Shipping and shipbuilding 2019 outlook - cdn.ihs.com · Shipbuilding Consolidation seems to be the...

Shipping and shipbuilding 2019 outlookMarch 2019

Brighter outlook for the majority of fleets, however trade war and IMO 2020 preparations will dominate 2019

Vessel type Key message + - 2019 trend 2019 fleet 2019 trade

Dry bulk Chinese economy slowdown brings worry but also some hope as Chinese government indicates fiscal stimulus. Fleet demolition capacity availability is limited among larger fleets but fleet supply tightening may happen due to scrubber retrofitting timings and stable deliveries.

+ Fleet growth under control - Sensitivity to Chinese economy and demand

2.7% 3.2%

Crude oil Crude oil tanker market bottomed out in 2018, although scheduled deliveries in the first half of 2019 and OPEC crude oil cuts are expected to continue exercising downward pressure on rates.

+ Some demolitions in the wake of IMO 2020 expected to shave off some excess capacity - OPEC cuts and expected US crude oil production

4.7% 1.4%

Containers IMO 2020 fuel spec change preparation, trade wars and available capacity adjustments are expected to dominate container fleet operators and shippers minds.

+ Fleet expansion under control and low bunker prices for 2019 - Slow down in Chinese exports and sensitivity to trade war

2.6% 4.8%

Shipbuilding Consolidation seems to be the way forward for the shipbuilding industry at the moment and intensification of competition among major shipbuilding countries will promote cost competition.

+ Signs of recovery in Dry bulk and intensification of orders for energy shipping - Oversupply in major shipping/offshore sectors and struggling crude oil price

Growth

30

35

40

45

50

55

60

65

May07

Jun08

Jul09

Aug10

Sep11

Oct12

Nov13

Dec14

Jan16

Feb17

Mar18

United States Eurozone Mainland China Japan

Purchasing manager's indexes

Source: IHS Markit © 2019 IHS Markit Source: IHS Markit © 2019 IHS Markit

Inde

x, o

ver 5

0 si

gnal

s exp

ansi

on

0

1

2

3

4

5

6

Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19 Jan 20

Real GDP Industrial production Real goods & services trade

Global real GDP, industrial production, and real exports

%

The period of above-trend economic growth is ending – Financial conditions are tightening and volatility is increasing. The

combined effects of policy uncertainty and the surge in financial volatility are hurting business sentiment and investment.

– In the United States, fiscal stimulus will continue to fuel growth in 2019, but inflationary pressures and policy tightening will restrain growth in 2020–21.

– Europe’s growth will be restrained by political uncertainties and weakening global trade dynamics.

– China’s growth will be slowed by US tariffs, deleveraging, and excess capacity. Government stimulus will provide some offsetting support. Emerging markets that depend heavily on external finance, including Turkey, Argentina, and South Africa, are vulnerable.

© 2019 IHS Markit

05,000

10,00015,00020,00025,00030,00035,000

1/3/2017

3/3/2017

5/3/2017

7/3/2017

9/3/2017

11/3/2017

1/3/2018

3/3/2018

5/3/2018

7/3/2018

9/3/2018

11/3/2018

1/3/2019

$/da

y

C5TC P4TC S10TC

Historical time charter rate - Capesize, Panamax, and Supramax

Source: Baltic Exchange, IHS Markit

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

Deliveries Demolitions BDI monthly averages

Dry bulk fleet monthly

Mill

ions

dw

t

Dry bulk freight earnings have recovered a long way since the abysmal earnings in 2016, mostly helped by a favourable shipping market.

Recovery mainly driven by Capesize freight rates, which have been trading above profitable level.

Source: IHS Markit © 2019 IHS Markit

Freight rate recovery and modest order book growth mean limited demolition candidates

– There are limited demolition candidates given the low fleet age. Combined with a restrained order book, it is expected IMO 2020 disruptions will further tighten tonnage supply and favourably influence freight rates for dry bulk owners.

– Owners of older inefficient tonnage face some tough choices in the market, to scrap or to comply with or without investing in scrubbers. Ultimately freight earnings, future sentiment and asset prices are going to play the biggest role.

– Scrubber retrofitting as it currently stands is not expected to bring much relief to dry bulk feet, but bigger disruption may happen as more ships are sent for retrofitting in shorter time periods as the compliance date approaches.

Balanced fleet growth expected with a limited number of demolition candidates, particularly among larger vessels

0

10

20

30

40

50

60

100,000 dwt+

40,000-64,999 dwt

10,000-39,999 dwt

65,000-99,999 dwt

Total

17-20 years 20-25 years 25 years + Orderbook deliveries

Dry bulk fleet orderbook vs demolition potential 2019

Notes: Total number of ships due for dry docking in 2019; when next dry docking information unavailable, we calculated dry docking age from historical information.

Mill

ion

dwt

Large sizes seem to have least possibility for demolition this year amid still large orderbook. Mid and smaller

sizes have more balance between orderbook and demolition potential.

-800

-600

-400

-200

0

200

400

600


Dry bulk orderbook vs demolition potential in 2019 - number of ships


Demolition candidates are expected to be taken from older vessel pools, primarily from owners who are facing tough investment decisions due to IMO 2020 fuel specification change. BWMP+Scrubber+Dry Docking costs


Scrubber retrofits are intensifying particularly among larger tonnage, but capacity indicated so far has minimal effect on fleet supply

-0.6%

-0.4% -0.3%-0.43%

-0.7%

-0.6%

-0.5%

-0.4%

-0.3%

-0.2%

-0.1%

0.0%100,000 dwt+

65,000-99,999dwt

40,000-64,999dwt Total

retrofit candidates fleet(total)

retrofit candidates fleet(scheduled for dry docking in 2019)

Confirmed and unconfirmed scrubber fitting tonnage influence on fleet supply (2018 fleet size)

Notes: Scrubber fittings dates when non -available assumed to be around scheduled dry dockings time. The scrubber fitting information is collected from company announcements, press releases, news websites and through various sources. Non-confirmed scrubber fitting numbers are subject to change and fleet slippage.

