Intercem Americas 2017 - Cement...

Drybulk and Cement Carrier market review for 2017 – Pointers for 2018 and onwards in the face

of legislation changes

Intercem Americas 2017Mandalay Bay Resort

Presented by Simon CoxNovember 2017

290 (11-Feb)

1,588 (24-Oct)

1,477 (27-Nov)

0

400

800

1,200

1,600

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

source: Baltic Exchange

Baltic Dry Index

0

5

10

15

20

25

Jan Apr Jul Oct

2016 Avg: 5,162

2017 Avg: 9,548

0

5

10

15

20

25

Jan Apr Jul Oct

2016 Avg: 5,940

2017 Avg: 9,059

Capesize Panamax 76000dwt

Supramax 58000dwt

0

5

10

15

20

25

Jan Apr Jul Oct

‘000

US$

/ D

ay

2016 Avg: 4,973

2017 Avg: 7,505

Handysize 28000dwt

Baltic Exchange Index Types – TC averagesYear-to-Date


0

5

10

15

20

25

Jan Apr Jul Oct

2016 Avg: 7,159

2017 Avg: 14,202

F L E E T U P D A T E

Annual Dry Bulk Fleet Development

31

4

13

7

26

36

23

17

29 31

14

2

0

20

40

60

80

100

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Milli

on T

onne

s

Demolition

Sold for Demolition

Forecast

25 2529

50

86

104101

62

48 49 47

36

4

0

20

40

60

80

100

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Gross Delivery

Forecast

2017 Jan-Oct Demolition:

7 VLOC18 Capesize

3 Post-Pmx47 Panamax70 Supramax71 Handysize

Deliveries Deletions

Dry Bulk Fleet StatusExisting Fleet vs. Orderbook as of 1st November 2017

Number of ships Million Deadweight

182

1,384

625

2,021

3,4803,838

61

69

32

136

187

170

0

1,000

2,000

3,000

4,000

5,000

VLOC Cape P-Pmx Pmx Smx Hsize

No. o

f shi

ps

On order: 655 ships (6% of Existing Fleet)

Existing Fleet: 11530 ships

55

255

59

157

192

10539%

5%

5%

7%

6%

6%

0

50

100

150

200

250

300

VLOC Cape P-Pmx Pmx Smx Hsize

Milli

on D

WT

On Order: 67m Dwt (8% of Existing Fleet)

Existing Fleet: 824m Dwt

source: Howe Robinson Research, Lloyd's Register Fairplay, Zosen News & various other sources

Annual Fleet Growthas of 1st November 2017

8 13 9 8

20 25 23 25 2938

80 78

66

3932

20 1624

13

26

35

23

1629

31 17

13

2115

12

2126 26 26

33

51

86

104101

62

48 49 47

40

2722

7

53

0

20

40

60

80

100

12020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

2018

*

2019

*

2020

*

Millio

n DW

T

Net Growth Deletions Deliveries Orderbook Orderbook Jan

2017F:24m dwt / 2.9%

net growth

1

2

3

4

5

Billio

n To

nnesWorld Seaborne Dry Bulk Trade Growth

source: MSI, Howe Robinson Research

2017 Forecast 3.6% Growth4.8% incl. Chinese Coastal Coal

Iron Ore30%

Coal25%

Grain & Soya10%

Minor Bulk35%

2017

Unit: mt 2016 2017

Iron Ore* 1,505 1,580

Coal 1,193 1,219

Grain 537 577

Minor Bulk 1,546 1,576

Total 4,781 4,952

China Coastal Coal 635 725

Total 5,416 5,677

China Monthly Crude Steel Production

source: GTIS, Howe Robinson Research

67.7

61.1

72.072.8

72.373.2

74.074.6

71.872.4

55

60

65

70

75

80

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mln T

2014-16 Range 2017

0

300

600

900

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Milli

on T

onne

s

Australia Brazil S.Africa India Iran Others

Q1 – Q3 China Iron Ore Imports2017: 817mt (+54mt / +7.1% y-o-y)

