Handy & Supra Market Outlook

Transcription

1 Handy & Supra Market Outlook (an analysis of the fleet profile, trade prospects, and rates) Aug 2018 bancosta blue studies volume DRY 2018/#11 research ; research@bancosta.com Aug 2018 Handy & Supra Market Outlook 1

2 Index 1. Fleet Development page 3 2. Shipbuilding Trends page Detailed Age Profiles page The Demand Side page The Charter and S&P Markets page Final Words page 55 Aug 2018 Handy & Supra Market Outlook 2

3 Fleet Development (deliveries, demolition, fleet growth) Aug 2018 Handy & Supra Market Outlook 3

4 Over the next few slides we will illustrate the current situation of the handy and supra dry bulk fleet, in terms of number of trading units, total deadweight, orderbook, deliveries, demolitions, and projected fleet growth. We have broken down the handy & supra dry bulk fleet into five segments, clearly shown on the next slide (page 5). In this study we consider only general bulk carriers, intentionally omitting all specialized units such as woodchip carriers, self-unloaders etc. According to our calculations, the current trading fleet (including units in lay-up and under repair) of Handy & Supra bulkers between 20,000-64,999 dwt consists of 5,624 units equivalent to about million dwt, as of August In the first 7 months of 2018, we recorded the delivery of 98 units, for a total of 4.9 mln dwt between 20,000-64,999 dwt, down 54 percent in dwt terms compared to the same period in This included 47 units between 60,000-64,999 dwt, 41 units between 30,000-39,999 dwt, 5 units between 50,000-59,999 dwt, 4 units between 20,000-29,999 dwt, and 1 unit of 43,000 dwt. After assuming delivery slippages, 2018 deliveries are expected to come in at a lower 7-8 mln dwt. In the first 7 months of 2018, 15 vessels amounting to 0.6 mln dwt were reported scrapped, down 83 percent in dwt terms compared to the same period in Units scrapped included 10 units between 40,000-49,999 dwt, 2 units between 30,000-39,999 dwt, and 3 units between 20,000-29,999 dwt. Demolition activity is expected to fall in 2018 due to an improved market sentiment, although the ballast water and sulphur regulations are expected to encourage more scrapping in following years. In the first 7 months of 2018, 47 units were ordered between 20,000-64,999 dwt for a total of 2.6 million dwt, compared to 19 units (0.95 mln dwt) ordered during the same period in The popularity of units between 60,000-64,999 dwt continues to be reflected in the orderbook, with its orderbook/ trading ratio being the highest at approximately 25.7 percent in terms of units. The total handy & supra orderbook/ fleet ratio is currently 6.3 percent in unit terms, and 7.0 percent in dwt terms. Aug 2018 Handy & Supra Market Outlook 4

5 Our size breakdown for Handy & Supra bulkers: 60,000-64,999 dwt 50,000-59,999 dwt 40,000-49,999 dwt Ultramax Standard Supramax Traditional Handymax 30,000-39,999 dwt Handysize 2 20,000-29,999 dwt Handysize 1 (note: for all sizes, includes general purpose bulk carriers, excludes specialist vessels such as cement carriers, con-bulkers, woodchip carriers and self-unloaders) Aug 2018 Handy & Supra Market Outlook 5

6 Handy & Supra Fleet By Size Sector - by No. of Units (August 2018 ; only units between 20,000-64,999 ; in number of units) 20,000-29,999 dwt % 60,000-64,999 dwt % 30,000-39,999 dwt % 40,000-49,999 dwt 505 9% 50,000-59,999 dwt % The dry bulk fleet between 20,000-64,999 currently totals 5,624 units, with 34 percent between 50,000-59,999 dwt, 28 percent between 30,000-39,999 dwt, and 15 percent between 20,000-29,999 dwt. Aug 2018 Handy & Supra Market Outlook 6

7 Handy & Supra Fleet By Size Sector - by DWT (August 2018 ; only units between 20,000-64,999 dwt ; in million dwt) 30,000-39,999 dwt % 20,000-29,999 dwt % 60,000-64,999 dwt % 40,000-49,999 dwt % 50,000-59,999 dwt % The fleet between 20,000-64,999 dwt totals close to mln dwt. 50,000-59,999 dwt vessels make up 42 percent of the total, followed by vessels between 30,000-39,999 dwt accounting for another 22 percent of the total. 60,000-64,999 dwt vessels now account for 18 percent of the total. Aug 2018 Handy & Supra Market Outlook 7

8 mln DWT 35.0 Handy & Supra Deliveries + Orderbook in DWT - Annual (August 2018 ; only units between 20,000-64,999 dwt ; assuming 30% slippage) ,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt 2017 deliveries for vessels between 20,000-64,999 dwt came in at 241 units totalling 12.8 mln dwt, of which 66 percent were sized between 60,000-64,999 dwt in dwt terms. In deadweight terms, this was down 25 percent compared to deliveries in After assuming delivery slippages, 2018 deliveries are expected to come in at a lower 7-8 mln dwt. Aug 2018 Handy & Supra Market Outlook 8