Retrofits are not expected to have a large e�ect, although some supply distortions may occur due to timing of the retrofitting capacity among larger fleets.

8 million

dwt10

million dwt

24 million

dwt

42 million

dwt

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19

Scrubber fitting fleet candidates (including unconfirmed)

Dry bulk fleet monthly scheduled scrubber retrofits including unconfirmed

Notes: Scrubber fittings dates when non-available assumed to be around scheduled dry dockings time. The scrubber fitting information is collected from company announcements, press releases, news websites and through various sources.

mill

ion

dwt

Scrubber retrofits may intensify in the 2nd half of 2019 as compliance dates aproach.

57%

34%

23%

29%

19%

34%

0% 20% 40% 60% 80% 100% 120%

DWT

no of ships

100,000 dwt+ 65,000-99,999 dwt 40,000-64,999 dwt 10,000-39,999 dwt

Confirmed and unconfirmed retrofits - vessel size breakdown

Notes: Scrubber fittings dates when non-available assumed to be around scheduled dry dockings time. The scrubber fitting information is collected from company announcement, press releases news websites and through various companies.


© 2019 IHS Markit

Larger units may consider scrubber fittings for older vessels, particularly in the case of high HSFO/LSFO differential

44.3%

29.6%

52.5%

35.8%

38.7%

32.4%

34.4%

42.2%

14.1%

35.4%

8.5%

22.1%

2.9%

2.6%

4.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

100,000 dwt+

65,000-100,000 dwt

40,000-65,000 dwt

10,000-40,000 dwt

<5 5-10 years 10-15 years 15 years +

Scrubber retrofitting candidates - age profile



Confirmed scrubbers fittings

In service No of ships

In service DWT

On order No of ships

On order DWT

VLOC 3 967,180 36 11,705,104

Capesize 4 827,363 29 5,842,000

Post Panamax 2 181,531 2 164,000

Panamax/Kamsarmax 3 202,066 - -

Supramax/Ultramax 3 179,491 32 2,021,870

Handymax 1 48,184 - -

Large Handy 13 449,438 4 152,000

Total 29 2,855,253 103 19,884,974

ROI for scrubbers on estimated CAPEX

Ship type Capesize Panamax Supramax

Yearly LSFO/HSFO differential in million USD at (100$/T)

1.2 0.8 0.7


3.5 2.3 2.1

Scrubber cost installation million USD

2-3 2-3 2-3

Estimated ROI in years - differential 100$/T

1.7-2.6 2.6-4.0 3.3-5.0


0.6-0.9 0.9-1.3 1.1-1.7

Notes: Yearly steaming at 300 days per year; Consumption numbers estimated/adjusted for slow steaming. Yearly scrubbers operating costs; cost of immobilization/time of charter and capital costs not taken into account


Capesize fleet is young with a small number of demolition candidates; some supply tightening may occur with scrubber retrofitting

-40

-30

-20

-10

0

10

20

30

40

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020

Scheduled dry dockings(17-20 years)

Scheduled dry dockings(20-25)

Scheduled dry dockings(25 years+)

Scheduled deliveries

Capesize (100,000 dwt+) - quarterly scheduled deliveries and demolition candidates

Scheduled deliveries outstrip potential fleet removals in 2019.

More bigger units delivered is expected to push supply amid a small number of demolition candidates.

23% 52% 14% 7% 4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

<5 5-10 years 10-15 years 15-20 years 20 years+

100,000 dwt+ Age profile

4935

20

18

010

20

30

40

50

6070

80

2019 2020

No BWMP BWMP

Demolition candidates BWMP installation indication

num

ber o

f ves

sels

6 units - 17 years 5 units - 20 -25 years 9 units - 25 years +



Num

ber o

f shi

ps

Panamax fleet has more demolition candidates, with a steady flow of deliveries and a challenging market into 2020

22.4% 42.4% 16.8% 11.0% 5.7%2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

<5 5-10 years 10-15 years 15-20 years 20-25 years 25 years +

65,000 - 99,999 dwt+ Age profile

-80

-60

-40

-20

0

20

40

60

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020





Panamax (65,000-99,999 dwt) - quarterly scheduled deliveries and demolition candidates

Num

ber o

f shi

ps

Scheduled deliveries for 2019 are expected to outstrip potential scapping candidates by about 5 ships.

149111

31

22

020406080

100120140160180200

2019 2020

No BWMP BWMP


num

ber o

f ves

sels



6 units - 17 years5 units - 20-25 years9 units - 25 years +

Supramax fleet deliveries seem to be under control with demolition candidates expected to be coming from older and inefficient fleets

-80

-60

-40

-20

0

20

40

60

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020





Supramax (40,000-64,999 dwt) - quarterly scheduled deliveries and demolition candidates

Num

ber o

f shi

ps

Supramax fleet is expected to comply mostly by using compliant fuel post 2020, with pressure expected on 20 + year old units.

