THE TANKER MARKET WHERE IT IS IN 2018; WHERE IT COULD BE IN 2020 & WHERE IT SHOULD BE IN 2050

Transcription

1 THE TANKER MARKET WHERE IT IS IN 2018; WHERE IT COULD BE IN 2020 & WHERE IT SHOULD BE IN 2050 How the tanker market could develop over the next couple of years and a few thoughts about how it should be developing once it starts focusing on meeting the IMO s 2050 Vision for Greenhouse Gas Emissions (GHG) Martin Stopford Non-Exec President, Clarkson Research 26-Nov-18 Climate change: four responses to IMO's maritime challenge 1

2 1: QUICK OVERVIEW OF MAIN CONCLUSIONS What can we learn about GHG reduction from the sulphur cap? Tanker index $12,994/day in last 12 months 48% below trend World industry cycle hovering at peak 3.3% pa Oil imports (ton-miles) grew 4.6% in 2017, down to 2.4% in 2018 Asset values pretty sluggish, newbuildings up a bit. China oil imports growing.5 mb pd but variable between years Tanker contracting 40 m dwt to end September Deliveries 30 m dwt in 2018, and 30.4 m dwt in Demolition 28 m dwt in 2018, but now fading - 11 m dwt in 2019? Fleet growth %, but 3.2% expected in 2019 Little underlying market strength

3 PART 1: WHERE THE TANKER MARKET IS TODAY

4 Tanker market about 48% below 7 year trend Chart shows average earnings in last 12 months as a % of average earnings in last 7 years Nov 2011 to Oct 2018) 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 Container Gas Offshore Chemical Tanker Handymax Panamax Capesize Cl Prod Aframax Suezmax VLCC 1990s Containers 40% Gas -36% Offshore -36% Chemical -21% Tankers -48% below trend Bulkers 26% above trend -100% -50% 0% 50% 100% Data to 2nd November 2018

5 Average daily spot earnings over last 3 months Tanker market just passed a 25 year low mini boom 1997 mini boom 2000 mini boom super boom starts super boom ends 2015 mini boom starts 25 year low $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 Average earnings $29,156/day $20,000 $10,000 $0 Spot earnings for all oil tankers (VL, Suez, Aframax, MR) (average over last 3 months)

6 Crude tanker spot earnings last 12 months Products tanker 12 month earnings Similar crude & products tanker earnings cycles (products on right AXIS) $80,000 35,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 Crude tankers Products tankers 12 month av (in arrears) Average earning Crude Tanker - $29,156 Products Tanker - $14,768 30,000 25,000 20,000 15,000 10,000 $10,000 $0 The freight earnings (average over last 12 months) 5,000 0

7 Tanker second hand price index Feb 1992=100 Tanker 2nd hand price index not much asset play micro boom starts 1990 mini boom 2000 mini boom 1997 mini boom super- boom 2015 miniboom distress prices 50 0 jan '18 Jan '16 Jan '14 Jan '12 Jan '10 Jan '08 Jan '06 Jan-04 Jan-02 Jan-00 Jan-98 Jan '96 Jan-94 Jan-92 Jan-90 Jan-88 Jan-86 Jan-84 Jan-82 Jan-80 Jan-78 Jan-76

8 $000 PER DAY Bunker cost $ TC rate Since 2008 daily bunkers cost more than the ship Based on Aframax tanker, 1 year TC rate and bunker cost at 50 TPD, 14.5 KTS, Rotterdam 380cst 40,000 TC COST OF THE 35,000 AFRAMAX WAY ABOVE COST OF 30,000 BUNKERS Aframax 1 year 25,000 timecharter rate in $/day 20,000 15,000 10,000 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 Bunker cost in $/day 26,650 NOW BUNKERS COST MORE THAN SHIP 13,250 10,650 15,250 18,300

9 PART 2: WHERE TANKER DEMAND IS HEADING

10 % growth per annum World Industry (August) at a weak peak 1. US Financial Crisis Asia Crisis Dot.com Crisis Credit Crisis Next crisis due

