Shipbuilding Market Overview Cargotec Capital Markets Day, Helsinki, 17 th November 2011. Steve Gordon, Clarkson Research Services Limited (CRSL) The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the Company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does not obviate the need to make further appropriate enquiries and inspections. The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services.
Agenda 1. Market Position, Seaborne Trade, World Fleet 2. Regional Shipbuilding Capacity 3. Ship Type Investment & Outlook 4. Summary
Three very different decades! Market Position: Clarksea Index Between the end of May 2008 and mid-april 2009, the Index fell from almost $50,000/day to a low of $7,350/day. 2009 & 2010 proved better than expected and low interest rates helped. Sentiment now weaker - as of 11 th November 2011, $11,142 / day 60 50 40 30 20 10 0 1980 '000 $/day 1983 1986 1989 ClarkSea Index The Clarksea Index is an average w eighted index of earnings across the major sectors of tankers, bulkers, containers and gas Average 1980s - $9,461/day Avergae 1990s - $11,924/day Average 2000s - $21,720/day 1992 1995 The Clarksea Index (tankers, bulkers,, containers, gas) Source: Clarkson Research 1998 2001 2004 2007 Source: Clarkson Research, April 2011 2010
Cycle Position November 2011 LNG LPG Offshore Container 1,700 teu Container 3,500 teu Handy Handymax Panamax Capesize Clean Products Aframax Suezmax VLCC Quarterly Upturn but lots of supply to come Tankers depressed Gas & Offshore better Rates have continued to decline since the summer This chart shows average earnings today for the ship type, as a % of the average earnings during the last 10 years -100% -50% 0% 50% 100% 150% 200% 250% % deviation from 10 year trend
8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% The World Economy - Sea trade cycles generally follow cycles in world GNP but not precisely. World Seaborne Trade & GDP Trade Grow th linear trendline 2009 2010 2008 2007 World GDP Grow th % Crude Oil 21% Other Dry 27% Seaborne Trade 2011, m.tonnes Oil Products 9% Gas 3% Minor Bulks 13% Major Bulks 25% 1990-2008: trade almost doubled to 8.2bn tonnes that is over one tonne for every person on the planet -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Source: Clarkson Research Services. IMF Source: Clarkson Research Services
World Seaborne Trade Billion Tonnes 10.0 Major Bulk 9.0 Container Trade Oil Products 8.0 Other 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Global Seaborne Trade Minor Bulk Crude Oil Gas 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 (e) Source: Clarkson Research, April 2011 Iron Ore Container LNG Coal 2000-2010 Trade Growth Cruise Cars Oil Products Baux./Alum. LPG Grain Minor Bulk Crude Oil Other Phos. Rock -1.9% 2.5% 1.7% 2.9% 5.3% 4.9% 4.3% 3.9% 2.7% 6.5% 5.7% 8.2% 7.9% -3.7% % Grow th Per -5.0% 0.0% A 5.0% 10.0% Source: Clarkson Research, April 2011 4% average
Seaborne Trade Scenarios Seaborne Trade Outlook 18 16 14 12 10 8 6 4 2 Billion Tonnes Chinese Imports World Less China 7% scenario 4% scenario 3% scenario 1% scenario Period % p.a. 1951-60 6.3% 1961-70 9.1% 1971-80 3.5% 1981-90 2.3% 1991-00 3.9% 2001-10 3.7% We expect trade to grow by around 5% in 2011 but there are lots of risks given economic developments / uncertainty and there is a lag on trade data. For planning purposes, 4% growth in trade over the next decade does not seem unreasonable. 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: Clarkson Research, April 2011 2020
