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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, 16 September 12
GLOBAL LOW DEMAND ; INDONESIA COAL AND CFR SOUTH CHINA COAL SWAPS DIP
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for November 2012 delivery lost 1.345 percent W-O-W on Friday, 14 September 2012, closing but gai ...
Sunday, 16 September 12
THE FREIGHT RATES FROM INDONESIA TO INDIA EXPECTED TO BE STEADY - VISTAAR
COALspot.com - The freight market was mixed with most indices closing positive except for the Panamax index.
The main sentiment seems to be ...
Saturday, 15 September 12
FINANCE MINISTRY OPPOSES TAX INCENTIVE PLAN FOR COAL MINERS - JP
The Jakarta Post reported that, the Finance Ministry has turned down the idea of providing a fiscal incentive to the country’s coal mining ind ...
Friday, 14 September 12
DRY BULK MARKET LOOKS TOWARDS CHINA FOR SOME POSITIVE NEWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the dry bulk market freight rates submerged underwater for a large part of the year, dry bulk owners are looking for some positive enhancement ...
Friday, 14 September 12
GOVT OFFERS CONDITIONAL TAX HOLIDAY TO AILING COAL MINERS - JP
The Jakarta Post, one of the leading English news paper in Indonesia reported that, acknowledging difficulties encountered by coal miners due to a p ...
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- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- Karbindo Abesyapradhi - Indoneisa
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Timah Investasi Mineral - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Savvy Resources Ltd - HongKong
- Bulk Trading Sa - Switzerland
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Rashtriya Ispat Nigam Limited - India
- PTC India Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tata Chemicals Ltd - India
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Therma Luzon, Inc, Philippines
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Sojitz Corporation - Japan
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Kideco Jaya Agung - Indonesia
- Standard Chartered Bank - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement - Thailand
- MS Steel International - UAE
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Kaltim Prima Coal - Indonesia
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Maheswari Brothers Coal Limited - India
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Marubeni Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Latin American Coal - Colombia
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- Central Java Power - Indonesia
- Pendopo Energi Batubara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- VISA Power Limited - India
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Salva Resources Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Bhushan Steel Limited - India
- Mintek Dendrill Indonesia
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Orica Mining Services - Indonesia
- Star Paper Mills Limited - India
- Holcim Trading Pte Ltd - Singapore
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Interocean Group of Companies - India
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- SMC Global Power, Philippines
- Parliament of New Zealand
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- Coastal Gujarat Power Limited - India
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Essar Steel Hazira Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Posco Energy - South Korea
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Banpu Public Company Limited - Thailand
- Dalmia Cement Bharat India
- Indo Tambangraya Megah - Indonesia
- Meralco Power Generation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Indian Energy Exchange, India
- Thai Mozambique Logistica
- Ministry of Mines - Canada
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Heidelberg Cement - Germany
- Bharathi Cement Corporation - India
- New Zealand Coal & Carbon
- Planning Commission, India
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- Economic Council, Georgia
- Petron Corporation, Philippines
- Medco Energi Mining Internasional
- The University of Queensland
- Jorong Barutama Greston.PT - Indonesia
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Global Green Power PLC Corporation, Philippines
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- South Luzon Thermal Energy Corporation
- CIMB Investment Bank - Malaysia
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Eastern Coal Council - USA
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Central Electricity Authority - India
- Wood Mackenzie - Singapore
- Makarim & Taira - Indonesia
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Cigading International Bulk Terminal - Indonesia
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Semirara Mining Corp, Philippines
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- Straits Asia Resources Limited - Singapore
- AsiaOL BioFuels Corp., Philippines
- Price Waterhouse Coopers - Russia
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Kapuas Tunggal Persada - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- LBH Netherlands Bv - Netherlands
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