holdings
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Indian Energy Exchange, India
- Wood Mackenzie - Singapore
- Medco Energi Mining Internasional
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Antam Resourcindo - Indonesia
- Commonwealth Bank - Australia
- Central Electricity Authority - India
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Power Finance Corporation Ltd., India
- Miang Besar Coal Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- San Jose City I Power Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- White Energy Company Limited
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- Singapore Mercantile Exchange
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Minerals Council of Australia
- Georgia Ports Authority, United States
- Tamil Nadu electricity Board
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- LBH Netherlands Bv - Netherlands
- Jaiprakash Power Ventures ltd
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Pipit Mutiara Jaya. PT, Indonesia
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- CNBM International Corporation - China
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- Mercuria Energy - Indonesia
- Madhucon Powers Ltd - India
- Straits Asia Resources Limited - Singapore
- Jindal Steel & Power Ltd - India
- Agrawal Coal Company - India
- Independent Power Producers Association of India
- ICICI Bank Limited - India
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- VISA Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Aditya Birla Group - India
- Coalindo Energy - Indonesia
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Kapuas Tunggal Persada - Indonesia
- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Anglo American - United Kingdom
- Meenaskhi Energy Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Chettinad Cement Corporation Ltd - India
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Pendopo Energi Batubara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- SMG Consultants - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Holcim Trading Pte Ltd - Singapore
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
- Rashtriya Ispat Nigam Limited - India
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Essar Steel Hazira Ltd - India
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- PNOC Exploration Corporation - Philippines
- Malabar Cements Ltd - India
- Thai Mozambique Logistica
- PTC India Limited - India
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- Gujarat Mineral Development Corp Ltd - India
- Global Coal Blending Company Limited - Australia
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Savvy Resources Ltd - HongKong
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Bulk Trading Sa - Switzerland
- OPG Power Generation Pvt Ltd - India
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
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