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METHANOL SHIPPING:

A SNAPSHOT

KARAN GROVER

SHIP BROKER

BRAEMAR QUINCANNON PTE LTD

17TH IMPCA ASIAN METHANOL CONFERENCE 04-06 NOVEMBER, SINGAPORE

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AGENDA

• BQ Introduction

• Methanol Dynamics in Brief

• Methanol Shipping - Overview• Requirements

• Typical Methanol Carrier

• Tonnage Profile

• Shipping Economics & Freight Rates

• Shipping Markets• New SECA Regulations

• Methanol as a Marine Fuel?

• Summary & Q/A

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BRAEMAR QUINCANNON PTE LTD

• Independent Shipbrokers established in 1998 in Singapore as a Joint Venture between BRAEMAR ACM & QUINCANNON ASSOCIATES w/ a Sister Company BQ Shanghai

• Ship Brokering Business for Bulk Shipments• Methanol and Derivatives / Chemicals / Specialty Liquids

• Petrochemical Gases

• Veg Oils & Derivatives / Ethanol / Lube-Base Oils / CPP

• Special Projects, Research and Consulting

• 22 Staff located in Singapore• 12 Brokers w/ Shipping Background

• 8 Post Fixture & Operations support Staff

• Dedicated Demurrage Analysts

• Dedicated Research Analysts

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METHANOL IS AMONGST

THE LARGEST TRADED

CHEMICAL COMMODITIES

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METHANOL DYNAMICS

• Current Demand ~60 M Tons

• ~38% of Demand is for the Energy Sector

• Asia accounts for 68% of the Demand

• ~54% of Demand is in China!

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By Derivative By Region

SOURCE: MMSA AND METHANEX; METHANEX INVESTOR PRESENTATION / AUGUST 2014

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GLOBAL METHANOL DEMAND

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• Steady Uptrend in Demand

• Driven by the Energy Sector

• 45 M Tons in 2009 > 60 M Tons in 2013 > ~80 M Tons in 2017*

SOURCE: MMSA

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METHANOL TRADE FLOWS

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SOURCE: MMSA

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METHANOL TRADE FLOWS

REQUIRE SHIPPING ON

SPECIALIZED TANKERS

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SHIPPING

• Methanol is shipped in Specialized Tankers with following attributes:

• IMO Classification• IBC Code Type III or Up

• Compatible Tank Coating• Stainless Steel / Marine Line / Zinc

• Epoxy Coated Tanks are NOT RECOMMENDED to carry Methanol

• Stripping Capacity (MARPOL Category “Y”)• Acceptable residue per Tank (75 ltrs – 150 ltrs per tank)

• Inerting / Purging Ability• For Tanks over 3000 CBM

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CHEMICAL v PRODUCT / CRUDE TANKER

CHEMICAL TANKER CRUDE OIL TANKER

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A TYPICAL IMO 2/3 TANKER

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TYPICAL METHANOL CARRIER

• Size Range:• 13,000T DWT upto ~ 50,000T DWT

• Average Speed:• 12 – 14 Knots

• 05 – 07 Days Transit from SE Asia to Mid China

• 17 – 20 Days Transit from New Zealand to Mid China

• 19 – 21 Days Transit from Middle East to Mid China

• 33 – 36 Days Transit from US Gulf to Mid China

• Ability to Load & Carry Multiple Cargoes• Multiple Tanks w/ Individual Manifold, Pumps and Lines for Each Tank

• Average Size has Increased Over the Years

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A TYPICAL CHEMICAL TANKER - SCHEMATICS

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GLOBAL IMO 2/3 TONNAGE

• ~ 2550 Ships @ ~38.85Mt DWT / ~43.2M CBM“IMO II / III” Classed Ships carrying Chemicals & Veg Oils on Water Today & Another 250 Expected in the Next 3 Years

• Quality Methanol Tonnage / 26.5 MIL CBM• 6.7 MIL CBM Zinc Space (~314 Ships)• 4.4 MIL CBM Marine Line Space (~337 Ships)• 15.4 MIL CBM Stainless Steel Space (~1075 Ships)

• Young Fleet ~ Average Age of 10.6 Yrs

• Average Age of Scrapping is 27 Yrs• 630 Ships over 15 Yrs Old and 317 Ships over 20 Yrs Old

• There is an Imbalance in Supply & Demand• w/ Excess Tonnage to cope till 2017-2018

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NEW BUILDS & SCRAPPING (2005 – 2017)#

OF

SH

IPS

MT DWT

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~1165 SHIPS ADDED SINCE 2005

SOURCE: BQ IN-HOUSE DATA

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SHIPPING MARKETS

ARE UNDER PRESSURE

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VESSEL ECONOMICS – 45K DWT TANKER

• Financial Cost: • New Build Cost $44 MIL

• Daily Finance Cost $8,500 (80% Financed @ 6% Over 12 Yrs)

• Vessel Daily Operating Costs:• Crew $3,500

• Maintenance $2,000

• Insurance $700

• Administration $800

• Break Even / Lay-Up $7,500

• T/C Break Even $16,000 / Day

• Current T/C Rates $14,000 - $15,000 / Day

• Residual Scrap Value $5.2 MIL (11500 LDT @ USD 450 ~ 25 YRS)

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FREIGHT RATES TO MID CHINA

*METHANOL PRICE DATA PROVIDED BY METHANOL MARKET SERVICES ASIA (MMSA)

FR

EIG

HT

PE

R M

TB

UN

KE

R &

ME

TH

AN

OL

CF

R P

RIC

E P

ET

MT

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CURRENT SHIPPING MARKETS

• Over Capacity of Tonnage Continues

• Shipping Markets are Still Soft

• Slow Year – w/ more of same projected for 2015

• Owners still Struggling

• Earnings & Sentiments Weaker & Compared to 2013

• Increased Costs in the Short Term due to New SECA Regulations

• Iran stable & an Eco-System by Itself

• Slight Premium on Rates, But Ships Available

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METHANOL AS AMARINE FUEL?

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NEW SECA REGULATIONS

• Effective 1 JAN 2015:

0.10% Sulphur Content in Fuels in SECA

• Increased OPEX Costs for Owners

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200 Nautical Miles area US & Candian Coastlines

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METHANOL AS A MARINE FUEL?

• Global Impact by 2020

• Methanol is Cheaper / Easier Alternative than LNG/CPP as a

Bunker (Marine) Fuel

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THE IMPORTANCE OF SHIPPING TO THE METHANOL

BUSINESS CANNOT BEOVER EMPHASIZED.

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SUMMARY

• Methanol is one of the Largest Traded Commodities & Methanol Demand is expected to Continue to Grow

• Methanol Requires to be Shipped on Specialized IMO Tankers

• Current Freight Rates are Low and Shipping Markets are expected to remain Soft in the Short-Medium Term

• Shipping Costs are a Substantial Percentage of the Total Cost, compared to other Commodities

• Methanol is a Potential Complimentary Marine Fuel

• For a World-Scale plant (1.5 Mil Tons) – an Optimization on Freight of just USD 1 represents a USD 30 Mil in Savings over 20 Years!

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Q & A

THANK YOU

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BRAEMAR QUINCANNON PTE LTD

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1 PICKERING STREET #08-01

GREAT EASTERN CENTRE

SINGAPORE 048659

T: +65 9112 3824

CHEMS@BQ.COM.SG