The role of the finance specialist for asset pricing in Shipping Part I

 The changing landscape in the wet freight trade is also remodelling the tanker fleet pricing. It is basically the role of the finance specialist to convert implied daily hires rates into asset prices considering the new expectations and new information elements printed by the … Continue reading

Greeks letters in Shipping, the role of the finance specialist for asset pricing Part II

The Role of the Finance Specialist for Shipping Asset Pricing Part II: Greeks letters in Shipping Greeks Θ Δ ϒ letters in Shipping To paraphrase the Greeks (but this time the Greeks in Finance), let’s take the MT Sirius Voyager  (156,500 DWT, 1994 built) … Continue reading

What is next for September ? Energy & Freighters

ENERGY_SKIER

This gallery contains 7 photos.

The best call that I have seen in the entire markets this year was from Commodore Research. The daily average rate to hire a Capesize, each able to carry about 160,000 metric tons of cargo, climbed 93 percent this month … Continue reading

Call of the Month: Commodore Research & Consultancy

During August,  the 66% lift in the Capesize marketwas preceded by a market call made by Jeffrey Landsberg and his team at Commodore.     The New York based consultancy that focuses on the global demand, supply, and seaborne trade of … Continue reading

Ebola and its effect on shipping contracts. Calling or not calling at African ports.

Calling or not calling at African ports. The Ebola outbreak in Africa is critical for Aluminium companies. These companies operate key assets all along the African Atlantic coast. Rusal is also dealing with supply problems with the ongoing turmoil in Ukraine. … Continue reading

Cargill hands in the Cape Market

  As Trader Cargill was expanding out of the Midwest, it was clear that the freight factor would become more paramount than ever. In the world markets, where competition is fierce, freight rates are a decisive factor. As Cargill was … Continue reading

Looking back at previous freight calls, Oil storage is now the Main View, LNG

  I found it very important to look back at previous calls made in Pacific Basin and West Coast Energy Markets Flows. About Libya. “In this segment, from a financial standpoint the cost/bbl is minimize. Look forward to buy the dips on high-quality tonnage … Continue reading

Natural Gas is gearing up for the Hurricane Season and Winter Pricing

I am always asked, why don’t you also cover Natural Gas ? Do you also cover Natural markets… Continue reading

Pacific Basin and West Coast Energy Markets Flows.

Pacific Basin and West Coast: Trade Flows Supply Curb WCS ex hardisty around USD 75/bbl=­> KMI is performing maintenance on Transmountrain). I’m also advised about the possibility that the transmountain pipeline leg between Surrey, BC and Puget Sounds, WA will stay … Continue reading

LPG Markets cast an eye to 2014-2015

MPORTANT: The Canadian Propane Association (CPA) is the national voice of the Canadian propane industry. Since, they do not comment markets.
Opinions made along the article are not endorsed or intended to be representative of the CPA's positions. Continue reading

Futures, forwards, physicals and shipping in the Brent market. The Contango explained.

Futures, forwards, physicals and shipping in the Brent market. The Contango explained.

JULY 25, 2014 Foreword When you study the Brent market pricing, it becomes obvious that the relationships between the derivatives and cargoes markets are particularly important during crucial times. The futures prices must stay compatible with the oil market short-term … Continue reading

Busy days at Galveston as tankers crowd the anchorages

Busy days at Galveston as tankers crowd the anchorages

  Busy days at Galveston as tankers crowd the anchorages By Barry Parker from New York The anchorages for tankers, in the Gulf of Mexico, in waters off Galveston, and at Bolivar Roads at the entrance to Galveston Bay, have … Continue reading

Lock, Stock a Barrel, Facts and fantasies about the Contango

Have you read Poten’s last one:

source: Poten Weekly Tanker Opinions, Commodity Consulting & Analytics department at Poten & Partners.

My short comment:

Facts and fantasies about the Contango

The medias and finance books make people to believe that traders need the “full carrying charge market”* to break-even or initiate a storage play with a contango. Short answer is no.

The simplest way to explain it is that the spot commodity investment isn’t the only source of risks/returns in a long-the-carry (storage play) trade.

While, some carry will help,  two other factors will also determine the outcome of a long-the-carry trade:  the roll yield and collateral yield*.

 

The 2008 Contango

In 08′, “Skew to the right” skyrocketed while volatility and correlation spiked. The Lehman bankruptcy inflicted a contagion in the oil and freight market.

Brent collapsed to $50/bbl, VLCCs AG-EAST TCE dropped 90%.

BET was categorically on the Rise: Billions of dollars were poured by Funds into commodity structured products. The Buy-side (Refiners) had a great market aversion for Brent to go up.

VLCCs did a +85% V-shape move once participants noticed the Contango that had appeared in oil.

In my opinion, current strip is rather Flat and many items for the contango are still missing.

The Trade Shipping and Finance Wizard © 2014

 Navigating the commodities markets with Freight and Spreads

*The full carrying charge: this is a situation in the  forward market when the price differential between delivery months reflects the full costs of interest, insurance and storage. It is not the only source of risk/return in a long-the-carry(storage play) trade. 

The roll yield or rolling is the action to extend the expiration or maturity of an option or futures contract by closing the initial shorter-term contract and opening a new longer-term contract for the same underlying asset. It is the biggest source of risk/return in a long-the-carry(storage play) trade. 

The collateral yield is the return on the collateral put for the futures margins. Generally, this a T-Bill return with a maturity matching the long-the-carry position.

Capesize, Dry Bulk Shipping, the only way is up ?

Capesize, Dry Bulk Shipping, the only way is up ?

