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27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 1
THE MARKET OUTLOOK
Martin Stopford, President Clarkson Research
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 2
Capital Link 25 September 2018
Global Shipping, Shipbuilding and Trade:Overview & Outlook
Dr Martin StopfordNon- executive President, Clarkson Research
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 3
PART 1: MARKET OVERVIEWPART 2: MARKET CYCLE TODAY BY SECTORPART 3: BUNKER PRICES – WHO PAYS?PART 4: SECOND HAND PRICESPART 5: SHIP DEMAND, SANCTIONS & TARIFFSPART 6: THE SUPPLY SIDE OF THE MARKETPART 7: SUPPLY-DEMAND ANALYSIS
Global Shipping, Shipbuilding & Trade
ISSUES IN THIS PRESENTATIONTHE SEVEN
ISSUES
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 4
PART 1: MARKET OVERVIEWGlobal Shipping & Shipbuilding Markets
The main markets have passed the trough of the cycle. But freight rates still below trend and world industrial growth has peaked out. The pace of recovery will depend on whether the economic upswing can be sustained in a turbulent world. Right now it looks as though it has peaked out, as has sea trade. Cargo fleet is slowing, but still growing. .
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 5
1. Clarksea index $12,000/day, but still below trend 2. World industry cycle over top – slipped to 3.2%3. Sea Trade grew 4.2% in 2017, but down to 3% in 20184.Asset values pretty sluggish, newbuildings up a bit.5. China imports growing - but something’s up6. Shipyard orderbook edged up again to 10.4% fleet7. Deliveries slip 20% to 80 m dwt in 2018, similar next year.8. Fleet growth 2018 about 2.6% (3.8% last year)9. Bottom line: market at risk of getting stuck in a rut.
S1: QUICK OVERVIEW OF MAIN CONCLUSIONS
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 6
PART 2: THE SHIPPING MARKET CYCLE TODAY“busy going nowhere”
Global Shipping & Shipbuilding Markets
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 7
S2: The Shipping Cycle – 12 month average to $11,500/day in Sept
0
5
10
15
20
25
30
35
40
45
50
1990
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
2018
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
$11,549/day, 25% below 28
year trend
28 year trend25 year average $15,591/day
2016
2013
2002
1999
1992
12 month moving
average in arrears
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 8
-100% -50% 0% 50% 100%
VLCC 1990sSuezmaxAframax
Cl Prod
CapesizePanamax
Handymax
Chemical TankerOffshore
GasContainer
Tankers -16% below trend
Bulkers 15% above trend
Offshore -40%
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)
• Bulk carriers are above the 7 year trend (but it was an easy target to beat)
• Tankers below trend
• Gas market now well below trend
Data to 20th September 2018
Chemical -21%
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 9
$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
2018
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 all oil tankers 1990-2017 (average over last 3 months)
S3: Tanker market … close to 25 year low.
3 month moving
average for all tankers
3 month average tanker earnings
last week $8,240/day, 63%
below 28year average
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 10
$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
28 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 $11,667/day, 27%
below 28 year average
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 11
-$1,000$1,000$3,000$5,000$7,000$9,000
$11,000$13,000$15,000$17,000$19,000$21,000$23,000$25,000$27,000$29,000$31,000$33,000$35,000
19901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018
Aver
age
earn
ings o
ver la
st 3 m
onths
28 year average $12,031 per day earnings
7 year av $7,177/day
The earnings of average smaller containerships (1,000;1700; 2500; 4400)) over last 3 months
S5: Where the Containership market still 25% below trend
3 month average spot rate last
week $8,920/day, a 25% below 28
year trend
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 12
$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000$90,000
$100,000$110,000$120,000
19901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018
Aver
age
earn
ings o
ver la
st 3 m
onths
28 year average $28,155 per day earnings7 year av $39,742/day
The earnings of average smaller containerships (1,000;1700; 2500; 4400)) over last 3 months
S%: Where the LPG market is - still well below trend
3 month average spot
rate last week $22,875/day,19% below 28
year trend
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 14
PART 3: BUNKER COSTS & WHO PAYS THEMGlobal Shipping & Shipbuilding Markets
The battle lines for 2020 are now drawn up, with 1000 ships retrofitted with scrubbers and 30% of newbuildings. The big question now is who pays.
