Dr Martin Stopford Non- executive President, Clarkson Research Martin Stopford, Capital Link, Tokyo 14 May 2019
Dr Martin StopfordNon- executive President,
Clarkson Research
Martin Stopford, Capital Link, Tokyo 14 May 2019
Coming to terms with the next era for shipping and shipbuilding
Dr Martin Stopford, President Clarkson Research
Martin Stopford, Capital Link, Tokyo 14 May 2019
ISSUE 1: The shipping market- still strugglingISSUE 2: Market fundamentals - looking betterISSUE 3: Strategies for reducing carbon emissions:-A. Cargo – lower growthB. Ships - slower speed etc C. Shipbuilding – lower carbon power & systemsD. Companies – future transport factories
The next era for shipping and shipbuilding – Martin Stopford
SEVEN ISSUES TO COVER
THE ISSUES
Martin Stopford, Capital Link, Tokyo 14 May 2019
Part 1: The shipping market – still struggling
Freight rates and prices remain “stuck in a rut”,
and the market is still struggling
Martin Stopford, Capital Link, Tokyo 14 May 2019
The Shipping Cycle – 12 month average to $11,239/day in April
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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 $11, 239/day, 25% below 29 year
trend
29 year average $15,230/day
2016
2013
2002
1999
1992
12 month moving
average in arrears
Martin Stopford, Capital Link, Tokyo 14 May 2019
THE MARKET IS STUCK IN A RUT
-100% -50% 0% 50% 100%
VLCC 1990sSuezmaxAframax
Cl Prod
CapesizePanamax
Handymax
Chemical TankerOffshore
GasContainer
Tankers -21% below trend
Bulkers 15% above trend!
Offshore -40%
Containers 22%Gas -54%
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 (April 2012 to April 2019)
• Bulk carriers are above the 7 year trend (but only just)
• Tankers below trend
• Gas market now well below trend
Data to 29 April 2019
Chemical -13%
Martin Stopford, Capital Link, Tokyo 14 May 2019
Part 2: Market fundamentals looking better
The world economy is caught up in long
running developments in both supply and
demand
Martin Stopford, Capital Link, Tokyo 14 May 2019
World seaborne trade 1963-2019 – recently slow but steady
y = 1712.4e0.0346x
0
2
4
6
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14
19631965196719691971197319751977197919811983198519871989199119931995199719992001200320052007200920112013201520172019
Billi
on to
nnes
of s
eabo
rne
impo
rts Chemicals
Gas
Other Dry
Containers
Minor bulks
Grain
Coal
Iron Ore
Oil Products
Crude Oil
World Trade
Expon.(World Trade)
1975
Seaborne cargo consists of many commodities
1983
1998
2909
Growth trend 1963-2019 was 3.4%
Martin Stopford, Capital Link, Tokyo 14 May 2019
World sea trade 1963-2019 – about 2.8% in 2019
11.9%8.7% 7.9%
5.1%9.7%
10.0%8.5%
5.9%7.2%
13.0%4.1%
-6.2%8.7%
2.6% 2.0%7.2%
-2.5% -4.0%-7.3%
-3.6%11.6%
1.0%1.3%
4.7%5.9%5.9% 5.0%
2.0%2.8%
3.6%1.7%
5.7% 4.3%5.6%
-0.9%6.0%
7.4%0.6%
3.0%5.6%
6.8%4.8%4.5%4.2%
2.5%-4.1%
9.4%4.3%4.2% 3.5%
3.4% 2.0%2.4%
4.1% 2.7%2.8%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
Sea
trad
e %
gro
wth
per
ann
um
Axis Title
Martin Stopford, Capital Link, Tokyo 14 May 2019
Growth positive
(about 2-3% pa) but slow
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 052.852.6
9 9 8 8 8 9 1012
141617
1922
2527
323536 31 24
15 1214
17 17 1518 17 15 10
1213
1517
21 21 2023
26 26 2528
32 3133
3640
4753
5768
7898
103 9671 64
68 66 6657
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120
1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018
Mill
ion
GRT
deliv
erie
sShipbuilding production at a more sustainable level
15Peak 1036 m GT
1
2011Peak 12
103.2 M Gt
2
Martin Stopford, Capital Link, Tokyo 14 May 2019
Half peak output
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
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2500
19631965196719691971197319751977197919811983198519871989199119931995199719992001200320052007200920112013201520172019
% 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) Fleet forecast m dwt % growth
Period of negative growth 1982-1987
when the fleet declined due to heavy scrapping and low ordering
World fleet growth - about 2.6% in 2019 & 1.8% in 2020
Martin Stopford, Capital Link, Tokyo 14 May 2019
Shipping market balance – 25% surplus (but tied up slow steaming!)
