Martin Stopford Marine Money 24 Feb 2011[1]

Tanker & Bulk Overview

Martin Stopford, Marine Money Hamburg 24 Feb 2011 1

30th September 2010

CLARKSON RESEARCH SERVICES LTD

Martin Stopford

CRSL24th Feb 2011

Tanker & Bulker Markets Tanker & Bulker Markets

Marine Money Hamburg

30th September 2010


The Agenda For Today

1. Fundamentals 2. Economic Outlook3. Shipbuilding Outlook4. Tanker Outlook5. Bulker Outlook6. Conclusions

90

115

140

165

190 After two years the pressures are

building



30th September 2010


2. Shipping Bankers

We only need

$800MM Sir

1. Shipping investors

What shall I

buy now?

3. Shipbuilders

We want to make loads of money building ships

Why not build our

own fleet?

4. Charterers

30th September 2010


Shipping In The 2010sShipping In The 2010s• We entered the 2000s

decade with excellent fundamentals -China “taking off”, not much shipbuilding capacity, and an old fleet

• The result was the strongest boom for years.

• In 2010 we started a new decade with the Credit Crisis problems, China steel slowing; record shipbuilding capacity

Shall we say $5 a tonne?

Cargo owner Ship owner

B**tard!



30th September 2010


World Economy & Sea Trade 2000 2010

Sea trade M tonnes 5,911 8,154 38%Trade Growth (last 10 years) % pa 4.30% 3.80%

World FleetFleet M Dwt 800 1,292 62%Fleet Growth previous decade % p.a. 3.60% 6.1%Tons/dwt 7.4 6.3

ShipbuildingShipbuilding Deliveries M dwt 45.8 152 232%Deliveries % Fleet % fleet 6% 12%

Orderbook M Dwt 93.2 471.2 406%% Fleet 12% 36%

Fundamentals 2000 and 2010

Increase

30th September 2010


0

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1980

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2011

Cla

rkse

a In

dex

$000

/day (Clarksea Index is a weighted (Clarksea Index is a weighted

average of earnings by tankers, average of earnings by tankers, bulkers, containerships & gas.)bulkers, containerships & gas.)

Earnings Trend 1980-2011

Here

Source: Clarkson Research Services Ltd

Dress

rehearsal

The Great Shipping Boom

1980s Recession

$8,500/day

$12,000/day

$22,800/day

SERIOUS SURPLUS SMALL SURPLUS SMALL SHORTAGEBulk Shipping Fundamentals balance

SMALL…



30th September 2010


Capes won, products lost

Ship Type League Table 2010

*Ratio KeyRatio Key1 = deep recession or depression2 = recession3 = mild recession4-6 = Strong Market etc

Rank Size TEU Earnings OPEX Ratio *1 Capesize 29,601 7,512 3.942 VLCC 37,970 10,812 3.513 Suezmax 31,328 9,309 3.374 Handymax 19,465 5,991 3.255 Panamax 18,472 6,321 2.925 Aframax 18,823 8,374 2.256 3300 TEU 12,313 8,000 1.547 2500 TEU 9,171 6,500 1.4110 1700 TEU 6,471 5,500 1.1811 Clean Prod 9,048 7,908 1.14

Earnings League Table 2010


0102030405060708090

100

Jan-

80Ja

n-82

Jan-

84Ja

n-86

Jan-

88Ja

n-90

Jan-

92Ja

n-94

Jan

'96Ja

n-98

Jan-

00Ja

n-02

Jan-

04Ja

n '06

Jan

'08Ja

n '10

price

$ m

illio

n

Aframax Tanker 5 Year OldPanamax bulk carrier 5 year old

Panamax peak $90MM

June 2008

Market Prices 1980-2011

Source CRSL

$42MM

$29Mm

Prices heading back to 1990s levels



30th September 2010


Millionaire for a day

Look, this one offers a $50,000

mortgage, $100,000 cash back & free

coffee

Where shall I put the credit

default swaps, pal?