11 World oil demand growth million BPD World oil demand growing about 1.2 m bpd 5 4 Average since m BPD increase

12 % growth of trade in year Oil trade growth slips to 2.4% in 2018 & about 2% in 2019? 15% 10% 5% 0% -5% -10% 8.3% 7.1% 5.4% 4.9% 4.8% 6.0% 5.9% 4.5% 2.8% 1.7% 0.4% 0.6% 1.4% -0.9% -0.3% -1.8% -2.5% -3.4% -4.8% -7.6% 6.2% 5.7% 2.4% 1.7% 2% Crude tonmiles Products tonmiles 2019 (f) 2018 (f) forecast

13 Products imports by region million tonnes Products import growth dominated by Non OECD Europe USA Japan Non OECD countries Africa, 97 M East, 49 CIS, 15 OECD, Asia, 475 Products Imports 2017 M Tonnes

14 Oil imports M bpd China anchors Oil imports - about.5 m bpd pa but varies China imports still the biggest single driving force in the crude tanker market

15 PART 3: IS SUPPLY/DEMAND BALANCE IN 2021 POSSIBLE?

16 Million dwt contracts & deliveries Shipbuilding contracts & deliveries still pretty robust Updated 11 Nov 2018 Deliveries Delivs Fcst Contracting Contracting collapsed after the 1973 bubble 2006 peak 93m dwt Contracting 34 m dwt in 2017 and about 24 m dwt in /11/2018 Martin Stopford Hong Kong November 20 th

17 % growth of tanker fleet (in DWT) Tanker fleet & demand growth both slowing 18% Oil Tanker Fleet (dwt) Oil demand (dwt) 13% 8% 3% -2% -7% -12%

18 Billion dwt supply/demand % surplus capacity at normal speed Tanker fleet balance still some surplus? Bars show surplus (+) & shortage (-) capacity as % of the fleet shortage surplus Demand in billion dwt (left axis) Tanker capacity in billion dwt (left axis) shortage surplus scenario 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25%

19 PART 4: IS 50% LESS CARBON EMISSIONS IN 2050 POSSIBLE?

20 The tanker industry should be forging bonds with the energy industry, whose product it carries, to lead the shipping industry towards making IMO s vision happen. 1. IMO s vision is to reduce GHG emissions from international shipping. 2. Emissions should peak as soon as possible and fall by at least 50% by 2050 compared to At the same time, the industry should pursue efforts towards phasing out GHG emissions entirely".

21 Million tonnes CO2e emissions Under Do nothing scenario GHG emissions could grow from 970Mt CO2 in 2008 to 3,000 Mt CO2 in ,500 3,000 2,500 2,000 1,500 Do nothing Scenario based on 3.2% cargo growth, 14 knots, produces 3,000 Mt of emissions in , Target

22 26/11/2018 Martin Stopford Hong Kong November 20 th Four ways to get from 3,000 Mt CO2 emissions in 2050 to 470 Mt CO2 Step 1: Transport less cargo by changing trading patterns, transport policies, pricing and better information systems (36% saving) Step 2: Cut carbon emissions/ship km by slowing down to 10.1 knots; using bigger small ships; better designs; retrofitting for safe operation at slow speeds etc (40% saving) Step 3: Develop zero carbon propulsion systems. Electric fuel cells look the best bet for volume and performance (8.5% saving) Step 4: Make solutions 1-3 effective by a complete re-think of the industry s organization and personnel structures

23 Million tonnes CO2e emissions 26/11/2018 Martin Stopford Hong Kong November 20 th Nov CO2 Emissions by the world cargo fleet -5 ways to cut them 3,500 3,000 2,500 2,000 Key conclusion We must start actively planning for ships to go much slower in future. And introduce hydrogen (e.g. burnt in fuel cells in internal combustion engines), as soon as possible to finish the job 2.Double ship size from 32,000 dwt to 70,000 dwt 1,500 1, knots, 2.2% pa cargo IMO target 470 Mt CO2e

24 THE END