GLOBAL SHIPPING Where are MARKETS we in...

12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018

1

GLOBAL SHIPPING MARKETS

current developments, outlook & the role of Asia

Martin Stopford, President Clarkson Research 24th April 2018

Where are we in the

cycle?


2

PART 1: TRENDS PART 2: DEMAND TRENDS PART 3: SUPPLY TRENDS PART 4: MARKET OUTLOOK PART 5: THE ROLE OF ASIA

Let’s take a look

AGENDA

THE FIV

E ISSUES


3

PART 1: CURRENT TRENDS

The main markets past cycle trough, but earnings still weak. Good stuff on demand side - world industrial

growth peaking; and trade growing fast. But shipyards still busy (mainly). Asia’s never been more exciting.


4

1. Past cycle trough, but still 19% surplus. Not there yet! 2.Clarksea index $10,248/day, below trend, edging up 3. Good news on demand side: –

a) World industry growing at 4.3% . b) Trade up 3.9% in 2017 & 3.4% in 2018 c) China imports up 8% pa in Dec 2017 - ore worries

4. Not so good news on supply side: - a) Ship orders 80 m dwt in 2017, orderbook 10.4% fleet b) Deliveries 98 m dwt in 2017, but 78 m dwt in 2018. c) Demolition 35 m dwt in 2017, one third of deliveries

5. Fleet growing 3.5% pa, same as trade. But only 2.6% in 2018.

S1: SUMMARY OF TRENDS


5

Ship earnings over three decades to April 2018

0

5

10

15

20

25

30

35

40

45

50

1990 1995 2000 2005 2010 2015 2020

$21,733/day

$11,919/day $11,670/day

Cla

rkse

a In

dex

$0

00

/day

This chart shows the average earnings of tankers, bulkers, containerships & gas

Like the 1990s?


6

-100% -50% 0% 50% 100%

VLCC 1990sSuezmaxAframax

Cl Prod

CapesizePanamax

Handymax

Chemical TankerOffshore

GasContainer

Clarksea Index

Tankers 43% below trend

Bulkers 18% over trend

Offshore -40%

Containers 9% Gas -67%

Cycle status in 12 markets: last 12 months as % seven year trend

• Bulk carriers much better than 12 months ago but tankers deterioration

• Tankers still weak

• Gas market now well below trend

• Chart shows average earnings in last 12 months as a % of average earnings in last 7 years May 2011 to April 2018)

Data to 14th April 2018

Chemical -16%

Clarksea Index -2%


9

- 5

10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

100 105 110 115 120 125

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Earn

ings

ove

r th

e la

s 1

2 m

on

ths

- $

00

0s

per

day

OPEX

Interest + spread

Depreciation

Earnings

Comment: Over 28 years the new Capesize cost $25,066/day and revenue averaged $24,685/day, a 1.7% loss. Earnings barely covered depreciation until 2003, when revenue shot up, producing super-profits.

12 month average earnings

(in arrears)

Capesize bulk carrier cost & revenue 1990-2018


10

(5)

5

15

25

35

45

55

65

75

85

95

105

115

125

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Earn

ings

ove

r th

e la

s 1

2 m

on

ths

- $

00

0s

per

day

OPEX Interest + spread Depreciation Earnings

12 month average earnings

(in arrears)

VLCC crude tanker cost & revenue 1990-2018

Comment: Over 25 years a new VLCC cost $36,178/day. Revenue averaged $37,515/day, a 3.7% margin. In 1990s earnings did not cover depreciation, then the 2000s saw big profits.

