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Drybulk and Cement Carrier market review for 2017 – Pointers for 2018 and onwards in the face
of legislation changes
Intercem Americas 2017Mandalay Bay Resort
Presented by Simon CoxNovember 2017
290 (11-Feb)
1,588 (24-Oct)
1,477 (27-Nov)
0
400
800
1,200
1,600
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17
source: Baltic Exchange
Baltic Dry Index
0
5
10
15
20
25
Jan Apr Jul Oct
2016 Avg: 5,162
2017 Avg: 9,548
0
5
10
15
20
25
Jan Apr Jul Oct
2016 Avg: 5,940
2017 Avg: 9,059
Capesize Panamax 76000dwt
Supramax 58000dwt
0
5
10
15
20
25
Jan Apr Jul Oct
‘000
US$
/ D
ay
2016 Avg: 4,973
2017 Avg: 7,505
Handysize 28000dwt
Baltic Exchange Index Types – TC averagesYear-to-Date
source: Baltic Exchange
0
5
10
15
20
25
Jan Apr Jul Oct
2016 Avg: 7,159
2017 Avg: 14,202
F L E E T U P D A T E
Annual Dry Bulk Fleet Development
31
4
13
7
26
36
23
17
29 31
14
2
0
20
40
60
80
100
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Milli
on T
onne
s
Demolition
Sold for Demolition
Forecast
25 2529
50
86
104101
62
48 49 47
36
4
0
20
40
60
80
100
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Gross Delivery
Forecast
2017 Jan-Oct Demolition:
7 VLOC18 Capesize
3 Post-Pmx47 Panamax70 Supramax71 Handysize
Deliveries Deletions
Dry Bulk Fleet StatusExisting Fleet vs. Orderbook as of 1st November 2017
Number of ships Million Deadweight
182
1,384
625
2,021
3,4803,838
61
69
32
136
187
170
0
1,000
2,000
3,000
4,000
5,000
VLOC Cape P-Pmx Pmx Smx Hsize
No. o
f shi
ps
On order: 655 ships (6% of Existing Fleet)
Existing Fleet: 11530 ships
55
255
59
157
192
10539%
5%
5%
7%
6%
6%
0
50
100
150
200
250
300
VLOC Cape P-Pmx Pmx Smx Hsize
Milli
on D
WT
On Order: 67m Dwt (8% of Existing Fleet)
Existing Fleet: 824m Dwt
source: Howe Robinson Research, Lloyd's Register Fairplay, Zosen News & various other sources
Annual Fleet Growthas of 1st November 2017
8 13 9 8
20 25 23 25 2938
80 78
66
3932
20 1624
13
26
35
23
1629
31 17
13
2115
12
2126 26 26
33
51
86
104101
62
48 49 47
40
2722
7
53
0
20
40
60
80
100
12020
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
*
2018
*
2019
*
2020
*
Millio
n DW
T
Net Growth Deletions Deliveries Orderbook Orderbook Jan
2017F:24m dwt / 2.9%
net growth
1
2
3
4
5
Billio
n To
nnesWorld Seaborne Dry Bulk Trade Growth
source: MSI, Howe Robinson Research
2017 Forecast 3.6% Growth4.8% incl. Chinese Coastal Coal
Iron Ore30%
Coal25%
Grain & Soya10%
Minor Bulk35%
2017
Unit: mt 2016 2017
Iron Ore* 1,505 1,580
Coal 1,193 1,219
Grain 537 577
Minor Bulk 1,546 1,576
Total 4,781 4,952
China Coastal Coal 635 725
Total 5,416 5,677
China Monthly Crude Steel Production
source: GTIS, Howe Robinson Research
67.7
61.1
72.072.8
72.373.2
74.074.6
71.872.4
55
60
65
70
75
80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mln T
2014-16 Range 2017
0
300
600
900
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Milli
on T
onne
s
Australia Brazil S.Africa India Iran Others
Q1 – Q3 China Iron Ore Imports2017: 817mt (+54mt / +7.1% y-o-y)
Coal – Surprising on the Upside 2017
2017 Coal Export Forecast: 1,219mt (+2.2%)
0
300
600
900
1,200
2012 2013 2014 2015 2016 2017
Milli
on T
onne
s
Australia Indonesia Russia Colombia US S.Africa Others