26% 42% 14% 9% 7% 2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


40,000 -64,999 dwt+ Age profile

0

50

100

150

200

250

2019

190

37

21

133

2020

No BWMP BWMP


num

ber o

f ves

sels



16 units - 17 years old15 units - 20-25 years old6 unit - 25 years+

Handy size fleet - Fleet deliveries are under control with older units likely to be replaced

21% 45% 12% 8% 9% 2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


10,000 - 39,999 dwt+ Age profile

0

50

100

150

200

250

300

2019 2020

No BWMP BWMP


num

ber o

f ves

sels

-80

-60

-40

-20

0

20

40

60

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020





Handysize (10,000-39,999 dwt) - quarterly scheduled deliveries and demolition candidates

Num

ber o

f shi

ps



193

46

28

159

9 units - 17 years old27 units - 20-25 years old9 unit - 25 years+

Dry bulk seaborne trade is expected to expand another year; however over-reliance on Chinese imports still a major risk

– Majority of the dry bulk commodities seaborne trade is expected to expand this year. Coal seaborne trade is expected to grow just shy of 3% while iron ore seaborne trade is expected to expand more modestly by about 1.5%.

– Over-reliance on Chinese demand remains a major risk factor for dry bulk shipping, although recently announced stimulus may bring another positive year for the dry bulk shipping sector.

– In the period up to the Vale dam disaster steel prices were in free fall, reflecting iron ore and coal prices. Prices slid due to a steel demand drop and excess production which in turn prompted steel makers to switch to lower grade iron ore, which had a negative effect on tonne mile demand. Steel prices grew sharply since the Vale incident, but this is not expected to have positive effect on shipping demand.

– Coal demand growth is expected to be supported by the growth of alternative markets such as Vietnam, as Chinese volumes fell during Q4 of 2018.

– Chinese buyers ordered some soybean shipments in the current trade war truce, but considering an expected record soybean harvest in Brazil, US exports are expected to continue to be displaced by Brazilian exports. US exports moved heavily to alternative markets such as Europe.

– Guinea bauxite exports are expected to continue growing.

-2%

0%

2%

4%

6%

8%

10%

12%

2012 2013 2014 2015 2016 2017 2018 2019

Dry bulk trade growth Dry bulk fleet growth

Dry bulk trade vs fleet growth

Notes: 2018 trade growth estimate. Source: IHS Markit; Fleet Capacity Forecast; World Trade Sefvices

© 2018 IHS Markit

Dry bulk seaborne trade is expected to so�en slightly this year, but fleet growth is also expected to be kept in check.

Some positive influence on tonne mile demand from Vietnam coal imports and China bauxite imports amid imports/pollution caps in China

– The rapid ascendancy in Vietnam’s coal importing is expected to continue. State-owned power generator, Electricity Vietnam (EVN), is anticipating its imports will be around 9.50 mt in 2019 and 10.92 mt of coal by 2020, up from around 7.00 mt in 2017. State-owned miner Vinacomin last month issued a tender for up to 1.2 mt of imported thermal coal, as domestic coal supply has been insufficient to keep pace with demand.

– Uncertainty regarding Chinese policy on when coal cargoes is due to change is weighing heavily on sentiment and resulting in Chinese-exposed traders largely withdrawing from coking coal transactions. However, as import control eased, trading conditions should improve.

0

5

10

15

20

25

Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19

2016 2017 2018

China coal imports monthly

Mill

ion

tonn

es

0

1

2

3

4

5

6

7

Jan

2011

Apr 2

011

Jul 2

011

Oct

201

1Ja

n 20

12Ap

r 201

2Ju

l 201

2O

ct 2

012

Jan

2013

Apr 2

013

Jul 2

013

Oct

201

3Ja

n 20

14Ap

r 201

4Ju

l 201

4O

ct 2

014

Jan

2015

Apr 2

015

Jul 2

015

Oct

201

5Ja

n 20

16Ap

r 201

6Ju

l 201

6O

ct 2

016

Jan

2017

Apr 2

017

Jul 2

017

Oct

201

7Ja

n 20

18Ap

r 201

8Ju

l 201

8O

ct 2

018

Mill

ion

tonn

es

Guinea Australia Indonesia Malaysia

Bauxite trade to China

Source: IHS Markit, China customs


© 2019 IHS Markit

Vietnam coal import volumes (t)

Country Dec-18 Nov-18 M-o-M(%) Nov-17 Y-o-Y(%)

Australia 1,105,474 374,176 195% 257,240 330%

Indonesia 973,558 1,195,175 -19% 905,390 8%

Russia 452,461 361,663 25% 232,822 94%

Source: Vietnam customs, IHS McCloskey – Coal market alert © 2019 IHS Markit

0123456789

10

Jan 17 Mar 17 May 17 Jul 17 Sep 17 Nov 17 Jan 18 Mar 18 May 18 Jul 18 Sep 18 Nov 18

Brazil United States

China soybean imports by source

Source: IHS Markit ; Global Trade Services

Mill

ion

tonn

es

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

0

10

20

30

40

50

60

70

80

90

2016 2017 2018

Brazil United States Argentina Brazil % share

China soybean imports by source

Source: IHS Markit ; Global Trade Services

Mill

ion

tonn

es

© 2019 IHS Markit

© 2019 IHS Markit


Trade war risks remain but US soybean exports to China are expected to be replaced by a record soybean crop harvest coming from Brazil this year

– China ordered the first quantity of soybean from the United States following a truce in the “trade war” which is set to last until March 2019, tempting the market that potential future negotiations may be possible.

– However, the incentive for China to negotiate soybean tariffs may be delayed until the fall of 2019 as Brazil’s new record soybean crop will be available for export in Q2 and there are increasing concerns about China’s swine fever outbreak.