  Capesize, Dry Bulk Shipping, the only way is up ?   The presentation was delivered by Joe Tobin,  Freight Analyst from Swiss Marine during the last Marine Money event in Genève. s. Between 2008 and 2010 the Baltic Dry Index fell by 94%. … Continue reading

CHSInc’s journey along the Danube H2O Highway-Connecting Farmers to Markets.

CHSInc’s journey along the Danube H2O Highway-Connecting Farmers to Markets.

CHS Inc a globally integrated energy, grains and foods system innovatively linking producers with consumers. On the behalf of their producer and cooperative owners. A look at the value of the Danube H20 Highway, the region and how it helps CHS … Continue reading

Growing and expanding the business despite low flat rates: Shipping Asset Management SA, Panacore, Caravel Group, Navig8 and Petredec

Growing and expanding the business despite low flat rates: Shipping Asset Management SA, Panacore, Caravel Group, Navig8 and Petredec

  Growing and expanding the business despite low flat rates: Shipping Asset Management SA, Panacore, Caravel Group, Navig8 and Petredec   Artist: Jean Louis Drye  Shipping is a risky venture, at a time when the shipping industry lives lean years in terms of … Continue reading

The most influential leaders in the tanker industry today by Tanker Shipping & Trade. 

The most influential leaders in the tanker industry today by Tanker Shipping & Trade. 

  Aristotle Onassis in 1946 just married Athina, the daughter of the major Greek Owner: Stavros Livanos. At the end of the WWII hundreds of Liberty Ships used for the war effort are waiting to be sold at or below … Continue reading

The Baltic Exchange explained

The Baltic Exchange explained

  The Baltic Exchange explained Greek Ship Poyagial Etar by Jean Louis Drye In The Baltic, Time-Charter Equivalent (TCE)  I felt that the Baltic was misunderstood so I provided my explanations about the Baltic, calculations made by Baltic participants and gave some … Continue reading

Doing a Flush, Laytime and Demurrage under the Beepeevoy 4, eurogas/cbob t/a arb talk

Doing a Flush, Laytime and Demurrage under the Beepeevoy 4, eurogas/cbob t/a arb talk

  “Appontement pétrolier” by Monray, Artist Physical, shipping & contractual aspects of trading are what is driving the show in the energy marine trade. In this article, I will first give explanations about limitations occurring at refined products terminals. Secondly, I … Continue reading

Why Canadian wheat has not been to the Brazilian market?

Why Canadian wheat has not been to the Brazilian market?

  Why Canadian wheat has not been to the Brazilian market? By Gabriel Ferreira The Argentine planting was far short of its potential in the 2013 crop losses from drought in the American wheat crop in 2014, local prices increased … Continue reading

Rio Tinto, Anglo American, Cargill, Vitol are in the Driver seat, Owners in the rear seat

Rio Tinto, Anglo American, Cargill, Vitol are in the Driver seat, Owners in the rear seat

Charterers Rio Tinto, Anglo American Cargill, Vitol are in the driver seat; Owners in the backseat.  The collapse of Iron Ore prices and economic woes in China have received an unprecedented attention level in the dry-bulk shipping and in the mining … Continue reading

Oil and Wheat are “Smiling”-Commodity risk management

Oil and Wheat are “Smiling”-Commodity risk management

Oil and Wheat are “Smiling”. Commodity risk management Black-Sea is crucial in the commodity trade especially for Energy and Grains. The Ukrainian crisis increases probabilities of tail events or extreme events in Oil and Wheat. Here comes the challenges: Dealing with the constant … Continue reading

The role and the interpretation of some Incoterms for Commodity Traders.

The role and the interpretation of some Incoterms for Commodity Traders.

What is FOB ? Do you know what does it mean ?  I thought so. However, as demonstrated by Mr. Laurence Bacon, in a transaction FOB can mean pretty anything. How to Avoid Unnecessary Disputes in Trading Contracts ? FOB Question. … Continue reading

Traders – Secrets and Commodities Part 3: A Masterpiece on the economics of the commodity firms

The Economics of Commodity Trading firms demystified the commodity trading business.

This paper is sponsored by Trafigura and is authored by Professor Craig Pirrong. The text is thick, (a 2-3 hours minimum reading),

source: Trafigura

Quote 1: The shale gas boom in the United States, and the resulting decline in natural gas prices, has substantially reduced the demand for coal for electricity generation in the United States. This freed substantial quantities of coal for export, but there is inadequate infrastructure to accommodate an increase in export flows. Trafigura determined that the Burnside Terminal is ideally placed to alleviate this bottleneck“.

Quote 2: “A primary advantage of private ownership is the superior alignment
of incentives between managers and equity owners. Managers who own small (or no) stake
in an enterprise have an incentive to act in ways that benefit themselves, but are harmful to
equity holders. For instance, they may consume excessive perquisites, invest in low-returning
prestige or empire-building projects, or run ill-advised risks: the managers enjoy the benefits
of these activities, but the outside investors bear the costs.”

I wonder who he meant, any suggestions readers ?

Pirrong is professor at University of Houston and has worked for the CME and Trafigura, If I’m not mistaken, he is also blogging as the Streetwiseprofessor. -:)

© 2014 -The Trade, Shipping and Finance Wizard

Appetizers:

“Traders – Secrets and Commodities Part 1

Traders – Secrets and Commodities Part 2

 

Grain & Oilseeds: Cash Markets, Logistics & Freight Report.

Grain & Oilseeds: Cash Markets, Logistics & Freight Report.

click here for higher resolution This is just an overview of our weekly commodity newsletter for selected clients. 4/30/2014 Record-High non-commercial short position, corn price demand elasticity ( from ethanol, exports, feeds), On-Farm Storage and Ukraine have triggered a rally in … Continue reading