9 units Handy & Supra Deliveries in No. of Units - Monthly (August 2018 ; only units between 20,000-64,999 ; in number of units) / / / / / / / / / / ,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt In the first 7 months of 2018, we recorded the delivery of 98 units, for a total of 4.9 mln dwt between 20,000-64,999 dwt, down 54 percent in dwt terms compared to the same period in This included 47 units between 60,000-64,999 dwt, 41 units between 30,000-39,999 dwt, 5 units between 50,000-59,999 dwt, 4 units between 20,000-29,999 dwt, and 1 unit of 43,000 dwt. Aug 2018 Handy & Supra Market Outlook 9

10 mln DWT 16.0 Handy & Supra Demolitions in DWT - Annual (August 2018 ; only units between 20,000-64,999 dwt ; in million dwt) (f) 2019(f) 2020(f) 20,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt In 2017, demolition activity of the dry bulk fleet between 20,000-64,999 dwt fell by 31.7 percent year-on-year in terms of DWT to 4.5 mln dwt (116 units). Improved market sentiments are expected to exert pressure on scrapping levels this year, although this could increase in future with implementation of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 10

11 mln DWT Handy & Supra Demolitions in DWT - Monthly (August 2018 ; only units between 20,000-64,999 dwt ; in million dwt) / / / / / / / ,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt In the first 7 months of 2018, 15 vessels amounting to 0.6 mln dwt were reported scrapped, down 83 percent in dwt terms compared to the same period in Units scrapped included 10 units between 40,000-49,999 dwt, 2 units between 30,000-39,999 dwt, and 3 units between 20,000-29,999 dwt. Aug 2018 Handy & Supra Market Outlook 11

12 mln DWT Deliveries and Demolitions in DWT - Jan-Jul 2018 (August 2018 ; only units between 20,000-64,999 dwt ; in million dwt) ,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt Deliveries Demolitions In the first 7 months of 2018, there was a net addition of 4.3 mln dwt in the fleet between 20,000-64,999 dwt. The net increase was driven by the deliveries of 60,000-64,999 dwt and 30,000-39,999 dwt vessels, while only the 40,000-49,999 dwt category saw a net decrease. Aug 2018 Handy & Supra Market Outlook 12

13 mln DWT Projected Total 20,000-64,999 dwt Fleet Growth (only units between 20,000-64,999 dwt ; after accounting for 30% slippage) % +8% +4% +4% +6% +4% +3% +2% +2% +0% (f) 2019(f) 2020(f) 20,000-64,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for is based on the current orderbook after assuming delivery slippage, and assumes a lower level of demolition activity compared to previous years due to improved market sentiments. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 13

14 mln DWT Projected 60,000-64,999 dwt Bulk Fleet Growth (only units between 60,000-64,999 dwt ; after accounting for 30% slippage) % -15% +19% +44% +79% +39% +23% +10% +10% +8% (f) 2019(f) 2020(f) 60,000-64,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for is based on the current orderbook after assuming delivery slippage, and assumes a lower level of demolition activity compared to previous years due to improved market sentiments. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 14

15 mln DWT Projected 50,000-59,999 dwt Bulk Fleet Growth (only units between 50,000-59,999 dwt ; after accounting for 30% slippage) % +18% +7% +3% +2% +2% +0% +0% -0% -1% (f) 2019(f) 2020(f) 50,000-59,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for is based on the current orderbook after assuming delivery slippage, and assumes a lower level of demolition activity compared to previous years due to improved market sentiments. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 15

16 mln DWT Projected 40,000-49,999 dwt Bulk Fleet Growth (only units between 40,000-49,999 dwt ; after accounting for 30% slippage) % -3% -0% -3% -5% -11% -8% -3% -6% -11% (f) 2019(f) 2020(f) 40,000-49,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for is based on the current orderbook after assuming delivery slippage, and assumes a lower level of demolition activity compared to previous years due to improved market sentiments. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 16

17 mln DWT Projected 30,000-39,999 dwt Bulk Fleet Growth (only units between 30,000-39,999 dwt ; after accounting for 30% slippage) % +10% +3% +5% +6% +7% +5% +4% +3% +1% (f) 2019(f) 2020(f) 30,000-39,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for is based on the current orderbook after assuming delivery slippage, and assumes a lower level of demolition activity compared to previous years due to improved market sentiments. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 17