Australia & Indonesia
-7.2mt /-1%
Rest of World
+33.2mt /+8%
2017
World Coal TradeJanuary – August Y-o-Y
0
60
120
180
240
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Milli
on T
onne
s
Indonesia (+11.8mt / +17%)
Australia (+8mt / +15%)
Russia (+7.8mt / +57%)
Vietnam (-0.01mt / -19%)
N.Korea (-12mt / -71%)
Others (-0.3mt / -3%)
China Q1 – Q3 Seaborne Coal Imports2017: 179mt (+16mt / +9.8% y-o-y)
source: GTIS, McCloskey, Howe Robinson Research
30%
40%
50%
60%
70%
0
20
40
60
80
100
120
140
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Share Indonesia
Milli
on T
onne
s
Indonesia
Australia
S.Africa
US
Russia
Others
Share Indonesia
India January – July Seaborne Coal Imports2017: 110mt (-9.4mt / -7.8% y-o-y)
source: GTIS, McCloskey, Howe Robinson Research
Coastal Coal Trade 2017F24mt (+4mt / +20%)
Q1 – Q3 Y-o-Y EC Americas Coal ExportsUS: 62mt (+25mt / +68%) Colombia: 64mt (-1.7mt / -3%)
source: GTIS, McCloskey, Howe Robinson Research
0
11
22
33
44
55
66
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Milli
on T
onne
s
Asia
Americas
Europe-Med
0
30
60
90
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
OthersCanada & MexicoF.East/SE AsiaIndian OceanECSAEurope-Med
GRAIN2017 Grain Export Forecast: 577mt (+7.5%)
0
30
60
90
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Milli
on T
onne
s
Soya Beans Barley Wheat Corn Soya Meal
Chinese Jan – Sep Grain Imports2017: 84.3mt (+13.4mt / +19%)
source: GTIS
Million Tonnes Soybean Imports % Change2012 58.4 11%2013 63.4 9%2014 71.4 13%2015 81.7 14%2016 83.2 2%
0
3
6
9
12
15
18
2005 2007 2009 2011 2013 2015 2017
Philippines
Malaysia
Thailand
Indonesia
Vietnam
SE Asia January – August Grain Imports
source: GTIS, Howe Robinson Research
Wheat
0
4
8
12
16
2005 2007 2009 2011 2013 2015 2017
Philippines
Malaysia
Thailand
Indonesia
Vietnam
0
1
2
3
4
5
6
7
8
9
10
2005 2007 2009 2011 2013 2015 2017
Philippines
Malaysia
Thailand
Indonesia
Vietnam
Soya Beans & SBM CornMillion Tonnes
Minor Bulk2017 Minor Bulk Export Forecast: 1,576mt (+1.9%)
US Q1 – Q3 Petcoke Exports by Region2017: 29.6mt (-1mt / -3% y-o-y)
source: GTIS, Howe Robinson Research
0%
5%
10%
15%
20%
25%
0
8
16
24
32
2000 2002 2004 2006 2008 2010 2012 2014 2016
Milli
on T
onne
s
Cont / MedCanada & MexicoSouth AmericaSE Asia/Far EastIndian OceanOthers% Share India
Annual Exports:2014: 37 mt2015: 37 mt2016: 39 mt
Primary Cement Exporters Jan-Aug Growth RateTurkey only exporting major to exhibit significant positive growth
source: GTIS, Howe Robinson Research
-11%
-34%
-3%
15%
-8%
9%
-4%2%
-9%
-40%
-30%
-20%
-10%
0%
10%
20%
EU China Thailand Turkey Iran* Japan Spain* Germany* India
Turkey surpassed Iran to become the third largest exporting country,
with stronger exports to the US, Middle East, and W.Africa
* Only January – July Data Available
FUTURE MARKET DIRECTION
Fleet Net Growth Scenario for 2018Nominal Orderbook 32-34m Dwt
3.0%
4.3%
3.1% 2.8%
6.6%7.4%
6.6% 6.7%7.3%
8.8%
16.9%
14.3%
10.5%
5.6%
4.3%
2.6%2.1%
2.9%
0%
3%
6%
9%
12%
15%
18%
0
20
40
60
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018*
Millio
n Dw
t
Net Dwt Delivery (m)
Fleet Net Growth % Dwt10m = 1.2%15m = 1.8%20m = 2.4%25m = 3.0%
