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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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Saturday, 08 September 12
RIO TINTO COMPLETES ACQUISITION OF BHP BILLITON'S INTERESTS IN RICHARDS BAY MINERALS
Rio Tinto has doubled its holding in Richards Bay Minerals (RBM) following the completion of its acquisition of BHP Billiton’s entire inte ...
Friday, 07 September 12
HBA GAINS $ 1.56 PER MT IN SEPTEMBER
COALspot.com - The Indonesian government’s declared coal reference price has gained US$ 1.56 per MT M-o-M. This is the first gain ...
Thursday, 06 September 12
SOME ANCHORED PANAMAX VESSELS WAITING FOR CARGOS TO COME
Handy
According to Fearnleys weekly report, in the smaller segments Fearnleys sees little to no changes since last week. There are still entering s ...
Thursday, 06 September 12
DRY BULK CARRIERS STILL IN HIGH DEMAND AMONG SHIP OWNERS, BUT NEWBUILDING ACTIVITY SLIDES IN AUGUST - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The slide of the dry bulk market this year hasn't abated ship owners' appetite for dry bulk carriers, as evidenced by the steady interest expresse ...
Tuesday, 04 September 12
SHIP OWNERS' COMPETITION LEADS TO TANKER FIXTURES BELOW OPERATING COSTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Ship owners operating in the VLCC tanker markets are increasingly finding it difficult to obtain even breakeven rates for their vessels, as competit ...
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- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Timah Investasi Mineral - Indoneisa
- The Treasury - Australian Government
- The University of Queensland
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- Mintek Dendrill Indonesia
- Aditya Birla Group - India
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- Edison Trading Spa - Italy
- Kohat Cement Company Ltd. - Pakistan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Samtan Co., Ltd - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- VISA Power Limited - India
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Eastern Coal Council - USA
- Price Waterhouse Coopers - Russia
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Sical Logistics Limited - India
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- Lanco Infratech Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Medco Energi Mining Internasional
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Cement Manufacturers Association - India
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Intertek Mineral Services - Indonesia
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- Carbofer General Trading SA - India
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Orica Australia Pty. Ltd.
- Globalindo Alam Lestari - Indonesia
- Malabar Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Georgia Ports Authority, United States
- Vizag Seaport Private Limited - India
- Port Waratah Coal Services - Australia
- Deloitte Consulting - India
- Central Electricity Authority - India
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Heidelberg Cement - Germany
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Dalmia Cement Bharat India
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Oldendorff Carriers - Singapore
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- Vijayanagar Sugar Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Gujarat Sidhee Cement - India
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- Salva Resources Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- McConnell Dowell - Australia
- SN Aboitiz Power Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Holcim Trading Pte Ltd - Singapore
- IHS Mccloskey Coal Group - USA
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Romanian Commodities Exchange
- Kideco Jaya Agung - Indonesia
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Barasentosa Lestari - Indonesia
- Trasteel International SA, Italy
- Planning Commission, India
- Indian Energy Exchange, India
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Rio Tinto Coal - Australia
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- Kapuas Tunggal Persada - Indonesia
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Renaissance Capital - South Africa
- MS Steel International - UAE
- The State Trading Corporation of India Ltd
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Borneo Indobara - Indonesia
- White Energy Company Limited
- Larsen & Toubro Limited - India
- PowerSource Philippines DevCo
- ASAPP Information Group - India
- Petron Corporation, Philippines
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- Mercator Lines Limited - India
- Ministry of Mines - Canada
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