18 mln DWT Projected 20,000-29,999 dwt Bulk Fleet Growth (only units between 20,000-29,999 dwt ; after accounting for 30% slippage) % -3% -4% -4% -5% -7% -4% -0% -2% -3% (f) 2019(f) 2020(f) 20,000-29,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for is based on the current orderbook after assuming delivery slippage, and assumes a lower level of demolition activity compared to previous years due to improved market sentiments. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Handy & Supra Market Outlook 18

19 Shipbuilding Trends (newbuilding orders, major builders) Aug 2018 Handy & Supra Market Outlook 19

20 mln DWT Handy & Supra Newbuilding Orders in DWT - Monthly (August 2018 ; only units between 20,000-64,999 dwt ; in mln dwt) / / / / / / / ,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt In the first 7 months of 2018, 47 units were ordered between 20,000-64,999 dwt for a total of 2.6 million dwt, compared to 19 units (0.95 mln dwt) ordered during the same period in Of the units ordered this year, 33 units were sized between 60,000-64,999 dwt, and 14 units were between 30,000-39,999 dwt. Aug 2018 Handy & Supra Market Outlook 20

21 units Handy & Supra Newbuilding Orders by Ship Size - Annual (only units between 20,000-64,999 dwt ; in number of units) (1-7) 20,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt In the few years before 2016, contracting of units between 20,000-64,999 dwt had been dominated by units between 30,000-39,999 dwt and 60,000-64,999 dwt. However, orders dropped in 2016 as dry bulk rates fell to a record low, although orders have picked up since Orders between 30,000-39,999 dwt and 60,000-64,999 dwt have continued to be the most popular. Aug 2018 Handy & Supra Market Outlook 21

22 Orderbook / Trading Fleet Dry Bulk Orderbook as Proportion of Trading Fleet (only units between 20,000-64,999 dwt ; in number of units) 30% 25% 25.7% 20% 15% 10% 8.3% 6.3% 5% 0% 1.5% 20,000-29,999 dwt 30,000-39,999 dwt 1.8% 40,000-49,999 dwt 0.3% 50,000-59,999 dwt 60,000-64,999 dwt Total The popularity of units between 60,000-64,999 dwt continues to be reflected in the orderbook, with its orderbook/ trading ratio being the highest at approximately 25.7 percent in terms of units. The total handy & supra orderbook/ fleet ratio is currently 6.3 percent in unit terms, and 7.0 percent in dwt terms. Aug 2018 Handy & Supra Market Outlook 22

23 deadweight 65,000 Handy & Supra Delivered Units Size Distribution (only units between 20,000-64,999 dwt ; delivered as year of built/capacity matrix) 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20, Year of delivery Newly designed vessels sized between 60,000-64,999 dwt were launched in Although of similar capacity to older gearless Panamax vessels they are equipped with cargo-handling gear and provide greater fuel efficiency. Aug 2018 Handy & Supra Market Outlook 23

24 deadweight 65,000 Handy & Supra Orderbook Size Distribution (only units between 20,000-64,999 dwt ; as date of delivery/capacity matrix) 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20, Year of delivery The orderbook is mostly focused on vessels between 34,000-39,999 dwt and 60,000-64,999 dwt, making the tendency for owners to order larger vessels more apparent. Aug 2018 Handy & Supra Market Outlook 24

25 units Handy & Supra Orders by Country of Built - Annual (only units between 20,000-64,999 dwt ; in number of units) (1-7) Japan Korea China Other A large percentage of orders of dry bulk vessels between 60,000-64,999 dwt in recent years have been placed at Chinese shipyards, which have successfully marketed the 60,000-64,999 dwt designs at low prices. After the lull in orders in 2016 across all shipyards, this trend has since continued over , although Japanese shipyards still remain a popular option. Aug 2018 Handy & Supra Market Outlook 25

26 units 700 Handy & Supra Age Profile By Country of Built (only units between 20,000-64,999 dwt ; in number of units) Japan Korea China Europe Others Output from Japanese shipyards has remained relatively consistent over the last two decades, helped by the weakening yen and domestic demand from local companies. China has significantly increased its output over the past decade. Aug 2018 Handy & Supra Market Outlook 26

27 Detailed Age Profiles (for individual sizes) Aug 2018 Handy & Supra Market Outlook 27

28 units Ultramax (60,000-64,999 dwt) Age Profile (in units) (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs yrs yrs yrs yrs 5-9 yrs up to 4 yrs No of units % of fleet 0% 0% 0% 0% 0% 27% 72% Aug 2018 Handy & Supra Market Outlook 28

29 units 330 Standard Supramax (50,000-59,999 dwt) Age Profile (in units) (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs yrs yrs yrs yrs 5-9 yrs up to 4 yrs No of units , % of fleet 0% 0% 0% 13% 27% 55% 5% Aug 2018 Handy & Supra Market Outlook 29