– US soybeans found an alternative market in Europe, MENA (Egypt and Iran), South East Asia, and Argentina (3rd biggest soya exporter).

Fleet growth is expected to be modest this year. Coupled with expected low crude oil prices, this should dampen the impact of trade wars

– Orderbook incentives and demolitions slowed down in 2018 with freight rates recovering. The majority of orders have been noted as expected in large fleets (vessels bigger than 10,000 teus) and Feeder fleets (vessels <3,000 teus).

– The two major global factors which are expected to be on operators’ minds are trade war implications and IMO 2020 fleet preparations. In the preparation for IMO 2020, the container fleet response is expected to be different, although carriers are expected in general to pass the additional cost of transport to shippers and ultimately to the end user, be it through fuel surcharges or cost of scrubber retrofits. Although, last year’s attempt was unsuccessful and resulted in losses for operators, this can be regarded as a warning in the face of upcoming legislation.

– Considering some recent announcements in the sector on scrubber installations and retrofits, it remains to be seen if this will be used to gain a competitive advantage in $/teu among large operators.

– So far announced scrubber retrofits are expected to have a limited impact on container fleet supply, and it seems likely that scrubber retrofits may intensify during times of lower trade activity, where surplus tonnage will be taken out of the loop. Total fleet growth this year is expected to be about 3%, with just shy of the 0.9 million teus capacity expected to be delivered, which is encouraging amid trade war concerns.

– With limited capacity expected for demolition, some younger inefficient units from the mid-size sector and very old units in the Feeder sector are expected to be under pressure.

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Dec-18

Deliveries Demolitions Orders

Container fleet

Mill

ions

teus

With recovery fleet orders growing again, this hasadded more than onemillion teus capacity tothe orderbook, mainly inthe ULCS sector, vesselsbigger than 10,000 teus.


With limited capacity expected to be targeted for demolition activity, some younger units from the mid-size sector expected to be under pressure

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

10,000 teus+

3,000-5,400 teus

0-3,000 teus

5,400-10,000 teus

Total


Container ships orderbook vs demolition potential 2019


Deliveries capacity is mainly coming from 10,000 Teus + segment and partially from Feeder ships.

dwt

Demolition potential is mainly expected from the segments below 10,000 teus.

-600

-500

-400

-300

-200

-100

0

100

200

300

10,000 teus+ 5,400-10,000teus

3,000-5,400teus

0-3,000 teus Total


Container ships orderbook vs demolition potential in 2019 - number of ships


Most older tonnage is within the Feeder sector, although the sector is expected to see the renewal of older units, 25 years+.


-1.0%

-0.1% -0.1%

-0.4%

-1.2%

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%10,000 teus+

3,000-5,400 teus

5,400-10,000 teus

<3,000tues

Total

total fleet influence retrofit candidates fleetscheduled for dry docking in 2019


Notes: The scrubber fitting information is collected from company announcements, press releases, news websites and through various sources. Non-confirmed scrubber fitting numbers are subject to change and fleet slippage.

0.8 million teus12% of active fleet segment capacity

Currently announced retrofits will have a mininmal e�ect on fleet supply, however, as January 2020 is getting closer we would expect to see pick up in retrofits and possible distortion of supply specifically if a number of ships are taken out of the market at the same time.

52%

78%

18%

15%

30%

7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

no of ships

TEU

10,000 teus + 5,400-10,000 teus 0-3,000 teus




A mixed response from container fleet operators to IMO 2020 fuel compliance, although more scrubber fittings are expected in larger units



In service TEUs


On order TEUs

ULCS 2 269,738 56 9,208,180

Post Panamax 3 294,943 - -

Feedermax 11 402,941 11 317,249

Large Feeder 11 185,694 31 607,506

Small Feeder 5 63,643 - -

53.9%

20.1%

67.1%

46.1%

52.0%

3.3%

23.8%

8.9%

4.0%

20.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

10,000 teus +

5,400-10,000 teus

3,000-5,400 teus

< 3,000 teu


Scrubber retro�ting announcements - age profile

Notes: The scrubber fitting information is collected from company announcements, press releases, news websites and through various sources. Non-confirmed scrubber fitting numbers are subject to change and fleet slippage.


Majority of retrofits are expected in larger ships, although the decision will make economical sense for smaller vessels used on longer routes

– Maersk Line, MSC, CMA CGM, and Hapag-Lloyd have all confirmed the rule will increase their individual, annual bunker fuel costs between $1 billion to $2 billion. The general range increase predicted for shippers on trans Pacific trade is more than $100 per TEU to more than $300 per TEU.

– If demand is weak because the tariffs take effect, carriers will have extra incentive to blank sailings and take ships out of service for scrubber retrofits.

– Ocean carriers have signaled to the market, publicly and in private negotiations, that they will not back down in trying to recoup the higher costs of burning LSFO or the installation and maintenance costs of scrubbers.


Ship type 18,000 teus 11,000 teus 5,000 teus


2.8 2.5 0.9


8.5 7.4 2.7


3-5 3-5 2-3


1.1-1.8 1.2-2.0 2.0-3.3


0.4-0.6 0.4-0.7 1.0-1.1

Notes: Yearly steaming at 300 days per year; Consumption numbers estimated/adjusted for slow steaming. Yearly scrubbers operating costs; cost of immobilization/time of charter and capital costs not taken into account.


Panamax and Post Panamax fleet expect a limited number of deliveries and there is some potential for demolitions, although the fleet is relatively young

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020

Scheduled deliveries (3,000-5,400) Scheduled dry dockings(25 years+)



Panamax and Post Panamax (3,000-10,000 teus) - quarterly scheduled deliveries and demolitions

Num

ber o

f shi

ps

As expected deliveries are very limited in this segment, with a small potential for demolitions.

