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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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Monday, 29 June 20
ULTRAMAX: A 58,000 FIXING DELIVERY SINGAPORE TRIP, VIA EAST COAST INDIA, REDELIVERY CHINA IN THE LOW $12,000S - BALTIC BRIEFING
Capesize
As the halfway mark of 2020 arrives, the capesize market is making new highs for the year. From persistent lows earlier caused by a ba ...
Saturday, 27 June 20
CHINA'S BENCHMARK POWER COAL PRICE REMAINS FLAT - XINHUA
China’s benchmark power coal price remained flat during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Friday, 26 June 20
WHAT TODAY'S BAILOUTS CAN DO FOR TOMORROW'S ECONOMIES - WORLD ECONOMIC FORUM
The COVID-19 crisis provides an opportunity for governments to build fairer, more sustainable and more resilient economies.
Governments a ...
Thursday, 25 June 20
ALL YOU WANT TO KNOW ABOUT COAL MINE AUCTIONS - THE HINDU BUSINESS LINE
Last week, Prime Minister Narendra Modi threw open the auction of 41 coal blocks for commercial mining. The decision, which was part of the announc ...
Wednesday, 24 June 20
MARKET INSIGHT - INTERMODAL
The World Bank estimates that the global economy will fall by 5.2% this year, underlining that the Covid-19 pandemic has had rapid and massive cons ...
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- PNOC Exploration Corporation - Philippines
- The University of Queensland
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- Xindia Steels Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kaltim Prima Coal - Indonesia
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- Standard Chartered Bank - UAE
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- AsiaOL BioFuels Corp., Philippines
- The Treasury - Australian Government
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- Mercator Lines Limited - India
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- Chamber of Mines of South Africa
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- Global Coal Blending Company Limited - Australia
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- Ministry of Transport, Egypt
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- TNB Fuel Sdn Bhd - Malaysia
- Metalloyd Limited - United Kingdom
- Straits Asia Resources Limited - Singapore
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
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- Australian Coal Association
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- Altura Mining Limited, Indonesia
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- Mintek Dendrill Indonesia
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- London Commodity Brokers - England
- Mjunction Services Limited - India
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- White Energy Company Limited
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- Sindya Power Generating Company Private Ltd
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- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
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- Power Finance Corporation Ltd., India
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- Lanco Infratech Ltd - India
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
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- CNBM International Corporation - China
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