-10%-5%0%5%10%15%20%25%30%35%40%45%50%55%60%65%
0.0
0.5
1.0
1.5
2.019
6319
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6919
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% su
rplu
s cap
acity
at n
orm
al sp
eed
Billi
on d
wt s
uppl
y/de
man
dscenarioBars show surplus
(+) & shortage (-) capacity as % of the
fleetDark red line shows fleet capacity
in billion dwt (left axis)
Light blue line shows demand in billion dwt (right axis)
shortage
surplus
surplus
shortage
Martin Stopford, Capital Link, Tokyo 14 May 2019
Part 3: Strategies for reducing carbon emissions
The ship’s emissions have become the
industry’s most pressing challenge
Martin Stopford, Capital Link, Tokyo 14 May 2019
Martin Stopford, Capital Link, Tokyo 14 May 2019
IMO’s Vision for elimination Greenhouse Gases (GHGs)– April 2018
“IMO’s vision is to reduce GHG emissions from international shipping. Emissions should peak as soon as possible and fall by at least 50% by 2050 compared to 2008. At the same time, the industry should pursue efforts towards phasing out GHG emissions entirely".
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1980
Billio
n to
nnes
of t
rade
year 1 AD to 2017 AD
World Sea Trade in 1840 AD – before fossil fuels In 1840, when shipping relied on the wind for power, Sea Trade was about 20 mill tonnes
Martin Stopford, Capital Link, Tokyo 14 May 2019
World Sea Trade 1 AD to 2017 AD
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TODAY TRADE IS 600 TIMES BIGGER THAN IN 1840
Martin Stopford, Capital Link, Tokyo 14 May 2019
Fossil fuel engines made this possible … this is the Emma Maersk’s Engine Thanks to fossil fuel, this engine
generates 109,000 HP (82 MW) It does the work of about 3
million people (working 8 hour shifts) If people powered the Emma
Maersk they would need a town the size of Athens to live in They would eat about 9 billion
calories a day (3,000 tonnes of grain)! Every tonne of bunkers
produces 3.3 tonnes of carbon Where else can we get so much
concentrated energy without the carbon?
Martin Stopford, Capital Link, Tokyo 14 May 2019
How could we realize the IMO’s vision of a 50% cut by 2050?
Martin Stopford, Capital Link, Tokyo 14 May 2019
Straetgy 1: Less cargo: Transport less cargo by changing trading patterns, transport policies, pricing and better information systems.Strategy 2: Slow down: Cut carbon emissions/ship km by slowing down to 10 knots; using bigger ships; better designs; retrofitting for safe operation at slow speeds etc.Strategy 3: Zerp carbon power: develop new propulsion systems. Electric fuel cells look the best bet for volume and performanceStrategy 4: Organization: Make sstrategies 1-3 possible by a complete re-think of the industry’s organization and personnel. -
500
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Mill
ion
tonn
es C
O2e
em
issio
ns
2050 IMO Target
“Do nothing” Scenario based on 3.2% cargo
growth, 14 knots, produces 3,000 Mt of
emissions in 2050
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500
1,000
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3,500
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Flee
t em
issio
ns m
illio
n to
nnes
CO
2
Martin Stopford, Capital Link, Tokyo 14 May 2019
NO
CARBON
SAVING
“Do nothing” Scenario based on 3.2% cargo
growth, 14 knots, produces 3,000 Mt of
emissions in 2050
World cargo fleet CO2 Emissions – 4 steps to a 50% reduction
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Flee
t em
issio
ns m
illio
n to
nnes
CO
2
Martin Stopford, Capital Link, Tokyo 14 May 2019
30% CARBO
N SAVIN
GWorld cargo fleet CO2 Emissions – 4 steps to a 50% reduction
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500
1,000
1,500
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3,500
1996199820002002200420062008201020122014201620182020202220242026202820302032203420362038204020422044204620482050
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t em
issio
ns m
illio
n to
nnes
CO
2
Step 3: 10 knots, 2.2% pa cargo
Martin Stopford, Capital Link, Tokyo 14 May 2019
CARBON
SAVING
World cargo fleet CO2 Emissions – 4 steps to a 50% reduction
World cargo fleet CO2 Emissions – 4 steps to a 50% reduction
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500
1,000
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1996199820002002200420062008201020122014201620182020202220242026202820302032203420362038204020422044204620482050
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2
Step 3: 10 knots, 2.2% pa cargo
Martin Stopford, Capital Link, Tokyo 14 May 2019
50% CARBO
N SAVIN
G
3A: CARGO strategy –reduce growth & improve logistics with better information
Develop better information about cargo
“carbon footprint” and more develop B2B integrated through transport services
Martin Stopford, Capital Link, Tokyo 14 May 2019
Cargo 1: Seaborne trade 3.4% growth trend – cut growth to 2%?