Coal – Surprising on the Upside 2017

2017 Coal Export Forecast: 1,219mt (+2.2%)

0

300

600

900

1,200

2012 2013 2014 2015 2016 2017

Milli

on T

onne

s

Australia Indonesia Russia Colombia US S.Africa Others

Australia & Indonesia

-7.2mt /-1%

Rest of World

+33.2mt /+8%

2017

World Coal TradeJanuary – August Y-o-Y

0

60

120

180

240

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Milli

on T

onne

s

Indonesia (+11.8mt / +17%)

Australia (+8mt / +15%)

Russia (+7.8mt / +57%)

Vietnam (-0.01mt / -19%)

N.Korea (-12mt / -71%)

Others (-0.3mt / -3%)

China Q1 – Q3 Seaborne Coal Imports2017: 179mt (+16mt / +9.8% y-o-y)

source: GTIS, McCloskey, Howe Robinson Research

30%

40%

50%

60%

70%

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Share Indonesia

Milli

on T

onne

s

Indonesia

Australia

S.Africa

US

Russia

Others

Share Indonesia

India January – July Seaborne Coal Imports2017: 110mt (-9.4mt / -7.8% y-o-y)


Coastal Coal Trade 2017F24mt (+4mt / +20%)

Q1 – Q3 Y-o-Y EC Americas Coal ExportsUS: 62mt (+25mt / +68%) Colombia: 64mt (-1.7mt / -3%)


0

11

22

33

44

55

66

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Milli

on T

onne

s

Asia

Americas

Europe-Med

0

30

60

90

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

OthersCanada & MexicoF.East/SE AsiaIndian OceanECSAEurope-Med

GRAIN2017 Grain Export Forecast: 577mt (+7.5%)

0

30

60

90

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

Milli

on T

onne

s

Soya Beans Barley Wheat Corn Soya Meal

Chinese Jan – Sep Grain Imports2017: 84.3mt (+13.4mt / +19%)

source: GTIS

Million Tonnes Soybean Imports % Change2012 58.4 11%2013 63.4 9%2014 71.4 13%2015 81.7 14%2016 83.2 2%

0

3

6

9

12

15

18

2005 2007 2009 2011 2013 2015 2017

Philippines

Malaysia

Thailand

Indonesia

Vietnam

SE Asia January – August Grain Imports


Wheat

0

4

8

12

16

2005 2007 2009 2011 2013 2015 2017

Philippines

Malaysia

Thailand

Indonesia

Vietnam

0

1

2

3

4

5

6

7

8

9

10

2005 2007 2009 2011 2013 2015 2017

Philippines

Malaysia

Thailand

Indonesia

Vietnam

Soya Beans & SBM CornMillion Tonnes

Minor Bulk2017 Minor Bulk Export Forecast: 1,576mt (+1.9%)

US Q1 – Q3 Petcoke Exports by Region2017: 29.6mt (-1mt / -3% y-o-y)


0%

5%

10%

15%

20%

25%

0

8

16

24

32

2000 2002 2004 2006 2008 2010 2012 2014 2016

Milli

on T

onne

s

Cont / MedCanada & MexicoSouth AmericaSE Asia/Far EastIndian OceanOthers% Share India

Annual Exports:2014: 37 mt2015: 37 mt2016: 39 mt

Primary Cement Exporters Jan-Aug Growth RateTurkey only exporting major to exhibit significant positive growth


