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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, 14 October 20
CHINA COKING COAL FUTURES RALLY ON REPORTED BAN ON AUSTRALIA CARGOES - REUTERS
Dalian coking coal futures rallied for a sixth straight session on Tuesday after reports surfaced that China had stopped buying coal from Australia ...
Wednesday, 14 October 20
MARKET INSIGHT - INTERMODAL
The tanker market has experienced severe freight rate and asset value declines over the past 5 months. A potential market upturn may arise in the c ...
Friday, 09 October 20
INDIA'S COAL IMPORTS IMPROVE SOMEWHAT, BUT RECOVERY IS UNEVEN - REUTERS
India’s coal imports, depressed by the impact of coronavirus this year, regained ground in September, but in an uneven uptick – shipmen ...
Thursday, 08 October 20
CHINA'S COAL IMPORTS FROM INDONESIA DECLINED 16.4% Y-O-Y, TO 80.2 MLN TONNES IN THE FIRST 9 MONTHS OF 2020 - BANCHERO COSTA
China's coal imports boomed in 2019, surprising many who had expected the government would clamp down strictly on shipments.
...
Thursday, 08 October 20
GLIMMER OF LIGHT FOR COAL, BUT SHORT TERM - FNARENA
Is coal on the rebound? Demand appears stronger and supply reductions have underpinned a tightening market. Certainly, the Newcastle thermal coal p ...
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- Price Waterhouse Coopers - Russia
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Savvy Resources Ltd - HongKong
- Pipit Mutiara Jaya. PT, Indonesia
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- Salva Resources Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Orica Mining Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- The University of Queensland
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Eastern Coal Council - USA
- Central Electricity Authority - India
- Asmin Koalindo Tuhup - Indonesia
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- New Zealand Coal & Carbon
- Posco Energy - South Korea
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Maharashtra Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Commonwealth Bank - Australia
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Vizag Seaport Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Grasim Industreis Ltd - India
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- Standard Chartered Bank - UAE
- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Energy Link Ltd, New Zealand
- Ministry of Transport, Egypt
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Wilmar Investment Holdings
- Directorate Of Revenue Intelligence - India
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Chamber of Mines of South Africa
- Wood Mackenzie - Singapore
- Latin American Coal - Colombia
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Mintek Dendrill Indonesia
- Miang Besar Coal Terminal - Indonesia
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- Coalindo Energy - Indonesia
- Semirara Mining Corp, Philippines
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- LBH Netherlands Bv - Netherlands
- Agrawal Coal Company - India
- Malabar Cements Ltd - India
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- European Bulk Services B.V. - Netherlands
- Tata Chemicals Ltd - India
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
- Petron Corporation, Philippines
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Bhatia International Limited - India
- Independent Power Producers Association of India
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Uttam Galva Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- Anglo American - United Kingdom
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Formosa Plastics Group - Taiwan
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Singapore Mercantile Exchange
- Jindal Steel & Power Ltd - India
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Riau Bara Harum - Indonesia
- Kideco Jaya Agung - Indonesia
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- ICICI Bank Limited - India
- Madhucon Powers Ltd - India
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PowerSource Philippines DevCo
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- Africa Commodities Group - South Africa
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Indika Energy - Indonesia
- Kumho Petrochemical, South Korea
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- Renaissance Capital - South Africa
- CNBM International Corporation - China
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
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