Fold, Hold, Double Up - which hand to play next? James Frew - Maritime Strategies International (MSI) 2017 Capital Link New York Maritime Forum

Transcription

1 Fold, Hold, Double Up - which hand to play next? James Frew - Maritime Strategies International (MSI) 2017 Capital Link New York Maritime Forum

2 Fold, Hold, Double Up - which hand to play next? Agenda 1. Demand 2. Supply 3. Earnings 4. Scenarios 5. The Winning Hand? 6. The real risk Maritime Strategies International 2

3 Fold, Hold, Double Up Demand Maritime Strategies International

4 Seaborne Cargo Growth - Positive Positive cargo growth across the board Maritime Strategies International

5 Average Annual Cargo Growth Relative Ranking Historical Forecast Ranking Movement (Forecast v Historical) Maritime Strategies International 5

6 Cargo Growth Only Presents Part of the Picture Maritime Strategies International 6

7 How Many Ships? Routes Distance Speed Waiting/Port Time Operating Days Ballast Ratio Carrying Capacity Size Changes Maritime Strategies International 7

8 Differentiating Hands Dry Bulk Effective Speed* Deck stacked against older tonnage? * Calculation is representative of port to port speed, including slow steaming, anchoring, waiting etc. Maritime Strategies International 8

9 Incremental Vessel Requirements (H )* 350 # of Vessels Crude Oil Product Chemicals * Assuming a current supply demand equilibrium LPG LNG Maritime Strategies International 9 Bulker Container PCTC Cruise AHTS

10 Full Picture Includes Supply Maritime Strategies International 10

11 Fold, Hold, Double Up Supply Maritime Strategies International

12 Vessel Requirements (H ) v s Current Orderbook 400 # of Vessels Ships Required Ships on order Over supply Crude Oil Product Chemicals LPG LNG Bulker Container PCTC Cruise AHTS Maritime Strategies International 12

13 Supply Side - 3 Card Trick Maritime Strategies International 13

14 Contracting as % of Fleet Contracting historically low * Includes MSI s forecast assessments for contracting, scrapping, slippage and cancellations Maritime Strategies International 14

15 Cancellations - Cancellations generally trending down Maritime Strategies International 15

16 Fleet Age Profile Youngest Fleet Oldest Fleet Maritime Strategies International 16

17 When to Fold - Average Age At Scrap 40 Average Age Oil Tanker Bulker Chem Tankers LPG Carriers Containerships Dry Cargo Reefer Vehicle Carrier Maritime Strategies International 17

18 Average Annual Fleet Growth Supply odds favourable * Includes MSI s forecast assessments for contracting, scrapping, slippage and cancellations Maritime Strategies International 18

19 Fold, Hold, Double Up Earnings Maritime Strategies International

20 Where on the Earnings Cycle Are We? Crude and Product Tanker OSVs LPG Carrier Rigs LNG MPP Chemical Tanker PCTC Container Bulker RoRo Schematic for illustrative purposes only! Maritime Strategies International

21 Earnings Maritime Strategies International 21

22 Fold, Hold, Double Up Scenarios Maritime Strategies International

23 Policy shifts impacting trade Maritime Strategies International 23

24 Two Scenarios Resource Nationalism Base Case Maximise use of national resources Limit imports Low priority given to environmental issues Strong demand for resources (in the short-run at least) Some efforts to control pricing Import when it makes economic sense Some attention paid to the environment More balanced economic growth Maritime Strategies International 24

25 Coal trade is finely balanced 2.5 Bn T Net Difference (Inverted, RH Axis) Mn T -200 Chinese Coal Production 2.0 Chinese Coal Consumption Maritime Strategies International 25

26 Policy shifts can have a massive impact 350 Chinese Coal Imports, MnT 300 Base Case Resource Nationalism Assuming China maximises its own coal production rather than relying on imports has severe implications for coal trade Maritime Strategies International 26

27 And take the zip out of a recovery $ k/day Only changing our assumption on coal trade, 2018 becomes a downturn and even in 2020 earnings are still 6% below the BC Base Case Resource Nationalism Maritime Strategies International 27

28 China s domestic chemical production key Mn T China s chems consumption outpacing consumption creates a healthy demand environment for chem tankers Implied Deficit (RH Axis) Production Consumption Mn T Maritime Strategies International 28

29 Impact of full utilisation on vessel demand 8 Mn Dwt 7 6 Base Case Resource Nationalism Strong chems imports relies on Chinese chemical production capacity operating at less than 100% utilisation Maritime Strategies International 29

30 Chemical Tanker Earnings Clobbered If China s chemical production can somehow run at full nameplate capacity, there won t be a chemical tanker market recovery Maritime Strategies International 30

31 Not all doom and gloom crude booms! $/bbl Oil Price (Base Case) Oil Price (Resource Nationalism) Oil Demand (Base Case, RH Axis) Oil Demand (Resource Nationalism, RH Axis) YoY Ch 3.5% 3.0% % % % % % 0 0.0% Maritime Strategies International 31

32 VLCC earnings back to 2015? VLCC 1 Yr T/C ($ k/day) Base Case Resource Nationalism The Resource Nationalism scenario assumes aggressive crude production causing an oil price drop in turn triggering strong demand and thus a VLCC market spike Maritime Strategies International 32

33 Fold, Hold, Double Up The Winning Hand? Maritime Strategies International

34 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 34

35 Pure Asset Play Maritime Strategies International 35

36 Base Case Including Cashflows Maritime Strategies International 36

37 Impact of resource nationalism Maritime Strategies International 37

38 Fold, Hold, Double Up The bigger risk Maritime Strategies International

39 Consolidating excess capacity key Shipbuilding Capacity, Mn CGT Other N. America E. Europe W. Europe China S. Korea Japan Maritime Strategies International 39

40 What happens if consolidation is slower? Mn CGT Japan - Scenario S.Korea - Scenario China - Scenario Japan - Base Case S.Korea - Base Case China - Base Case Maritime Strategies International 40

41 The impact for asset play is significant Maritime Strategies International 41

42 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 42

43 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 43

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