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Wednesday, 24 February 16
THIRTEEN - NOT ALWAYS AN UNLUCKY NUMBER? - CLARKSONS
 Back in early 1999 the price of a 5 year old Panamax bulkcarrier dipped to $13.5m, and ever since analysts have hailed purchase decisions made at that time as some of the most lucrative shipping deals ever seen. Today, with the price back at $13m, perhaps it’s a good time to reflect on how successful investors were back in 1999 and whether there are similar opportunities once again.
What Was The Deal?
The graph shows for each year since 1990 the return that would have been generated by the purchase of a 5 year old Panamax bulkcarrier at the start of the year, the subsequent operation for ten years at the prevailing one year timecharter rate and then the sale of the unit at the end of that period as a 15 year old (for units purchased in 2007 and later, disposal at start 2016 was assumed). At the end of 1999 investors could pick up a 5 year old Panamax bulker for $14m. Trading that vessel at the start year one year timecharter rate for 10 years would have generated estimated earnings of $66.5m (after opex), and then as a 15 year old unit in 2009 the vessel could have been sold for $12.5m. That’s a small loss of $1.5m on the asset but still a total return of $65m, and an impressive internal rate of return (IRR) of 26%.
Playing Snap
A few years later, 5 year old Panamax bulkcarrier purchases did perhaps even better. Buying a 5 year old in 2002, once again at $14m, trading at the timecharter rate and selling as a 15 year old would have generated total returns of $73.2m and an IRR of 41%, whilst the equivalent project in 2003 would have generated $66.1m and an IRR of 44%. These vessels would have generated boom earnings earlier in the project period, subject to a heavier weighting in terms of the internal rate of return calculation.
Not Always A Good Hand
However, not all investors are so lucky. In this example, 5 year old ships purchased since 2008 (and sold this year, so admittedly with less time to hit upon a period of boom earnings) generated negative returns, and those purchased pre-1995 an average IRR of 7%. Buyers in 2008 would have lost a whopping $82.1m on the asset. Nevertheless, there was clearly a golden period; in the years 1998-2006 investors would have achieved an IRR ranging between 20% and 44%.
Unlucky (Or Lucky) 13?
So for those who have had the stomach to buy in at difficult times, there have been more than ample rewards. Today the price of a 5 year old Panamax is back at $13m. Dry bulk fundamentals, particularly on the demand side with the Chinese economy maturing, don’t look helpful at all (see SIW 1207), but with the 5 year old price at almost half that of a newbuild, who really knows what the longer-term opportunity might be?
Fortune favours the brave, but they also say that fools rush in. The outlook seems scary but investors might also have half an eye on their peers who invested at low points in the price cycle in the past. That’s the beauty of volatile and cyclical sectors, but it’s tricky food for thought for shipping investors. Are they willing to party like it’s 1999? Have a nice day.
Source: Clarksons
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Monday, 11 April 16
BDI ROSE TO ITS HIGHEST LEVEL IN FOUR MONTHS
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities continued to rose this week.
The freight market was ...
Friday, 08 April 16
COASTAL ENERGEN CROSSES GENERATION OF 1068 MW AND EXPORT OF 1004 MW FROM ITS 1200 MW IPP
COALspot.com: Coal & Oil (C&O) Group, an India centric Energy & Infrastructure company announced that their Coastal Energen' ...
Friday, 08 April 16
WEEKLY US COAL PRODUCTION ESTIMATES DIP 5.4% TO 11 MMST
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 11 million short ...
Friday, 08 April 16
MINISTER OF ENERGY AND MINERAL RESOURCES OF INDONESIA TO ISSUE REGULATION TO GUARANTEE THE COAL SUPPLY TO ITS 35K POWER PLANT PROJECTS
COALspot.com: In order to guarantee the supply of coal for 35,000 megawatt (mw) coal based power plants ( still in planning stage), the Minister of ...
Thursday, 07 April 16
CHINA STEEL CAPACITY CUTS FACE SOCIAL, FINANCIAL HURDLES - FITCH RATINGS
Fitch Ratings says today that the Chinese government's supply-side reform of the steel sector faces immense social and financial challenges. Th ...
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- Kapuas Tunggal Persada - Indonesia
- Heidelberg Cement - Germany
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Xindia Steels Limited - India
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Dalmia Cement Bharat India
- London Commodity Brokers - England
- India Bulls Power Limited - India
- Baramulti Group, Indonesia
- Kideco Jaya Agung - Indonesia
- Chamber of Mines of South Africa
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Mercuria Energy - Indonesia
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- VISA Power Limited - India
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Indo Tambangraya Megah - Indonesia
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Binh Thuan Hamico - Vietnam
- Toyota Tsusho Corporation, Japan
- Straits Asia Resources Limited - Singapore
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Global Coal Blending Company Limited - Australia
- The University of Queensland
- Latin American Coal - Colombia
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- Parry Sugars Refinery, India
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- Antam Resourcindo - Indonesia
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Meralco Power Generation, Philippines
- Gujarat Sidhee Cement - India
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Kohat Cement Company Ltd. - Pakistan
- Iligan Light & Power Inc, Philippines
- Siam City Cement PLC, Thailand
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Australian Coal Association
- The State Trading Corporation of India Ltd
- Ind-Barath Power Infra Limited - India
- Riau Bara Harum - Indonesia
- Standard Chartered Bank - UAE
- PowerSource Philippines DevCo
- Kaltim Prima Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Bhushan Steel Limited - India
- Commonwealth Bank - Australia
- Salva Resources Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- The Treasury - Australian Government
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Larsen & Toubro Limited - India
- Marubeni Corporation - India
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Borneo Indobara - Indonesia
- Sojitz Corporation - Japan
- Wood Mackenzie - Singapore
- Anglo American - United Kingdom
- Planning Commission, India
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Petron Corporation, Philippines
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Interocean Group of Companies - India
- PTC India Limited - India
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Star Paper Mills Limited - India
- Timah Investasi Mineral - Indoneisa
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asmin Koalindo Tuhup - Indonesia
- Tata Chemicals Ltd - India
- Minerals Council of Australia
- Sical Logistics Limited - India
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- Indika Energy - Indonesia
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Port Waratah Coal Services - Australia
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Vizag Seaport Private Limited - India
- Orica Australia Pty. Ltd.
- Bukit Makmur.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- Semirara Mining Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Bukit Baiduri Energy - Indonesia
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