Second hand prices – bulkers just below replacement cost

0

100

200

300

400

500

600

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Pri

ce in

dex

, 5 y

ear

old

sh

ip 2

00

0=1

00

Tanker 5 year old price index Bulker 5 Year old price index

Global Shipping Markets - Martin Stopford 24 April 2018


12

PART 2: DEMAND TRENDS

Demand looking quite good


13

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

% g

row

th p

er a

nn

um

4. Credit Crisis

3. Dot.com Crisis

2. Asia Crisis

S10: World Industrial Production 1993-2017 (Dec) picking up

1. US Financial Crisis Good

recovery


14

223 293 336

393 500

626 709

801

927 998

1,369 1,474

1,647

1,832

2,026 2,091 2,114

2,256

2,437

0

500

1,000

1,500

2,000

2,500

3,000

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Imp

ort

s m

illio

n t

on

nes

per

an

nu

m

China Trade – imports back on growth trend

205 million tonnes pa increase in imports in 5 years 2008-2013

100 million tonnes pa increase in imports in 5 years 2003-8

160 million tonnes pa increase in imports in 2016-7

seaborne trade - by commodity (tons)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

20

16

bill

ion

to

nn

es t

rad

e

Gas & Chem

Other dry

Container

Minor Bulks

Grain

Coal

Iron ore

Products

Crude oil

Sea Trade growth 2000-2017 (annual % change)

7.3

%

0.7

%

3.0

%

5.7

%

6.6

% 4

.5%

4.8

%

4.5

% 2

.5%

-3.7

%

9.3

%

4.5

%

4.2

%

3.4

%

3.2

%

2.0

%

3%

3.9

%

3.0

%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

19

05

Total sea trade fo

recast

PART 3: SUPPLY TRENDS

Supply could respond faster!


18

28 33 39 39 36 42 46 47 51 55 62 73 77 83

95

119

153 167

157

109 91 97 101 97

0

20

40

60

80

100

120

140

160

180

200

19941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019

Del

iver

ies

of

dem

olit

ion

Mill

ion

DW

T

Orderbook slippage

Orderbook April 2016

Deliveries

Demolition

Stage 2 (Build & sell contracts for

new capacity)

Stage 1 (expand existing

capacity)

Stage 4 (Close 581uneconomic

shipyards)

Stage 5 (Slow production &

diversify in 423 active shipyards)

Del

iver

ies

bas

ed o

n o

/bo

ok

Stage 3: orderbook

slippage

S19: World shipbuilding output & capacity 1994- 2019

In 2009 there were 992 active yards In 2016 there were 423 active yards

forecast

11.7

10.9

6.8

0.4

0.5

0.0

0.1

0.2

0.0

0.2

2.7

-1.0 1.0 3.0 5.0 7.0 9.0 11.0 13.0 15.0

China

S. Korea

Japan

Germany

Italy

Philippines

Norway

Turkey

Spain

Netherlands

Others

Million CGT

Shipbuilding Deliveries by Country 2017

Source: Clarkson Research

121 yards

16 yards

57 yards

What is CGT? CGT is the Gross Tonnage (GT) of the ship weighted to reflect its work content per GT. For example the

weight for a containership might be 1.0 and the weight for a big tanker 0.25)

Martin Stopford, President CRSL 20 April 2018


20

0%

10%

20%

30%

40%

50%

60%

70%

80%Ja

n 1

99

6

Jan

19

97

Jan

19

98

Jan

19

99

Jan

20

00

Jan

20

01

Jan

20

02

Jan

20

03

Jan

20

04

Jan

20

05

Jan

20

06

Jan

20

07

Jan

20

08

Jan

20

09

Jan

20

10

Jan

20

11

Jan

20

12

Jan

20

13

Jan

20

14

Jan

20

15

Jan

20

16

Jan

20

17

Jan

20

18

Ord

erb

oo

k as

% f

leet

(d

wt)

Tankers

Bulk carriers

Container ships

S15: Merchant Orderbook Feb 2018 as % Fleet

Orderbook shrinking fast The orderbook is now down to 10.4% of the fleet. • Bulkers 7.5%, • Tankers 11.8% • Containerships 11.9%.