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 15
y = 155.17e0.0055x
0
100
200
300
400
500
600
700
800
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan'05
Jan '06
Jan '07
Jan '08
Jan '09
Jan '10
Jan '11
Jan '12
Jan '13
Jam '14
Jan '15
Jan '16
Jan '17
Jan '18
Rott
erda
m B
unke
r Pric
e $/
tonn
eBunker priceBunker price
Bunker price Rotterdam $/tonne- very volatile
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 16
0
50
100
150
200
250
0
100
200
300
400
500
600
700
800
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan'05
Jan '06
Jan '07
Jan '08
Jan '09
Jan '10
Jan '11
Jan '12
Jan '13
Jam '14
Jan '15
Jan '16
Jan '17
Jan '18
VLCC
Spo
t ear
ning
$00
0s/d
ay
Rott
erda
m B
unke
r Pric
e $/
tonn
eBunker price VLCC spot
Bunkers and VLCC spot earnings in $/day
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 17
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Jan '13
Jan '14
Jan '15
Jan-16
Jan-17
Jan-18
Gulf Korea VLCC W/S Gulf-US Gulf Series 3 Linear (Gulf Korea VLCC W/S)
VLCC spot earnings in W/S – no sign of a tanker boom here – boom was driven by bunker prices
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 18
PART 4: SHIPPING MARKET PRICES TODAY
Global Shipping & Shipbuilding Markets
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 19
S7 Tanker & Bulker second hand price index – wandering around 100
0
50
100
150
200
250
300
350
400
450
500
Jan-76Jan-77Jan-78Jan-79Jan-80Jan-81Jan-82Jan-83Jan-84Jan-85Jan-86Jan-87Jan-88Jan-89Jan-90Jan-91Jan-92Jan-93Jan-94Jan-95Jan '96Jan-97Jan-98Jan-99Jan-00Jan-01Jan-02Jan-03Jan-04Jan'05Jan '06Jan '07Jan '08Jan '09Jan '10Jan '11Jan '12Jan '13Jan '14Jan '15Jan '16Jan '17jan '18
Tanker price Index Dry bulk carrier index
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 20
Panamax bulker, Aframax tanker 5 year old price – not really a bargain
-
20.0
40.0
60.0
80.0
100.0
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
$ m
illio
n pr
ice
of A
fram
ax
$ m
illio
n pr
ice
Panamax bulker price (left axis)
Aframax tanker price (right axis)
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 21
PART 5: THE DEMAND SIDE OF THE MARKET
Global Shipping & Shipbuilding Markets
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 22
-14-12-10
-8-6-4-202468
101214
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
2018%
gro
wth
per
ann
um4. Credit
Crisis3. Dot.com
Crisis2. AsiaCrisis
S10: World Industrial Production 1993-2018 (July) slowing1. US Financial
Crisis5. Next
crisis due
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 23
S12: Sea trade growth edges down - about 3.1% growth likely in 2018
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%
4.2%
-4%
-2%
0%
2%
4%
6%
8%
10%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% g
row
th o
f tra
de in
yea
r
forecast
Growth of sea trade 2000-2018 (annual % change)
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 24
S13: Oil & dry cargo trades weaker in 2018
7.0%
-1.4%-0.7%
7.2%6.3%
3.7%2.8%
1.8%0.6%
-2.8%
3.8%
0.3%
2.2%
-1.0% -0.9%
4.2% 4.7%
2.7%1%
-15%
-10%
-5%
0%
5%
10%
15%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% g
row
th o
f tra
de in
yea
r
Total oil Dry bulk forecast
Growth of sea trade 2000-2018 (annual % change)
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 25
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
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Impo
rts m
illio
n to
nnes
per
ann
umS11: China Trade – imports on more gentle growth trend
?