-11%

-34%

-3%

15%

-8%

9%

-4%2%

-9%

-40%

-30%

-20%

-10%

0%

10%

20%

EU China Thailand Turkey Iran* Japan Spain* Germany* India

Turkey surpassed Iran to become the third largest exporting country,

with stronger exports to the US, Middle East, and W.Africa

* Only January – July Data Available

FUTURE MARKET DIRECTION

Fleet Net Growth Scenario for 2018Nominal Orderbook 32-34m Dwt

3.0%

4.3%

3.1% 2.8%

6.6%7.4%

6.6% 6.7%7.3%

8.8%

16.9%

14.3%

10.5%

5.6%

4.3%

2.6%2.1%

2.9%

0%

3%

6%

9%

12%

15%

18%

0

20

40

60

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018*

Millio

n Dw

t

Net Dwt Delivery (m)

Fleet Net Growth % Dwt10m = 1.2%15m = 1.8%20m = 2.4%25m = 3.0%

Sub-Cape Quarterly Newbuilding Contractingas of 1st November 2017

source: Sea-Web

0

10

20

30

40

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millio

n DW

T

Post Panamax Panamax Supramax Handysize

2016-2017ytd7.0m dwt

(We are aware that more orders have been placed

which are not officially listed with IMO numbers yet)

Dry Cargo Growth& Forecast 2017

4,500

4,800

5,100

5,400

5,700

2012 2013 2014 2015 2016 2017

Milli

on T

onne

s

2012-146.8%

2015-160.8%

2017*4.8%

m Tonnes % Change2012 4,583 4.7%2013 4,932 7.6%2014 5,327 8.0%2015 5,303 -0.5%2016 5,416 2.1%2017 5,677 4.8%

Dry Cargo Growth

1

4

7

10

13

2015 2016 2017 2018 2019 2020 2021 2022

‘000

US$

/ D

ay

Avg TC BPI

FFA TC BPI

Avg TC BSI

FFA TC BSI

Avg TC BHSI

FFA TC BHSI


Forward Timecharter AveragesMonthly Avg. Spot TC Rates & FFAs

New Kamsarmax Index May Commence in Q417: Premium on BPI 11-12%

9.7k

8.6k

9.7k

• Market fundamentals are more positive than at any time during the recent cycle

• Orderbook now at its lowest level for 10 years and net growth for 2018 will not exceed 2017 levels, however there have been significant fresh orders in Q3/417 with further options to be declared

• Demand has been broad based across all commodities and, at almost 5%, has exceeded expectations in 2017. We may not see a similar upside in 2018

• On balance rates should be maintained at current or improved levels in 2018

• But we are unlikely to see inflated levels as supply/demand though returning to some sort of balance remains fragile and geopolitical or external factors such as commodity price volatility may negatively impact on demand

• China remains the wildcard, and though we remain optimistic of continued growth it remains difficult to predict future levels ofindustrial activity whilst government policy in relation to their steel and coal Industry is constantly evolving

• Looking ahead, there will be a dramatic upheaval in our Industry with forthcoming IMO regulations

CONCLUSION

Legislation Change: Ballast Water TreatmentImplementation Sep-2019: only 20% Fleet have BWT Systems

Source: Sea-web, Howe Robinson Research

16.415.9

12.0

5.8

0

6

12

18

VLOC & Capesize Post-Pmx & Panamax Supramax Handysize

Millio

n Dw

t

3rd SS 4th SS 5th SS 6th SS

Bulker Fleet Special Survey 2020

Total = 50m Dwt5th + 6th SS = 10m Dwt

New Regulation Applies GLOBALLY• IMO will lower limit on sulphur content in bunker fuel from 3.5% to 0.5%• High sulphur fuel oil accounts for 70% of overall bunker fuels1

UncertaintiesAvailability of low sulphur fuel oil• 0.5% fuel oil does not exist yet• Only 0.25% sulphur crude oil will be able to yield 0.5% fuel oil – IEA does not see enough supply2

• Shipping industry uses 3m barrels/day of HFO vs. 0.7m barrels/day of MGO

Enforcement• Uncertain who will be monitoring ships• As of now, flag states will decide whether ships are burning right type of fuel away from territorial waters• IMO has no regulatory/enforcement powers• Regulations must be ratified by member countries which may suggest differing levels of enforcement