Bulkers edging up aain

Shipbuilding prices up a few % in April 2018

0

20

40

60

80

100

120

140

160

1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018

$ m

illio

n p

rice

VLCC Suezmax Aframax Tanker

Products Capesize Panamax Bulk

30,000 dwt bulker 6700 TEU

Source: Compiled from several sources including Fearnleys, CRSL

Martin Stopford, President CRSL 20 April 2018


22

24.30%

9.20%

9.00%

9.90%

11.50%

11.30%

8.60%

4.30%

3.30%

6.20%

1.70%

3.10%

2.30%

2.60%

0.00%

0% 5% 10% 15% 20% 25% 30%

LNG CARRIERSLPG CARRIERS

OFFSHORE (AHTS/PSV)BULKERS

CONTAINERSHIPSOIL TANKERS >10k dwt

CHEMICAL TANKERSCAR CARRIERS

MULTI-PURPOSERO-RO

OTHER CARGOOIL TANKERS <10k dwt

GENERAL CARGOREEFERS

COMBOSWORLD CARGO FLEET

Merchant Orderbook April 2018 by % Fleet Total cargo orderbook 195.8 m dwt (down 25%) and average is 10.9% of fleet

Orderbook as % fleet in dwt


23

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0

200

400

600

800

1000

1200

1400

1600

1800

2000

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

% g

row

th o

f w

orl

d c

argo

fle

et (

the

red

lin

e)

Wo

rld

car

go f

leet

m d

wt

(blu

e b

ars)

World cargo fleet (dwt) % growth

Period of negative growth 1982-1987

when the fleet declined due to heavy scrapping

S17: World fleet growth was 3.7% in2017, and about 2.3% in 2018


24

PART 4: MARKET OUTLOOK

Capital Link Forum

Now that we are past the trough of the recession the key issues are the development of the world economic business cycle, China steel, shipbuilding production, scrapping and the dynamics of releasing the surplus capacity. Not easy to weigh up.


25

S21: Bulk carrier supply demand balance – surplus gradually falling

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

100

200

300

400

500

600

700

800

900

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

% s

urp

lus

cap

acit

y at

no

rmal

sp

eed

Bill

ion

dw

t su

pp

ly/d

em

and

scenario

Bars show surplus (+) & shortage (-)

capacity as % of the fleet

Dark red line shows fleet capacity in billion dwt (left axis)

Light blue line shows demand in billion dwt (left axis)

surplus shortage


26

PART 5: THE ROLE OF ASIA

Capital Link Forum April 2018

Exciting possibilities as Asia adapts to its position as top cargo importer

y = 1980.1e0.0313x

0

5,000

10,000

15,000

20,000

25,000

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

Imp

ort

s –

mill

ion

to

nn

es

Sea Trade grew at 3.1% per annum from

1.7 billion tonnes in 1965 to 11.5 billion

tonnes in 2017

If the trend continues, trade it will reach 22 billion

tonnes in 2040.

Source: data collected by martin stopford from various sources, mainly United Nations and UNCTAD Dr Martin Stopford, President, Clarkson Research

Crude tankers, 387, 21%

[CATEGORY NAME], [VALUE],

[PERCENTAGE]

Bulk carriers, 816, 44%

Gas tankers, 63.8, 4%

[CATEGORY NAME][VAL

UE], [PERCENTA

GE]

Other, 148.8, 8%

Merchant fleet (dwt) Oct 2017

How will sea transport meet the

changing trade & cut the carbon footprint

by 50%?

If past trend continues, sea cargo will double by 2040

The changing regional trade matrix is creating a new trading matrix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

% o

f w

orl

d s

ea im

po

rts

in y

ear

N. Atlantic 89% world sea imports

Korea & the Tigers

China

Japan

Figure 6: Regional change will be a major feature of the next 60 years Marine digitalization and the Smart-Shipping roadmap