30 units Traditional Handymax (40,000-49,999 dwt) Age Profile (in units) (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs yrs yrs yrs yrs 5-9 yrs up to 4 yrs No of units % of fleet 4% 7% 36% 15% 2% 30% 7% Aug 2018 Handy & Supra Market Outlook 30

31 units 250 Handysize 2 (30,000-39,999 dwt) Age Profile (in units) (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs yrs yrs yrs yrs 5-9 yrs up to 4 yrs No of units % of fleet 1% 0% 2% 5% 9% 52% 31% Aug 2018 Handy & Supra Market Outlook 31

32 units Handysize 1 (20,000-29,999 dwt) Age Profile (in units) (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs yrs yrs yrs yrs 5-9 yrs up to 4 yrs No of units % of fleet 4% 4% 22% 12% 15% 38% 4% Aug 2018 Handy & Supra Market Outlook 32

33 The Demand Side (coal, steel products, agribulks) Aug 2018 Handy & Supra Market Outlook 33

34 Handysize and Supramax vessels are fairly versatile as they are geared and have a limited LOA providing advantages for trades with port restrictions and/or lacking infrastructure for cargo handling. Handy & Supra vessels transport a wide range of commodities including coal, grains, soybeans, and minor bulks including steel products and agribulks. Other common cargoes include nickel ore, alumina, petcoke, wood pellets, scrap, limestone and fertilizers. Coal In 2017, China s coal and lignite imports grew a relatively strong 6.1 percent year-on-year to mln tonnes, estimated to account for around 20 percent of global coal imports. This came from a combination of factors, including strengthening thermal electricity output, strong demand from domestic steel mills, and improvements in the construction and industrial sectors. However, Chinese coal imports could be threatened by government policies to control domestic coal prices and increase local production this year. According to China s National Energy Administration (NEA), China aims to increase domestic coal production by 7.3 percent to 3.7 billion tonnes in 2018 in the first 7 months of 2018, China has reported a 3.4 percent increase in domestic coal production to 2.0 billion tonnes. Media outlets also reported restrictions on coal imports from April 2018 in some eastern provinces, as the government intervened to cool surging coal prices. In spite of these factors, coal imports are still expected to pick up from June to August during the peak demand season. In the first half of 2018, Reuters reported that Chinese seaborne coal imports are estimated to have surged around 14 percent, largely due to an increase in Indonesian imports due to their lower sulphur content and substantial discount to higher-quality thermal coal from Australia. As the U.S.-China trade war escalates, China has included coal in the list of U.S. imports facing a 25 percent import tariff from August 23. However, this is not expected to have a large impact as China is not a major buyer of U.S. coal. In 2017, China imported 3.2 million tonnes of U.S. coal, equivalent to only 1 percent of total Chinese coal imports. Aug 2018 Handy & Supra Market Outlook 34

35 Japan s coal imports increased 1.6 percent to million tonnes in 2017, as the country continues to rely heavily on coal for power generation while the majority of the country's nuclear reactors remain shut following the Fukushima disaster nearly seven years ago. Court orders and public opposition have held up the return of nuclear plants, with only 8 out of 42 operable reactors currently approved to restart. However, further restarts of nuclear power plants from next year could reduce coal purchases. In the first half of 2018, Japanese coal imports fell 2.6 percent to 91.8 million tonnes. South Korea s coal imports also increased by a strong 10.2 percent to mln tonnes in 2017, as nuclear reactor outages impacted energy supply, and new coal-fired power stations came online. This benefited tonne-mile demand as coal imports increased from Indonesia and longer haul destinations such as Canada, South Africa, Colombia, and the U.S.. However, South Korea s demand profile for thermal coal is expected to change with the adoption of a new 0.4% sulphur limit for thermal coal used in their coal power plants, and a consumption tax for imported thermal coal that favors higher calorific thermal coal. These factors could favor increased imports from Colombia, South Africa, and Russia, with the longer haul supplies likely to utilize more Capesizes for transport. In the first 7 months of 2018, South Korea s coal imports increased by 0.5 percent to 86.1 million tonnes. India appears set to be a bright spot for coal trade this year, as domestic logistical bottlenecks due to a shortage of trains, regulatory changes targeting pollution cuts, and surging power demand from household electrification all fuel higher imports. State-run Coal India Ltd. (CIL), which meets around 84 percent of India s coal demand, has also been failing to meet production and shipment targets, creating a demand gap that needs to be met through imports. These factors thus encouraged increased shipments from suppliers such as South Africa and the U.S.. Steel Products Steel products represent a significant portion of handy and supramax trades. China is the world s largest crude steel producer, and also the largest steel exporter accounting for around 16 percent of global steel exports. Aug 2018 Handy & Supra Market Outlook 35