30th September 2010


-13

-8

-3

2

7

12

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Six Crises & Six Rebounds

1. 1957Suez Crisis

5. 2001Dot.com

crisis

2. 19731st OilCrisis

3. 19792nd OilCrisis

4. USFinancial

Criisi

% growth

6.Creditcrisis

THIS CHART SHOWS WORLD INDUSTRIAL PRODUCTIONBounce

back as in previous

crises



30th September 2010


90

100

110

120

130

140Fe

b-93

Feb-

94Fe

b-95

Feb-

96Fe

b-97

Feb-

98Fe

b '9

9Fe

b'00

Feb'

01Fe

b'02

Feb

'03

Feb

'04

Feb-

05Fe

b '0

6Fe

b '0

7Fe

b '0

8Fe

b '0

9Fe

b '1

0

050100150200250300350400450

Industrial ProductionIndex

1992=100

Atlantic economies(left axis) did well in

the 1990s

Pacific Economies(right Axis)

Index 1992=100

30th September 2010


0102030405060708090

100110120

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

$ per

bar

rel

Oil Price Expon. (Oil Price)

The Oil Price – Trending Up

Source: BP energy review

After 20 years of cheap oil the crude price is

heading up



30th September 2010


China's Trade Growth

0102030405060708090

100110120130140

Jan-

99Ja

n-00

Jan-

01Ja

n-02

Jan-

03Ja

n-04

Jan-

05Ja

n-06

Jan-

07Ja

n-08

Jan-

09Ja

n-10

Imports

China Trade Surge & Stagnation

• After a big jump China’s imports look as though they have got stuck in a rut at 120 Mt/month

• Exports are very sluggish

Mt trade per month

1. Trade takes offin 2000

2. Investment overheats

2005

30th September 2010


Oil, Dry Bulk Trade Growth

-5%

0%

5%

10%

15%

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2011

Major BulksCrude Oil ImportsLinear (Crude Oil Imports)Log. (Major Bulks)

% growthForecast

2011

Trend 5-6%pa

Trend 2-3 p%a



30th September 2010


Sea Trade Scenarios 1950-2020

0123456789

1011121314151617

1950

1955

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2010

2015

2020

seab

orne

impo

rts b

illio

n to

nnes

C hina Impo rtsW o rld le ss C hina7 % i

Figure 8 World & ChinaFigure 8 World & China’’s seaborne imports with scenarioss seaborne imports with scenarios

Period %pa1950-60 7.5%1961-70 9.1%1971-80 4.8%1981-90 0.9%1991-00 4.1%2001-09 2.9%

Growth of sea trade

1% scenario

3% scenario

4% scenario

7% scenario

30th September 2010




3/1/2011 17


World Shipbuilding: Past The Peak!

0

20

40

60

80

100

1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2002 2012

Milli

on G

T De

liver

ies

The last shipbuilding peak was in 1975 when output

reached 36 million GT

Source Maritime Economics 3rd Ed Martin Stopford (2009)

Restructuring of capacity 1976-86

Looks like 2010 was the peak of the shipbuilding boom with

97 m GT deliveries

30th September 2010


Investment In New Ships

1. Between 2003 and 2008 the industry ordered $857 billion of new ships

2. 50% of the orders were placed in 2007/8 when prices were at a peak

3. The pace of investment slumped to $28 Million in 2009

4. $72bn investment in 2010

8 13 7 5 13 11 10 21 21 23

5539 35

7 1356

3 75 3 7

11 13 14

25

105

68

13

32

12

0 13 4 3

212 9

9

5

1

0

1

9 35 6

117 4

2221 28

28

47

17

1

8

12 1417 14

167 9

13

2133

40

61

42

7

7

020406080

100120140160180200220240

1996

1997

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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Bill $ Orders

0

20

40

60

80

100

120

New Cape $MM

OthersContainerLPGLNGBulkTankersNew Cape $MM

Source: Clarkson Research Services LtdInvestment in new ships & newbuilding prices

Price of new Cape (right axis)



30th September 2010


Deliveries– The Downturn Scenario

29 33 38 3724

41 46 46 50 55 62 70 75 8089

117

39

192

157

59

0

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40

60

80

100

120

140160

180

200

1994

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2011

2012

2013

Mill

ion

Dea

dwei

ght

Original scheduled orderbook

Deliveries

Demolition

Current Scenario(based on orderbook)

Stage 2

Stage 1

30th September 2010


Shipyard Output: Downturn Starts

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Mill

ion

CG

T D

eliv

erie

s

Other OthersTaiwanEuropeJapanS KoreaChina

The graph shows deliveries per quarter in million CGT downswing starts (but still

preliminary data)



