shipping markets in the 2020s: lessons from the life and ...€¦ · 1. peak steel consumption...

Shipping Markets in the 2020s:Lessons from the Life and Music of Bob DylanDavid K. Jordan – Maritime Strategies International (MSI)Marine Money Week Asia 2019 – 25th September 2019

© Maritime Strategies International www.msiltd.com

Agenda

2

Shipping in the 2020s

1. Demanding Complexities2. Supply Side Easing

3. Market Cycles4. Looking to the HORIZON

You should always take the best from the past, leave the worst back there and go forward into the future.

- Bob Dylan

© Maritime Strategies International www.msiltd.com3

Demanding ComplexitiesFor the times they are a-changin’


0%

1%

2%

3%

4%

5%

6%

7%

8%

Crude Oil Oil Products Dry Bulk Container Chemicals LNG LPG PCC Cruise

CAGR

2000s 2010s 1H 2020s 2H 2020s

Let’s Talk about Trade

4

Positive demand growth for LNG & containers


-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

% Ch yoy

China Rest of World

Dry Bulk: The Chinese Lynchpin No More

5

Chinese dynamics continue to change


-50

-25

0

25

50

75

100

125

150

175

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

MnT

Other APAC China Mid East & Af. Europe Americas

6

Chinese peak iron ore import demand driven by:1. Peak steel consumption reached in 20192. Domestic Iron Ore substitution reaching max.3. Increasing % steel produced via scrap / EAF

Iron ore will no longer drive growth in the dry bulk market

Iron Ore: Peak Levels on the Immediate Horizon


Coal: Potential Replacement Demand

7

5%

10%

15%

20%

25%

30%

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

% ShareMnT

India China Others % India (RHS) % China (RHS)


Grains & Minor Bulks: Not so Minor After All

-50

-25

0

25

50

75

100

125

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

MnT

Minor Bulks Grains Soybean and Meal


Container Trade: A New Chapter has Already Started

0

1

2

3

4

5

6

7

8

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Multiple

Trade:GDP 1980s 1990s 2000s 2010s 2020s


-2,000

-1,500

-1,000

-500

0

500

1,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Net Position (MnTpa) East of Suez (Excluding Middle East) West of Suez

Oil: The Great Reversal

10

Oil Production – Oil Consumption = Net Position

In Deficit… …now an increasing surplus


Oil: Saudi Oil Production

11

0

2

4

6

8

10

12

Jan-

94O

ct-9

4Ju

l-95

Apr-9

6Ja

n-97

Oct

-97

Jul-9

8Ap

r-99

Jan-

00O

ct-0

0Ju

l-01

Apr-0

2Ja

n-03

Oct

-03

Jul-0

4Ap

r-05

Jan-

06O

ct-0

6Ju

l-07

Apr-0

8Ja

n-09

Oct

-09

Jul-1

0Ap

r-11

Jan-

12O

ct-1

2Ju

l-13

Apr-1

4Ja

n-15

Oct

-15

Jul-1

6Ap

r-17

Jan-

18O

ct-1

8Ju

l-19

Mn b/d

Saudi Arabia Crude ProductionProlonged RecoveryRapid Recovery

Production levels immediately afterattacks - reduction of 5.7 Mn b/d

Saudi crude production accounts for about 10% of global oil demand

Source: MSI, IEA


-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Mn b/d

Other Asia Pacific China

S/SE Asia ME+Africa

Europe+FSU Americas

Oil Products: Refinery Capacity Development

12

The location of refineries is key


LNG: The Great Hope

13

0

20

40

60

80

100

120

Japa

n

Chi

na

Kor

ea

Wes

t Med

Indi

a

Taiw

an

SEA

N. E

ur

East

Med

Paki

stan

MnTMajor Seaborne LNG Importers

201020182025

0

20

40

60

80

100

120

Mid

dle

East

Aus

tral

ia

SEA

W.A

fric

a

Uni

ted

Stat

es

Rus

sia

Can

ada

MnTMajor Seaborne LNG Exporters

201020182025


Supply Side EasingBeyond here lies nothing’ but the mountains of the past


-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

2

4

6

8

10

12

14

16

18

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

% ChUS$k/dayContainerships

1.1k TEU 1 Year TC Rate World GDP, % Ch (RHS)

0

200

400

600

800

1,000

1,200

0

20

40

60

80

100

120

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

MnTUS$k/dayBulkcarriers

Cape 1 Year TC Rate China Ore Import (RHS)

80.0%

81.0%

82.0%

83.0%

84.0%

85.0%

86.0%

0

5

10

15

20

25

30

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

%US$k/dayProduct Tankers

40/50k Dwt Tanker 1 Year TC Rate

World Refinery Op. Rate (RHS)

0

20

40

60

80

100

120

0

10

20

30

40

50

60

70

80

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

US$/bblUS$k/dayCrude Tankers

VLCC 1 Year TC Rate Oil Price (RHS)

2010s: The Impact of Oversupply

15

û

Supply

û

Supply

û

Supply

û

Supply


The Shape of Supply

15

-50

-25

0

25

50

75

100

125

150

175

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Mn GT

Deliveries

Deletions

Contracting


2019 onwards includes MSI’s explicit assumptions on contracting, deliveries, scrapping, cancellations and slippage

Supply Growth Restraint…Finally!

