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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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Monday, 10 September 12
DRY BULK MARKET SLOWLY BUT SURELY REACHING CRITICAL STATUS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The radical consequences of the shifts in dry bulk demand and prices, especially for the most sought after commodity, concerning the industry, i.e. ...
Monday, 10 September 12
ORPHEUS ENERGY SECURES INDONESIAN COAL TRADING LICENSE
COALspot.com - Indonesian coal producer, Orpheus Energy (ASX:OEG) has announced today that the Indonesian Ministry of Energy and Mineral Resources h ...
Monday, 10 September 12
A SNAPSHOT ON THE ECONOMIC AND SHIPPING ENVIRONMENT - GOLDEN DESTINY / HELLENIC SHIPPING
The European Central Bank left its interest rate unchanged at 0.75% focusing on pushing down borrowing costs in troubled economies, Spain and Italy. ...
Sunday, 09 September 12
H213 SUB-BIT FOB INDONESIA COAL SWAPS ARE TRADING HIGHER
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for October 2012 delivery lost 0.14 percent W-O-W on 7 September 2012, Friday closing but gained ...
Saturday, 08 September 12
INDO INDIA ROUTE FREIGHT FOR SUPRAMAX REMAINS STRONG - CAPT. REDDY
COALspot.com - The freight market overall remained weak and except for cape index all other sectors were down. The biggest drop was in the Panamax s ...
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- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
- Medco Energi Mining Internasional
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- Australian Coal Association
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- Coal and Oil Company - UAE
- Billiton Holdings Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Uttam Galva Steels Limited - India
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
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- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
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- MS Steel International - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Toyota Tsusho Corporation, Japan
- Economic Council, Georgia
- Latin American Coal - Colombia
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Deloitte Consulting - India
- Planning Commission, India
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Trasteel International SA, Italy
- India Bulls Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Baramulti Group, Indonesia
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Heidelberg Cement - Germany
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Indogreen Group - Indonesia
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Agrawal Coal Company - India
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Attock Cement Pakistan Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- White Energy Company Limited
- Romanian Commodities Exchange
- ASAPP Information Group - India
- Electricity Authority, New Zealand
- Kideco Jaya Agung - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Bhushan Steel Limited - India
- Marubeni Corporation - India
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Chettinad Cement Corporation Ltd - India
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Malabar Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Carbofer General Trading SA - India
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Sakthi Sugars Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Anglo American - United Kingdom
- Oldendorff Carriers - Singapore
- Port Waratah Coal Services - Australia
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Minerals Council of Australia
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Mercuria Energy - Indonesia
- Siam City Cement - Thailand
- Chamber of Mines of South Africa
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Lanco Infratech Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- London Commodity Brokers - England
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Edison Trading Spa - Italy
- Simpson Spence & Young - Indonesia
- Kartika Selabumi Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Makarim & Taira - Indonesia
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tata Chemicals Ltd - India
- Petron Corporation, Philippines
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Jaiprakash Power Ventures ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Maheswari Brothers Coal Limited - India
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