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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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- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- Maharashtra Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Larsen & Toubro Limited - India
- IHS Mccloskey Coal Group - USA
- Marubeni Corporation - India
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Medco Energi Mining Internasional
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- PowerSource Philippines DevCo
- Wood Mackenzie - Singapore
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Aditya Birla Group - India
- Barasentosa Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Manunggal Multi Energi - Indonesia
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Timah Investasi Mineral - Indoneisa
- Thiess Contractors Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sree Jayajothi Cements Limited - India
- Semirara Mining Corp, Philippines
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- The University of Queensland
- Malabar Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Australian Coal Association
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- Jindal Steel & Power Ltd - India
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- Cement Manufacturers Association - India
- White Energy Company Limited
- Carbofer General Trading SA - India
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Samtan Co., Ltd - South Korea
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Pipit Mutiara Jaya. PT, Indonesia
- Thai Mozambique Logistica
- London Commodity Brokers - England
- Kumho Petrochemical, South Korea
- Indo Tambangraya Megah - Indonesia
- Port Waratah Coal Services - Australia
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Karaikal Port Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Interocean Group of Companies - India
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- European Bulk Services B.V. - Netherlands
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- Kepco SPC Power Corporation, Philippines
- Standard Chartered Bank - UAE
- VISA Power Limited - India
- Commonwealth Bank - Australia
- Straits Asia Resources Limited - Singapore
- Makarim & Taira - Indonesia
- Iligan Light & Power Inc, Philippines
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- Siam City Cement PLC, Thailand
- Parliament of New Zealand
- Bhatia International Limited - India
- Agrawal Coal Company - India
- SN Aboitiz Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- ICICI Bank Limited - India
- Mintek Dendrill Indonesia
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- South Luzon Thermal Energy Corporation
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Oldendorff Carriers - Singapore
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Xindia Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- Videocon Industries ltd - India
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- Electricity Generating Authority of Thailand
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- Indika Energy - Indonesia
- SMG Consultants - Indonesia
- Electricity Authority, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Coalindo Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- Dalmia Cement Bharat India
- Bharathi Cement Corporation - India
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Aboitiz Power Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Energy Development Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
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