Shipyard Capacity Conundrum: What Next?

Transcription

1 Shipyard Capacity Conundrum: What Next? Dr Adam Kent - Maritime Strategies International (MSI) 8th Annual Marine Money London Ship Finance Forum 25 th Jan 2016

2 Agenda Shipyard Capacity Conundrum: What Next? 1. The Issue 2. Current Situation 3. Solutions 4. The Link 5. When does NB begin to make sense? Maritime Strategies International 2

3 Shipyard Capacity Conundrum The Issue Maritime Strategies International

4 Contracting Perfect Storm Timeline Maritime Strategies International Ltd. 4

5 60 Mn CGT Evolution of Effective Shipyard Capacity Other Europe China Korea Japan Orders supported a rapid increase in shipyard capacity Maritime Strategies International 5

6 Chinese Yard Proliferation China and Korea adopted different growth strategies China South Korea Japan # of yards taking contracts for ocean going vessels Maritime Strategies International 6

7 Shipyard Capacity Conundrum Current Situation Maritime Strategies International

8 2016 Example Bankruptcies & Restructurings Year Reported Shipyard Country Status 2016 Samsung Heavy Industries South Korea Self Restructuring 2016 STX Offshore & Shipbuilding South Korea Restructuring 2016 Zhong Chuan Heavy Industry Shipbuilding China Bankrupt 2016 DSME South Korea Self Restructuring 2016 Hyundai Heavy Industries South Korea Self Restructuring 2016 Sainty Marine Co. China Bankrupt 2016 Wuzhou Shipbuilding China Filed for bankruptcy 2016 Sinopacific Zhenjiang China Bankrupt 2016 Sinopacific Yangzhou Dayang China Restructuring 2016 Dung Quat Yard Vietnam Possible bankruptcy 2016 Qingdao Yangfan Shipbuilding China Bankrupt Maritime Strategies International 8

9 2016 Juxtaposition Mn CGT Deliveries Contracts Orderbooks eroded rapidly in South Korea China Japan Europe Others Maritime Strategies International 9

10 Quarters Since Last Order Increasing number of yards redundant Maritime Strategies International 10

11 Is there still an issue? Actual/Scheduled Deliveries Empty Capacity South Korea China Japan Others Mn CGT Maritime Strategies International 11

12 2016 The Reality Mn CGT scheduled 2016 actual Chinese phantom orderbook strikes again China Japan South Korea Other Maritime Strategies International 12

13 Phantoms The Rationale Explanation Fate of 2016 Non Deliveries 2016 Non Deliveries Year of Contract Slipped 1 year Slipped 2 years Cancelled pre Non Deliveries Sectors to Blame Reoccurring Nightmare 2015* Tanker Bulker Gas Container Other S Korea China Japan Other * Vessels scheduled for 2015 delivery that are still on order Maritime Strategies International 13

14 Q Orders and Time to Delivery # of vessels China Japan S Korea Recent orders support the view that over a third of the Chinese orderbook will disappear into the night to 12 months 12 to 18 months 18 to 24 months 24 to 30 months 30+ months Maritime Strategies International 14

15 Shipyard Capacity Conundrum Solutions? Maritime Strategies International

16 Contracting Drivers Cargo Demand Replacement Tonnage Earnings Obsolescence Herd Mentality Market Insight Calculated Strategy Investment Thesis 16

17 Cargo Growth Increase in cargo growth although average levels Maritime Strategies International 17

18 Mn CGT Replacement Tonnage 25+ Yrs old Yrs old Yrs old Yrs old 5-9 Yrs old 0-4 Yrs old % over 20 years (RH Axis) Fleet remains young (looks better in 5yrs time) 80% 70% 60% 50% 40% 30% 50 20% 10% 0 0% Oil Tanker Bulker Chemical LPG LNG FCC MPP Reefer RoRo Cruise ship Vehicle Maritime Strategies International 18

19 Contracting Forecast Mn CGT PCC/RoRo/RoPax/Cruise MPP 120 FCC Gas Container Bulker Tankers % Commodity % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 0% Maritime Strategies International 19