Timing• IMO says it is too late to change implementation date• Little time for investment in refineries to make changes required to cope with increased MGO demand

source: IMO, 1Wood Mackenzie, 2IEA Oil 2017, 3 Jacobs Consultancy

Lower Global Sulphur Limit for Fuel OilEffective 1st January 2020

LNG-fuelled capabilities newbuildings

Scrubbers used to lesser extent as ECAs begin to crack down on high-sulphur fuel even with scrubbers

Scrubbers may face further crackdown due to CO2 emissions

LNG ships designed to operate with spark ignition reducing need for MGO

Long

Cost of MGO drives innovation of scrubber & LNG technology

Scrubbing & LNG bunkering to be taken up

Re-liquefaction facilities & LNG bunkering ports rolled out globally

Increased scrapping of older ships that cannot be retrofitted

MediumMGO price to increase due to demand + little time for refineries to invest in MGO development. IFO380 produced until transfer date

Diesel price to increase due to competition between vehicle & marine markets for distillate materials

IFO380 price to decrease after regulatory change

Fuel waiver for ships likely, particularly for smaller vessels which do not have space for retrofit

Short

Implications

0

300

600

900

1200

2012 2013 2014 2015 2016 2017 2018 2019 2020

USD

/ To

nne

Rotterdam MGO Rotterdam IFO

Legislation Change January 2020Global Sulphur Limit for Fuel Oil

Bunker price movements will undoubtedly impact on the future direction of the dry bulk market.

Effect of IMO 2020 low sulphur regulations remains unclear.

HighMGO: 1,026

IFO: 713

LowMGO: 260IFO: 109

Fleet UpdateCement Carriers

• Part One: Fleet Statistics

• Part Two: 2015/7 Changes & Orderbook

• Part Three: Regional Developments

NOTE – All Data Based on Minimum 2,000 Dwt

Fleet Evolution:1985 – 2015

Part 1Fleet Statistics

Kiel Canal November 2015

Off Kobe Dec-15Kiyoyasu Maru, 13000 dwt built 2016, Japan

Cement Carrier Headline Data17 November 2017

§ As of 21st November 2017, the total fleet of cement carriers (mechanical & pneumaticcombined) excluding Great Lakes traders is 368 vessels

§ Of which 41 are out of service, either laid up, under arrest or unserviceable.

§ Of these 327 vessels, 7 are presently SPOT seeking business and a further 8-10 arecharter free within the next 8 weeks. This does NOT include vessels that are idlebetween contract commitments.

Total Fleet Development2010 – end 2017est: +42Vessels / +0.37mt (+14.4%)

2010 2011 2012 2013 2014 2015 2016 2017e

Fleet as of 1st Jan 2,567,962 2,545,083 2,435,105 2,438,187 2,468,722 2,593,875 2,672,610 2,770,043

Deliveries 74,198 55,735 34,350 11,519 124,615 82,453 66,250 76,522

Conversions 2,800 0 0 19,016 40,800 39,368 54,455 116,251

Total Additions 76,998 55,735 34,350 30,535 165,415 121,821 120,705 192,773

Demolition / Lost 99,877 165,713 31,268 0 40,262 43,086 23,272 25,277

Net Change -22,879 -109,978 3,082 30,535 125,153 78,735 97,433 167,496

% Net Change -0.9% -4.3% 0.1% 1.3% 5.1% 3.0% 3.6% 6.0%

Deadweight

2010 2011 2012 2013 2014 2015 2016 2017e

Fleet as of 1st Jan 327 328 315 313 318 333 344 353

Deliveries 9 6 3 3 13 12 10 8

Conversions 1 0 0 2 6 3 4 11

Total Additions 10 6 3 5 19 15 14 19

Demolition / Lost 9 19 5 0 4 4 5 3

Net Change 1 -13 -2 5 15 11 9 16

% Net Change 0.3% -4.0% -0.6% 1.6% 4.7% 3.3% 2.6% 4.5%

Vessels

0

30

60

90

On Order 0-4 5-9 10-14 15-19 20-24 25-29 30-34 >=35

No.

