Capital Link 1 12 September 2017 Global Shipping ...forums.capitallink.com/shipping/2017london/pres/STOPFORD.pdf · 9/13/2017 · 13/09/2017 Maritime Lectures – Guest Lecture 2:

13/09/2017 Maritime Lectures – Guest Lecture 2: Shipping & Shipbuilding Market Outlook 1

Capital Link 112 September 2017

Global Shipping & Shipbuilding MarketsOverview & Outlook

Dr Martin StopfordNon- executive President, Clarkson Research


PART 1: MARKET OVERVIEWPART 2: MARKET CYCLE TODAYPART 3: MARKET PRICES TODAYPART 4: THE DEMAND SIDE OF THE MARKETPART 5: THE SUPPLY SIDE OF THE MARKETPART 6: SUPPLY-DEMAND ANALYSIS

Global Shipping & Shipbuilding Markets

ISSUES IN THIS PRESENTATIONTHE SIX ISSU

ES


PART 1: MARKET OVERVIEWGlobal Shipping & Shipbuilding Markets

The main markets are now past the trough of the cycle and, despite continuing low freight rates, there should be a gradual improvement ahead as the world industrial growth picks up and the growth rate of the cargo fleet slows. But the trough is not over yet and the pace of recovery will depend on whether the economic upswing can be sustained in a turbulent world, and how effectively the industry manages the slow down of the world cargo fleet.


1. Clarksea index $10,806/day, still well below trend 2. World industry cycle upturn – now growing at 3.8%3.Sea Trade growth 3.5% in 2017, up from 2.7% last year4. China imports growing at 8% pa in year to May5. Shipyard orderbook down to 9.5% fleet6. Deliveries steady at 100 m dwt, but set to fall 40%7. Fleet growth 2017 about 3.7% pa, but slower in 20188. Expect “bumpy” improvement over next three years

S1: SUMMARY OF TOPICS TO COVER


PART 2: THE SHIPPING MARKET CYCLE TODAYGlobal Shipping & Shipbuilding Markets


S2: The Shipping Cycle – 12 month average falls below $10,000/day

0

5

10

15

20

25

30

35

40

45

50

1990

1991

1992

1993

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1998

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2001

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2011

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2015

2016

2017

Clar

ksea

Inde

x $0

00/d

ay

The Clarksea index shows the average earnings of tankers, bulkers, containerships & gas

Clarksea Index 12 month average

$9,900/day

25 year trend25 year average $15,582/day

2016

2013

2002

1999

1992

12 month moving

average in arrears


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Aver

age

daily

spot

earn

ings o

ver la

st 3 m

onths

Average earnings $22,521/day

Note: the line shows the 3 month average spot earnings of VLCCs, Suezmaxes, Aframaxes & MRs over the previous 3 months

The freight earnings for crude oil tankers 1990-2017 (average over last 3 months)

S3: Crude tankers market … close to 25 year low.

3 month moving

average for all tankers

3 month average tanker earnings

last week $12,273/day, 46%

below 27 year average


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017

Aver

age

spot

earn

ings o

ver l

ast 3

mon

ths

25 year trend $15,882 per day earnings

Average bulk carrier (Cape, Panamax and Handy) over last 3 months

S4: Dry Bulk market 3 month average 27% below trend

3 month average spot rate last

week $9,393/day, 40% below 27 year average


$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

1990

1991

1992

1993

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1995

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1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016Av

erag

e ea

rning

s ove

r last

3 mon

ths

25 year average $12,399 per day earnings

The earnings of average smaller containerships (1,000;1700; 2500; 4400)) over last 3 months

S5: Where the Containership market is now – about 40% below trend

3 month average spot rate last

week $7,630/day, a 39% below 27

year average


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

VLCC 1990sSuezmaxAframax

Cl Prod

CapesizePanamax

Handymax

Chemical TankerOffshore

GasContainer

Tankers 20% below trend

Bulkers 10% below trend

Offshore -54%

Containers -12%Gas -66%

S6: Cycle status in 12 markets: last 12 months as % seven year trend • Chart shows average

earnings in last 12 months as a % of average earnings in last 7 years Sept 2010 to September 2017)