Asia 63% world sea imports

Asia’s Belt and road needs a maritime B2B transport system

Thailand

Laos

Malaysia

Taiwan

Indonesia

S. Asia (1.8 bn) Afghanistan Bangladesh India, Pakistan Iran, Nepal Sri Lanka, Bhutan

S. E. Asia (.7 bn) Cambodia Indonesia Laos, Brunei Malaysia Myanmar Philippines Singapore Thailand Vietnam

E. Asia (1.6 bn) China Hong Kong N Korea Japan, S. Korea Mongolia

Central Asia (.07 bn) Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan

Marine digitalization and the Smart-Shipping roadmap


30

THE END


31

“The statistical, graphical information contained in this paper are drawn from the Clarkson Research Services Limited ("CRSL") database and other sources. CRSL advises that: (i) some information in CRSL's database is derived from estimates or subjective judgments; and (ii) the information in the databases of other maritime data collection agencies may differ from the information in CRSL's database; and (iii) whilst CRSL has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such information does not obviate any need to make appropriate further enquiries; (vi) the provision of such information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (vii) shipping is a variable and cyclical business and anyone who thinks they can forecast it needs their head examining. Where views are expressed they are in the context of this general presentation and should not be used or relied on in any other context without appropriate investigation, validation and the written permission of the author

Disclaimer


32

Dry Bulk trade - about 2.7% growth likely in 2018

8.4

%

1.6

%

4.0

%

6.1

%

9.0

%

6.2

%

5.9

%

7.2

%

1.9

%

-3.8

%

6.2

%

6.3

%

6.1

%

5.2

%

0.0

%

1.6

%

3.9

% 2

.7%

-4%

-2%

0%

2%

4%

6%

8%

10%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

% g

row

th o

f tr

ade

in y

ear

forecast

Growth of sea trade 2000-2018 (annual % change)


33

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Peak 16 1952-3

"Undreamed of freight rates"

Peak 18 1970

"Firm & healthy"

Peak 19 1973-4

"An exciting market"

Peak 20 1979-81 "Rates

boomed"

Peak 21 1995

"Firm"

2000 “Stronger"

1999 “Sentiment rock

bottom"

Peak 15 1947

“positive market”

Peak 17 1956-7

"Healthy atmosphere"

Peak 22 2004

“fortunes made”

1982-6 "Worst ever"

1958-9 “Rock bottom"

1953 “Sad year” 1971-2

“Very poor"

1961-2 “worse than 30s"

1964-6 “fairly stable"

1948-9 “pessimis

m”

1975-7 “Un-profitable"

Note: based on the Norwegian Shipping News Tramp index from 1947 to 1963 & US Gulf-Japan grain freight 1964-2015. Parcel size increased from around 10,000 dwt in the early 1950s to 55,000 dwt in the 2000s

Suez reopens

June 1975

Asia Crisis June 1997

Dot.com Crisis 2001

China boom 2003

Korean war started in

1950

Suez canal closed 29 Oct 1956

Suez canal opens April

1957

Suez canal closed May

1967

Oil Crisis Oct

1973

Iran revo- lution 1979

Iran-Iraq war

starts 1982

Iraq Invades Kuwait

Aug 1990

Credit crisis Oct 2008

2007 “Bullish sentiment shows

no sign of changing” S5 Dry bulk market cycles 1947-2018

2010 “so far

sentiment firm”

2013 “activity

increased firmly”

2016 “staring into the abyss”


34

2004-8 Investment super boom still in play

0%

5%

10%

15%

20%

25%

30%

35%

1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

New

bu

ildin

g co

ntr

acts

% f

leet

(d

wt)

Source: data compiled by Martin Stopford from several sources

SHIP INVESTMENT CYCLE 1 1950-1973 During this cycle newbuilding investment gradually built up from 5% of the fleet to a peak of 30% in 1973. The upswing lasted 23 years.

SHIP INVESTMENT CYCLE 2 1987-2017 During this cycle newbuilding investment gradually built up from 5% of the fleet to a peak of 30% in 1973. The upswing lasted 20 years.

