Contact : Daejin Lee / [email protected]/ www.JinreSearch.com Dry Bulk Supply Review - The Seeds of Recovery 2016.06.28 This report has been produced for general information. Whilst care has been taken in the production of this report, no liability or responsibility can be accepted for any loss incurred in any way whatsoever by any person who may seek to rely on the information contained herein. The information in this report may not be reproduced without the written permission
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Shipping Supply Analysis : planting the seeds of recovery
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Seaborne dry bulk trade declined 0.1% in 2015 largely due to a 6% drop in coal trade and is unlikely to show any significant recovery in the medium term.
However, record levels of demolition and minimal new orders have given some hope for fundamental recovery, even though fleet supply is expected to increase in the near term because of the existing orderbook.
Support for recovery
High slippage and cancellation of contracts
Absence of new orders / Shipyard defaulting
Tonnage adjustment through slow-steaming
Difficulties
Highly fragmented ownership across many geographical regions
Massive remaining orderbook / Government backed Shipyards
Dry Bulk Fleet Size Distribution as of 1st June 2016
According to Clarksons, the current trading fleet of bulkers over 10,000 dwt consists of 10.728 units equivalent to about 781 million dwt, as of 1st June 2016. This includes 1625 Capesize(100k+) vessels, 2453 Panamax(65-100k) vessels, 3360 Supramax(40-65k) vessels, and 3290 Handysize(10-40k) vessels.
BDI at historical lows with lots of Orderbook & Shipyard capacity, over-supply continues
The general consensus is that market is at or near the floor and now focus on the shape of the downturn – namely how long will the downturn last? Is there hope this year?
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Baltic Dry Index
Super Cycle 2003-2008China Demand Boom with Lack of Ship & Shipyards capacity
After strong demand growth averaged around 5 percent y-o-y over the last decade, seaborne dry trades declined by nearly 0.1 percent last year and is forecast to remain largely flat this year.
The stagnant dry trade growth led Capesize earnings even more correlated to fleet development (r=-0.80)
Supply-side adjustment helps to support rates at the moment, and supply development will be critical for the fundamental recovery of the dry bulk freight market.
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2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
(3)
(2)
(1)
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3
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
There was a notable shift away from some of traditional sectors in recent years, with relatively fewer Panamax(65-80k) and Handymax(40-50k) sectors being delivered, in favor of a larger portion of Kamsarmax and Ultramax delivery.
With earnings currently at OPEX or below, even 15 YR Old vessels are near at scrap value
Tonnage volume of age beyond 15 years which has become pure candidate for demolition is coincidently matching the size of Orderbook(15% of total fleet).
0
50
100
150
200
250
300
On Order 0-4 years 5-9 years 10-14 years 15-19 years 20+ years
Around 130 Mdwt were identified that could be removed from the market in the medium term based on elderly vessels(15.8% of total fleet) approaching their five year special surveys and/or interim surveys over the next two or three years.
The trend of reduction in the scrapping age has continued, with total 10.8 Mdwt(53%) of the tonnage leaving the fleet aged less than 20 years.
The average demolition age usually follows the state of market, and unsurprisingly it dropped to 23.5 years in 2016, almost two years younger than last year.
Even though, demolition is the only possible solution for ship owners to survive, the slower pace of scrapping vessels is expected in the short-term with onset of the monsoon, the fall in scrap prices, and the hope of seasonal rise in freight rate for the final quarter of the year.
In 2014 Jan-May, there were 712 new vessels ordered. In 2015 Jan-May, there were 503, this year has been 120 orders placed so far in world shipyards.
For Dry bulk carriers, in 2015 Jan-May, there were 135 new Vessels ordered. This year has been only 4 ships if excluding 30 Valemax orders in Chinese shipyards.
In 2016, all 30 Valemax ships ordered in Chinese Shipyards, which will be scheduled for delivery across 2018/2019 while none of dry bulk vessel ordered in Korean Yard
Japanese yards has become increasingly more competitive due to the depreciation in the Yen versus the US dollar, thereby securing large new building orders for 2017-2018
Dry bulk ships are being ordered primarily in China and to a lesser extent, Japan
It is expected that almost half of the orders placed in China will likely be either cancelled or delayed this year while most of the orders in Japan will be delivered on schedule.
