12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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GLOBAL SHIPPING MARKETS
current developments, outlook & the role of Asia
Martin Stopford, President Clarkson Research 24th April 2018
Where are we in the
cycle?
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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.
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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?
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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-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%
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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- 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
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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(5)
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15
25
35
45
55
65
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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PART 2: DEMAND TRENDS
Demand looking quite good
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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-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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
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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
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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%
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05
Total sea trade fo
recast
PART 3: SUPPLY TRENDS
Supply could respond faster!
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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0%
10%
20%
30%
40%
50%
60%
70%
80%Ja
n 1
99
6
Jan
19
97
Jan
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Jan
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Jan
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00
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
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63
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67
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01
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07
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09
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11
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13
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15
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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.
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
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15
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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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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THE END
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“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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
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14
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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)
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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”
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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
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Investment in new ships – doubled in 2017 (from low base)
0
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$ b
illio
n o
rder
ed in
yea
r Tankers
Bulkers
LNG
LPG
Containers
NB This data excludes Cruise
& Offshore
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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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
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43
80
99 99
62
48 49 47
38
26 26
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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
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3
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20
19
Deliveries Delivs Fcst Contracting
2007 peak 274m dwt
Contracting 73 m dwt in
2017
Million dwt contracts
Global Shipping Markets - Martin Stopford 24 April 2018
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
Global Shipping Markets - Martin Stopford 24 April 2018
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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
12/06/2018 Global Shipping Markets – Martin Stopford 24th April 2018
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 Markets - Martin Stopford 24 April 2018
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