Post Panamax

Panamax

Panamax+Post Panamax

0% 20% 40% 60% 80% 100% 120%


Panamax and Post Panamax age structure

94% 90%

6% 10%

0%

20%

40%

60%

80%

100%

120%

2019 2020

No BWMP BWMP


num

ber o

f ves

sels



Feeder fleet scrubber retrofitting is not expected to have a major effect on the fleet supply this year

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020

Scheduled deliveries 0-3,000 teus Scheduled dry dockings(25 years+)



Feeder fleet (0-3,000 teus) - quarterly scheduled deliveries and demolitions

Num

ber o

f shi

ps

Demolition candidates expected to be coming mainly from 25 year old units.

14% 16% 36% 18% 12% 4%<3,000 teus

0% 20% 40% 60% 80% 100% 120%


Feeder fleet (<3,000 teus) age profile


94% 90%

6% 10%

0%

20%

40%

60%

80%

100%

120%

2019 2020

No BWMP BWMP

Scrapping candidates BWTS(M) installation indication

num

ber o

f ves

sels


Our baseline forecast expects trade growth on major trade routes

– We estimated that world containerized trade would increase 5.6% to 140.7 million TEUs in 2017, and a further increase 4.0% to 146.3 million TEUs in 2018. We project the global growth rate will be 4.0–5.1% in the medium term. From a historical point of view, this is a major change compared with the double-digit growth rates the industry became accustomed to, but we must accept that globalization appears to have worked its way through the global sourcing system and that we are now back to depending on straightforward demand. Even with the lower growth rates, global container trade will be 20 million TEUs higher in 2019 than in 2016, at 153.3 million TEUs, helping explain the need for increased shipping tonnage over the longer term.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Jan-15 Jan-17 Jan-19 Jan-21

Asia-Europe Asia-North America Total trade

Container trade

Forecast

© 2019 IHS Markit Source: IHS Markit ; World Trade Services

Trade Metric 2015 2016 2017 2018 2019

Europe – Far East % 0.3 1.9 4.8 -3.2 3.9

North America – Far East % -5.8 18.7 7.9 4.1 6.3

Europe – North America % 5.9 1.6 9.2 4.8 4.4

North America – Europe % -6.6 0.2 15.7 9.6 4

% 1.3 4.8 4 4.2 5.4

Source: IHS Markit; World Trade Services © 2019 IHS Markit

Trade war implications and bunker fuel specification change are expected to remain in focus

– Operators are expected to keep an eye on capacity control on major lines including Far East to Europe trade lines, where larger vessels are utilized. The fleet growth is expected to remain under control, which is another positive for operators. Some leading operators seem to be moving into added value territory with recent announcements from Maersk, rather than competing on market share.

– Following Buenos Aires talks, the US tariffs 25% rise, aimed at Chinese exports has been postponed for three months. According to JOC, the shippers incentivized imports in the last quarter of last year in order to avoid the rise in tariffs. Rates climbed down since its November/December peak and slightly peaked again in preparation for the lunar new year. How tariff talks between China and the United States play out will determine whether trans-Pacific volume and rates remain strong as the US economy continues to expand. If both sides can reach an agreement, the high freight rates that will result from the rush to beat tariffs and Lunar New Year factory closings will carry into the annual trans-Pacific contract talks and put carriers in a position of strength for negotiations. If no deal is reached, shippers will be better placed to pressure carriers for concessions because of expected weak demand, but the low-sulfur fuel rule will complicate efforts.

– The trans-Atlantic trade is one of the world’s most stable, as carriers manage capacity much more effectively than the Asia-Europe and trans-Pacific routes, but reliability is a major concern. Shippers can expect relatively minor fluctuations in rates depending on how supply and demand develops, and rates will start 2019 at levels above those at the outset of 2018.

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Wee

k 1

Wee

k 4

Wee

k 7

Wee

k 10

Wee

k 13

Wee

k 16

Wee

k 19

Wee

k 22

Wee

k 25

Wee

k 28

Wee

k 31

Wee

k 34

Wee

k 37

Wee

k 40

Wee

k 43

Wee

k 46

Wee

k 49

Wee

k 52

2014 2015 2016 2017 2018

Tari�s spur growth in trans-Pac spot rates higher than a�er Hanjin collapse

Source: JOC and Shanghai Shipping Exchange

Year-over-year change in SCFI spot rates per FEU to US West

Hanjin bankruptcy

Plans for 25% tari�s announced

© 2019 IHS Markit

Despite freight rates recovery in the last quarter of 2018, newbuilding deliveries are expected to weigh in on freight earnings in the first half of 2019

– Freight earnings started recovering in the last quarter in 2018, particularly in the VLCC sector, as seasonal demand started growing and deliveries started slowing down, consequently slowing demolitions.

– More than 80% of total capacity scheduled for delivery next year is scheduled for the first half of the year. The majority of fleet on order are in the VLCC sector.

– Although some deliveries are expected to be postponed, this is expected to put a downward pressure on freight rates which in turn is expected to intensify demolitions.

– Despite a larger number of potential demolition candidates only a handful of vessels were sent to breaking yards so far this year, mainly in the Suezmax and Aframax sectors. Demolition will continue to be used as a market adjustment factor and older inefficient units are expected to be sent to break yards.

– Announced scrubber fittings are expected to have a limited effect on freight rates as a portion of those are expected to be fitted within the next dry docking. Although it is worth noting that moving a larger number of ships into scrubber retrofitting (particularly in the VLCC sector) at the same time may distort the market supply at some stages.

