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