36 However, Chinese steel exports have been falling since 2016, largely due to improved domestic demand, the shutdown of illegal steel production and stringent measures by a number of importing countries on steel imports. In the first 7 months of 2018, Chinese steel exports fell by 13.6 percent year-on-year to 41.3 million tonnes. In March 2018, the U.S. imposed a 25 percent tariff on steel imports and a 10 percent duty on aluminium, after a government report found that foreign shipments of the metals impacted national-security interests. Canada, Mexico, and the European Union were initially exempted, but such exemptions have since been lifted in June The U.S. is the world s largest steel importer, importing 34.5 mln tonnes in In the first 5 months of 2018, U.S. steel imports fell 2.5 percent to 13.9 million tonnes, according to the U.S. Department of Commerce. The top suppliers to the U.S. are Canada (16.5 percent), the E.U. (14.5 percent), Brazil (13.5 percent), S. Korea (9.9 percent), Mexico (9.2 percent), and Russia (8.3 percent). Japan accounts for 5 percent of U.S. imports, while China only makes up around 2 percent of U.S. imports, despite being the world s largest steel exporter. With the tariffs in place, steel shipments to the U.S. could fall, which would have a negative impact on the Supramax segment especially if long haul shipments from Far East countries such as South Korea and Japan are affected. Trading partners may also take both retaliatory and safeguard measures, which would have a ripple effect on other trade routes and commodity trades. For example, the European Union (E.U.) launched in July 2018 provisional safeguard measures in an effort to limit steel imports that they fear will be diverted to them following the U.S. tariffs implementation. The new measures have a much broader effect compared to the retaliatory tariffs the E.U. has already imposed on 2.8 billion euros ($3.3 billion) of U.S. imports. India and Canada are also said to be considering similar safeguard measures, which would be on top of retaliatory tariffs already imposed by Canada and Mexico on U.S. goods. Recently at the start of Aug 2018, the U.S. doubled tariffs on steel and aluminium imports from Turkey, in a dramatic escalation in the spat between the two allies. Turkey s steel exports to the U.S. had already halved in the first 5 months of the year after U.S. import tariffs were imposed, falling to 0.5 million tonnes. Aug 2018 Handy & Supra Market Outlook 36

37 Wheat, Coarse Grains, & Soybeans Global wheat and coarse grain exports are estimated to have grown 1.9 percent in the 2017/18 marketing year, mainly due to an increase in imports by the Middle East, North America, and the E.U.. The trade is forecast to grow another 2.4 percent in 2018/19, as imports by South America, Southeast Asia, and South Asia increase. Asia remains the biggest importing region, estimated to have imported mln tonnes in 2017/18. The largest global wheat exporters are Russia, the EU, U.S., Canada, Ukraine, and Australia while the largest global exporters of corn (and coarse grains in general) are the U.S., Argentina, Ukraine, and Brazil. Russia has seen an increase in market share over the years, as ample supplies, low global prices, and their competitive prices improved their prospects with importing countries. The global soybean trade is estimated to have grown 4.3 percent in the 2017/18 marketing season, with China accounting for around 63 percent of global imports. The global soybean trade is expected to grow another 2.8 percent in 2018/19, as lower import demand from China due to the ongoing trade war is offset by higher demand from the E.U. and other destinations. In Aug 2018, China s official Xinhua News Agency reported the country could lower its imports by more than 10 million tonnes in 2018 through measures including using low-protein diet formula in animal feed, and boosting purchases of alternative ingredients for their animal feed. Chinese buyers have also been rushing to the world s largest exporter Brazil for supplies, as well as other major exporters Argentina and Paraguay. However, Brazil s supplies will start to tighten by October, and a lack of other substantial alternative supplies may force Chinese buyers to purchase some U.S. soybeans for which harvesting will be getting into full swing. Meanwhile, other importers have also been taking advantage of the cheap U.S. soybean supplies to stock up, with the E.U. reporting a 283 percent year-on-year increase in U.S. soybean imports in the first five weeks of the 2018/2019 marketing year. Aug 2018 Handy & Supra Market Outlook 37

38 Thermal/Coking Coal Trade Still the second most traded dry bulk commodity after iron ore Fast growth in on Chinese demand Volumes declining over China s imports down 30% in 2015, but rallied in 2016 EU s imports falling dramatically India s imports currently stable outlook uncertain Brazil W. Europe Major Coal Exporters in 2017 (thermal & lignite + coking): Australia mln tonnes Indonesia mln tonnes Russia mln tonnes Colombia mln tonnes South Africa mln tonnes USA mln tonnes 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% Canada USA Colombia 1.4% 15.4% 7.4% 12.2% S. Africa Russia India China Indonesia S. Korea Japan Australia Major Coal Importers in 2017 (thermal & lignite + coking): EU mln tonnes India mln tonnes Japan mln tonnes China mln tonnes South Korea mln tonnes Taiwan mln tonnes 5.5% 2.9% -6.1% -0.3% 2.5% (e) Aug 2018 Handy & Supra Market Outlook 38