– Expected OPEC cuts due to production growth coming from US, will have a negative effect on tanker demand. There are also signs of deceleration of global economies which is worrying for crude oil demand and tanker demand all together.

0

200

400

600

800

1,000

1,200

1,400

-6,000,000

-4,000,000

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

Jan18

Apr18

Jul 18

Oct18

Jan19

Apr19

Jul 19

Oct19

17-20 Years 20-25 Years25-30 Years 30> YearsDeliveries Scheduled deliveriesBDTI

Deliveries and demolitions to intensify in the first half of the year

dwt

Demolitions slowed down in the later months last year, with a slow down inin deliveries.

Actual demolitions Demolition candidates


Strong deliveries expected in the first quarter of the year.

Our baseline forecast expects trade growth on major trade routes

0

5

10

15

20

25

30

35

40

VLCC Suezmax Aframax/Lr2 Total fleet

17-20 years 20 years + Orderbook deliveries

Tanker orderbook vs demolition potential 2019

Notes: Total number of ships due for dry docking in 2019; when next dry docking information unavailable,we calculated dry docking age from historical information.

The VLCC sector is expected to remain oversupplied with a limited number of ships available for demolition. If the market worsens younger vessels maybe targeted.

Tankers demolition age structure

Mill

ion

dwt

-27 -18 -17-62-13 -12

-38

-63

75

3165

171

35

1 10

46

-150

-100

-50

0

50

100

150

200


17-20 years 20 years +Orderbook deliveries Net (secondary axis)

Tanker orderbook deliveries vs demolition potential 2019

Notes: Total number of ships in the age bracket due for dry docking in 2019; when next dry docking information unavailable, we calculated dry docking age from historical information.

Fleet is subject to delays and postponements. 9 VLCC units are scheduled for December delivery and 16 units are scheduled forQ4 all together.


Announced scrubber fittings are expected to have a limited effect on freight rates but intensification of retrofitting may distort supply side

-0.9%-1.0%

-0.7%-0.8%

-1.2%

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%VLCC Suezmax AFRAMAX/LR2 Total

retrofit candidates fleet(total)

retrofit candidates fleet(scheduled for dry docking in 2019)



11% of active fleet

11% of active fleet

8% of active fleet

10% of active fleet

Timings of retrofits and intensification may tighten the supply of ships, although scheduled deliveriesfor this year are high, particularly in the VLCC sector.

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000


Orderbook deliveries Orderbook deliveries adjusted

2019 scheduled deliveries capacity adjusted for Scrubber fitting tonnage (2019 Dry dockings)


The Suezmax fleet has the greatest influence on scrubber retrofittingfleet supply tonnage, despite being the smallest fleet.

11% 6%

6%

6%

37%

21%

28%

23%

35%

56%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

no of ships

DWT

Aframax/Lr2 Suezmax VLCC





ROI for scrubber installation favours larger units – scrubber installation may not be the sole-reserve of young fleets

46%

57%

61%

36%

26%

24%

12%

16%

13%

6.49%

1.27%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

VLCC

SUEZMAX

AFRAMAX


Scrubber retroting announcements - age profile

Source: IHS Markit

Notes: The scrubber fitting information is collected from company announcements, press releases, news websites and through various sources. Non-confirmed scrubber fitting numbers are subject to change and fleet slippage..

© 2019 IHS Markit


Ship type VLCC Suezmax Panamax/LR1


2.1 1.3 0.9


6.5 4.0 2.7


3-5 2-3 2-3


1.7-2.8 1.7-2.5 2.4-3.6


0.6-0.9 0.6.-1.1 0.8-1.2

Notes: Yearly steaming at 300 days per year; Consumption numbers estimated/adjusted for slow steaming. Yearly scrubbers operating costs; cost of immobilization/time of charter and capital costs not taken into account




In service DWT


On order DWT

VLCC 12 3,785,507 48 14,830,012

Suezmax 7 1,064,900 19 2,944,193

Aframax/LR2 10 1,124,968 14 1,575,430

Total 29 5,975,375 81 19,349,635

VLCC sector is expected to see the majority of older scrap candidates removed this year – some relief is expected to come from scrubber fittings

-20

-10

0

10

20

30

40

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020





VLCC - quarterly scheduled deliveries and demolitions

Num

ber o

f shi

ps

Total scrap potential is expected to be lowered further by ships indicated to have BWMinstallations. Younger vessels may consider scrubber installation.

26% 34% 20% 18% 2%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

VLCC

<5 5-10 years 10-15 years 15-20 years 20-25 years

VLCC fleet age profile

© 2019 IHS MarkitSource: IHS Markit

..

4027

8

6

0

10

20

30

40

50

60

2019 2020

No BWMP BWMP

num

ber o

f ves

sels

5 units - 17 years 2 units - 20 years 1 units - 22 years



Suezmax – drop in scheduled deliveries is expected to relieve pressure of demolition candidates in the latter part of the year

-15

-10

-5

0

5

10

15

20

25

30

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020





Suezmax - quarterly scheduled deliveries and demolitions

Num

ber o

f shi

ps

Scheduled deliveries for 2019 are expected to outstrip potential scapping candidates by about5 ships.

Scrapping candidates are expected to be limited to older tonnage due for special survey.

24% 35% 20% 16% 3%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

SuezmaxX

<5 5-10 years 10-15 years 15-20 years 20-25 years 25 years+

Suezmax fleet age profile


31 31

5

05

10152025303540

2019 2020

No BWMP BWMP


num

ber o

f ves

sels 5 units from demolition

candidates indicate BWM installations. 3 of those units are around 17 years old. Possible scrubber�ting candidates?