Figure 5: The last sixty years was dominated by two super-cycles


35

Investment in new ships – doubled in 2017 (from low base)

0

20

40

60

80

100

120

140

160

180

200

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

$ b

illio

n o

rder

ed in

yea

r Tankers

Bulkers

LNG

LPG

Containers

NB This data excludes Cruise

& Offshore


36

3 2 5 6 8 8 6 6 8 9 9 9 8 12 14

8 4 5

12 14 11 16 14 12

7 4

7 10 6 5 8

12 16 17 19

12 13 13 21

14 12 20

23 26 25 24

43

80

99 99

62

48 49 47

38

26 26

0

10

20

30

40

50

60

70

80

90

1001

96

3

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

Del

iver

ies

Mill

ion

Dw

t b

y sh

ip t

ype

Axis Title

Bulk carriers Bulker fcst Tankers Tanker fcst

Bulk carrier investment bubble 2007/8 with

deliveries 2009-2013, after market had

collapsed

The 1970s bubble was about tankers; the 2000s bubble is about bulkers

Tanker ordering bubble 1973 with deliveries in

1975/6, after market had collapsed (m dwt)

S14: Shipbuilding contracts & deliveries 1963-2017 & forecast

0

50

100

150

200

250

3001

96

3

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

Deliveries Delivs Fcst Contracting

2007 peak 274m dwt

Contracting 73 m dwt in

2017

Million dwt contracts


S6 Shipbuilding dry cargo price cycles 1945-2018

0

5

10

15

20

25

30

35

40

19

45

19

47

19

49

19

51

19

53

19

55

19

57

19

59

19

61

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

New

pri

ce $

mill

ion

23-38,000 dwt bulk carrier (1945-63 is based on a 9,500 treendecker, pro-rata)

1970 “

1973 “Record orders”

1980 “dry bulk

orders boom”

1986 “extremely low prices offered

good opportunities”

1990 “orders increased in first half, then

stopped” 1998

“shipbuilders under price pressure”

2007 “Record new

orders”

2016 “builders

under pressure”

Source: Compiled from several sources including Fearnleys, CRSL , RS Platou Price 1945-1963 based on 9,500 dwt ‘tweendecker



39

S21: World fleet supply demand balance – surplus gradually falling

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0.0

0.5

1.0

1.5

2.01

96

3

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

% s

urp

lus

cap

acit

y at

no

rmal

sp

eed

Bill

ion

dw

t su

pp

ly/d

em

and

scenario Bars show surplus (+) & shortage (-)

capacity as % of the fleet

Dark red line shows fleet capacity in billion dwt (left axis)

Light blue line shows demand in billion dwt (right axis)

shortage

surplus

surplus

shortage


40

S20: “Shadow” Surplus & Laid Up Tonnage

-80

-60

-40

-20

0

20

40

60

80

100

120

140

160

180

200

220

240

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

M d

wt

Shadow surplus Bulkers laid up Tankers laid up

Shows “Shadow” surplus tonnage and the proportion laid up

“Shadow” surplus is soaked up by slow

steaming today (19% fleet)

“Shadow” Surplus – tonnage in excess of the dwt of ships needed to carry trade at full

speed

7a


41

7.1

7.9

12

.3

9.3

4.6

8.2

6.1

4.2

0.4

1.0

1.8

0.5

5.6

10

.6

6.5

23

.2

33

.4 2

3.1

16

.3

30

.5

29

.3

14

.5

0

5

10

15

20

25

30

35

40

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

Mill

ion

dw

t sc

rap

ped

Series2 Bulk fcst Tankers Tank Fcst

Tanker & bulk carrier Demolition


42

0

20

40

60

80

100

120

140

160

180

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

VLCC (5 years) Suezmax Aframax

Second hand tanker prices – replacement cost (74% new)

Second hand bulker prices – just below replacement cost

0

20

40

60

80

100

120

140

160

180

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Pri

ce o

f 5

yea

r o

ld s

hip

$ m

Panamax Bulk carrierCapesizeLinear (Capesize)


GLOBAL SHIPPING Where are MARKETS we in...

Documents

Transcript of GLOBAL SHIPPING Where are MARKETS we in...