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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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Tuesday, 04 August 20
KOEN INVITED BIDS FOR TOTAL 900K MT OF MIN 5600 NCV COAL FOR 3 YEARS
COALspot.com: South Korea’s KOREA SOUTH-EAST POWER CO., LTD. (KOEN) has issued an international tender for 260,000 to 300,000 Tons (MT) min. ...
Tuesday, 04 August 20
THE WORLD’S FLEET OF COAL-FIRED POWER STATIONS HAS GOT SMALLER FOR THE FIRST TIME ON RECORD, WITH MORE CAPACITY RETIRED IN THE FIRST HALF OF 2020 THAN THE AMOUNT OPENED - IEA
This is according to the latest Global Coal Plant Tracker (GCPT) results by Global Energy Monitor (GEM), which we completed last month and report f ...
Monday, 03 August 20
U.S. COAL CONSUMPTION, WHICH HAS DECLINED SINCE ITS 2007 PEAK, FELL TO ITS LOWEST POINT IN APRIL 2020 - EIA
According to the U.S. Energy Information Administration’s (EIA) most recent Monthly Energy Review, the United States consumed 6.5 quadrillion ...
Monday, 03 August 20
LOW OIL PRICE AND CORONA VIRUS HIT SUB-SAHARAN AFRICA OIL PRODUCERS - FITCH RATINGS
The collapse in oil prices and the coronavirus shock is worsening the fiscal and external balances of sub-Saharan African oil producers, Fitch Rati ...
Saturday, 01 August 20
SHIP SHAPE - OUCH: FIS
Thursday afternoon saw a report that US GDP in Q2 shrank by 32.9%. Now this may have beaten expectations, but it’s a bit like saying that you ...
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- Indian Oil Corporation Limited
- Africa Commodities Group - South Africa
- Savvy Resources Ltd - HongKong
- Directorate Of Revenue Intelligence - India
- Coal and Oil Company - UAE
- Wilmar Investment Holdings
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Agrawal Coal Company - India
- Kideco Jaya Agung - Indonesia
- Australian Commodity Traders Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Jaiprakash Power Ventures ltd
- Metalloyd Limited - United Kingdom
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- Tata Chemicals Ltd - India
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- International Coal Ventures Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Energy - Thailand
- AsiaOL BioFuels Corp., Philippines
- Maheswari Brothers Coal Limited - India
- Kartika Selabumi Mining - Indonesia
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- PTC India Limited - India
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Finance - Indonesia
- South Luzon Thermal Energy Corporation
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Jindal Steel & Power Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Bhatia International Limited - India
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- SN Aboitiz Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
- Bhushan Steel Limited - India
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining Corp, Philippines
- Riau Bara Harum - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Dalmia Cement Bharat India
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Renaissance Capital - South Africa
- Billiton Holdings Pty Ltd - Australia
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Ind-Barath Power Infra Limited - India
- Central Electricity Authority - India
- Petrochimia International Co. Ltd.- Taiwan
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Electricity Regulatory Commission - India
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Gujarat Sidhee Cement - India
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Salva Resources Pvt Ltd - India
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Simpson Spence & Young - Indonesia
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Bukit Asam (Persero) Tbk - Indonesia
- Star Paper Mills Limited - India
- Merrill Lynch Commodities Europe
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Samtan Co., Ltd - South Korea
- Mintek Dendrill Indonesia
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Standard Chartered Bank - UAE
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
- Baramulti Group, Indonesia
- New Zealand Coal & Carbon
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bharathi Cement Corporation - India
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Lanco Infratech Ltd - India
- Iligan Light & Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- GMR Energy Limited - India
- Cigading International Bulk Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Intertek Mineral Services - Indonesia
- GVK Power & Infra Limited - India
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Economic Council, Georgia
- White Energy Company Limited
- Posco Energy - South Korea
- Australian Coal Association
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
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