Aframax/LR2 – older and less efficient units are expected to be under pressure due to newbuilding deliveries and IMO 2020 fuel spec change

-30

-20

-10

0

10

20

30

40

Q12019

Q22019

Q32019

Q42019

Q12020

Q22020

Q32020

Q42020





Aframax - quarterly scheduled deliveries and demolitions

Num

ber o

f shi

ps

Demolitions are expected to slow down in the later part of the year with scheduled deliveries dropping. Owners of older and less e�icient fleets have some tough decisions to make.

23% 26% 30% 17% 3%1%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Aframax/Lr2

<5 5-10 years 10-15 years 15-20 years 20-25 years 25 years+

Aframax/Lr2 fleet age profile


65

40

8

2

010

203040

5060

7080

2019 2020

No BWMP BWMP


num

ber o

f ves

sels

3 units - 17 years 2 units - 20 years 2 units - 22 years 1 unit - 25 years


0.00.20.40.60.81.01.21.41.61.82.02.2

Will it happen again in 2019? Growth in world oil demand and US production from preceding year

Chan

ge fr

om p

revi

ous y

ear

(mill

ion

barr

els p

er d

ay)

2017

Source: IHS Markit; IHS Markit Global Crude Oil Markets Short-Term Outlook - December 2018 Source: IHS Markit; IHS Markit Global Crude Oil Markets Short-Term Outlook - December 2018Note: Oil demand is for total liquids, which include refined products, NGLs, biofuels, and other miscellaneous liquid fuels.

2018 2019

Projections based on WTI at $60 in 2019

-2.4

-2.0

-1.6

-1.2

-0.8

-0.4

0.0

0.4

0.8

1.2

1.6

2.0

2.4

94

95

96

97

98

99

100

101

102

103

104

105

106

Q1

16Q

2 16

Q3

16Q

4 16

Q1

17Q

2 17

Q3

17Q

4 17

Q1

18Q

2 18

Q3

18Q

4 18

Q1

19Q

2 19

Q3

19Q

4 19

Q1

20Q

2 20

Q3

20Q

4 20

Implied change in global liquids inventories (right-hand side)Demand (le�-hand side)

World oil (liquids) demand and production, and implied change in global liquids inventories

Mill

ion

barr

els p

er d

ay

Outlook

Million barrels per day

© 2019 IHS Markit © 2019 IHS Markit

Production (le�-hand side)

Global balances set to loosen in 2019–20; as US supply rises rapidly, Gulf-3 will likely return to active market management to keep global supply in check

– On the supply side, the bad news is that the Vienna Alliance – OPEC countries plus Russia, reversed their previous decision and decided to cut oil production. Active supply management seems to be needed in order to support prices/balances as the US is set to increase it’s production even further.

– United States crude oil production projected to increase a cumulative 3.0 MMb/d in 2019-20. Including 2018, 3-year cumulative growth is 4.5 MMb/d. Nearly 80% of new US lower-48 onshore barrels in 2019-20 will come from wells that breakeven below $50/bbl WTI which will make the Vienna alliance more difficult, particularly through Q1 2019.

US production growth is expected to support exports further, currently exports are curtailed by infrastructure but this will change come 2020

1.15

-0.35-0.95

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2018 2019

Annual change in crude oil output for large global producers, 2018–20

Note: * indicates OPEC memberSource: IHS Markit; IHS Markit Global Crude Oil Markets Short-Term Outlook - December 2018

Mill

ion

barr

els p

er d

ay

United States crude oil production projected to increase a cumulative 3.0 MMb/d in 2019-20.Including 2018, 3-year cumulative growth is 4.5 MMb/d.

Exports to China switched to Japan and South Korea whichis expected to remain beneficial for tonne mile demand as production and exports are expected to grow.

0

10

20

30

40

50

60

70

80

90

0

5

10

15

20

25

Jan17

Mar17

May17

Jul17

Sep17

Nov17

Jan18

Mar18

May18

Jul18

Sep18

Nov18

China JapanSouth Korea India

VLCC loadings in US by destination

num

ber o

f shi

ps

Slight drop in average voyage duration, but volumes keep increasing.

© 2019 IHS Markit Source: IHS Markit © 2019 IHS Markit

United Sta

tes

CanadaBrazil

Russia

Iraq*

Nigeria*

Kazakhsta

nLibya*

Saudi Arabia*

United Kingdom

Norway

Kuwait *Oman

Colombia

Angola*UAE*

Algeria*China

Mexico

Venezuela*

Iran*

While demand continues to grow by 1.4 MMb/d in 2019; Supply growth is expected to match the growth with 1.5MMB/d

– Refining crack spreads depict a deteriorating global refinery margins environment that will likely act as a headwind for crude demand and in turn the Vienna Alliance’s market management efforts in Q1 2019.

– US gasoline demand fell 260,000 bd year-on-year in September 2018. US gasoline margins have tumbled in Q4 2018.

– By November 2018 India’s refined products demand had continued to reduce causing a material contraction in diesel consumption.

– The contraction in China’s vehicle sales growth relative to year prior levels for six consecutive months suggests mounting pressure on gasoline demand.

– While these trends reflect demand fears, it is too early to tell whether these data points are indicative of a broader slowdown.

– Some of the economic pressure can be offset (even temporarily) as the recent decline in crude oil prices has translated (to a varying degree) into lower refined product prices, helping to ease price pressure on consumers.