30th September 2010


Quarterly Shipbuilding Output: By Country

01122334455

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Mill

ion

CG

T D

eliv

erie

sChinaS KoreaJapanEuropeTaiwanOther Others

The graph shows deliveries per quarter in million CGT

30th September 2010


Newbuilding Prices 1990-2010

• Aframax tanker price peaked at $75 million in 2008

• Today a new Aframax costs about $58 million

• Orders firm over summer but Autumn quieter

90

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Jan

'00

Jan

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'04

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'06

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'08

Jan

'10

New

Pric

e In

dex

1988

=100

New prices fell 28% in 2009

25%fall

Index peaks at 190



30th September 2010


World Merchant Fleet

0100200300400500600700800900

10001100120013001400

1978

1980

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wor

ld fl

eet m

dw

t

-4%

-2%

0%

2%

4%

6%

8%

10%

12%Tankers CombosOther % pa

Figure 8 World fleet by ship typeFigure 8 World fleet by ship type

1980s recession fleet

falls

Latest figures show fleet now growing at 7% pa

Flee

t gro

wth

% p

a

30th September 2010




30th September 2010


Tanker Earnings 1990-2008

$0

$10

$20

$30

$40

$50

$60

$70

$80Ja

n-90

Jan-

91Ja

n-92

Jan-

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n-94

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Jan-

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n-02

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n '04

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'05Ja

n '06

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n '08

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n '10

Jan

'11

$/da

y ea

rnin

gs o

ver l

ast 1

2 m

onth

s

Crude Tankers 12 Month AverageProducts Tankers 12 Month Average

Asia Crisis

Chart shows 12 month moving average of tanker earnings (i.e.

$71,000/day is average for September 2007 to August 2008))

1

2

3

4

30th September 2010


VLCC Cost & Revenue 1990-2011

0

20

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120

Jan-

90Ja

n-91

Jan-

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n-93

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n-95

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n '11

$000/day

InterestDepreciationOPEXCost with commercial spreadVLCC Earnings (12 month average)

Operating cost, plus interest at LIBOR on new cost, plus depreciation

INTEREST based on Newbuilding value at LIBOR

Depreciation –over 20 yrs

12 month earnings way

above cost




048

121620242832

2,000

6,000

10,00

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,000

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,000

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,000

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,000

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,000

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070

,000

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078

,000

82,00

086

,000

90,00

094

,000

98,00

0

Num

ber o

f mon

ths

2000-09

1990-99

2009-11

Shows the earnings profile of Aframax tanker on the specified dates

Source CRSL

Aframax Earnings 2009-11

Tight supply makes this possible

30th September 2010


76.3 76.8 77.279.0

82.5 83.7 85.1 86.3 85.087.8 89.2

86.5

66

71

76

81

86

91

2000

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2008

2009

2010

2011

World Oil Demand Recovering

• Oil demand jumped 2.8 m bpd in 2010 and 1.4 m bpd increase predicted for 2011

• That would push up oil trade by about 4%

Million barrels per day

IEA Forecast Feb 2011

9.5 m bpd growth

2000-2007

Figure 6: World oil demand 2000-2011 & IEA projection



30th September 2010


-100

102030405060708090

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VLOC ConvFPSO ConversionOrderbookDeliveries Deliveries ForecastDemolition forecast2007 OrdersOrdersDemolition

2011 orderbook of 43.8 m

dwt

Tanker Orders, Deliveries & Demolition

Tanker orders, deliveries, scrapping and future deliveries

Million dwt

30th September 2010


Tanker Supply/Demand Balance 1963-2013

0

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600

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2013

M. Dwt

-10%

0%

10%

20%

30%

40%

50%

60%% Surplus

Available tanker fleet

Tanker demand

growing less than fleet

Surplus tanker capacity (right

axis)