Sub-Cape Quarterly Newbuilding Contractingas of 1st November 2017
source: Sea-Web
0
10
20
30
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Millio
n DW
T
Post Panamax Panamax Supramax Handysize
2016-2017ytd7.0m dwt
(We are aware that more orders have been placed
which are not officially listed with IMO numbers yet)
Dry Cargo Growth& Forecast 2017
4,500
4,800
5,100
5,400
5,700
2012 2013 2014 2015 2016 2017
Milli
on T
onne
s
2012-146.8%
2015-160.8%
2017*4.8%
m Tonnes % Change2012 4,583 4.7%2013 4,932 7.6%2014 5,327 8.0%2015 5,303 -0.5%2016 5,416 2.1%2017 5,677 4.8%
Dry Cargo Growth
1
4
7
10
13
2015 2016 2017 2018 2019 2020 2021 2022
‘000
US$
/ D
ay
Avg TC BPI
FFA TC BPI
Avg TC BSI
FFA TC BSI
Avg TC BHSI
FFA TC BHSI
source: Baltic Exchange
Forward Timecharter AveragesMonthly Avg. Spot TC Rates & FFAs
New Kamsarmax Index May Commence in Q417: Premium on BPI 11-12%
9.7k
8.6k
9.7k
• Market fundamentals are more positive than at any time during the recent cycle
• Orderbook now at its lowest level for 10 years and net growth for 2018 will not exceed 2017 levels, however there have been significant fresh orders in Q3/417 with further options to be declared
• Demand has been broad based across all commodities and, at almost 5%, has exceeded expectations in 2017. We may not see a similar upside in 2018
• On balance rates should be maintained at current or improved levels in 2018
• But we are unlikely to see inflated levels as supply/demand though returning to some sort of balance remains fragile and geopolitical or external factors such as commodity price volatility may negatively impact on demand
• China remains the wildcard, and though we remain optimistic of continued growth it remains difficult to predict future levels ofindustrial activity whilst government policy in relation to their steel and coal Industry is constantly evolving
• Looking ahead, there will be a dramatic upheaval in our Industry with forthcoming IMO regulations
CONCLUSION
Legislation Change: Ballast Water TreatmentImplementation Sep-2019: only 20% Fleet have BWT Systems
Source: Sea-web, Howe Robinson Research
16.415.9
12.0
5.8
0
6
12
18
VLOC & Capesize Post-Pmx & Panamax Supramax Handysize
Millio
n Dw
t
3rd SS 4th SS 5th SS 6th SS
Bulker Fleet Special Survey 2020
Total = 50m Dwt5th + 6th SS = 10m Dwt
New Regulation Applies GLOBALLY• IMO will lower limit on sulphur content in bunker fuel from 3.5% to 0.5%• High sulphur fuel oil accounts for 70% of overall bunker fuels1
UncertaintiesAvailability of low sulphur fuel oil• 0.5% fuel oil does not exist yet• Only 0.25% sulphur crude oil will be able to yield 0.5% fuel oil – IEA does not see enough supply2
• Shipping industry uses 3m barrels/day of HFO vs. 0.7m barrels/day of MGO
Enforcement• Uncertain who will be monitoring ships• As of now, flag states will decide whether ships are burning right type of fuel away from territorial waters• IMO has no regulatory/enforcement powers• Regulations must be ratified by member countries which may suggest differing levels of enforcement
Timing• IMO says it is too late to change implementation date• Little time for investment in refineries to make changes required to cope with increased MGO demand