39 Wheat/Coarse Grains Trade Wheat and coarse grain trade increased in 2017 to over 350 mln t Trades are quite complex Production and trade is seasonal, and depends on weather patterns Main exporters are North and South America, Russia/Ukraine, and Australia Main importers are Middle Eastern countries as well as Japan and South Korea 40.0% 20.0% 0.0% -20.0% Canada USA Central/South America Argentina Brazil W. Europe Major Grain Exporters in 2017/18: USA Russia Argentina Ukraine EU Brazil 87 mln tonnes 50 mln tonnes 42 mln tonnes 42 mln tonnes 33 mln tonnes 29 mln tonnes N. Africa 0.8% 2.5% 3.7% 9.4% 2.9% Ukraine Russia Middle East Far East SE Asia Australia Major Grain Importers in 2017/18: Japan 23 mln tonnes EU 23 mln tonnes Mexico 23 mln tonnes Egypt 21 mln tonnes China 21 mln tonnes Saudi Arabia 16 mln tonnes 9.8% 4.8% 4.2% 4.7% (e) Aug 2018 Handy & Supra Market Outlook 39

40 Soybean Trade Volumes have grown very strongly in recent years, to about 150 mln t in 2017, without accounting for soymeal which is another 60 mln t Trade dominated by Chinese imports, accounting for twothirds of volumes Main exporters are USA and Brazil Imports last year affected by sales of government stocks in China and increased support to domestic farmers EU Japan USA China Mexico SE Asia Brazil Paraguay Argentina Major Soybean Exporters in 2017/18: Major Soybean Importers in 2017/18: Brazil 73 mln tonnes China 97 mln tonnes USA 56 mln tonnes EU 14 mln tonnes Paraguay 6 mln tonnes Mexico 4 mln tonnes Canada 6 mln tonnes Japan 3 mln tonnes Argentina 4 mln tonnes Thailand 3 mln tonnes 40.0% 20.2% 20.0% 12.0% 12.5% 6.3% 5.3% 4.8% 9.8% 4.1% 0.0% -20.0% -5.9% (e) Aug 2018 Handy & Supra Market Outlook 40

41 Steel Products Trade China dominates as the largest steel exporter, although their steel exports fell slightly in 2016 due to capacity curbs and a pick up in domestic demand Chinese exports to Southeast Asian countries such as Vietnam and Thailand have been rising However, Chinese steel trade to India, the U.S., and Europe have fallen due to increased protectionism 40.0% 20.0% 0.0% -20.0% -40.0% USA Major Steel Products Exporters in 2017: China 73 mln tonnes Japan 37 mln tonnes Russia 31 mln tonnes South Korea 31 mln tonnes Germany 26 mln tonnes -24.7% Brazil 18.5% EU 4.1% 1.7% Turkey Russia S Korea China Major Steel Products Importers in 2017: USA 35 mln tonnes Germany 28 mln tonnes Italy 20 mln tonnes South Korea 19 mln tonnes France 15 mln tonnes -1.4% Japan Thailand Philippines Vietnam 11.3% 3.5% Indonesia -0.7% -2.5% (e) Aug 2018 Handy & Supra Market Outlook 41

42 million tonnes 160 Far East - Coal Imports by Period (source: customs data ; in million tonnes) China Japan Korea 2016 (1-6) 2017 (1-6) 2018 (1-6) In the first half of 2018, Chinese coal and lignite imports increased 9.2 percent to million tonnes, mainly due to strong demand in Q1 from a colder than expected winter as well as gas supply shortages. On the other hand, Japanese coal imports fell 2.6 percent to 91.8 million tonnes over the same period, while South Korea s coal imports increased by 0.9 percent to 73.9 million tonnes Aug 2018 Handy & Supra Market Outlook 42

43 million tonnes Imports of Wheat and Coarse Grains by Region (source: USDA ; Aug 2018 ; in million tonnes) Asia Africa Middle East Others 2014/ / / / /19 (f) Wheat and coarse grain global imports during the 2017/2018 season is estimated to have reached million tonnes, an increase of 1.9 percent year-on-year. In the 2018/2019 season, global imports are expected to grow 2.4 percent to million tonnes, driven by increased demand in Southeast Asia and South Asia, as well as Sub-Saharan Africa. Aug 2018 Handy & Supra Market Outlook 43

44 million tonnes Imports of Soybeans by Region (source: USDA ; Aug 2018 ; in million tonnes) China European Union Mexico Japan Others 2014/ / / / /19 (f) Global imports of soybean in the 2017/18 season reached a total of million tonnes, a strong increase of 6.3 percent year-on-year. In 2018/19, global imports are expected to increase by 0.9 percent, reaching approximately million tonnes, as lower import demand from China due to the ongoing trade war is offset by higher demand from the E.U. and other destinations. 2018/19 soybean imports to China is forecasted to fall 1.0 percent to 95.0 million tonnes. Aug 2018 Handy & Supra Market Outlook 44

