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Wednesday, 19 August 20
MARKET INSIGHT - GEORGE LAIOS | INTERMODAL
 Since the Covid-19 outbreak, governments and central banks around the globe have been using their ammunition and stimulus packages to keep their economies running. Trillions have been injected into global economies to fight unemployment and minimize recession. Apart from the central banks of EU, Japan, Switzerland, Sweden and Denmark, who have been offering negative rates for the past five years – a handful of central banks have now reduced their policy rates to near-zero values. Regardless of how successful or not the above mentioned five banks’ “experiment’’ has been, negative rates have undoubtedly made hedging strategies more complicated.
When it comes to the US Dollar, the Fed Chair has made it clear that negative rates are not part of its policy tools for the time being and that it is highly unlikely that rates will be pushed below zero. However, the US President has openly expressed that he views such a tool favourably. Although market experts do not expect negative Libor rates in the imminent future, no one can rule out the possibility of this happening.
These developments have had numerous effects on shipping companies who typically borrow using USD-Libor floating loans. The first and obvious outcome of lower Libor is the reduced borrowing cost. Whilst average 3-month LIBOR rates were 0.69%, 0.74% and 0.95% during the 2009, 2016 and 2020 (to date) recessions respectively, the 3-month LIBOR rate in July closed at 0.3% and has decreased approximately 6-fold since January (0.25%, as of 17/8). USD Libor loans have a zero lower bound limit which is incorporated by banks in their loan documentation (LMA) language: if Libor is less than zero “it will be deemed to be zero’’. This wording is also included in proposed documentation by the Alternative Reference Rates Committee, who is responsible for the development of Libor’s successor.
Low interest rates have also resulted in increased enquiries from bank clients who want to exploit their interest rate hedging options. Most shipping borrowers have decided not to hedge owing to the consensus that USD interest rates will not increase significantly over the next couple of years. Nevertheless, the number of shipping companies (mainly listed) that have engaged in hedging derivatives remain significant.
Under “normal” circumstances, a Cap or a SWAP for protection against an upward movement of interest rates would be the norm. However, nowadays it is essential to provision for negative interest rates. The borrower who hedges should bear in mind that USD Libor can also turn negative. Some banks even “encourage” clients to include a Floor in their SWAPS which will prevent base rates on their loans from dropping below zero. This limits the extent to which their derivatives can fall “out of the money”. Such protection comes at a premium. Indicatively, a 5 year SWAP is priced at 0.37 %, while the cost of a Floor is [10-30] bps. With rates expected to remain close to zero, the SWAP protection premium will continue to rise for as long as there are statements in favour of negative rates such as that of President Trump. However, whether the cost of protecting of a company’s future cash flows through the xyz premium is high or not is also a matter of perception and is reflective of one’s risk profile.
By George Laios
Deputy CEO, Intermodal Group
Compiled by:
Intermodal Research & Valuations
Analysts:
Ms Eva Tzima
Mr.George Panagopoulos
Disclaimer and legal disclosure: For any further queries please do not hesitate to contact our Research & Valuations Department. The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without making guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no reproducing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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Wednesday, 21 October 20
INDIA: THE COMMERCIALISATION OF COAL BLOCKS WILL BENEFIT THE ECONOMY - HINDU BUSINESS LINE
As the government of India receives 76 bids for 23 coal mines against the 38 up on auction, what does this commercialisation of coal block allocati ...
Wednesday, 21 October 20
MARKET INSIGHT - INTERMODAL
The second wave of COVID-19 is now a reality; offices are closing again, and stricter rules and regulations are being implemented in public spaces. ...
Tuesday, 20 October 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.82 PCT - XINHUA
China Taiyuan coal transaction price index stood at 127.49 points Monday, up 0.82 percent week on week.
The index, released by China ...
Tuesday, 20 October 20
BIMCO 'SHIPLEASE' TERM SHEET - WATSON FARLEY & WILLIAMS
KNOWLEDGE TO ELEVATE
The ever-growing importance of sale and leaseback transactions as an alternative to financing ships by way of loan, makes ...
Friday, 16 October 20
KOMIPO ON BEHALF OF K GENCO'S INVITED BIDS FOR TOTAL 715,000 MT MIN. 5,700 NAR COAL FOR DECEMBER
COALspot.com: Korea Midland Power Co., Ltd (KOMIPO) on behalf of EWP, KOSPO, KOSEP and KOWEPO has issued an international tender for total 715,000& ...
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- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Eastern Energy - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Indonesian Coal Mining Association
- Georgia Ports Authority, United States
- Eastern Coal Council - USA
- Power Finance Corporation Ltd., India
- Cigading International Bulk Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Grasim Industreis Ltd - India
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- CIMB Investment Bank - Malaysia
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- Medco Energi Mining Internasional
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Goldman Sachs - Singapore
- Gujarat Sidhee Cement - India
- Mercator Lines Limited - India
- Therma Luzon, Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Sojitz Corporation - Japan
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Bukit Baiduri Energy - Indonesia
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Coastal Gujarat Power Limited - India
- Oldendorff Carriers - Singapore
- Ministry of Mines - Canada
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- Chamber of Mines of South Africa
- Billiton Holdings Pty Ltd - Australia
- Electricity Authority, New Zealand
- Jindal Steel & Power Ltd - India
- Jaiprakash Power Ventures ltd
- Globalindo Alam Lestari - Indonesia
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Ind-Barath Power Infra Limited - India
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Malabar Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Interocean Group of Companies - India
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Economic Council, Georgia
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Global Green Power PLC Corporation, Philippines
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Central Java Power - Indonesia
- Mercuria Energy - Indonesia
- The University of Queensland
- Parry Sugars Refinery, India
- SN Aboitiz Power Inc, Philippines
- Makarim & Taira - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining Corp, Philippines
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Bhoruka Overseas - Indonesia
- SMG Consultants - Indonesia
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Standard Chartered Bank - UAE
- Cement Manufacturers Association - India
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- San Jose City I Power Corp, Philippines
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Rashtriya Ispat Nigam Limited - India
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
- Attock Cement Pakistan Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Renaissance Capital - South Africa
- Merrill Lynch Commodities Europe
- Wilmar Investment Holdings
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- Central Electricity Authority - India
- Deloitte Consulting - India
- Minerals Council of Australia
- Bhushan Steel Limited - India
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Australian Commodity Traders Exchange
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- International Coal Ventures Pvt Ltd - India
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Thai Mozambique Logistica
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- Indian Energy Exchange, India
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Independent Power Producers Association of India
- Meenaskhi Energy Private Limited - India
- PTC India Limited - India
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- MS Steel International - UAE
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- Bukit Makmur.PT - Indonesia
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