of V

esse

ls

Age Group

>16k dwt

12 - 15.9k dwt

8 - 11.9k dwt

5 - 7.9k dwt

2 - 4.9k dwt

Cement Carriers Age ProfileIn Service (excluding Laid Up), as of 21st November 2017

Bergen Dec-15

Part TwoFleet Changes since January 2017

Cement Carriers Sold YTD

source: Howe Robinson Cement Desk, Howe Robinson Research

No. of Ships Ave Age No. of Ships Avg Age

2011 19 36 21 27 75%2012 4 32 9 27 84%2013 0 n/a 13 23 n/a2014 3 33 7 35 106%2015 5 37 8 26 70%2016 4 42 7 21 50%2017 2 36 2 33 92%Total 37 36 67 26 73%

Sold for Demo Sold Further Trading % age Demo

Sold for Demo Sold Further Trading% age Demo

No. of Ships Ave Age No. of Ships Avg Age

2011 19 36 21 27 48%

2012 4 32 9 27 31%

2013 0 n/a 13 23 0%

2014 3 33 7 35 30%

2015 5 37 8 26 38%

2016 5 41 7 21 42%

2017 3 36 5 25 37%

Total 39 36 72 26 34.2%

2017 Newbuilds, to date

Mahanuwara – 15 years TC for Sri Lanka Trade

Name Dwt Country Built

MAHANUWARA 21,000 ChinaFORTUNE 13,479 JapanIRIANA 10,000 IndonesiaAZALEA 7,582 Japan

Conversions2017

Name Dwt Built Converted Where By

NACC ITACA 7,489 2012 2017 TURKEY NACCNACC POROS 7,489 2012 2017 TURKEY NACCNACC QUEBEC 15,000 2011 2017 CHINA NACCJUNG JIN 12,764 2003 2017 KOREA SampyoLINA 12,764 2003 2017 KOREA SampyoNORDANHAV 9,891 1992 2017 SWEDEN ThunCAMILLA 10,085 1997 2017 INDONESIA Andalas

ConversionsUnder way & Expected

Name Dwt Built Converted Where By

GRACE 35283 2006 2018 China? TokyoCementKONDILI 28442 2006 2018 China CSLARDITA 13500 2007 2018 China McKeilNACC TORONTO 13977 2003 2017 Turkey NACCSIDER ALICUDI 7500 2011 2017 Turkey NACCICELAND 4537 2006 2018 Lithuania JTC

Kondili, ex Cape Knox Grace, ex New Creation

Current Order Book

NAME DWT Built CoB Owner

SHIN KURUSHIMA ONISHI 6018 23500 2019-12 Japan Ta Ho

SHIN KURUSHIMA ONISHI 6017 23500 2019-08 Japan Ta Ho

ABG 378 20000 UNCLEAR India ABG

KANDA 578 7200 2018-09 Japan Japanese

CYMBIDIUM 7000 2017-11 Holland SMT

MIURA 1577 5800 2018-06 Japan Japanese

KARYA TEKHNIK 1 4999 2018 indonesia Indonesians

KARYA TEKHNIK 2 4999 2019 indonesia Indonesians

KANDA 576 3300 2018-02 Japan Japanese

Part 3Regional Developments

Cement Carrier Trading Areasas of 21/11/2017 - over 2,000dwt

§ Indian Ocean 28 DOWN 2§ Australia/NZ 7 DOWN 5§ Indonesian Coastal 64 UP 25§ Japanese Coastal 92 UP 19§ Vietnam Coastal 6 no change§ Korean Coastal 39 UP 7§ Other Far East Trades 33 no change§ Americas 21 no change§ Med inc Canaries/Wafrica 31 DOWN 9§ North Cont/Baltic 36 UP 9

Change from Nov 2011

Japan – still growing

• 92 with Japanese Flag: 90 are in service. All in domestic trade, cabotage protected.