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 27
23.8%
18.9%
28.7%26.2%
24.3%
21.5% 21.7%
15.5%
5.2%
-13.9%
14.8%
10.9%
4.4%
7.3%6.2%
1.4% 2.0% 2.3%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% g
row
th p
er a
nnum
China’s exports of containerisable cargo
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 29
PART 6: THE SUPPLY SIDE OF THE MARKET
Global Shipping & Shipbuilding Markets
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 30
S14: Shipbuilding contracts & deliveries 1963-2017 – sill pretty robust
0
50
100
150
200
250
300
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
2019
Deliveries Delivs Fcst Contracting
2007 peak 274m dwt
Contracting78 m dwt
to 2017 and about 65 m dwt in 2018
Mill
ion
dwt c
ontr
acts
& d
eliv
erie
s
Look how much faster contracting fell after the 1973 bubble than after the 2009 bubble
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 32
0
10
20
30
40
50
60
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018M
illio
n dw
t scr
appe
dTankersBulkersContainersOther
Bulkers forecastTankers forecast
S16: Demolition about 36 m dwt pa, about 45% of 2018 deliveries
Container forecast
This level of demolition leaves the cargo fleet growing at about 2.5% pa
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 33
-4.0%
-2.0%
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
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 and low ordering
S17: World fleet – growth up 3.8% in2017, and 2.9% pa in 2018
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 37
PART 2: THE BALANCE OF SUPPLY & DEMAND
Global Shipping & Shipbuilding Markets
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 38
5,098
4,062
4,171
3,337
4,201
4,796
5,286
4,792
3,381
4,670
6,922
5,872
6,684
7,643
7,763
11,699
14,652
17,253
23,595
17,691
22,411
31,000
31,950
29,700 26,650
13,250
10,650
15,250
18,300
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1990
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
2018
$000
PER
DAY
Bun
ker c
ost $
TC
rate
Bunker cost
1 Year TC Rate
Based on Aframax tanker, 1 year TC rate and bunker cost at 50 TPD, 14.5 KTS, Rotterdam 380cst
COST OF THE SHIP WAY ABOVE
COST OF BUNKERS
NOW BUNKERS
COST MORE THAN SHIP
Until 2010 the ship cost 4X the bunker cost… Now bunkers cost more than the ship!
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 39
S20: “Shadow” Surplus & Laid Up Tonnage
-100-80-60-40-20
020406080
100120140160180200220240260280300
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
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 (17% 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?
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 40
0
5
10
15
20
25
30
35
40
45
50
16.0
15.5
15.0
14.5
14.0
13.5
13.0
12.5
12.0
11.5
11.0
Tonn
es p
er d
ay fu
el c
onsu
mpt
ion
Speed of ship (knots)
Speed & consumption – Panamax bulker
50% reduction
in fuel consump
tion
Slow steaming, carbon footprint, sulphur emissions and the financial performance of shipping assets
20% speed reduction
• The economic importance of ship speed has changed radically in the last decade, for two reasons:-
• The first is the increased cost of bunkers. At design speed the ship used to cost four times as much as the bunkers. Today the bunkers cost more than the ship.
• The second is the greenhouse gas issue. In April 2018 IMO took the decision to cut carbon emissions by 50% in 2050, compared with 2008.
• On a typical ship that target can be met by slowing down 20%. Since the fleet is carrying 17% shadow surplus it is probably almost there.
• Speed will also effect the cost of compliant fuel when the sulphur regulations start in 2020.
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 41
S21: World fleet supply demand balance – surplus not reducing much
-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
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 42
THE END
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 43
“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
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 44
1711
36
25 21
5040
31
96
44
56
16
38
13 15
3829
53
12
34
0
10
20
30
40
50
60
70
80
90
100
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000 Contract
earnings
3 per. Mov. Avg.(Contract)
Source: SROK Tanker rates 43
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 45
28 33 39 39 36 42 46 47 51 55 6273 77 83
95119
153167 157
10991 97 101 98
0
20
40
60
80
100
120
140
160
180
200
19941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019
Deliv
erie
s of d
emol
ition
Mill
ion
DWT
Orderbook slippage
Orderbook September 2018
Deliveries
Series4
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- 2019forecast
27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 46
18,361
18,577
13,683
13,009
14,288
16,856
17,163
17,784
15,943
13,111
20,260
25,019
17,413
20,933
30,330
35,087
33,135
33,144
35,793
20,077
18,731
15,457
13,633
13,288
17,538
26,712
21,488
15,490
14,250
5,098
4,062 4,171
3,337
4,201
4,796
5,286
4,792
3,381
4,670
6,922
5,872
6,684
7,643
7,763
11,699
14,652
17,253
23,595
17,691
22,411
31,000
31,950
29,700
26,650
13,250 10,650
15,250
18,300
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
1990
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
2018
$000
PER
DAY
Bun
ker c
ost $
TC
rate
Bunker cost1 Year TC Rate
Based on Aframax tanker, 1 year TC rate and bunker cost at 50 TPD, 14.5 KTS, Rotterdam 380cst
7. Until 2010 the ship cost much more than its bunkers…but that’s changed!