Age Profile 11% of fleet above 25 years 100 Million GT Deliveries 80 60 40 20 Relatively few vessels built in the 1980s so limited replacement requirement 0 1971 1981 1991 2001 2011
World Fleet 1986-2012 1200 1000 800 600 400 200 0 Million World Fleet Development World Fleet Development % Growth 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Clarkson Research, April 20112012 (f) 10% 8% 6% 4% 2% 0% -2% -4% Growth Rates: This year the fleet moved past the billion GT mark Fleet growth has moved up to 7-8% in recent years and this is also forecast for 2011 and 2012. This is roughly double long term trade growth and more than the 5% trade growth expected this year. Graph in GT
Agenda 1. Market Position, Seaborne Trade, World Fleet 2. Regional Shipbuilding Capacity 3. Ship Type Investment & Outlook 4. Summary
World Shipbuilding & Scenario 100 Market Peak 2010 or 2011? Surplus Capacity Million GT Deliveries 80 60 40 20 The last shipbuilding peak was in 1975 when output reached 36 million GT 35 year cycle 0 1971 1981 1991 2001 2011 2021
Shipbuilding Output by Country & CGT 60 Million CGT Deliveries 40 20 0 Europe Japan S. Korea China Others 1996 1998 2000 2002 2004 2006 2008 2010
100 90 80 70 60 50 40 30 20 10 0 Shipbuilding Waves of Competition Other USA China Korea Japan 1902 1907 1912 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 % total ships launched Britain Scandinavia Europe Source: Maritime Economics (2009)
China takes the lead.. Global Shipbuilding Share - Delivery 70% % DWT Deliveries China Europe Japan South Korea 60% Others Global Shipbuilding Share (2011 YTD Delivery in Dwt) Others Europe 4% 2% Japan 20% 50% 40% 30% 20% China 41% 10% 0% 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 YTD S. Korea 33% Source: Clarkson Research Services
South Korean success in high value orders 60% 50% Global Shipbuilding Share - Contracting % CGT Deliveries China Europe Japan South Korea Others Global Shipbuilding Share (2011 YTD contracting in CGT) Others Eur ope Japan 7% 6% 5% 40% 30% 20% China 32% 10% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD S. Korea 50% Source: Clarkson Research Services
World Shipbuilding by Country 2010 Million CGT Output 2010 0 5 10 15 20 25 China S. Korea Japan Germany Italy Philippines Norway Turkey Spain Netherlands Others 0.8 0.7 0.6 0.5 0.5 0.4 0.3 78 yards 3.6 30 yards 223 yards 9.7 16.0 19.0 What is CGT? CGT is the Gross Tonnage (GT) of the ship weighted to reflect its work content per GT. For example the weight for a containership might be 1.0 and the weight for a big tanker 0.25) Source: Clarkson Research
World Shipbuilding by Country 2011 YTD Million CGT Output in 2011 0 5 10 15 20 25 China S. Korea Japan Germany Italy Norway Turkey Spain Netherlands Others 0.4 0.4 0.2 0.2 0.2 0.2 68 yards 2.4 232 yards 31 yards 7.0 14.7 13.1 What is CGT? CGT is the Gross Tonnage (GT) of the ship weighted to reflect its work content per GT. For example the weight for a containership might be 1.0 and the weight for a big tanker 0.25) Source: Clarkson Research
World Shipbuilding Capacity 2010 - CGT World Shipbuilding Production by Country COUNTRY Tankers Bulkers Containers Gas her Total Output M CGT M CGT M CGT M CGT M CGT M CGT China 3.9 10.3 1.7 0.1 3.0 19.0 S. Korea 4.6 3.0 4.8 2.2 1.4 16.0 Japan 2.3 4.7 0.8 0.6 1.3 9.7 Germany 0.0 0.0 0.2 0.0 0.6 0.8 Italy 0.0 0.0 0.0 0.0 0.7 0.7 Philippines 0.1 0.3 0.2 0.0 0.0 0.6 Norway 0.0 0.0 0.0 0.0 0.5 0.5 Turkey 0.3 0.0 0.0 0.0 0.1 0.5 Spain 0.0 0.0 0.0 0.0 0.3 0.4 Netherlands 0.0 0.0 0.0 0.0 0.3 0.3 All Others 0.4 0.5 0.4 0.0 2.2 3.6 Total 11.6 18.8 8.1 3.0 10.5 52.0 Indicates market leader for each ship type
