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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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Friday, 04 September 20
IN A DEEPENING DEBT HOLE OF $34 BILLION, INDONESIA’S PLN MUST STOP DIGGING - IEEFA
The utility has added IDR100 trillion in debt annually for the last five years
Utilities globally started changing the way they do business ye ...
Friday, 04 September 20
KOMIPO INVITED BIDS FOR AUSTRALIAN MIN 5,700 NCV COAL FOR NOVEMBER
COALspot.com: Korea Midland Power Co. Ltd, has issued an International tender for 260,000 MT Min.5,700 kcal/kg NCV coal November, 2020 loading. Acc ...
Thursday, 03 September 20
BRINGING SERVICES OF FTCCI CLOSER TO THE EXPORTERS AT GMR AIR CARGO COMPLEX AT SHAMSHABAD
Press Release: “FTCCI Trade Facilitation Services at your doorstep now” says J.S. Chandrashekar, IRS., Principal Commissioner of Custom ...
Thursday, 03 September 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 ...
Wednesday, 02 September 20
COAL PRODUCTION FALLS 7% IN APR-AUG; OFF TAKE DIPS 13.4% - FINANCIAL EXPRESS
In the month of August coal off take also increased 9.3% y-o-y to 44.34 MT as compared with 40.57 MT in the same period last year.
C ...
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- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Xindia Steels Limited - India
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Chamber of Mines of South Africa
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- Videocon Industries ltd - India
- Wood Mackenzie - Singapore
- Manunggal Multi Energi - Indonesia
- Ministry of Mines - Canada
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tamil Nadu electricity Board
- Banpu Public Company Limited - Thailand
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Iligan Light & Power Inc, Philippines
- PowerSource Philippines DevCo
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Trasteel International SA, Italy
- Alfred C Toepfer International GmbH - Germany
- Antam Resourcindo - Indonesia
- Posco Energy - South Korea
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- Coastal Gujarat Power Limited - India
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Transport, Egypt
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Energy Link Ltd, New Zealand
- Sakthi Sugars Limited - India
- Toyota Tsusho Corporation, Japan
- Siam City Cement - Thailand
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Indian Oil Corporation Limited
- Independent Power Producers Association of India
- Jindal Steel & Power Ltd - India
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- London Commodity Brokers - England
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Vizag Seaport Private Limited - India
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Salva Resources Pvt Ltd - India
- SMC Global Power, Philippines
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Orica Australia Pty. Ltd.
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Coal Association
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Kobexindo Tractors - Indoneisa
- Parry Sugars Refinery, India
- Romanian Commodities Exchange
- Kartika Selabumi Mining - Indonesia
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- Dalmia Cement Bharat India
- Bharathi Cement Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Parliament of New Zealand
- The Treasury - Australian Government
- SN Aboitiz Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vedanta Resources Plc - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- GVK Power & Infra Limited - India
- Riau Bara Harum - Indonesia
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- Wilmar Investment Holdings
- The University of Queensland
- Central Java Power - Indonesia
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- Coalindo Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- SMG Consultants - Indonesia
- Bhatia International Limited - India
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- Ind-Barath Power Infra Limited - India
- VISA Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Commonwealth Bank - Australia
- Eastern Coal Council - USA
- Altura Mining Limited, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Karaikal Port Pvt Ltd - India
- Madhucon Powers Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Economic Council, Georgia
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Port Waratah Coal Services - Australia
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- South Luzon Thermal Energy Corporation
- IEA Clean Coal Centre - UK
- Samtan Co., Ltd - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sree Jayajothi Cements Limited - India
- Star Paper Mills Limited - India
- Semirara Mining Corp, Philippines
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Binh Thuan Hamico - Vietnam
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- GAC Shipping (India) Pvt Ltd
- White Energy Company Limited
- Timah Investasi Mineral - Indoneisa
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