45 Charter and S&P Markets (rates, values, sales volumes) Aug 2018 Handy & Supra Market Outlook 45

46 USD/day Baltic Exchange Supramax TC Average - Seasonality (source: the baltic exchange ; daily data ; USD/day) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec In 2017, the Baltic Supramax TC equivalent averaged around 9,400 USD/day, up 50 percent compared to the average rate in In the first 7 months of 2018, rates remained strong, averaging around 11,100 USD/day, compared to 8,800 USD/day during the same period in Aug 2018 Handy & Supra Market Outlook 46

47 USD/day Baltic Exchange Handysize TC Average - Seasonality (source: the baltic exchange ; daily data ; USD/day) 12,000 10,000 8,000 6,000 4,000 2,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec In 2017, the Baltic Handysize TC equivalent averaged around 7,600 USD/day, up 46 percent compared to the average rate in Rates remained strong in the first 7 months of 2018, averaging around 8,200 USD/day compared to an average of around 7,100 USD/day during the same period in Aug 2018 Handy & Supra Market Outlook 47

48 USD/day Baltic Supramax S1B_58 and S8_58 Indices - last 12 months (source: the baltic exchange ; daily data ; USD/day) 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 08/ / / / / / /2018 S1B_58 (Canakkale trip via Med or Bl Sea to China-South Korea) S8_58 (South China trip via Indonesia to East Coast India) In the first 7 months of 2018, the S1B_58 and S8_58 timecharter averages rose 21 percent and 35 percent year-on-year respectively, compared to the same period a year ago. Aug 2018 Handy & Supra Market Outlook 48

49 USD/day Baltic Handysize HS3 and HS5 Indices - last 24 months (source: the baltic exchange ; daily data ; USD/day) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, / / / / / / / / /2018 HS3 (Rio de Janeiro-Recalada trip to Skaw-Passero) HS5 (South East Asia trip via Australia to Singapore-Japan) In the first 7 months of 2018, the HS3 and HS5 timecharter averages rose by 18 percent and 28 percent year-on-year respectively. Aug 2018 Handy & Supra Market Outlook 49

50 USD/day Supramax Period Timecharter Rates (basis modern standard unit ; estimated monthly avg. ; in USD/day) 70,000 60,000 50,000 40,000 30,000 20,000 10, / / / / / / Year Timecharter Rate 3-Year Timecharter Rate In the first 7 months of 2018, rates for Supramaxes averaged 11,700/day and 11,500/day respectively for 1-year and 3- year timecharter rates. In 2017, the 1-year and 3-year Supramax TC rates had averaged around 9,100 usd/day and 9,800 usd/day respectively. Aug 2018 Handy & Supra Market Outlook 50

51 USD/day Handysize Period Timecharter Rates (basis modern standard unit ; estimated monthly avg. ; in USD/day) 50,000 40,000 30,000 20,000 10, / / / / / / Year Timecharter Rate 3-Year Timecharter Rate In the first 7 months of 2018, rates for Handysizes averaged 9,600 usd/day and 9,400 usd/day respectively for 1-year and 3-year timecharter rates. In 2017, the 1-year and 3-year Handysize TC rates had averaged around 7,900 usd/day and 8,200 usd/day respectively. Aug 2018 Handy & Supra Market Outlook 51

52 USD mln Supramax Newbuilding and 5 Yrs Old Secondhand Prices (basis modern standard units ; indicative monthly average ; in USD mln) / / / / / / / / / / /2018 Supramax NB Supramax 5 YO SH Supramax newbuilding and secondhand prices have generally been staging a recovery on improved market sentiment. In July 2018, newbuilding prices have increased 22 percent year-on-year, while 5 year old secondhand prices have increased 15 percent year-on-year. Aug 2018 Handy & Supra Market Outlook 52

53 USD mln Handysize Newbuilding and 5 Yrs Old Secondhand Prices (basis modern standard units ; indicative monthly average ; in USD mln) / / / / / / / / / / /2018 Handysize NB Handysize 5 YO SH Much like for Supramaxes, Handysize newbuilding and secondhand prices have been staging a recovery on improved market sentiment. In July 2018, Handysize newbuilding prices were up 20 percent compared to a year ago, while 5 year old prices were up about 13 percent year-on-year. Aug 2018 Handy & Supra Market Outlook 53