source: IMO, 1Wood Mackenzie, 2IEA Oil 2017, 3 Jacobs Consultancy
Lower Global Sulphur Limit for Fuel OilEffective 1st January 2020
LNG-fuelled capabilities newbuildings
Scrubbers used to lesser extent as ECAs begin to crack down on high-sulphur fuel even with scrubbers
Scrubbers may face further crackdown due to CO2 emissions
LNG ships designed to operate with spark ignition reducing need for MGO
Long
Cost of MGO drives innovation of scrubber & LNG technology
Scrubbing & LNG bunkering to be taken up
Re-liquefaction facilities & LNG bunkering ports rolled out globally
Increased scrapping of older ships that cannot be retrofitted
MediumMGO price to increase due to demand + little time for refineries to invest in MGO development. IFO380 produced until transfer date
Diesel price to increase due to competition between vehicle & marine markets for distillate materials
IFO380 price to decrease after regulatory change
Fuel waiver for ships likely, particularly for smaller vessels which do not have space for retrofit
Short
Implications
0
300
600
900
1200
2012 2013 2014 2015 2016 2017 2018 2019 2020
USD
/ To
nne
Rotterdam MGO Rotterdam IFO
Legislation Change January 2020Global Sulphur Limit for Fuel Oil
Bunker price movements will undoubtedly impact on the future direction of the dry bulk market.
Effect of IMO 2020 low sulphur regulations remains unclear.
HighMGO: 1,026
IFO: 713
LowMGO: 260IFO: 109
Fleet UpdateCement Carriers
• Part One: Fleet Statistics
• Part Two: 2015/7 Changes & Orderbook
• Part Three: Regional Developments
NOTE – All Data Based on Minimum 2,000 Dwt
Fleet Evolution:1985 – 2015
Part 1Fleet Statistics
Kiel Canal November 2015
Off Kobe Dec-15Kiyoyasu Maru, 13000 dwt built 2016, Japan
Cement Carrier Headline Data17 November 2017
§ As of 21st November 2017, the total fleet of cement carriers (mechanical & pneumaticcombined) excluding Great Lakes traders is 368 vessels
§ Of which 41 are out of service, either laid up, under arrest or unserviceable.
§ Of these 327 vessels, 7 are presently SPOT seeking business and a further 8-10 arecharter free within the next 8 weeks. This does NOT include vessels that are idlebetween contract commitments.
Total Fleet Development2010 – end 2017est: +42Vessels / +0.37mt (+14.4%)
2010 2011 2012 2013 2014 2015 2016 2017e
Fleet as of 1st Jan 2,567,962 2,545,083 2,435,105 2,438,187 2,468,722 2,593,875 2,672,610 2,770,043
Deliveries 74,198 55,735 34,350 11,519 124,615 82,453 66,250 76,522
Conversions 2,800 0 0 19,016 40,800 39,368 54,455 116,251
Total Additions 76,998 55,735 34,350 30,535 165,415 121,821 120,705 192,773
Demolition / Lost 99,877 165,713 31,268 0 40,262 43,086 23,272 25,277
Net Change -22,879 -109,978 3,082 30,535 125,153 78,735 97,433 167,496
% Net Change -0.9% -4.3% 0.1% 1.3% 5.1% 3.0% 3.6% 6.0%
Deadweight
2010 2011 2012 2013 2014 2015 2016 2017e
Fleet as of 1st Jan 327 328 315 313 318 333 344 353
Deliveries 9 6 3 3 13 12 10 8
Conversions 1 0 0 2 6 3 4 11
Total Additions 10 6 3 5 19 15 14 19
Demolition / Lost 9 19 5 0 4 4 5 3
Net Change 1 -13 -2 5 15 11 9 16
% Net Change 0.3% -4.0% -0.6% 1.6% 4.7% 3.3% 2.6% 4.5%
Vessels
0
30
60
90
On Order 0-4 5-9 10-14 15-19 20-24 25-29 30-34 >=35
No.
