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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, 21 August 20
BHP COMMITS TO SELLING ITS THERMAL COALMINES WITHIN TWO YEARS - THE GUARDIAN
Move follows pressure from investors but company stops short of full exit from coalmining
BHP has announced it plans to sell off its ...
Thursday, 20 August 20
MINER BHP CONFIRMS PLANS TO EXIT THERMAL COAL SECTOR - THE SYDNEY MORNING HERALD
The head of mining giant BHP has laid out plans for a reshaping of its global operations by seeking to quit thermal coal mining, offload some cokin ...
Thursday, 20 August 20
LONDON RETAINS ARBITER CROWN - BALTIC EXCHANGE | HFW
Fears that the UK’s decision to leave the European Union would dent the reputation of the nation’s capital as the leader in maritime ar ...
Wednesday, 19 August 20
U.S. COAL STOCKPILES STEADILY INCREASE AFTER REACHING LOWEST LEVEL IN A DECADE IN 2019 - EIA
After reaching their lowest level in more than a decade in March 2019, U.S. coal stockpiles steadily increased to 152 million tons in April 2020, r ...
Wednesday, 19 August 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.26 PCT - XINHUA
China Taiyuan coal transaction price index stood at 124.92 points Monday, down 0.26 percent week on week.
The index, released by Chi ...
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- PowerSource Philippines DevCo
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- Simpson Spence & Young - Indonesia
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- India Bulls Power Limited - India
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- White Energy Company Limited
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Kaltim Prima Coal - Indonesia
- Bharathi Cement Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Straits Asia Resources Limited - Singapore
- Orica Australia Pty. Ltd.
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Latin American Coal - Colombia
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- Bhushan Steel Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- The University of Queensland
- Commonwealth Bank - Australia
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- Aditya Birla Group - India
- Renaissance Capital - South Africa
- Kideco Jaya Agung - Indonesia
- Minerals Council of Australia
- Bhatia International Limited - India
- Parry Sugars Refinery, India
- Ministry of Mines - Canada
- Ind-Barath Power Infra Limited - India
- Mjunction Services Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Orica Mining Services - Indonesia
- Kobexindo Tractors - Indoneisa
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- Savvy Resources Ltd - HongKong
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- Kalimantan Lumbung Energi - Indonesia
- Parliament of New Zealand
- Singapore Mercantile Exchange
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Australian Coal Association
- Madhucon Powers Ltd - India
- Goldman Sachs - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
- ASAPP Information Group - India
- Globalindo Alam Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- The Treasury - Australian Government
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coalindo Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- GMR Energy Limited - India
- GVK Power & Infra Limited - India
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Makarim & Taira - Indonesia
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Toyota Tsusho Corporation, Japan
- Eastern Coal Council - USA
- Petron Corporation, Philippines
- Larsen & Toubro Limited - India
- TeaM Sual Corporation - Philippines
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Jorong Barutama Greston.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Energy Development Corp, Philippines
- Edison Trading Spa - Italy
- Siam City Cement PLC, Thailand
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- Planning Commission, India
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indonesian Coal Mining Association
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- European Bulk Services B.V. - Netherlands
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Krishnapatnam Port Company Ltd. - India
- Vijayanagar Sugar Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Kumho Petrochemical, South Korea
- Mercator Lines Limited - India
- Eastern Energy - Thailand
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- LBH Netherlands Bv - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Interocean Group of Companies - India
- McConnell Dowell - Australia
- VISA Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- SN Aboitiz Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
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