FREIGHT AND LOWER COMMODITY PRICES METAL BULLETIN INTERNATIONAL IRON ORE SYMPOSIUM JUNE 215
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
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 11. 1. 9. 8. 7. 6. 5. 4. 3. 2. 1.. Brazil-Rotterdam Brazil-China JUNE 215 3
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
$/t BRAZIL-ROTTERDAM CAPESIZE SPOT RATE ANNUAL AVERAGES 35 3 Annual Averages 215 Ytd 25 2 15 1 5 215 213 211 29 27 25 23 21 1999 1997 1995 1993 1991 1989 1987 1985 1983 JUNE 215 5
$/t BRAZIL-CHINA CAPESIZE SPOT RATES: PHYSICAL & PAPER 35 3 25 2 15 1 5 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
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
1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215ytd 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
Annual Percentage Change ANNUAL CHANGE IN CHINESE DRY BULK IMPORTS 3 25 2 15 1 5-5 -1-15 1q15 4q14 3q14 2q14 1q14 4q13 3q13 2q13 1q13 4q12 3q12 2q12 1q12 4q11 3q11 2q11 1q11 JUNE 215 9
Mdwt DRY BULK SHIPBUILDING ACTIVITY BY COUNTRY: ACTUAL & ON ORDER 11 1 9 8 7 6 Other S.Korea China Japan 5 4 3 2 1 217 216 215 214 213 212 211 21 29 28 27 26 25 24 23 22 21 JUNE 215 1
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 215 11
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 215 12
1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213 215a 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 215 13
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 8. 7. 6. 5. 4. 3. 2. 1.. JUNE 215 14
Pre 1991 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 Mdwt CAPESIZE (1+ KDWT) FLEET BY YEAR OF BUILD 5 45 4 35 On Order Existing 3 25 2 15 1 5 Orderbook = 56.8 Mdwt (18.5% of existing fleet) 15+ year old fleet = 5.9 Mdwt JUNE 215 15
Million Dwt POTENTIAL CAPESIZE DEMOLITION POOL 2 18 16 1-159.9kdwt 16-219.9kdwt 22+ kdwt 14 12 1 8 6 4 2 25+ Years 2-24 Years 15-19 Years JUNE 215 16
Pre 1991 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 Mdwt PANAMAX (65-99,999 DWT) FLEET BY YEAR OF BUILD 3 25 On Order Existing 2 15 1 Orderbook = 28.5 Mdwt (14.7% of existing fleet) 15+ year old fleet = 35.7 Mdwt 5 JUNE 215 17
pre 1981 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 Mdwt HANDYMAX/SUPRAMAX (4-64,999 DWT) FLEET BY SIZE/YEAR OF BUILD 24 22 2 18 6-64,999 55-59,999 5-54,999 45-49,999 4-44,999 16 14 12 1 8 6 4 2 Orderbook = 36.1 Mdwt (21.4% of existing fleet) 15+ year old fleet = 27.5 Mdwt JUNE 215 18
Million Dwt DRY BULK CARRIER NET FLEET CHANGE 11 1 9 8 7 6 5 4 3 2 1-1 -2-3 -4 7 Additions Deletions Net Change 18 22 22 24 28 38 76 77 65 39 32 25 21 216(f) 215(f) 214 213 212 211 21 29 28 27 26 25 24 23 JUNE 215 19
Mdwt PROJECTED NET FLEET CHANGE IN 215 BASE CASE 25 2 Additions Deletions 12.7 Mdwt +7.8% 5.9 Mdwt +1.9% 15 5.1 Mdwt +2.6% 1 1.6 Mdwt 1.9% 5 Handysize Handymax Panamax Capesize JUNE 215 2
Annual Percentage Change ANNUAL CHANGE IN CHINESE DRY BULK IMPORTS 3 25 2 15 1 5-5 -1-15 4q15f 3q15f 2q15f 1q15 4q14 3q14 2q14 1q14 4q13 3q13 2q13 1q13 4q12 3q12 2q12 1q12 4q11 3q11 2q11 1q11 JUNE 215 21
1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215f 216f Million tonnes ANNUAL GROWTH IN SEABORNE DRY BULK TRADE: IRON ORE, COAL & GRAINS 22 2 18 16 14 12 1 8 6 4 2-2 -4 AAA A JUNE 215 22
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 12-18 months, but development of a sustained freight market recovery will be a longer process MAY 215 23
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