20 Business Model - Grass is Always Greener SE Asia China Korea Germany Maritime Strategies International 20

21 China Shipyard Evolution- Contracting Share by Vessel Type % Share 100% Others Containerships Gas Carriers Chemical Tankers Bulkers Oil Tankers 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Maritime Strategies International 21

22 A Cog in a Larger Machine - Diversification Source: Hyundai Heavy Industries I.R. Maritime Strategies International 22

23 Domestic Ordering Japan China % Share 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% International Domestic % Share 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% International Domestic China cannot rely on domestic orders unlike Japan Maritime Strategies International 23

24 Chinese Shipyard - Extreme Self Help Scenario 14 Mn CGT Incremental Chinese shipping demand * Chinese 20+ year fleet replacement ** Enough to keep Chinese yards busy for a couple of years * Incremental demand taken from MSI s econometric models (tanker, bulker, container only) based on cargo moved translated into requirement for shipping ** Chinese 20+ year fleet assumes all Chinese vessels are scrapped once they are 20 years old and are replaced with new contracted tonnage Maritime Strategies International 24

25 Shipyard Capacity Conundrum The Link Maritime Strategies International

26 Why s it Important? Newbuilding Prices part of the secondhand price jigsaw Shipyard Capacity is no longer a limiting factor Maritime Strategies International 26

27 Directional Analysis VLCC QoQ % Change NB Price 1 Yr TC Rate 5 Yr Price 40% 30% 20% 10% 0% -10% -20% -30% -40% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Maritime Strategies International 27

28 Quarters Where 2 nd hand Price Moves with NB Price Only Since 1990 # of Quarters 120 No Yes Supramax Panamax Capesize MR Aframax VLCC Maritime Strategies International 28

29 NB Price Outlook FC Pricing Power - YARD FC Pricing Power - OWNERS FC = forward cover Maritime Strategies International 29

30 Yards Don t Just Disappear Yards have become ghost towns but haven't disappeared Source: Google Earth Maritime Strategies International 30

31 60 Mn CGT Shipyard Elasticity Other Europe China Korea Japan Maritime Strategies International 31

32 Shipyard Capacity Conundrum When does NB begin to make sense? Maritime Strategies International

33 MSI - FMV MSI Forecast Marine evaluator (FMV) is the first web-based tool to provide forecast and historical price data covering virtually all of the deepsea shipping fleet. Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs for specific vessels. MSI FMV draws on MSI s proven, proprietary models and a consistent cross-sectional view across all principal shipping sectors. It puts asset values in the context of the near term market to enable reliable benchmarking with outputs based on annual averages. Coverage: Crude Oil Tanker Chemical Tanker Multi Purpose Product Oil Tanker LPG Carrier Containership Dry Bulk Carrier LNG Carrier PCC/PCTC AHTS /fmv PSV Maritime Strategies International 33

34 IRR - NB versus Modern Tonnage Maritime Strategies International 34

35 Thank you for listening Maritime Strategies International 35

36 MSI Background For over 30 years, MSI has developed integrated relationships with a diverse client base of financial institutions, ship owners, shipyards, brokers, investors, insurers and equipment and service providers. MSI s expertise covers a broad range of shipping sectors, providing clients with a combination of sector reports, forecasting models, vessel valuations and bespoke consultancy services. MSI is staffed by economists and scientists offering a structured quantitative perspective to shipping analysis combined with a wide range of industry experience. MSI balances analytical power with service flexibility, offering a comprehensive support structure and a sound foundation on which to build investment strategies and monitor/assess exposure to market risks. Maritime Strategies International 36

37 Disclaimer While this document has been prepared, and is presented, in good faith, Maritime Strategies International assumes no responsibility for errors of fact, opinion or market changes, and cannot be held responsible for any losses incurred or action arising as a result of information contained in this document. The copyright and other intellectual property rights in data, information or advice contained in this document are and will at all times remain the property of Maritime Strategies International. Maritime Strategies International 37

38 Maritime Strategies International Ltd 6 Baden Place Crosby Row London SE1 1YW United Kingdom Tel: +44 (0) Fax: +44 (0) info@msiltd.com