0%

2%

4%

6%

8%

10%

12%

Tankers Bulker Containerships Gas Others

CAGR

2000s 2010s 1H 2020s 2H 2020s


0

10

20

30

40

50

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Mn CGT

Others Europe China Korea Japan

Shipyard Capacity

18

2020s will see a reduction in capacity before increasing

towards the end of the decade


Market CyclesThe only thing I knew how to do was to keep on keepin’ on

19


RoR

o

Con

tain

ersh

ip

LPG

20

Schematic for illustrative purposes only

Bulk

er

LNG

MPP

Oil T

anke

r

Che

mic

al T

anke

r

PCTC

OSV

s &

MO

DU

s

Where on the Earnings Cycle Are We?


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

Supp

ly S

ide

Gro

wth

Seaborne Cargo Growth

Posi

tive

Neg

ativ

e

A delicate balance for most sectors

PositiveNegative

20

1H 2020s: Supply-Demand Balance


Earnings in Context

22

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

20k Dwt Chem

78k cbm LPGC

160k cbm LNGC

1 k TEU FCC

8 k TEU FCC

Handysize Bulker

Capesize Bulker

MR Tanker

VLCC

Average 1 Yr TC Rate ($k/day)

1H 2020s2010s2000s


Graphite Diamond

Both Carbon but with different structural modifications

Looking to the HORIZONMay you have a strong foundation, when the winds of changes shift


MSI HORIZON

24

MSI HORIZON is our new online platform.

Bringing together all of MSI’s services onto one centralised portal, it offers unparralled insights into the shipping & offshore markets.

Enhanced functionality includes:(1) Enhanced data reporting

(2) Simultaneous, cross-sector model forecast simulations(3) Integration of MSI’s forecasting models with FMV

Market Reports1

Sectoral Forecast Models3

Online Valuation Tool (FMV)2

Scenarios & Sensitivities4

horizon.msiltd.com


Online Valuation Tool

25

• 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 along with offshore vessels and units.

• Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs for specific assets.

• MSI FMV draws on MSI’s proven, proprietary models and a consistent cross-sectional view across all principal shipping and offshore sectors. It puts asset values in the context of both historical averages and the near term market to enable reliable, consistent benchmarking.

Crude Oil Tanker

Product Oil Tanker

Dry Bulk Carrier

Chemical Tanker

LPG Carrier

LNG Carrier

Multi Purpose

Containership

PCC/PCTC

PSV & AHTS Drill Ships & Semi Subs Jack-Ups


2020s: Placing Bets on 5 Year Old Ships

6%

8%

8%

9%

9%

9%

10%

12%

12%

16%

16%

21%

0% 5% 10% 15% 20% 25%

Handysize Prod Tanker

LR2

VLCC

Aframax Tanker

Capesize Bulker

13/14 k TEU Gls FCC

78/85 k cbm FR LPGC

160/170 k cbm DFDE LNGC

Handysize Bulker

1.6/1.8 k TEU Grd FCC

25/27 k Dwt Coated Chem

5/8 k cbm SR LPGC

IRR (%)


Scenarios and “What if Questions?” can be answered.What is the impact on 5 year old VLCC price if Chinese GDP is + 100 basis points on base case?

Forecast Models, Scenarios & Sensitivities

For over 30 years, MSI has developed integrated relationships with a diverse client base of financial institutions, ship owners, shipyards,brokers, investors, insurers and equipment and service providers.

MSI’s expertise covers a broad range of shipping sectors, providing clients with a combination of sector reports, forecasting models, vesselvaluations and bespoke consultancy services.

MSI’s team is comprised of professionals with extensive academic credentials, deep industry knowledge and many years experience ofdelivering successful client projects.

MSI balances analytical power with service flexibility, offering a comprehensive support structure and a sound foundation on which to buildinvestment strategies and monitor/assess exposure to market risks.

While this document has been prepared, and is presented, in good faith, MSI assumes no responsibility for errors of fact, opinion or marketchanges, and cannot be held responsible for any losses incurred or action arising as a result of information contained in this document.

The copyright and other intellectual property rights in data, information or advice contained in this document are and will at all times remainthe property of MSI.


MSI Background & Disclaimer


Contact Details

29

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shipping markets in the 2020s: lessons from the life and ...€¦ · 1. peak steel consumption...

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