CAGR 2014-16 - Marine Money

Shipping markets outlook
11th Annual Istanbul Ship Finance Forum
21 May 2014
Contents
Shipping markets overview
Section I
Bulk carrier market
Section II
Tanker market
Section III
Containership market
Section IV
Conclusions
Section V
Section I
Shipping markets overview
Vessel earnings
Bulker earnings1
Tanker earnings2
(US$ per day)
Containership earnings3
(US$ per day)
16000
14000
(US$ per day)
30000
12000
25000
10000
20000
8000
15000
6000
10000
4000
5000
2000
0
0
12000
10000
8000
6000
2012
•
2013
2014
2012
2013
2014
2012
2013
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Oct
Nov
Sep
Aug
Jul
Jun
May
Apr
Mar
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Feb
Mar
Jan
0
Feb
2000
Jan
4000
2014
1Q14 vs Q13
1Q14 vs 1Q13
1Q14 vs 1Q13
+12%
+30%
+83%
Earnings improved in all sectors during the first three months of the year. Improvements were led by the drybulk
sector
• Weakness in Q2 is somewhat unexpected. However, it is believed to be a temporary issue and earnings are likely to
improve in 2H2014
1 – Based on Clarksons average bulker earnings index, US$ per day
2 – Based on Clarksons average tanker earnings index, US$ per day
3 – Based on Clarksons average containership earnings index, US$ per day
Asset values – change from the trough
Drybulk
Containerships
Tankers
60%
60%
60%
50%
50%
50%
40%
40%
40%
30%
30%
30%
20%
20%
20%
10%
10%
10%
0%
NB Average
•
•
•
•
5yr average
10yr average
0%
0%
NB Average
5yr average
10yr average
NB Average
5yr average
10 yr average
Asset values appreciated substantially since the trough 18 months ago on expectations of improving earnings
There has been strong interest in all asset classes and all age groups
In the drybulk and tanker sectors older tonnage saw values rising sharply albeit from a very low base
Container values increased only marginally due to persistent low vessel earnings
Improving fundamentals
Fleet growth*
Trade growth*
(no of ships)
7%
7%
6%
Contracting*
5.9%
5.5%
4%
4%
2%
1.5%
800
5.1%
5%
3.0%
900
6%
5%
3%
1,000
4.6%
600
3.5%
500
3%
400
2%
300
1.1%
1%
200
1%
0%
Drybulk
Crude oil
Oil
products
Container
Fleet growth is slowing down
700
100
0
0%
Drybulk
Crude oil
Oil
products
Container
Seaborne trade is expanding
Drybulk Crude oil
Oil
Container
products
But, contracting is rising again…
• Deliveries declined significantly in 2013 while demolition remained relatively high. Fleet growth has continued to slow
further in the bulker and tanker sectors in 2014
• Only in oil products did trade growth exceed fleet growth in 2013. Seaborne trade is continuing to improve in all
sectors in 2014, creating better supply-demand balance
• Low prices, new fuel efficient designs and improving fundamentals boosted contracting in 2013, particularly in the
drybulk sector. This trend has continued into 2014
*All figures are for 2013
Section II
Drybulk market
Improving fundamentals…
Seaborne trade growth forecasts
Drybulk fleet growth forecasts
7.0%
7.0%
6.5%
6.5%
6.0%
6.0%
5.5%
5.5%
5.0%
5.0%
4.5%
4.5%
4.0%
4.0%
3.5%
3.5%
3.0%
3.0%
2.5%
2.5%
2014f
2015f
Trade growth
2014f 5.3%
2015f 6.1%
2016f 6.0%
2016f
2014f
Growth in trade is
expected to exceed
growth in fleet for the
first time since 2007
2015f
Fleet growth
2014f 4.7%
2015f 4.5%
2016f 3.8%
2016f
…leading to improved fleet utilisation
Fleet utilisation is expected
to improve over the next
few years and reach 87.5%
by 2016 from 77% in 2013
Earnings will improve in
line with rising utilisation
7500
6500
BDI
5500
4500
R² = 0.7476
3500
2500
1500
Drybulk fleet utilisation and Baltic Dry Index
102%
Forecast
98%
75%
85%
95%
Utilisation
105%
8000
94%
7000
90%
6000
86%
5000
82%
4000
78%
3000
74%
2000
70%
1000
66%
0
2004
500
9000
2006
2008
2010
Utilisation
2012
BDI
2014f
2016f
Earnings are not where they need to be!
