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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, 19 August 20
COAL INDIA TRADE UNIONS DEFER DAY-LONG STRIKE: PTI
The unions had decided to go on strike against the commercial mining and the proposed divestment or buyback of shares of Coal India Ltd (CIL).
...
Wednesday, 19 August 20
MISC MARKS ITS MAIDEN FORAY INTO MAJOR DEEP-WATER PROJECT IN LATIN AMERICA WITH MERO 3 FPSO
MISC Berhad (MISC) is pleased to announce its acceptance of Letter of Intent (LOI) from Petróleo Brasileiro S.A. (Petrobras) for the provisi ...
Wednesday, 19 August 20
INDIA SAW A SHARP DECLINE IN ENERGY COAL IMPORTS IN JANUARY - JUNE 2020; –27 PER CENT YOY - BHP
Energy coal prices were weak in the second half of financial year 2020, BHP says in its Economic and Commodity Outlook FY20.
Accordi ...
Wednesday, 19 August 20
COAL PRICES TO REMAIN SUBDUED THIS FISCAL AMID WEAK DEMAND, HIGH INVENTORY - THE HINDU BUSINESS LINE
Coal offtake is improving gradually as lockdown eases
Coal prices are expected to remain subdued to weak demand and high inventory l ...
Tuesday, 18 August 20
BLACKBALLED: WILL COAL BOUNCE BACK FROM SLUMP OR IS IT TERMINAL? - SYDNEY MORNING HERALD
Even by the standards of this miserable year, 2020 has been a shocker for the global coal industry.
As the lockdown kicked in demand ...
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Vizag Seaport Private Limited - India
- Renaissance Capital - South Africa
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Minerals Council of Australia
- GN Power Mariveles Coal Plant, Philippines
- Petron Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- Samtan Co., Ltd - South Korea
- Ministry of Transport, Egypt
- Sree Jayajothi Cements Limited - India
- Rashtriya Ispat Nigam Limited - India
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- India Bulls Power Limited - India
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Marubeni Corporation - India
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- CIMB Investment Bank - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Indika Energy - Indonesia
- Energy Link Ltd, New Zealand
- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Africa Commodities Group - South Africa
- Baramulti Group, Indonesia
- Simpson Spence & Young - Indonesia
- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- SMG Consultants - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- CNBM International Corporation - China
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Cement Manufacturers Association - India
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Kalimantan Lumbung Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- San Jose City I Power Corp, Philippines
- IEA Clean Coal Centre - UK
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement PLC, Thailand
- AsiaOL BioFuels Corp., Philippines
- Australian Coal Association
- Indo Tambangraya Megah - Indonesia
- Vedanta Resources Plc - India
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Price Waterhouse Coopers - Russia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Parry Sugars Refinery, India
- Australian Commodity Traders Exchange
- Indogreen Group - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Bhushan Steel Limited - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Central Java Power - Indonesia
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Pendopo Energi Batubara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Commonwealth Bank - Australia
- Edison Trading Spa - Italy
- Indonesian Coal Mining Association
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Independent Power Producers Association of India
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- The Treasury - Australian Government
- Bukit Asam (Persero) Tbk - Indonesia
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- Planning Commission, India
- Madhucon Powers Ltd - India
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- Eastern Coal Council - USA
- Ministry of Finance - Indonesia
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Sojitz Corporation - Japan
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Karaikal Port Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Singapore Mercantile Exchange
- VISA Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Bulk Trading Sa - Switzerland
- Meralco Power Generation, Philippines
- Global Green Power PLC Corporation, Philippines
- Merrill Lynch Commodities Europe
- Kumho Petrochemical, South Korea
- Aboitiz Power Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
- Dalmia Cement Bharat India
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- ICICI Bank Limited - India
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Bhatia International Limited - India
- White Energy Company Limited
- GVK Power & Infra Limited - India
- Georgia Ports Authority, United States
- Makarim & Taira - Indonesia
- Antam Resourcindo - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Formosa Plastics Group - Taiwan
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- Bharathi Cement Corporation - India
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Posco Energy - South Korea
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