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196319661969197219751978198119841987199019931996199920022005200820112014201720202023202620292032203520382041204420472050
Billi
on to
nnes
of s
eabo
rne
impo
rts
Chemicals
Gas
Other Dry
Containers
Minor bulks
Grain
Coal
Iron Ore
Oil Products
Crude Oil
2050 trend
Series13
Martin Stopford, Capital Link, Tokyo 14 May 2019
Sea Trade grew at 3.3% beteen 1965
and 2018
If 3.3% trend continues, shipping
will transport over 30 billion tonnes in 2050.
Cargo shippers must be involved.
Tax on bunkers best method
2.2% growth cuts trade by 10 billion tonnes & carbon
by 1 billion tonnes
15
0
30
45
60
75
15
30
45
60
75
20 20 80 180100100160
ASIA B2BMARITIME BUSINESS
CLUSTER
ATLANTIC B2BMARITIME BUSINESS
CLUSTER
Develop regional short sea trade, supported by B2B commerce
Martin Stopford, Capital Link, Tokyo 14 May 2019
Cargo companies should develop trading systems which are less reliant on long distance transport using the low carbon transport option (for example short sea shipping in preference to air, road or rail)
3B: The SHIP – slow speed and fine tune and apply available technology
Information and monitoring are key
(MRV)
Martin Stopford, Capital Link, Tokyo 14 May 2019
5,098
4,062
4,171
3,337
4,201
4,796
5,286
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4,670
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7,643
7,763
11,699
14,652
17,253
23,595
17,691
22,411
31,000
31,950 29,700 26,650
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15,250
18,300
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2018
$000
PER
DAY
Bun
ker c
ost $
TC
rate
Aframax 1 year timecharter rate in
$/day
Based on Aframax tanker, 1 year TC rate and bunker cost at 50 TPD, 14.5 KTS, Rotterdam 380cst
In 2004 the daily cost of an Aframax tanker was 3X cost of
bunkers
NOW BUNKERS COST MORE THAN SHIP SO SHIPS ARE SLOW STEAMING
1: For the first time the fuel costs more than the ship
Bunker cost in $/day
Martin Stopford, Capital Link, Tokyo 14 May 2019
Ship 2: Surplus capacity and slow steaming raise “market-balance” issues
020406080
100120140160180200220240260280300320340360380400420440460480500
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M dw
t
Shadow surplus Bulkers laid up Tankers laid upShows “Shadow” surplus tonnage and the proportion laid up
“Shadow” surplus is soaked up by slow
steaming today (roughly 25% fleet)
“Shadow” Surplus – tonnage in excess of the dwt of ships needed to carry trade at full
speed
Is this “real” surplus or a new
market variable?
Martin Stopford, Capital Link, Tokyo 14 May 2019
Permanent ‘shadow surplus’?
020406080
100120140160180200220240260280300320340360380400420440460480500
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1959
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M dw
t
Shadow surplus Bulkers laid up Tankers laid upShows “Shadow” surplus tonnage and the proportion laid up
“Shadow” surplus is soaked up by slow
steaming today (roughly 25% fleet)
Is this “real” surplus or a new
market variable?
Martin Stopford, Capital Link, Tokyo 14 May 2019
If ships slow down even more how will
the market manage a permanent “shadow
surplus”?