Inflation adjusted 10yr old capsize values
(20 year average vs current (US$m)
40
Inflation adjusted capesize earnings
20 year average vs current (US$ per day)
35,000
30,000
35
25,000
20,000
30
$37
$33
15,000
$30,869
10,000
25
$11,060
5,000
0
20
20 year average inflation
adjusted (excl 2007-08)
Current
20 year average inflation
adjusted (excl 2007-08)
Current
Higher earnings are already priced into asset values!
* As of 16 May 2014
Heavy ordering is threatening the recovery!
Historical contracting
Drybulk orderbook
2500
170
(number of ships)
(m-dwt)
+19%
160
2000
4th Highest contracting
ever!
1500
150
140
130
1000
120
500
110
100
0
2007
•
•
•
•
2008
2009
2010
2011
2012
2013
2014ytd
Jan-13
May-14
993 bulk carriers totalling 85m-dwt were ordered in 2013 - the 4th highest level of contracting in history
Supramax attracted the strongest interest: out of the 993 orders over 367 or 36% were in the supramax segment
Recent contracting is unlikely to have an impact on near-term prospects given the delivery lead time
However, if ordering continues at recent levels then it may lead to another recession in the medium term
Section III
Tanker market
Fall in US crude imports are offset by Asian imports
US crude oil imports from WAF
Asia crude oil imports from WAF
(million barrels)
(million barrels per day)
70
2.0
60
1.9
1.8
50
1.7
40
1.6
30
1.5
20
1.4
10
1.3
0
1.2
1Q11
•
•
•
•
•
1Q12
1Q13
1Q14
2011
2012
2013
US crude oil imports declined sharply as a result of booming shale oil production
Imports from West Africa (WAF) were hit severely. Volumes declined by about 70% y-o-y during 1Q14
Decline in US-bound volumes have been partly largely by an increase in exports to Asia
Total Asian imports from WAF increased by about 7% during the first four months of the year
Longer haul trades to Asia from WAF create additional tonne-mile demand
2014ytd
Crude oil tanker fleet growth is slowing
Crude oil fleet growth
Average fleet growth by segment
(year-on-year)
(year-on-year, CAGR 2014-16)
6.0%
3.0%
5.0%
2.0%
4.0%
1.0%
3.0%
0.0%
2.0%
-1.0%
1.0%
-2.0%
CAGR 2014-16 :
1.2%
-3.0%
0.0%
2013
2014F
2015F
2016F
VLCC
Suezmax
Aframax
Panamax
• Crude oil tanker fleet growth is expected to slow down sharply in 2014 and 2015 before rebounding in 2016
• We expect the crude oil fleet to grow by 1.2% this year, down from 4.8% in 2013
• Crude oil fleet growth is set to decline further to 0.7% in 2015 before accelerating to 1.8% in 2016
• Overall, crude oil fleet growth is likely to average 1.2% per year expansion between 2014 and 2016
Rising products exports out of the US
Refinery throughputs have
increased sharply as a
result of the shale oil
boom in the US
US imports of oil products
declined by 48% between
2009 and 2013 whereas
exports have increased by
over 125%
The recent trend reversal
has seen USG refiners
stockpile domestic crude
(about 200m barrels)
This is partly due to
limited light, sweet refining
capacity but also for
geopolitical reasons
(Ukraine)
US oil products trade
(mbpd)
4.5
2009-13 imports
2009-13 exports
4.0
- 48%
+125%
3.5
3.0
2.5
2.0
1.5
1.0
2009
2010
2011
Oil products imports
2012
2013
Oil products exports
2014
Rising ME and Asia-Pacific products exports
The continuing shift in the
distribution of world
refining capacity away from
Europe towards the East
will create more long-haul
trades into the Atlantic.