Source: IHS Markit Global Crude Oil Markets Short-Term Outlook - December 2018

-20

-10

0

10

20

30

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

2016 2017 2018

China passanger car sales growth, year-on-year

Perc

ent

-200-100

0

100200

300

400500

600

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18

Diesel/Gasoil demand Total refined product demand

Net change in India refined product demand, year-on-year

Source: IHS Markit; IHS Markit Global Crude Oil Markets Short-Term Outlook - December 2018

Source: IHS Markit; IHS Markit Global Crude Oil Markets Short-Term Outlook - December 2018

Thou

sand

bar

rels

per

© 2019 IHS Markit

© 2019 IHS Markit

0

500

1,000

1,500

2,000

2,500

0

10,000

20,000

30,000

40,000

50,000

60,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Average size Number of ships

Average ship on order getting bigger again

Notes: Ship types included: Tankers (Gas and liquid), Dry Bulk, Container, Ro-ro, Vehicle carriers, General Cargo, Cruise Source: IHS Markit

GT

Num

ber o

f shi

ps

0

200

400

600

800

1,000

1,200

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Europe KRS CHR JPN RoW No of yards

Ordering activity versus number of yards taking orders

Notes: Vessels over 100 gtSource: IHS Markit

Mill

ion

GT

The last couple of years' of orders are characterized by large tanker, gas, container and dry bulk vessels.

O�shore vessels newbuilding orders have been almost non-existent in the last 3 years since the drop in crude oil prices in 2014. Outlook for this year remains cautious.

© 2019 IHS Markit

© 2019 IHS Markit


– Korean yards newbuilding orders almost reached the level of orders seen in 2015. This is 5th best result for Korean yards in the last ten years which have been turbulent, a result that can not be disregarded considering owners are very cautious about newbuilding orders, and that sentiment in the majority of markets is “cautiously optimistic at best.” Korean yards managed to capture the majority of large vessels on order as shipowners appetite for fleet expansion in the last few years switched to large Tanker and Container units, where Korean yards specialize. During last year there have been calls from Europe and Japan to curtail on state help and propping of Korean shipyards. Drop in shipyard activity can be attributed mostly to drop in newbuilding orders in Chinese yards, and newbuilding orders but also partially to the demise of specialist sectors such as Offshore since 2015.

Total capacity of orders grew last year, but number of yards taking orders dropped even further

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

0

2

4

6

8

10

12

14

16

18

20

Q116

Q216

Q316

Q416

Q117

Q217

Q317

Q417

Q118

Q218

Q318

Q418

Rest

LPG Tanker

LNG TankerPassenger/CruiseContainerDry Bulk

Tankers

average size (le hand axis)

Ordering - some recovery in the last few quarters in capacity orders

Mill

ion

GT

Renewal of interest in Gas sectors in recent months with increased sentimentfor the sector, mainly in New Panamaxsector (150,000 m3 +). 0

200400600800

1,0001,2001,4001,6001,800

Jan16

Mar16

May16

Jul16

Sep16

Nov16

Jan17

Mar17

May17

Jul17

Sep17

Nov17

Jan18

Mar18

May18

Jul18

Sep18

Nov18

BDI BDTI

Major indexes monthly averages

Source: IHS Markit; Baltic exchange

0

100

200

300

400

500

600

700

800

last 18 monts orders 2019 scheduled deliveries 2020 scheduled deliveries

All ship types Dry bulk, Tanker and Container

Number of shipyards - orders and scheduled deliveries

Source: IHS Markit © 2019 IHS Markit Source: IHS Markit

© 2019 IHS Markit

0

20

40

60

80

100

120

2008 2010 2012 2014 2016 2018 2020

Order Delivery

Ordering versus deliveries

Notes: Vessels over 100 gtSource: IHS Markit

Mill

ion

GT

Newbuilding orders capacity is closing on newbuilding deliveries.

Scheduled deliveries (subjet to delays and cancellations).

59,880,380

45,529,139

31,816,965

22,476,340

CHR KRS

JPN RoW

Total orderbook per country of build

© 2019 IHS Markit Source: IHS Markit © 2019 IHS Markit


– There is still a large number of orders sitting on orderbook and despite a large number of orders taken in 2018 in Korean yards, the largest capacity to be built still remains in Chinese yards.

– Market conditions have been challenging in the last three years with the majority of sectors suffering greatly. With signs of recovery orderbooks are starting to grow, although still a far cry from orderbooks between 2013 and 2015.

– With IMO 2020 closing in, there is a general notion that demolitions may incentivise, but that will heavily depend on freight rates earnings that may get pushed up by supply side distortion related to fuel availability and scrubber retrofitting in some sectors and sudden upward demand movements. This certainly can push demand for older vessels and in case of high differential and short ROI may incentivise scrubber adoption for some older vessels.

311715154-0119-MT

Find out more

About IHS MarkitIHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

ihsmarkit.com/maritime_trade

CUSTOMER CARE

america T +1 800 447 2273 (1 800 IHS CARE)

europe, middle east and africa

T +44 1344 328 300

asia pacific

T +604 291 3600 E [email protected]

For more information please contact:

DALIBOR GOGIC

Principal Analyst

T +44(0)2032532388 E [email protected]

Copyright © 2019 IHS Markit. All Rights Reserved

https://ihsmarkit.com/industry/maritime.html

mailto:[email protected]

Shipping and shipbuilding 2019 outlook - cdn.ihs.com · Shipbuilding Consolidation seems to be the...

Documents

Transcript of Shipping and shipbuilding 2019 outlook - cdn.ihs.com · Shipbuilding Consolidation seems to be the...