2014 Market Forecast Report

Newbuilding Requirements 2014-2035 | SEA Market Forecast WG

3

Contents

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Global Economic Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Global Energy Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Global seaborne trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Newbuilding Requirements: Cargo Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

a. Containerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

b. General Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

c. Bulk Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

d. Oil and Chemical Tankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

e. LNG carriers:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

f. LPG carriers: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Newbuilding Requirements: Offshore Oil & Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

a. Offshore E&P: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

- Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

- Floating Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

b. Construction & Subsea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

c. Offshore Supply & Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Newbuilding Requirements: Cruise Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Newbuilding Requirements: Special Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

a. Port tugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

b. Dredgers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

c. Research vessels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

d. Fishing vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

e. Other special vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

5

Foreword

Since the beginning of the seventies, SEA Europe1 has been preparing newbuilding requirement forecasts. SEA Europe has a good cooperation with its colleagues overseas SAJ, KOSHIPA and CANSI2, and annually they all meet to discuss results and methodology for their forecasting at the International Shipbuilding Forecast Expert Meeting (ISFEM).

In 2014, the latest forecast (to 2035), was launched, based on the same methodology as previous years. The forecast is based on macro-economic forecasts, taking the economic development in the world and the global production, energy consumption and the expectation for future energy mix into consideration. Based on these factors, the global trade is investigated into the individual product types such as major bulk, oil and gas cargo and general cargo and minor bulk. Unfortunately, the valid trade figures often fall short and this gives the forecasting team some challenges, which it believes that it has overcome. The future seaborne trade is forecasted including the expectations for the future trade patterns.

Newbuilding requirements are evaluated by individual ship types and sizes, considering the average age and scrapping perspectives. Over the last couple of years SEA Europe has invested further efforts in the forecasting of specialized ship types, however, it is important to have in mind that all the different ship types alongside each other best reflect the market and the future opportunities.

Before going further into detail SEA Europe wants to make clear that this report is forecasting the newbuilding requirements and not the demand. Demand is usually affected by the competitive inte-rests of the individual ship-owners and the history and market have shown that both concepts dont necessarily go together. On the other hand, the forecast looks into the long term, to better understand where the mega trends may drive the newbuilding market in 2035. Short term forecasts are usually left for individual companies.

The figure below illustrates the methodology:

The forecast shows that the newbuilding requirements will increase in the coming years, even at re-latively low levels. However, the increase of transport needs and environmental considerations will influence the need for the replacement of the fleet and this will show up in the demand.

Despite the newbuilding demand increasing in the forecasted period, it cannot be expected to see the high demand for newbuilding seen in the mid 2000s. The industry will have to act upon the global overcapacity both with regard to shipbuilding capacity and seaborne transport capacity, and thereby some structural changes are to come.

Jenny N. Braat - Chairwoman

Sarai Blanc Ralph Dazert Marika Kletzander Sandra WeersElina Vahaheikkila Paulino Fernandez Vergilius Vals Runnar Hadal

1) Previously AWES & CESA 2) SAJ = Shipbuilders Association of JapanKOSHIPA = Korean Shipbuilders Association - CANSI = Chinese Association of National Shipbuilding Industry.

Global trade

trade patterns type of trade sea borne/land etc .

Fleet requirement to 2035

Existing fleet size & age deleted ships & replacement regulations etc .

Newbuildng requirement

to 2035

Macro economic GDP demography production energy mix etc .

7

Global Economic Situation

The current macroeconomic situation is a tale of record-breaking stock prices laden with uncertainty. Four macro considerations to keep in mind when looking forward include oil prices, the US financial situation, growth forecasts, and the Eurozone recovery.

Because of the US development of tight oil and a weak world demand at present, prices are low and could go lower, if:

Instability in the Middle East does not disrupt extraction efforts;

The US lifts export restrictions on domestic oil;

OPEC does not agree to limit the supply. Going forward, however, there are less large discoveries, and oil will be more difficult to extract, deeper, and technologically challenging. Marginal fields will make more of a business case as global growth marches along and technologies improve.

There is ongoing robustness on the worlds major stock markets currently: News headlines can make the market jumpy, but there is underlying momentum- for now. Lower than expected profit prospects/ Ebola/ End of QE in the US/ ISIS/ Russian expansion have not proven enough to upset the stock mar-kets. These issues are long from dead and buried and could act as a strain on consumer confidence over time.

The IMF has lowered their world growth forecast for 2015, coupled with lower economic activity in China and G7 economies particularly Germany.4 Couple that with persistent unemployment in the Eu-rozone- especially among youth and a severe debt burden in some Eurozone countries - and we would need to redefine what a recovery is. As regards unemployment many youth with STEM educations are heading to Silicon Valley, and these would-be entrepreneurs are not creating the job-delivering small-and-medium enterprises that would be absorbing young and highly educated workers. The risk here is of a higher tax burdens or imposing more user fees as Europes demographic ages.

-8,00%

-6,00%

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (IMF) 2015-20 2020-25 2025-30 2030-35

GDP Development

Total OECD Developing Countries Total Transisition Economy World

Source: SEA Europe MF

3) http://www.ihs.com/info/0514/crude-oil.aspx4) http://www.imf.org/external/pubs/ft/survey/so/2014/new100714a.htm

ShipbuildingShipowners should see a short-term return to profitability based on lower bunker prices. Global shipbuilding cycles follow shipowners profit mar