Refinery capacity
additions
by region
17%
Refinery capacity additions by year
(mbpd)
3,000
New refinery
Capacity addition
2,500
2,000
1,500
1,000
11%
4%
33%
500
0
31%
2014
2015
2016
2017
2018+
4%
Africa
Europe & Eurasia
N. America
Asia-Pacific
Middle East
S&C America
CAGR 2014-18: 2.2% or 2.1m bpd per annum
Unknown
Heavy contracting threatens tanker market recovery
Tanker contracting
Tanker orderbook
(number of ships)
(Current versus January 2013*)
400
100%
350
80%
63
300
60%
40%
250
20%
200
150
100
50
56
71
2011
-9%
0%
288
35
-20%
Crude oil tanker
29
98
2012
Product tanker
2013
2014YTD
Product tanker
•
Total tanker contracting rose to 8.3m-dwt in
1Q14 compared with 7.1m-dwt in 1Q13
•
MRs were the clear orderbook winners in 2013
with 175 orders placed
•
20 VLCC orders were placed in 1Q14 taking
the total to 67 since the start of 2013
41
0
* As of May 2014
+81%
Crude oil tanker
Product tanker fleet growth is picking up
Product tanker fleet growth
Average fleet growth by segment
(year-on-year)
(year-on-year, CAGR 2014-16)
7.0%
10.0%
6.0%
8.0%
5.0%
CAGR 2014-16 :
4.8%
6.0%
4.0%
4.0%
3.0%
2.0%
2.0%
0.0%
1.0%
-2.0%
0.0%
2013
•
•
•
•
2014F
2015F
2016F
LR2
LR1
MR
SR
Contrary to the crude oil tanker sector, the products tanker fleet is expected to grow rapidly over the next 3 years
The fastest growing segment is likely to be the LR2 fleet, albeit from a low base
In actual capacity terms the MR tanker fleet is expected to grow the fastest
It is forecast to add a net 10.5m-dwt of capacity during the 2014-16 period
Section IV
Containership market
Global container trade growth is expected pick up
Global container trade is
likely to accelerate in an
improving global economy
However, capacity
overhang is likely to keep
pressure on freight rates in
the short term
Markets are expected to
improve gradually as the
gap between demand and
supply narrows during the
2014-16 period
Global container trade volumes
(million TEU)
CAGR 2014-16 :
6.3%
2014F
2016F
200
190
180
170
160
150
140
130
120
110
100
2010
2011
2012
2013
2015F
Scrapping remains high
Containership scrapping
reached an all time high in
2013. Despite the fleet
getting younger some
463,000 TEU was scrapped
Scrapping remains strong
so far in 2014 and is
expected to reach 500,000
TEU by the end of the year
Containership scrapping activity
(thousand TEU)
500
450
400
350
300
250
Average demo age
(years)
30
150
100
28
50
26
24
2014ytd
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014ytd
20
2001
0
22
2000
32
200
Newbuilding contracting and orderbook
Despite the on-going woes
of most mainline carriers,
new vessel contracting
continues apace
18 ships were ordered of
10,000-teu and larger in 1Q
2014 in addition to the 69
ordered in 2013
This has taken the total
orderbook in the largest
vessel sizes to 73% of the
current fleet
This illustrates how the
carriers are still chasing
economies of scale in their
future operations.
Herd-like investment is all
about keeping up and
staying competitive. Pain
before gain?
Orderbook
2013 Contracting
10,000+ teu
10,000+ teu
69
7,500-9,999 teu
7,500-9,999 teu
63
5,100-7,499 teu
2
3,000-3,999 teu
6
2,000-2,999 teu
4,000-5,099 teu
32
3,000-3,999 teu
29
1,500-1,999 teu
20
1,500-1,999 teu
1,000-1,499 teu
18
1,000-1,499 teu
54
45
33
<1,000 teu
1
0
23
2,000-2,999 teu
24
<1,000 teu
109
5,100-7,499 teu
14
4,000-5,099 teu
147
50
no of ships
100
6
0
25 50 75 100 125 150 175
no of ships
Conclusions
• DRY BULK
• We expect to achieve better supply-demand balance from late 2014.
• But further ordering needs to be constrained. It will remain a fragmented sector.
• TANKERS
• Near-term COT supply growth is declining but near-term PT supply growth is rising.
• We still foresee expansion in east-west product trades and west-east crude trades.
• CONTAINERS
• The big ships appear to be over-ordered and the smaller ones under-ordered.
• Container trade is at least expanding. Further consolidation is likely in various ways.
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