World Shipbuilding Capacity 2011 YTD - CGT World Shipbuilding Production by Country COUNTRY Tanker Bulk Carrier Containership Gas Others Total China P.R. 2.6 9.3 0.7 0.1 2.1 14.7 South Korea 3.3 3.6 4.2 0.7 1.4 13.1 Japan 1.6 4.2 0.4 0.2 0.6 7.0 Philippines 0.0 0.6 0.0 0.0 0.0 0.6 Italy 0.0 0.0 0.0 0.0 0.4 0.4 Germany 0.0 0.0 0.0 0.0 0.3 0.4 Taiwan 0.0 0.1 0.2 0.0 0.0 0.3 Vietnam 0.0 0.2 0.0 0.0 0.1 0.3 Norway 0.0 0.0 0.0 0.0 0.2 0.2 Turkey 0.1 0.0 0.1 0.0 0.0 0.2 All Others 0.2 0.2 0.1 0.0 1.1 1.6 Total 7.8 18.1 5.6 1.0 6.3 38.8 Indicates market leader for each ship type
Top Builders 2010 2010 Output - 000 CGT COUNTRY BUILDER Bulkers Container Gas Other Tankers Total Cont % tot 1 South Korea Daewoo 217 1,468 606 235 612 3,138 47% 2 South Korea Hyundai H.I. 467 1,304 263 446 488 2,968 44% 3 South Korea Samsung H.I. - 961 998 356 299 2,614 37% 4 South Korea Hyundai Samho 249 408 88-539 1,284 32% 5 China P.R. Jiangnan Changxing 50 377 - - - 427 88% 6Taiwan CSBC - 325 - - - 325 100% 7 South Korea Hanjin H.I. - 312 81 13 52 459 68% 8 China P.R. Jiangsu New YZJ 391 309 - - - 700 44% 9 Japan Mitsubishi H.I. - 289 233 244-766 38% 10 Philippines HHIC-Phil. Inc. - 207 - - 52 260 80% 11 China P.R. Guangzhou Wenchon - 207-58 - 264 78% 12 Japan Koyo Dock K.K. 246 190 81 - - 517 37% 13 China P.R. Dalian Shipbuilding 409 168 - - 554 1,131 15% 14 South Korea Sungdong S.B. 709 154 - - 156 1,020 15% 15 Japan Naikai S.B. - 118 - - 17 135 88% 16 China P.R. Jiangsu Yangzijiang - 113-156 - 269 42% 17 Japan Imabari S.B. 752 101-233 44 1,131 9% 18 China P.R. Shanghai S.Y. 248 96 - - - 344 28% 19 Japan I.H.I. 194 95 - - 178 466 20% 20 China P.R. Zhejiang S.B. 33 78-15 - 126 62%
Top Builders 2011 YTD 2011 YTD Output - 000 CGT COUNTRY BUILDER Bulk Carrier Containership Gas Others Tanker Total Cont % tot 1 South Korea Hyundai H.I. 513 1,173 83 363 641 2774 42% 2 South Korea Samsung H.I. - 1,104 162 294 840 2400 46% 3 South Korea Daewoo 219 742 410 341 153 1866 40% 4 South Korea Hyundai Samho 271 898-114 305 1587 57% 5 South Korea Hyundai Mipo 438 21 17 223 493 1192 2% 6 South Korea STX Shipbuild. 558 120 34-275 987 12% 7 China P.R. Dalian Shipbuilding 346 49 - - 545 941 5% 8 South Korea Sungdong S.B. 660 - - - 128 788 0% 9 Japan Imabari S.B. 595 - - 99-694 0% 10 China P.R. Shanghai Waigaoqiao 403 - - - 181 583 0% 11 South Korea SPP Shipbuilding 472 - - - 104 575 0% 12 Japan Oshima S.B. Co. 566 - - - - 566 0% 13 China P.R. Jiangsu New YZJ 492 26 - - - 517 5% 14 Japan Mitsubishi H.I. - 248-174 89 511 49% 15 China P.R. Dayang S.B. 440 - - 47-487 0% 16 Japan Universal S.B. 352 - - - 133 485 0% 17 China P.R. New Times S.B. 333 - - - 114 447 0% 18 Japan Mitsui SB 390 - - - 44 435 0% 19 Japan I.H.I. 209 47 - - 177 433 11% 20 China P.R. Hudong Zhonghua 183 90-75 51 399 23%
Non-Delivery Trends 50% 40% 30% % Difference of Forecast vs. Actual Deliveries into the Global Fleet Slippage and Cancellation by Shiptype, 2011 TOTAL 20% 10% BULKERS Unit : Dwt 0% CONTAINERS Cancellation Slippage -10% -20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TANKERS -30% -40% -50% Source: Clarkson Research, October 2011 GAS 0% 5% 10% 15% 20% 25% 30% 35% In recent years around a quarter to a third of expected deliveries at the start of the year have not delivered.