Fleet growing faster than

demand due to high investment



30th September 2010


1. Massive collapse2. China Steel declining3. Rates own to

$20,000/day for Capesize4. Huge orderbook

Capesize heads for its terminal

BulkerForecast

30th September 2010


Dry Bulk Carrier Earnings Trend

0102030405060708090

100110120130

1991

1992

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$ 000

Per

day

aver

age 1

2 mon

th ea

rnin

gs

Panamax Capesize

1 2

3

4

Shows 12 month average earnings



30th September 2010


Capesize Cost & Revenue 1990-2011

0

20

40

60

80

100

120Ja

n-90

Jan-

91Ja

n-92

Jan-

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n-94

Jan-

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n-96

Jan-

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n-98

Jan-

99Ja

n-00

Jan-

01Ja

n-02

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03Ja

n '04

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'05Ja

n '06

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'07Ja

n '08

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'09Ja

n '10

$000/day

DepreciationInterestOPEXCost + spreadCapesize Earnings (12 month average)

Operating cost, plus interest at LIBOR on new cost, plus depreciation

INTEREST based on Newbuilding value at LIBOR

Depreciation –over 20 yrs

12 month earnings way

above cost

12 month earnings not covering depreciation

30th September 2010


Steel output sluggish in 2010

• The recovery started in March and has been strong in China but muted elsewhere

• China now 50 Mt down from 55Mt last year

• Some analysts think the infrastructure programme is now at a mature level

0

10

20

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60

Mar-0

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Mar-0

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Mar'0

8

Mar '

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Mar '

10

Millio

n to

ns p

er m

onth

China Japan S.Korea EC-12

China’s output slowing and

OECD countries back to pre crash

levels

Figure 5: World steel production showing China’s recovery



30th September 2010


05

101520253035404550556065

Jan-

07

Apr

-07

Jul-0

7

Oct

-07

Jan-

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Apr

-08

Jul-0

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-08

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Apr

-09

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-09

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-10

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0

Oct

-10

China Ore Imports SluggishM tonnes

collapse in September

2008

Coal imports

Iron ore imports steady


048

121620242832

2,000

6,000

10,00

014

,000

18,00

022

,000

26,00

030

,000

34,00

038

,000

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046

,000

50,00

054

,000

58,00

062

,000

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070

,000

74,00

078

,000

82,00

086

,000

90,00

094

,000

98,00

0

Num

ber o

f mon

ths

2000-09

1990-99

2009-10

Shows the earnings profile of Aframax tanker on the specified dates

Panamax Earnings 1990s

Source CRSL



30th September 2010


Dry Bulk Deliveries & Demolition

0

20

40

60

80

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120

140

16019

9019

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0020

0120

0220

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0420

0520

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1020

1120

1220

1320

14

Millio

n dw

t deli

verie

s / d

emol

ition

Orderbook (with slippage)DeliveriesDemolition ScenarioOrdersDemolition

Bulk carrier orderbook 277 m dwt, 50% fleet

2010 orderbook of 105 m

dwt but 78 m dwt

delivered

2011orderbook

of 80 m dwt cut

back to 77 m dwt

30th September 2010


Bulker Supply/Demand Balance 1963-13

0

100

200

300

400

500

600

700

1963

1965

1967

1969

1971

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1977

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2003

2005

2007

2009

2011

2013

M. Dwt

-10%-6%-2%2%6%10%14%18%22%26%30%34%38%42%46%50%

% Surplus

Available Bulker fleet

Surplus bulker capacity (right axis)

Fleet growing faster than

demand due to high investment



30th September 2010


• The fundamentals are less favourable than they were at the start of the last decade

• Trade could be ok but the economic outlook is still worrying

• Shipyard output has peaked.• The big orderbook is rolling out and

it’s now hard to stop so the fleet will grow fast

• Tankers have sluggish demand but a smaller orderbook

• Bulkers have stronger demand but big orderbook

• So it looks like a classic shipping recession

Sir John Templeton, one of Wall Street’s greatest investors,

warned against investing in the belief that the world has changed

“The four most expensive words

in the English language are This time it’s different”

30th September 2010


Disclaimer

The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the Company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided.

Provision of this data does not obviate the need to make further appropriate enquiries and inspections. Forecasts are frequently wrong and the information on which they are based is not always accurate, so they are not a reliable basis for business decisions. Always consult as many sources as possible and check the validity of each to the extent the decision justifies.

The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services Limited, England, No 1944749. Registered Office at St. Magnus House, 3 Lower Thames Street, London, EC3R 6HE.

Martin Stopford Marine Money 24 Feb 2011[1]

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Transcript of Martin Stopford Marine Money 24 Feb 2011[1]