of V
esse
ls
Age Group
>16k dwt
12 - 15.9k dwt
8 - 11.9k dwt
5 - 7.9k dwt
2 - 4.9k dwt
Cement Carriers Age ProfileIn Service (excluding Laid Up), as of 21st November 2017
Bergen Dec-15
Part TwoFleet Changes since January 2017
Cement Carriers Sold YTD
source: Howe Robinson Cement Desk, Howe Robinson Research
No. of Ships Ave Age No. of Ships Avg Age
2011 19 36 21 27 75%2012 4 32 9 27 84%2013 0 n/a 13 23 n/a2014 3 33 7 35 106%2015 5 37 8 26 70%2016 4 42 7 21 50%2017 2 36 2 33 92%Total 37 36 67 26 73%
Sold for Demo Sold Further Trading % age Demo
Sold for Demo Sold Further Trading% age Demo
No. of Ships Ave Age No. of Ships Avg Age
2011 19 36 21 27 48%
2012 4 32 9 27 31%
2013 0 n/a 13 23 0%
2014 3 33 7 35 30%
2015 5 37 8 26 38%
2016 5 41 7 21 42%
2017 3 36 5 25 37%
Total 39 36 72 26 34.2%
2017 Newbuilds, to date
Mahanuwara – 15 years TC for Sri Lanka Trade
Name Dwt Country Built
MAHANUWARA 21,000 ChinaFORTUNE 13,479 JapanIRIANA 10,000 IndonesiaAZALEA 7,582 Japan
Conversions2017
Name Dwt Built Converted Where By
NACC ITACA 7,489 2012 2017 TURKEY NACCNACC POROS 7,489 2012 2017 TURKEY NACCNACC QUEBEC 15,000 2011 2017 CHINA NACCJUNG JIN 12,764 2003 2017 KOREA SampyoLINA 12,764 2003 2017 KOREA SampyoNORDANHAV 9,891 1992 2017 SWEDEN ThunCAMILLA 10,085 1997 2017 INDONESIA Andalas
ConversionsUnder way & Expected
Name Dwt Built Converted Where By
GRACE 35283 2006 2018 China? TokyoCementKONDILI 28442 2006 2018 China CSLARDITA 13500 2007 2018 China McKeilNACC TORONTO 13977 2003 2017 Turkey NACCSIDER ALICUDI 7500 2011 2017 Turkey NACCICELAND 4537 2006 2018 Lithuania JTC
Kondili, ex Cape Knox Grace, ex New Creation
Current Order Book
NAME DWT Built CoB Owner
SHIN KURUSHIMA ONISHI 6018 23500 2019-12 Japan Ta Ho
SHIN KURUSHIMA ONISHI 6017 23500 2019-08 Japan Ta Ho
ABG 378 20000 UNCLEAR India ABG
KANDA 578 7200 2018-09 Japan Japanese
CYMBIDIUM 7000 2017-11 Holland SMT
MIURA 1577 5800 2018-06 Japan Japanese
KARYA TEKHNIK 1 4999 2018 indonesia Indonesians
KARYA TEKHNIK 2 4999 2019 indonesia Indonesians
KANDA 576 3300 2018-02 Japan Japanese
Part 3Regional Developments
Cement Carrier Trading Areasas of 21/11/2017 - over 2,000dwt
§ Indian Ocean 28 DOWN 2§ Australia/NZ 7 DOWN 5§ Indonesian Coastal 64 UP 25§ Japanese Coastal 92 UP 19§ Vietnam Coastal 6 no change§ Korean Coastal 39 UP 7§ Other Far East Trades 33 no change§ Americas 21 no change§ Med inc Canaries/Wafrica 31 DOWN 9§ North Cont/Baltic 36 UP 9
Change from Nov 2011
Japan – still growing
• 92 with Japanese Flag: 90 are in service. All in domestic trade, cabotage protected.