54 mln DWT 2.5 Handy & Supra Bulk Reported Secondhand Sales in DWT (August 2018 ; only units between 20,000-64,999 dwt ; in mln dwt) / / / / / / / ,000-29,999 dwt 30,000-39,999 dwt 40,000-49,999 dwt 50,000-59,999 dwt 60,000-64,999 dwt In the first 7 months of 2018, 222 vessels amounting to 10.2 mln dwt were reported sold in secondhand sales, compared to 187 vessels totalling 8.5 mln dwt during the same period in Sales were dominated by vessels between 50,000-59,999 dwt as well as 30,000-39,999 dwt, with 104 units and 56 units recorded respectively. Aug 2018 Handy & Supra Market Outlook 54

55 Final Words (summary and conclusions) Aug 2018 Handy & Supra Market Outlook 55

56 After much pressure on rates in 2016, the Baltic Supramax and Handysize TC averages have since recovered, averaging around 11,100 USD/day and 8,200 USD/day respectively in the first 7 months of Deliveries in 2018 are expected to fall to around 7-8 mln dwt, after assuming 30 percent delivery slippage, compared to 12.8 mln dwt of deliveries in Of these units, around 60 percent in deadweight terms would be Ultramaxes sized between 60,000-64,999 dwt. In the first 7 months of 2018, we recorded the delivery of 98 units, for a total of 4.9 mln dwt between 20,000-64,999 dwt, down 54 percent in dwt terms compared to the same period in However, demolitions are expected to remain slow in 2018, with only 15 vessels amounting to 0.6 mln dwt reported scrapped in the first 7 months of 2018, down 83 percent in dwt terms compared to the same period in Demolition activity is expected to fall in 2018 due to an improved market sentiment, although the ballast water and sulphur regulations are expected to encourage more scrapping in following years. Ordering activity have been picking up: In the first 7 months of 2018, 47 units were ordered between 20,000-64,999 dwt for a total of 2.6 million dwt, compared to 19 units (0.95 mln dwt) ordered during the same period in The popularity of units between 60,000-64,999 dwt continues to be reflected in the orderbook, with its orderbook/ trading ratio being the highest at approximately 25.7 percent in terms of units. The total handy & supra orderbook/ fleet ratio is currently 6.3 percent in unit terms, and 7.0 percent in dwt terms. The supply-demand balance continues to improve even as demolitions slow, as deliveries remain relatively stable at lower levels, and trade growth generally continuing at decent levels factors which are expected to continue supporting the Supramax and Handysize markets. While the U.S.-China trade war may disrupt some commodity trades such as for steel, coal, and soybeans, the tariffs are expected to reshuffle rather than halt trade routes. However, further escalations and safeguard measures pose the risk of undermining key trades and market sentiments, which could negatively impact global economies and dry bulk demand over time. Aug 2018 Handy & Supra Market Outlook 56

57 & network c. s.p.a. In addition to regular market reports, research recognize the need for bespoke reports & analysis, tailored to specific client needs. Reports can be produced on a wide range of shipping markets including dry bulk, tankers, gas & containers. In addition in-depth reports can be produced on specific commodity markets. To discuss individual requirements please contact: Phone: research@bancosta.com Aug 2018 Handy & Supra Market Outlook 57

58 & network c. s.p.a. head office: via pammatone, genoa (italy) phone: [5631-1] dry - capesize capes@bancosta.com research research@bancosta.com dry - panamax capespmx@bancosta.com ship finance financial@bancosta.com dry - handy handy@bancosta.com insurance insurance@bancostains.it dry - operation dryoper@bancosta.com p&i hull@bancostains.it tankers tanker@bancosta.com yachting yachts@bancosta.it containers containers@bancosta.com agency bcagy@bcagy.it s&p salepurchase@bancosta.com ship repair shipyard@bcagy.it offshore offshore@bancosta.com towage/salvage shipyard@bcagy.it bancosta uk bancosta monaco bancosta sa medioriental london monte carlo geneva dubai phone: phone: phone: phone: info@bancosta.co.uk info@bancosta-monaco.com info@bancosta.ch mena@bancosta.com bancosta oriente bancosta oriente bancosta oriente japan rep.office singapore hong kong beijing tokyo phone: phone: phone: phone: sap@bancosta.com.hk sap@bancosta.com.hk capespmx@bancosta.it bancosta.tokyo@spa.nifty.com web site: linkedin: linkedin.com/company-beta/ / twitter: twitter.com/banchero_costa Legal notice: The information and data contained in this presentation is derived from a variety of sources, own and third party s, public and private, and is provided for information purposes only. Whilst has used reasonable efforts to include accurate and up-to-date information in this presentation, makes no warranties or representations as to the accuracy of any information contained herein or accuracy or reasonableness of conclusions drawn there from. Although some forward-looking statements are made in the report, cannot in any way guarantee their accuracy or reasonableness. assumes no liabilities or responsibility for any errors or omissions in the content of this report. Aug 2018 Handy & Supra Market Outlook 58