Roads to Recovery: Comparing and Contrasting the Outlook for Distressed Sectors Niklas Carlén Maritime Strategies International (MSI) 18 th Annual Marine Money Greek Ship Finance Forum 11 th October 2016
Introduction
Bulker Gen Cargo Oil Tanker Peak to Trough Comparision: Peak 2006-08 Levels Vs Q2 2016 Chem Tanker LNG LPG Container Car Carrier RoRo 0% -10% -20% -30% -40% -50% -60% -70% -80% -90% -100% T/C Rate 5-Yr Old Price Maritime Strategies International 3
Demand
2000 2002 2004 Iron Ore: Chinese Imports Growing Despite Stagnant Steel 2006 2008 2010 2012 2014 2016 2018 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 800 700 600 Chinese Steel Production Chinese Iron Ore Imports MnT Steel Production Yoy% Ch 900 Forecast 45% MnT 1400 Rest of World India S Africa Brazil 40% 1200 Australia 35% 30% 1000 Forecast 500 400 300 200 100 0-100 25% 20% 15% 10% 5% 0% -5% 800 600 400 200 0 Maritime Strategies International 5
2000 2002 2004 2006 2008 2010 Coal: Indian Outlook Shrouded in Uncertainty 2012 2014 2016 2018 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Chinese and Indian Coal Imports Coal Seaborne Trade MnT China India 350 Forecast MnT Coking Coal Steam Coal 1400 Forecast 300 1200 250 1000 200 800 150 600 100 400 50 200 0 0 Maritime Strategies International 6
2000 2002 2004 2006 2008 Other Bulks: Short-Term Plateau, Medium-Term Growth 2010 2012 2014 2016 2018 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Grains+Soya Seaborne Trade Minor Bulks Seaborne Trade MnT Soyabean+Meal Grains 600 Forecast YoY % Ch 20% 500 15% 400 300 200 10% 5% 0% -5% 100-10% 0-15% Maritime Strategies International 7
TEU Trade and TEU Miles 70 Mn TEU of trade Mn TEU of shipping capacity 3.5 60 Trade volume Shipping capacity required (RH Axis) 3.0 50 2.5 40 2.0 30 1.5 20 1.0 10 0.5 0 0.0 Asia-Europe Transpacific FE-ME/ISC FE-Lat. Am. intra-asia Asia-Europe isn t dominant in volume terms, but is in terms of capacity required Maritime Strategies International 8
Asia-Europe Transpacific Transatlantic intra-asia intra-europe Container Demand: 2016 Volume Weakness Asia-Latin America Asia-Middle East/ISC Europe-Latin America Other 6% 2016 growth 4% 2% 0% -2% -4% -6% -8% North-South trades have been the worst affected, but trade disappointing across the board Maritime Strategies International 9
Trade Growth is Key to Cascading Vessel Deployme nt, k TEU 900 800 700 600 500 400 300 200 100 0 Non-Mainlane East/West Trade Headhaul E/W Trade YoY % Ch 9% Dec-13 Dec 14 Dec 15 Aug 16 0.1-2.9k TEU 2.9-5.2k TEU 5.2-7.6k TEU 7.6-12k TEU 12k TEU+ Demand (RH Axis) 8% 7% 6% 5% 4% 3% 2% 1% 0% The cascade has currently broken down four reasons: Low fuel price Slow trade growth Service fragmentation Alliance reshuffle In our view, trade growth is the most important of these; lines upsized in anticipation of trade growth, when that disappointed then swiftly downsized. Huge supply of spot ships puts lines under no pressure to secure tonnage can keep flexibility (2-12 month fixtures). Maritime Strategies International 10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Container Cascade 6 5 Evolution of Asia-Europe Deployment Mn TEU 12k + TEU 7.6-12k TEU 5.2-7.6k TEU 3.9-5.2k TEU 2.9-3.9k TEU 1.3-2.9k TEU Intra-Asian Deployment Mn TEU 2.5 7.6-12k TEU 5.2-7.6k TEU 3.9-5.2k TEU 2.9-3.9k TEU 1.3-2.9k TEU 0.1-1.3k TEU 2.0 4 1.5 3 2 1.0 1 0.5 0 0.0 End 2011 End 2012 End 2013 End 2014 End 2015 Aug 2016 Maritime Strategies International 11
Seaborne Growth Prospects Compared: Dry Bulk Vs Container Trade 12% 10% YoY % Ch Container Dry Bulk Average Annual Trade Growth Over 5-Year Periods (CAGR) 8% 6% 4% 2% 0% 1991-95 1996-00 2001-05 2006-10 2011-15 2016-20 Maritime Strategies International 12
Supply
Current Orderbook: Sectors Over-Exposed Required Ships* Vs Orderbook # of 600Vessels Ships Required Ships on order 500 10 5 YTD Capacity Adjustment Mn GT Contracting Scrapping 400 300 200 0-5 100-10 0 Bulker Container -15 Bulker Container *Required ships to meet incremental demand, irrespective of current over-capacity Maritime Strategies International 14
Old Tonnage versus Orderbook Bulk Carriers Containerships Mn Dwt 50 45 Over 15 Years Orderbook Mn TEU 2.5 Over 15 Years Orderbook 40 2.0 35 30 1.5 25 20 1.0 15 10 0.5 5 0 10-40k Dwt 40-65k Dwt 65-120k Dwt 120k+ Dwt 0.0 0.1-2.9k TEU 2.9-5.2k TEU 5.2-7.6k TEU 7.6-12k TEU 12k+ TEU Maritime Strategies International 15
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Imminent Significant (3 rd +) Special Surveys Bulk Carriers Containerships Mn Dwt 60 6th+ 5th 4th 3rd 50 % of current fleet (RH Axis) 6% 5% 1.4 1.2 Mn TEU 6th+ 5th 4th 3rd % of current fleet (RH Axis) 7% 6% 40 4% 1.0 5% 0.8 4% 30 3% 0.6 3% 20 2% 0.4 2% 10 1% 0.2 1% 0 2017 2018 2019 0% 0.0 2017 2018 2019 0% Maritime Strategies International 17
Fleet Growth Compared: Dry Bulk Vs Container Trade 14% 12% YoY % Ch Container Dry Bulk Average Annual Fleet Growth Over 5-Year Periods (CAGR) 10% 8% 6% 4% 2% 0% 1991-95 1996-00 2001-05 2006-10 2011-15 2016-20 Maritime Strategies International 18
Roads to Recovery
Roads to Recovery: Weighted Average Timecharter Indices Compared 2015 2016 2017 2018 2019 2020 180 160 T/C Index (2015=100) Bulker Container 140 120 100 80 60 40 20 0 Maritime Strategies International 20
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 /fmv Maritime Strategies International 21
FMV Output Quarterly Fair Market Value & 1 Year Time Charter Rate (1Q history, current Q,2Q forecast Annual average: Newbuilding contract price Fair Market Value 1 Year Time Charter Rate Operating Cost 5 years history and 15 years forecast Price Development Chart detailing forecast price development in relation to historical metrics /fmv Maritime Strategies International 22
Asset Play Prognosis Buy 5 year old today sell in 5 years time Maritime Strategies International 23
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