DRY BULK FREIGHT MARKET 2017 REVIEW AND FORWARD ANALYSIS Assocarboni Roma March 22 nd, 2018 MARCH 2018 1
STRUCTURE OF PRESENTATION Market figures and graphs for 2017 Main market movers for 2017 Supply and demand outlook for 2018 2018 market forecast Main market movers for 2018 Outlook for 2019 and onwards & key factors to watch. MARCH 2018 2
2017 Market Cape Size 5 TC routes 35.000 30.000 25.000 20.000 15.000 10.000 USD 15.129 USD 10.300 2017 Average FFA January 2017 5.000 0
2017 Market Panamax 4 TC routes 16.000 14.000 12.000 10.000 8.000 6.000 4.000 USD 9.766 USD 7.300 2017 Average FFA January 2017 2.000 0
Seaborne Trade Seaborne Dry Bulk Trade (MMt) 2016 2017 growth % Coking coal 295 294-1 -0.34% Steam coal 831 854 23 2.77% Iron ore 1,482 1,529 47 3.17% Grains 473 503 30 6.34% Minor 457 438-19 -4.16% Total 3,538 3,618 80 2.26% MARCH 2018 5
2017 Fleet structure 2017 Net Fleet Change Actual (Mdwt) Handysize Handymax Panamax Capesize Total Additions 3.38 10.64 8.98 15.27 38.27 Deletions 1.57 3.28 3.41 5.77 14.03 Net growth 1.81 7.36 5.57 9.50 24.24 Total 806 % increase 2.8 % 2017 Existing Fleet (Mdwt) MARCH 2018 6
2017 Fleet growth 18 16 Additions Deletions 9.5 Mdwt +3.0% Mdwt 14 12 10 8 7.4 Mdwt +4.0% 5.6 Mdwt +2.8% 6 4 1.8 Mdwt +2.0% 2 0 Handysize Handymax Panamax Capesize MARCH 2018 7
2017 Supply / Demand Ratio TRANSPORT GROWTH 2017/16 79.0 MILL. (+ 2,6%) FLEET NET GROWTH 2017/16 24.2 MILL. (+ 2,8%) CAPE 9.5 MILL. (+ 2,9%) PANAMAX 5.6 MILL. (+ 2,7%) MARCH 2018 8
2017 Main market movers Large increase of US coal volumes, to both EU & Far East. Recovery of world Economy. Fleet supply under control due to uncertainty on rules. Large increase in grains & iron ore, typically on long routes Slow steaming persists due to high bunker price. MARCH 2018 9
2018 Outlook MARCH 2018 10
2018 expected trade growth 2018 Est. Seaborne Dry Bulk Trade (MMt) 2017 2018 est. growth % Coking coal 294 311 17 5.78% Steam coal 854 867 13 1.52% Iron ore 1,529 1,578 49 3.20% Grains 503 519 16 3.18% Minor 438 460 22 5.02% Total 3,618 3,713 117 3.23% MARCH 2018 11
2018 Estimated fleet growth 2018 Est. Net Fleet Change Actual (Mdwt) Handysize Handymax Panamax Capesize Total Additions 2.68 5.46 5.55 12.98 26.67 Deletions 0.98 2.02 2.01 5.03 10.04 Net growth 1.70 3.44 3.54 7.95 16.63 Total 823 % increase 2.02% 2018 Est. Existing Fleet (Mdwt) MARCH 2018 12
2018 supply/demand ratio EST. TRANSP. GROWTH 2018/17 117.00 MILL. (+ 3,23%) EST. FLEET NET GROWTH 2018/17 16.63 MILL. (+ 2,02%) CAPE 7.95 MILL. (+ 2,46%) PANAMAX 3.54 MILL. (+ 1,76%) MARCH 2018 13
2018 Main market movers Extended recovery of world Economy. Fleet supply under control due to uncertainty on LSFO rules. Delays in USCG approval of BWM system have jeopardized NB orderbook. Lowest NB deliveries in the last 10 years. Rising oil price will boost slow steaming. Expectation for record low hydro electric output in China. Expected record soya beans crop in Brazil. Highest trade growth in the last 7 years Government interventions & Political turbulences MARCH 2018 14
Legislation on fuels as from 2020 As from Jan 1 st 2020, vessels shall have to use LSFO at all times. There will not be any postponement. Rules will be further tightened. Fast implementation does not allow industry to timely solve technical issues. Investments in fuel logistics will be required and prices are set to rise. LSFO will be mainly allocated to big players. Older fleet will be heavily penalized. Upgrade costs have a different % impact, depending on vessel size. MARCH 2018 15
MGO steaming. What does it mean? Tsuneishi Cebu built 2016. about 13 Kn on 22 mt fuel laden and ballast Tsuneishi built 2011 about 11 Kn Laden and 12 kn ballast on 24.5 mt fuel Voyage. Hong Kong/Santos/singapore/Quingdao with grains Duration Tsuneishi 2016 about 101 days Tsuneishi 2011 about 114 days Fuel cost Tsuneishi 2016 about 914,000 usd Tsuneishi 2011 about 1,180,000 usd Difference about 266,000 usd MARCH 2018 16
Risks for fleet development A the end of 2019, around 100 panamax and 100 supramax built 2001 will still be afloat. This vessels will have to face costs for Scrubber and BWM with very short shelf life. Alternatively they will have to run on LSMGO at heavy costs. Unless market will rocket up (unlikely) like 2007, then these will be candidate for scrapping. At the same time, uncertainty on rules keeps order book at low levels. Far Eastern yards offer a variety of options, but no one wants to go first! MARCH 2018 17
Conclusions Market is set to rise steadily in the few years to come. Demand will rise following a rising world economy. Supply side set to remain under control due to lack of clarity on legislations. Panamax rates seem to be the best candidate to lead this rise. The most delicate time will be at beginning of 2020, when we shall see if the supply chain of LSFO has developed enough to grant market efficiency. Severe peaks unlikely, due to Chinese shipbuilding capacity already there. Charterers should seek today sufficient level of cover for the next 2/4 years. But do not worry, owners have not learned even the last of the many lessons, and soon will splash billions in new buildings MARCH 2018 18
2018 Estimated fleet growth MARCH 2018 19
Chinese Dry Bulk Import by Cargo million tonnes 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 All Others Total coal Grains Iron Ore "Other" comprises steel products, bauxite/alumina, petcoke, pulp/woodchip, logs, fertilizers, ferrous scrap, nickel, copper, chrome and manganese ores Source: Chinese Customs/SSY 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 MARCH 2018 20
Annual change in world steel production MARCH 2018 21
DRY BULK MARKET REVIEW & OUTLOOK ASSOCARBONI 22 MARZO, 2018 MARCH 2018
2018 Estimated fleet growth MARCH 2018 23
2018 Estimated fleet growth MARCH 2018 24
2018 Estimated fleet growth MARCH 2018 25
2018 Estimated fleet growth MARCH 2018 26
2018 Estimated fleet growth MARCH 2018 27