Investor Behaviour Major No. of Vessels Value $ billion Investors 2007 2008 2009 2010 2011* 2007 2008 2009 2010 2011* Investment Trends This Year Greece 655 257 67 292 118 37.7 21.2 3.0 13.3 11.5 STEADY. 4% Norway 259 104 19 119 67 19.9 10.2 0.5 5.8 7.5 UP BY. 55% Denmark 103 143 14 15 37 4.1 8.6 0.4 0.3 6.7 UP BY. 2222% Germany 667 366 35 75 42 35.2 19.3 1.7 3.0 3.4 UP BY. 35% France 103 38 11 68 27 4.4 1.8 0.1 3.1 0.9 DOWN BY.. -63% Italy 165 102 30 18 13 8.9 6.0 1.1 2.4 0.8 DOWN BY.. -59% Netherlands 165 99 55 43 28 4.6 2.1 1.0 2.4 0.7 DOWN BY.. -64% Turkey 242 108 12 43 22 9.0 5.0 0.1 1.5 0.7 DOWN BY.. -49% Russia 40 63 28 30 22 1.1 1.6 0.4 1.2 0.6 DOWN BY.. -37% Sweden 7 10 4 14 5 1.1 1.7 0.1 0.5 0.5 UP BY. 20% United Kingdom 79 35 9 26 7 1.7 2.0 0.4 1.0 0.2 DOWN BY.. -75% Monaco 0 3 0 5 5 0.0 0.1 0.0 0.2 0.2 UP BY. 28% Other Europe 246 107 41 58 19 11.0 6.0 1.2 2.1 0.3 DOWN BY.. -81% TOTAL EUROPE 2,731 1,435 325 806 412 138.7 85.7 10.0 36.9 34.2 UP BY. 11% China P.R. 391 273 230 444 136 18.5 13.8 6.9 14.5 4.4 DOWN BY.. -64% Singapore 234 149 91 111 76 6.0 6.2 1.5 4.3 3.2 DOWN BY.. -13% Hong Kong 157 63 32 81 36 6.9 3.0 1.6 2.6 2.5 UP BY. 13% Japan 423 326 84 100 39 24.4 17.8 2.8 3.7 2.3 DOWN BY.. -25% South Korea 253 141 43 89 43 12.8 8.3 2.1 4.2 2.1 DOWN BY.. -41% Taiwan 103 44 12 63 24 8.6 3.1 0.4 3.4 1.4 DOWN BY.. -50% Malaysia 85 61 31 35 24 1.8 0.8 0.5 3.3 0.4 DOWN BY.. -86% India 94 31 18 47 11 3.9 1.6 0.4 1.9 0.3 DOWN BY.. -80% Other Asia 84 60 30 21 17 1.9 1.6 0.3 0.3 0.2 DOWN BY.. -13% TOTAL ASIA 1,824 1,148 571 991 406 84.9 56.1 16.5 38.4 16.7 DOWN BY.. -48% Israel 49 19 2 21 28 4.5 1.8 0.1 1.2 1.5 UP BY. 49% Saudi Arabia 33 7 3 3 6 1.2 0.4 0.0 0.3 0.4 UP BY. 76% U.A.E. 81 77 51 22 4 2.5 3.6 0.6 0.8 0.2 DOWN BY.. -66% Other Mid. East 37 63 13 10 4 3.5 5.0 0.7 0.3 0.2 DOWN BY.. -24% TOTAL MID. EAST 200 166 69 56 42 11.7 10.7 1.4 2.6 2.3 UP BY. 8% United States 178 61 43 67 53 19.4 6.1 1.8 5.7 14.3 UP BY. 200% Brazil 28 32 30 21 28 1.1 7.4 5.2 1.4 5.3 UP BY. 355% Canada 52 13 5 40 16 4.2 0.2 0.1 1.3 2.1 UP BY. 98% Other 100 69 56 56 8 4.1 3.6 2.5 2.8 0.2 DOWN BY.. -91% TOTAL OTHER 358 175 134 184 105 28.8 17.4 9.7 11.1 21.8 UP BY. 135% GLOBAL TOTAL 5,113 2,924 1,099 2,037 965 264.1 169.9 37.5 88.9 75.0 STEADY. 1%
Chinese Owned Fleet & Contracts 100 80 60 40 20 0 m. GT Chinese Owned Fleet & Contracts China P.R. Ow ned Fleet (LHS) China P.R. Ow ned Contracts (RHS) Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Source: Clarkson Research Services m. GT 6 5 4 3 2 1 0 Strong Chinese owned contracts before the financial crisis leads to strong growth rate after financial crisis. About 9% (in GT) yoy growth rate pre-financial crisis. Over 20% (in GT) yoy growth rate post-financial crisis. Global fleet growth rate consist at about 7% yoy during the same period.
