FREIGHT AND LOWER COMMODITY PRICES METAL BULLETIN INTERNATIONAL IRON ORE SYMPOSIUM

Transcription

1 FREIGHT AND LOWER COMMODITY PRICES METAL BULLETIN INTERNATIONAL IRON ORE SYMPOSIUM JUNE 215

2 PRESENTATION STRUCTURE current situation acutely depressed actual & expected earnings China slowdown more severe than anticipated rapid rise in demolition forecast implications trade fleet supply conclusions Whilst care and attention has been taken to ensure that the information contained is accurate, it is supplied without guarantee. SSY Consultancy & Research Ltd can accept no responsibility for any errors or omissions or consequences arising therefrom. JUNE 215 2

3 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 $/t CAPESIZE IRON ORE SPOT RATES FROM BRAZIL MONTHLY AVERAGES Brazil-Rotterdam Brazil-China JUNE 215 3

4 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 $/t THE OIL PRICE EFFECT ON FREIGHT COSTS BRAZIL-CHINA CAPES 35 3 balance of freight rate bunker component 25 44% 2 74% 15 68% 1 5 JUNE 215 4

5 $/t BRAZIL-ROTTERDAM CAPESIZE SPOT RATE ANNUAL AVERAGES 35 3 Annual Averages 215 Ytd JUNE 215 5

6 $/t BRAZIL-CHINA CAPESIZE SPOT RATES: PHYSICAL & PAPER Actual FFA (Stockholm 214) FFA (Vienna 215) Jul-17 Jan-17 Jul-16 Jan-16 Jul-15 Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-1 Jan-1 JUNE 215 6

7 SOURCES OF FREIGHT MARKET NEGATIVITY faltering world demand for steel and key raw materials reduced Chinese coal imports displacement of high cost iron ore and coal export capacity by low international prices limited offset for lost Indonesian mineral ores further 115+ Mdwt of newbuildings scheduled for delivery by end-216 lower bunker prices reduced port congestion more effective Valemax utilisation JUNE 215 7

8 ytd Index Jan 1985=1 FREIGHT & BULK RAW MATERIAL PRICING 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, BDI Iron Ore Steam Coal Coking Coal Crude Oil JUNE 215 8

9 Annual Percentage Change ANNUAL CHANGE IN CHINESE DRY BULK IMPORTS q15 4q14 3q14 2q14 1q14 4q13 3q13 2q13 1q13 4q12 3q12 2q12 1q12 4q11 3q11 2q11 1q11 JUNE 215 9

10 Mdwt DRY BULK SHIPBUILDING ACTIVITY BY COUNTRY: ACTUAL & ON ORDER Other S.Korea China Japan JUNE 215 1

11 FUNDAMENTAL REQUIREMENTS further supply-side adjustments sustained scrapping of older vessels restructuring of the existing newbuilding orderbook through postponements, cancellations & conversions minimal new ordering revival in dry bulk trade cyclical improvement in Chinese steel demand boost to global economic growth from lower oil prices increased fronthaul cargoes MAY

12 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 $ Million CAPESIZE ASSET VALUES $8 $7 Newbuilding ex-japan Five Year Old Ten Year Old Fifteen Year Old Scrap Value $6 $5 $4 $3 $2 $1 $ JUNE

13 a Million dwt Baltic Dry Index (points) DRY BULK CARRIER DELETIONS & THE BDI 45 4 Source: IHS Fairplay, Baltic Exchange, SSY 7, 6, 35 3 Bulker deletions BDI (annual average) 5, 25 4, 2 3, 15 2, 1 5 1, JUNE

14 Jan-6 Jun-6 Nov-6 Apr-7 Sep-7 Feb-8 Jul-8 Dec-8 May-9 Oct-9 Mar-1 Aug-1 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Million Dwt DRY BULK NET FLEET GROWTH: MOVING 12 MONTH AVERAGE JUNE

15 Pre Mdwt CAPESIZE (1+ KDWT) FLEET BY YEAR OF BUILD On Order Existing Orderbook = 56.8 Mdwt (18.5% of existing fleet) 15+ year old fleet = 5.9 Mdwt JUNE

16 Million Dwt POTENTIAL CAPESIZE DEMOLITION POOL kdwt kdwt 22+ kdwt Years 2-24 Years Years JUNE

17 Pre Mdwt PANAMAX (65-99,999 DWT) FLEET BY YEAR OF BUILD 3 25 On Order Existing Orderbook = 28.5 Mdwt (14.7% of existing fleet) 15+ year old fleet = 35.7 Mdwt 5 JUNE

18 pre Mdwt HANDYMAX/SUPRAMAX (4-64,999 DWT) FLEET BY SIZE/YEAR OF BUILD , , , , , Orderbook = 36.1 Mdwt (21.4% of existing fleet) 15+ year old fleet = 27.5 Mdwt JUNE

19 Million Dwt DRY BULK CARRIER NET FLEET CHANGE Additions Deletions Net Change (f) 215(f) JUNE

20 Mdwt PROJECTED NET FLEET CHANGE IN 215 BASE CASE 25 2 Additions Deletions 12.7 Mdwt +7.8% 5.9 Mdwt +1.9% Mdwt +2.6% Mdwt 1.9% 5 Handysize Handymax Panamax Capesize JUNE 215 2

21 Annual Percentage Change ANNUAL CHANGE IN CHINESE DRY BULK IMPORTS q15f 3q15f 2q15f 1q15 4q14 3q14 2q14 1q14 4q13 3q13 2q13 1q13 4q12 3q12 2q12 1q12 4q11 3q11 2q11 1q11 JUNE

22 f 216f Million tonnes ANNUAL GROWTH IN SEABORNE DRY BULK TRADE: IRON ORE, COAL & GRAINS AAA A JUNE

23 CONCLUSIONS new records for dry bulk trade still anticipated in 215 and beyond, but at much slower growth than in the last 1-15 years and under threat from greater than expected weakness in Chinese raw material demand supply-side adjustments essential for eventual freight market recovery are underway and will be accelerated by a protracted period of low earnings and asset values Capesize spot market retains potential for short term volatility over next months, but development of a sustained freight market recovery will be a longer process MAY

24 London T: Singapore T: E: research@ssy.co.uk ssyonline.com JUNE 215