PART 3C: SHIPBUILDING zero carbon propulsion
A radical review in design methods is
needed to integrate on board systems,
achieving more efficient transport, lower
emissions and greater safety
Martin Stopford, Capital Link, Tokyo 14 May 2019
50 Years change in car technology – “Modern BMW is a computer on wheels” (The Economist 17th Oct 2018)
Martin Stopford, Capital Link, Tokyo 14 May 2019
1967 BMW (source: History of cars.com) 2017 BMW (source: Autocar)
It’s the inside that changed
How will ship design and construction develop in future?
How might shipbuilders develop the next generation of ships?
NavigationNavigation on network with ability to view on shore as well as ship (e.g. Sperry system)
Propulsion plant.• Dual fuel diesel• Diesel electric• Battery & fuel cell• Fusion??
Auxiliary power• Common interfaces• Power management
systems
Auxiliary machineryDigital protocols and
direct systems support from suppliers in integrated system
Ballast & trimIntegrated digital
management systems covering all operating
components
Cargo handlingAutonomous cargo
handling systems driven by cargo management
software sharing key data between ship & shore
IT & comms Ship systems managed
across the fleet by company IT department rolling out upgrades &
providing global support
MaintenanceCondition based
systems managed across fleet, with telematics using
standard protocols
Martin Stopford, Capital Link, Tokyo 14 May 2019
Martin Stopford, Capital Link, Tokyo 14 May 2019
The shipbuilding scenario 2018-2050 – mix of diesel & zero carbon ships
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50.0
100.0
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illio
n Dw
t Del
iver
ies
Hydrogen power (fuel cell or internal combustion engine)Ships burning oil, gas etc
1. Slowing down to 10 knots boosts shipbuilding demand by about 30%2. Heavy replacement of the 2008 bubble ships3. New demand for hydrogen/electric ships etc
Shipbuilding deliveries scenario
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% o
f GRT
Lau
nche
s in
year
OtherUSATaiwanChinaS. Korea JapanEurope
Shipbuilding competition – new construction methods will be crucial
Korea
Japan
Europe
other countriesChina
Martin Stopford, May 2019
2.HULL BLOCK
CONSTRUCTION METHOD (HBCM)
3.PRE-OUTFITTING BLOCKS PRIOR TO
ERECTION
4.ZONE-OUTFITTING
BLOCKS WITH SUB-ASSEMBLIES
1.FRAME FIRST
CONSTRUCTION ON BERTH
Gradual switch from system-by-system to zone-by-zone construction
5.DEVELOP
INTEGRATED SHIP-SYSTEMS
PART 3D: COMPANIES –new information based organizations
A radical review in design methods is
needed to integrate on board systems,
operating as transport factories
Martin Stopford, Capital Link, Tokyo 14 May 2019
Change 2: Transport chain should be integrated using digital technology
Martin Stopford, Capital Link, Tokyo 14 May 2019 Source: Martin Stopford 2019
DATA READY SHIPS 1. Navigation
2. Operations3. Comms.
Core systems
1. SHIP TEAMS
ship servers managing data, apps & comms
6. SHIPBUILDERS & EQUIPMENT
SUPPLIERS
5.CUSTOMERS WITH CARGO SYSTEMS
7. PORTS & THROUGH
TRANSPORT
Warehouse(on cloud?)
Company Systems:-1. Process management2. STQ monitoring3. Messaging system4. Intranet & dashboards5. Fleet maintenance6. LPWAN & APIs
3. SYSTEMS. TEAM
S
1. Support systems2. Process data3. Automation4. Build apps5. Manage stats
1. Technical support 2. Maintenance systems3. Regulatory reports4. Fleet performance5. Personnel management
4. TECHNICAL TEAM
S
2. SHORE TEAM
S
Fleet management
Martin Stopford, Capital Link, Tokyo 14 May 2019
Conclusions1. We are facing unprecedented change in the
maritime industry.2. The goals are zero carbon shipping and developing
the amazing logistics digital technology is already providing to businesses on land.
3. Cargo interests, shipowners and shipbuilders must all play a part.
4. Financiers will play a crucial part in enabling change.
5. Some of the architects of the next era in shipping are sitting here in this hall.
6. This is a once in a lifetime challenge – we must make it work.
“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
Martin Stopford, Capital Link, Tokyo 14 May 2019