Agenda 1. Market Position, Seaborne Trade, World Fleet 2. Regional Shipbuilding Capacity 3. Ship Type Investment & Outlook 4. Summary
Massive Investment In New Ships 1. Between 2003 and 2008 the industry ordered over $800 billion of new ships. 50% of the orders were placed in 2007/8 when prices were at a peak 2. Majority of investment related to standard designs and technology 3. In 2011, 40% of investment has been offshore related and 15% gas. 4. Today, the contract value of the marine orderbook is over $300 billion and offshore is nearly $150 billion. Bill $ Orders 240 220 200 180 160 140 120 100 80 60 40 20 0 Others Container LPG LNG Bulk Tankers New Cape $MM 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 New Cape $MM 120 100 80 60 40 20 0 Source: Clarkson Research Services Ltd
Shipbuilding Output by Type & CGT Million CGT Deliveries 60 40 20 Others Containership Bulkercarrier Tanker 0 1996 1998 2000 2002 2004 2006 2008 2010
2010 Activity & 2011 Potential 2010 Others, 374, 19% Tankers, 301, 15% Gas, 56, 3% Others, 328, 28% 2011 Tankers, 153, 13% Gas, 82, 7% Container, 125, 6% Bulk, 325, 27% Bulk, 1117, 57% Container, 289, 25% 1,973 1,177 (f)
2011. Winners & Losers Tanker 2011 versus 2010 Offshore Gas Container We expect the relative share of orders by sector to change in 2011. We expected Offshore, Container and Gas to do better. We expect bulkers and tankers to be down year on year. Ferry Overall volumes expected to be slightly down on 2010. Bulk -100% -50% 0% 50% 100% 150% 200%
Newbuilding Requirement Scenario Relatively low ordering expected in the short term. Surplus capacity may put pressure on pricing. Gradual pick up later in the decade but with relatively more gas, container, ferry, Ro Ro, PCC and Offshore. Bulkers remains a volume market but not at the same levels as the boom. Counter cyclical ordering possible. New designs and technology provide marketing opportunities.
Offshore Oil Production & Forecast Following a decade of stagnation, offshore oil is expected to grow strongly. Step change in oil price expectation and offshore oil is getting deeper Projection based on over 178 oil fields currently under development 1,125 potential development oil fields and 1,038 gas fields Million BPD 35 30 25 20 15 10 5 0 1980 Caspian Black Sea Asia Pacific M East & ISC Nth America Growth 1985 1990 1995 West Africa Sth America NW Europe Stagnation 2000 2005 Growth forecast? 2010 2015 2020 Offshore oil production and forecast
Offshore Discoveries Getting Deeper Water Depth (M) 3,500 3,000 Brazilian Pre-Salt Discoveries 2,500 2,000 Akal & Cantarell, Mexico 6.7 bn bbls combined Deepwater Gulf of Mexico Fields 1,500 1,000 500 Safaniya, S.Arabia 3.5 bn bbls Shengli, China 3.8 bn bbls - 1940 1950 1960 1970 1980 1990 2000 2010
Offshore & Marine Orderbook- Value by Type Offshore Marine Mobile Offshore Drilling 46% Others 20.1% Tankers 12.8% Gas 5.0% Survey 3% Supply 6% AHTS 7% Logistics 3% Mobile Production 20% Construct & Platform 13.9% Container 19.9% $137 bn $291 bn Bulk 42.2%
Offshore Contracting Forecast Significant Requirement Project Intelligence Methodology Contracting Forecast Long Term Project Intelligence Forecast is based on the projected construction and startup of future offshore fields. The contracting forecast is based on the units required for each of the fields in the projection start-up. No of Contracts Placed 1000 900 800 700 600 500 400 300 200 100 Forecast 0 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Support Production and Logistics Survey and Development
Agenda 1. Market Position, Seaborne Trade, World Fleet 2. Regional Shipbuilding Capacity 3. Ship Type Investment & Outlook 4. Summary
Conclusions We have entered a market trough following a decade of exceptional earnings. The big three volume sectors tankers, bulkers, containers all face difficult issues. World trade averages under 4% growth but there is currently shipbuilding capacity to grow the fleet at 7%. Suggests prices may ease back and a return towards boom ordering levels is unlikely. Shipbuilding output is at a record high and marks the peak of a 35 year cycle. China took the shipbuilding crown last year but is having a tough 2011 in contracting terms. In 2011, Gas, Container and Offshore have been more active. Securing finance at the moment is difficult. We expect dry bulk to remain a volume newbuild market but for Gas, Ro Ro, Ferry and Offshore to do relatively better over the coming decade It is a buyers market and yards are being far more flexible with new designs. Solutions that reduce fuel consumption and have a green angle are very attractive. Lower newbuild prices may encourage counter cyclical ordering.
Clarksons Research Disclaimer The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the Company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does not obviate the need to make further appropriate enquiries and inspections. The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services. The statistical and graphical information contained under the heading is drawn from the Clarkson Research Services Limited ("CRSL") database and other sources. CRSL has advised that: (i) some information in CRSL's database is derived from estimates or subjective judgments; and (ii) the information in the databases of other maritime data collection agencies may differ from the information in CRSL's database; and (iii) whilst CRSL has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such information does not obviate any need to make appropriate further enquiries; (vi) the provision of such information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (vii) shipping is a variable and cyclical business and any forecasting concerning it cannot be very accurate 18/11/2011