THE MARKET OUTLOOKforums.capitallink.com/shipping/2018london/pres/stopford.pdf · 9/25/2018 ·...

27/09/2018 Martin Stopford – Shipping, Shipbuilding & Trade – Overview and outlook 25 Sept 2018 1

THE MARKET OUTLOOK

Martin Stopford, President Clarkson Research


Capital Link 25 September 2018

Global Shipping, Shipbuilding and Trade:Overview & Outlook

Dr Martin StopfordNon- executive President, Clarkson Research


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


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. .


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


PART 2: THE SHIPPING MARKET CYCLE TODAY“busy going nowhere”

Global Shipping & Shipbuilding Markets


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


-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%


$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


$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


-$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


$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


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.


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


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


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


PART 4: SHIPPING MARKET PRICES TODAY



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


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)


PART 5: THE DEMAND SIDE OF THE MARKET



-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


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)


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)


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

?


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


PART 6: THE SUPPLY SIDE OF THE MARKET



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


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


-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


PART 2: THE BALANCE OF SUPPLY & DEMAND



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!


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?


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.


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


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


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


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


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!

THE MARKET OUTLOOKforums.capitallink.com/shipping/2018london/pres/stopford.pdf · 9/25/2018 ·...

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