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Friday, 10 July 20
SLOW RECOVERY IN TANKER RATES TO WEIGH ON BUANA LINTAS LAUTAN - FITCH RATINGS
 Fitch Ratings believes that international tanker rates are likely improve after their sharp fall since May 2020, albeit at a slow pace. The weakness in rates may weigh on the financial profile of PT Buana Lintas Lautan Tbk (BULL, B+/Negative), which has around 15% of its fleet capacity earning revenue based on international spot rates.
The Baltic Dirty Tanker Index, which is made up from 12 Baltic international routes and mainly for crude oil shipping, has declined to below 500 points, from an average of 1,200 in March-April 2020, and is at its lowest since 2009. The index averaged 855 points in 2019 and around 770 points since 2009. Similarly, the Baltic Clean Tanker Index for refined fuel shipping has fallen to below 400 points from an average of around 1,305 points in April 2020.
The sharp fall in rates follows lower demand for global oil transportation with the OPEC+ alliance announcing in April 2020 an agreement to cut output by 9.7 million barrels per day (mbpd), or 10% of global output, from May 1. The group agreed in June to extend the production cut by one month through the end of July. The cut in output also resulted in a sharp rally in crude oil prices, with Brent price increasing to over USD40 per barrel (bbl) from around USD20/bbl near mid-April. Higher oil prices reduced the demand for floating storage and such tankers were freed, increasing spare capacity and pressuring rates.
Tanker demand has declined sharply since March-April, when Saudi Arabia increased its oil output ahead of the OPEC+ deal to cut production. The effect of increased oil output on tanker rates was compounded by the sharp fall in oil prices, which caused the futures curve to be in contango and incentivised oil storage on land and in tankers.
Demand for tankers is likely to improve from August with a reduction in the OPEC+ cuts to 7.7mbpd until the end of the 2020 and further to 5.8mbpd from January 2021. However, the output cut will continue weighing on tanker rates and improvement in rates is likely to be a gradual process.
Indonesian tanker operators PT Soechi Lines Tbk (B/Stable) and BULL benefit from largely stable rates in the domestic market, which is protected from foreign competition by cabotage laws and dominated by state-owned oil major PT Pertamina (Persero) (BBB/Stable) which is the main revenue driver.
However, BULL’s exposure to international rate volatility has increased this year. BULL had 24 of its 25 ships, or 93% of its fleet capacity, under standard time-charter contracts as of end-2019 while one tanker was part of a pool of ships managed by a pool operator and earned revenue based on international spot rates. The share of BULL’s fleet capacity managed by the pool operator has increased to 14% by end-2Q20 with three out of 33 ships being part of the pool. Additionally, BULL has two ships constituting 10% of its capacity under time-charter contracts with a base rate and upside if international spot rates are higher.
The company said it is seeking to switch the fleet under the pool operator to short-term time charter contracts of three to six months from September 2020 to limit the impact of the fall in tanker rates. Nonetheless, the Negative Outlook on BULL’s rating reflects risks to its financial profile from weak international rates, apart from sustained spending on fleet expansion. We estimate FFO gross leverage to increase to 3.8x in 2021, from 2.9x in 2020 (2019: 4.3x), due to lower international rates and EBITDA. We also assume BULL acquires five more ships for USD100 million in 2021.
Source: Fitch Ratings
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Wednesday, 01 July 20
MARKET INSIGHT - INTERMODAL
It was beginning of 2020 – close to 6 months from now – when we first experienced the huge impact of the COVID 19 outbreak on Ship Repa ...
Monday, 29 June 20
INDONESIAN COAL AT THE MERCY OF THE DRAGON AND TIGER - GHEE PEH | IEEFA
Coal sector analysts have been busy in recent months mapping the negative impact of low coal prices from the COVID-19 pandemic on Indonesian coal c ...
Monday, 29 June 20
FALLING DEMAND IN CHINA AND INDIA SIGNAL TOUGH TIMES AHEAD FOR INDONESIAN EXPORTS - GHEE PEH | EEFA
Assessing the Impact on Indonesian Coal Companies
The bad news for Indonesia’s coal companies is that they are likely to have ...
Monday, 29 June 20
INDIA COAL IMPORT OUTLOOK: WEAK DEMAND, IMPORT SUBSTITUTION, EXPECT 20% YOY DECLINE - GHEE PEH | IEEFA
For India, the coal demand indicators have clearly turned negative.
According to Argus Media, since the government declared a ...
Monday, 29 June 20
CHINA COAL IMPORT OUTLOOK: MANY MOVING PARTS, FORECAST TO FALL 10% YOY - GHEE PEH | IEEFA
China’s coal demand declined in the first quarter of 2020. According to the China National Coal Association, the country consumed 870mt in th ...
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- Georgia Ports Authority, United States
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- Merrill Lynch Commodities Europe
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- Economic Council, Georgia
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- Global Coal Blending Company Limited - Australia
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- Kohat Cement Company Ltd. - Pakistan
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- Makarim & Taira - Indonesia
- Meralco Power Generation, Philippines
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- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
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- Thai Mozambique Logistica
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- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Medco Energi Mining Internasional
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Power Finance Corporation Ltd., India
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- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Baramulti Group, Indonesia
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
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- Coastal Gujarat Power Limited - India
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Chamber of Mines of South Africa
- McConnell Dowell - Australia
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- The State Trading Corporation of India Ltd
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- Altura Mining Limited, Indonesia
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- Bukit Asam (Persero) Tbk - Indonesia
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- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- Gujarat Mineral Development Corp Ltd - India
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- Coalindo Energy - Indonesia
- Trasteel International SA, Italy
- Mintek Dendrill Indonesia
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
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- Wilmar Investment Holdings
- Anglo American - United Kingdom
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Ceylon Electricity Board - Sri Lanka
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Karbindo Abesyapradhi - Indoneisa
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- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Independent Power Producers Association of India
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- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rio Tinto Coal - Australia
- London Commodity Brokers - England
- White Energy Company Limited
- SMG Consultants - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Australian Commodity Traders Exchange
- LBH Netherlands Bv - Netherlands
- Star Paper Mills Limited - India
- Indian Energy Exchange, India
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