• Improvement since 2016

• Bulk carriers and tankers much better than 12 months ago

• Gas market now well below trend

Data to 26th September 2016

Chemical -7%


PART 3: SHIPPING MARKET PRICES TODAYGlobal Shipping & Shipbuilding Markets

S7 Tanker & Bulker second hand price index – wandering around 100

0

50

100

150

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450

500

Jan-00

Jan-01

Jan-02

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Jan '07

Jan '08

Jan '09

Jan '10

Jan '11

Jan '12

Jan '13

Jan '14

Jan '15

Jan '16

Jan '17Tanker price Index Dry bulk carrier index


S8: Second hand Bulk carrier price change Sept 2016-August 2017Size Age Sep-16 Aug-17 $m %

Cape 180,000 Resale 36.5 45 8.5 23%Cape 170,000 5 yrs 24 33 9.0 38%Cape 170,000 10 yrs 14 21 7.0 50%Cape 170,000 15 yrs. 8 15 7.0 88%Panamax 82,000 Resale 24.5 28.5 4.0 16%Panamax 82,000 5 yrs 14 21 7.0 50%Panamax 73,000 10 yrs 8 13.5 5.5 69%Panamax 73,000 15 yrs. 4.5 9 4.5 100%Supramax 61,000 Resale 21.6 26.5 4.9 23%Supramax 56,000 5 yrs 13.3 16.3 3.0 23%Supramax 56,000 10 yrs 8.5 12.5 4.0 47%Supramax 52,000 15 yrs. 4.5 8.5 4.0 89%Supramax 45,000 20 yrs. 2.8 5 2.2 79%Handy 37,000 Resale 17.6 21.5 3.9 22%Handy 32,000 5 yrs 9.5 14 4.5 47%Handy 32,000 10 yrs 6.8 8.5 1.7 25%Handy 28,000 15 yrs. 4 5 1.0 25%Total 1,399,000 222.1 303.8 81.7 37%

Total Profit of $81.7 m

Top % 15 yr old Panamax

Top $5 yr old

Capesize


S9: Second hand Tanker price change Sept 2016-August 2017

Total loss of $50 m

Worst performer 10

year old Suezmax

Best performer $5 yr old VLCC

Size Age Sep-16 Aug-17 $m %VLCC 310,000 Resale 86 83 - 3.0 -3%VLCC 310,000 5 yrs 62 63 1.0 2%VLCC 300,000 10 yrs 41 39 - 2.0 -5%VLCC 300,000 15 yrs. 26 21.5 - 4.5 -17%

Suezmax 160,000 Resale 58 55 - 3.0 -5%Suezmax 160,000 5 yrs 45 40 - 5.0 -11%Suezmax 150,000 10 yrs 32.5 25 - 7.5 -23%Aframax 105,000 15 yrs. 48 44 - 4.0 -8%Aframax 105,000 Resale 33 30 - 3.0 -9%Aframax 105,000 5 yrs 21 20 - 1.0 -5%Panamax 73,000 10 yrs 44 39 - 5.0 -11%Panamax 73,000 15 yrs. 31.5 26.5 - 5.0 -16%Panamax 70,000 Resale 21 17 - 4.0 -19%

MR 51,000 5 yrs 34 33 - 1.0 -3%MR 47,000 10 yrs 23 23.5 0.5 2%MR 45,000 15 yrs. 16.5 16 - 0.5 -3%MR 45,000 resale 11 9 - 2.0 -18%

Handy 37,000 5 yrs. 20 21 1.0 5%Handy 37,000 10 yrs. 15 13 - 2.0 -13%

Total 2,483,000 668.5 618.5 - 50.0 -7%


PART 3: THE DEMAND SIDE OF THE MARKETGlobal Shipping & Shipbuilding Markets


-14-12-10

-8-6-4-202468

101214

1993

1993

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2013

2014

2015

2015

2016

2017

% g

row

th p

er a

nnum

4. CreditCrisis

3. Dot.comCrisis

2. AsiaCrisis

S10: World Industrial Production 1993-2017 (June) picking up (patchy)1. US Financial