• A further 31 foreign flagged Cement Carriers traded in or out of Japan in last 12 months – doing the non cabotage trades.
• 5 Japanese Cement Carriers sold since Jan 2016 – built 1987/1988 – to Indonesia, Korea and Greece; price around US $280 to 380 per MT DWCC
• 23 New builds for Japan since January 2014 (avg. 5,421dwt) – in that time they sold 10 (avg. 6,001 dwt, average 30 years old)
• The Domestic Japan trade continues to grow and is the single most dominant factor in the market
Indonesia – VERY over capacity • There are 67 Indonesian flagged cement carriers. 21 of them are not trading, being used for storage, idle or laid up.
Since early 2016, a number of ships have moved to trade outside domestic trade (presently 3), a further sign of over-capacity.
• 1985 = Average year of build, 7,295mt = Average Deadweight
• 9 have been built new for Indonesian Owners, all since Jan-14, and since 2013 Indonesian owners have started converting bulkers for the first time.
• Remainder bought second hand, 5.5 per annum average between Jan-08 and Dec-13, then dropping to 2.3 per annum since then. Average age of purchases dropped from 29.6 years to 24.4 years. Just over 42% bought from Japan. No ships acquired from the Atlantic Ocean since mid 2013.
Sirios Cement III
• 36 cement carriers currently discharging in this area (10 vessels more than in April 2016). All fully employed, with the odd (seasonal) gap now and then.
• 1995 = Average year of build - 6,215mt = Average Deadweight
• UK imports the major growth market - cement carrier UK port calls up 20-25% per annum for last 2 years. 19 different Cement Carriers called UK in 2016 and 18 different vessels so far in 2017. Baltrader by far the main carrier into UK with 66% of the total port calls.
• 3 Owners (Independents) dominate the market, owning 26 of the vessels.
Baltrader have 9 SMT Eureka have 9 JTC/KGJ have 8
North Europe – growing market
Med Sea – weak for over 6,000dwtsstrong for sub 4,000dwts
• There are 31 ships in the area (but 3 are fully out of service) – Jan 2010 there were 56.
• We see 9 available for charter in the next few weeks -highest %age available ww!!
• 1988 Average year of build, 7,404mt the Average Dwt. 15 different owners. Only 1 owner has over 3 ships in the zone (Sirios has 6)
• Israel: started importing in 2015 by cement carrier – now 4 are on the trade, with more enquiry.
• Libya & Algeria were the two big import markets but now collapsed.
Eviacement IV in Corinth Canal
Yemen Imports by Cement CarrierName DWT built TradedYemen tradingnow
LevantOrient 14,650 1962 current Yemen
SescoCement1 34,196 1972 current Yemen
RaysutI 9,813 1979 current Oman
LevantSuez 11,798 1979 current Yemen
MegahCement 10,849 1984 2016 DEMO
RaysutII 17,442 1984 current Oman
Koralia 8,811 1995 2014 Malaysia
Montok 10,247 2004 2016 Japan
UBCCanada 15,000 2010 2017 Australia
Outlook
• It seems the barrier to entry for new owners to get into the cement carrier trade has been lowered
• Well marketed Cement Handling Equipment available, along with money targeting better returns than in bulk sectors
• Absence of modern resales has forced many players to the conversion game• Increasing interest in larger sizes for Asia and Australia – projects under way on
23/35,000dwt• We estimate 70% of cement carrier activity to be domestic trade, 30% international –
domestic share slowly increasing.• New players and new ships will hit the margins of shipowners, and provide opportunities
for Cement Companies.• Regulation changes – BWT not a major issue this sector, but Sulphur cap will be as very
thirsty ships in port so LSMGO price rise will have to be passed on to clients in 2020.
THANK YOU