• A further 31 foreign flagged Cement Carriers traded in or out of Japan in last 12 months – doing the non cabotage trades.

• 5 Japanese Cement Carriers sold since Jan 2016 – built 1987/1988 – to Indonesia, Korea and Greece; price around US $280 to 380 per MT DWCC

• 23 New builds for Japan since January 2014 (avg. 5,421dwt) – in that time they sold 10 (avg. 6,001 dwt, average 30 years old)

• The Domestic Japan trade continues to grow and is the single most dominant factor in the market

Indonesia – VERY over capacity • There are 67 Indonesian flagged cement carriers. 21 of them are not trading, being used for storage, idle or laid up.

Since early 2016, a number of ships have moved to trade outside domestic trade (presently 3), a further sign of over-capacity.

• 1985 = Average year of build, 7,295mt = Average Deadweight

• 9 have been built new for Indonesian Owners, all since Jan-14, and since 2013 Indonesian owners have started converting bulkers for the first time.

• Remainder bought second hand, 5.5 per annum average between Jan-08 and Dec-13, then dropping to 2.3 per annum since then. Average age of purchases dropped from 29.6 years to 24.4 years. Just over 42% bought from Japan. No ships acquired from the Atlantic Ocean since mid 2013.

Sirios Cement III

• 36 cement carriers currently discharging in this area (10 vessels more than in April 2016). All fully employed, with the odd (seasonal) gap now and then.

• 1995 = Average year of build - 6,215mt = Average Deadweight

• UK imports the major growth market - cement carrier UK port calls up 20-25% per annum for last 2 years. 19 different Cement Carriers called UK in 2016 and 18 different vessels so far in 2017. Baltrader by far the main carrier into UK with 66% of the total port calls.

• 3 Owners (Independents) dominate the market, owning 26 of the vessels.

Baltrader have 9 SMT Eureka have 9 JTC/KGJ have 8

North Europe – growing market

Med Sea – weak for over 6,000dwtsstrong for sub 4,000dwts

• There are 31 ships in the area (but 3 are fully out of service) – Jan 2010 there were 56.

• We see 9 available for charter in the next few weeks -highest %age available ww!!

• 1988 Average year of build, 7,404mt the Average Dwt. 15 different owners. Only 1 owner has over 3 ships in the zone (Sirios has 6)

• Israel: started importing in 2015 by cement carrier – now 4 are on the trade, with more enquiry.

• Libya & Algeria were the two big import markets but now collapsed.

Eviacement IV in Corinth Canal

Yemen Imports by Cement CarrierName DWT built TradedYemen tradingnow

LevantOrient 14,650 1962 current Yemen

SescoCement1 34,196 1972 current Yemen

RaysutI 9,813 1979 current Oman

LevantSuez 11,798 1979 current Yemen

MegahCement 10,849 1984 2016 DEMO

RaysutII 17,442 1984 current Oman

Koralia 8,811 1995 2014 Malaysia

Montok 10,247 2004 2016 Japan

UBCCanada 15,000 2010 2017 Australia

Outlook

• It seems the barrier to entry for new owners to get into the cement carrier trade has been lowered

• Well marketed Cement Handling Equipment available, along with money targeting better returns than in bulk sectors

• Absence of modern resales has forced many players to the conversion game• Increasing interest in larger sizes for Asia and Australia – projects under way on

23/35,000dwt• We estimate 70% of cement carrier activity to be domestic trade, 30% international –

domestic share slowly increasing.• New players and new ships will hit the margins of shipowners, and provide opportunities

for Cement Companies.• Regulation changes – BWT not a major issue this sector, but Sulphur cap will be as very

thirsty ships in port so LSMGO price rise will have to be passed on to clients in 2020.

THANK YOU

Intercem Americas 2017 - Cement...

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