CrisisModest recovery


0

500

1,000

1,500

2,000

2,500

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Impo

rts m

illio

n to

nnes

per

ann

umS11: China Trade – imports back on more gentle growth trend

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




S12: Sea trade growth edges up - about 3.7% growth likely in 2017

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%

3.4% 2.1%

2.7%

3.7%

-4%

-2%

0%

2%

4%

6%

8%

10%

2000

2001

2002

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2015

2016

2017

% g

row

th o

f tra

de in

yea

r

forecast

Growth of sea trade 2000-2016 (annual % change)


S13: Oil weaker & dry cargo trades firmer in 2017

-15%

-10%

-5%

0%

5%

10%

15%

2000

2001

2002

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2004

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2006

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2008

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2017

% g

row

th o

f tra

de in

yea

r

Total oil Dry bulkforecast

Growth of sea trade 2000-2017 (annual % change)


PART 4: THE SUPPLY SIDE OF THE MARKETGlobal Shipping & Shipbuilding Markets

S14: Shipbuilding contracts & deliveries 1963-2017 & forecast

0

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1120

1320

1520

1720

18

Deliveries Delivs Fcst Contracting

2007 peak 274m dwt

Contracting31 m dwt

to July 2017

Million dwt contracts


0%

10%

20%

30%

40%

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60%

70%

80%Ja

n 19

96

Jan

1997

Jan

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2015

Jan

2016

Jan

2017

Ord

erbo

ok a

s % fl

eet (

dwt)

TankersBulk carriersContainer ships

S15: Merchant Orderbook September 2017 as % Fleet

Orderbook shrinking fastThe orderbook is now down to 9.6% of the fleet. • Bulkers 7.5%, • Tankers 11.8%• Containerships 11.9%.

Bulkers lowest since April 2002


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illio

n dw

t scr

appe

dTankers Bulkers Containers Other

BulkersTankers

S16: Demolition about 45 m dwt pa, about 40% of 2016 deliveries


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0

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1963196519671969197119731975197719791981198319851987198919911993199519971999200120032005200720092011201320152017

% g

row

th o

f wor

ld c

argo

flee

t (th

e re

d lin

e)

Wor

ld c

argo

flee

t m d

wt (

blue

bar

s)

World cargo fleet (dwt) % growth

Period of negative growth 1982-1987

when the fleet declined due to heavy scrapping

S17: World fleet – growth up 3.7% in2017, and 2.8% pa in 2018


26.80%

9.80%

9.00%

7.50%

11.90%

11.80%

10.00%

5.40%

4.00%

5.40%

1.70%

3.30%

1.70%

2.20%

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

S18: Merchant Orderbook September 2017 by % FleetTotal cargo orderbook 176 m dwt (down 25%) and average is 9.6% of fleet

Orderbook as % fleet in dwt


28 33 39 39 36 42 46 47 51 55 6273 77 83

95119

153167

157

10991 97

0

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200

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Deliv

erie

s of d

emol

ition

Mill

ion

DWT

Orderbook slippageOrderbook April 2016DeliveriesSeries4

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)

Deliv

erie

s bas

ed o

n o/

book

Stage 3: orderbook

slippage

S19: World shipbuilding output & capacity 1994- 2017

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

forecast


PART 5: THE BALANCE OF SUPPLY & DEMANDGlobal Shipping & Shipbuilding Markets


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

2.019

6319

6519

6719

6919

7119

7319

7519

7719

7919

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0520

0720

0920

1120

1320

1520

1720

1920

21

% su

rplu

s cap

acity

at n

orm

al sp

eed

Billi

on d

wt s

uppl

y/de

man

d

scenarioBars 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


THE END


“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

Capital Link 1 12 September 2017 Global Shipping ...forums.capitallink.com/shipping/2017london/pres/STOPFORD.pdf · 9/13/2017 · 13/09/2017 Maritime Lectures – Guest Lecture 2:

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