The pace of cancellations and new building contract renegotiations has continued at the strong level, with 90 vessels being adjusted from the orderbook which will be scheduled for delivery this year. (310 delivered / 400 removed from the schedule in 2016)
310
-400
9552 24 6
-223-157
-500
-400
-300
-200
-100
0
100
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300
400
2016 2017 2018 2019 2020
Delivery in
2016
On Order On Order
Summary
Total
Num
ber
of
vess
els
Capesize (100k+) Panamax (65-100k) Supramax (40-65k) Handysize (10-40k) Sum
New 30 Valemax ships ordered which will be scheduled for delivery across 2018/2019.
12 Capesize vessels being adjusted from the orderbook which will be scheduled for delivery this year. (61 delivered / 73 removed from the schedule in 2016)
61
-73
922
130
-29-35
-80
-60
-40
-20
0
20
40
60
80
2016 2017 2018 2019 2020
Delivery in
2016
On Order On Order
Summary
Total
Num
ber
of
vess
els
VLOC(260k+) Large Cape(200-260k) Capesize(160-200k) Small Cape (100-160k) Total (100k+)
In the first five months of 2016, Clarksons reported the delivery of 295 units over 10,000 dwt, for a total of 24.7 million dwt. This included 56 Capesize vessels of 10.4Mdwt, 65 Panamax of 5.3Mdwt, 103 Supramax of 6.3Mdwt, 71 Handysize of 2.6Mdwt.
Compared to the orderbook at the beginning of 2016, which indicated 92.7m dwt to be delivered this year, the number of new deliveries of Chinese yard and Japanese yard so far showed a delivery rate of about 33%(by dwt) and 80% in 2016 respectively.
Multiple correlation(R=0.78) among Brent price, Capesize speed, and earning explains that either of higher earning or lower bunker cost could result in speed acceleration which would unlock further capacity onto the market, delaying any longer term sustained freight recovery.
The severity of the freight market weakness forced owners to recycle their ships in near record level last year and is forecast to do so this year. However, considering the large amount of existing contracts, dry fleet will continue to expand albeit at a slower pace for next 2-3 years.
3%4%
3% 2%
7% 7% 7% 7% 7%
10%
17%
15%
11%
6%4%
2%1% 1%
4%
-10%
-5%
0%
5%
10%
15%
20%
(60)
(40)
(20)
0
20
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80
100
120
Mil
lio
n d
wt
of
Ve
ssel
s
Dry
Dry Deliveries Dry Demolition Orderbook Total Growth
Last year, while the fleet has shrunk by five vessels, the larger size of new builds led 0.3% fleet growth in dwt term and for now is forecast to increase modestly around 0~1% across 2016/2017 before facing 30 Valemaxes in 2018
파나막스 섹터는 연비가 높은 대형 캄사르막스(80-84k)선형의 유행으로 2010-2013년까지연평균 10%수준의 매우 높은 선복 증가율을 기록했으나 지난해부터 인도량 감소와 해체량증가로 1%대로 성장율이 하락함. 현재 섹터 중 가장 저조한 수익을 보이고 있어 해체량이더욱 증가할 것으로 예상 됨에 따라 당분간 증가율은 약 0~1%에 머물 것으로 전망됨
수프라막스 섹터는 지난해 다른 선형들이 모두 약 0~1% 수준의 낮은 선복 증가율을 보였음에도 홀로 8%의 매우 높은 성장율을 기록함. 여전히 막대한 신조 주문 잔량이 남아 있고 현존 선대 역시 대부분 2010년 이후 인도된 모던 선박들로 구성되어 해체량 규모 역시 기대하기 힘들어 2017년까지도 약 4~5% 수준의 높은 선복 증가율이 유지 될 것으로 예상됨.
(1) Bulk Supply : The Seeds of Recovery (Korean / English) (2) Tanker Supply : Oil Prices and Oversupply (Korean) (3) Coal Trade Market : The end of the coal era, soon or yet? (Korean / English)(4) Iron Ore Trade Market : Chinese steel market (Korean) (5) Understanding Bulk Shipping Market (Korean)(6) Shipping Market Chartpack(7) Shipping Supply Chartpack
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