where now, where next? martin stopford - clarksons...source: “maritime economic” martin stopford...
TRANSCRIPT
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 1
London
Singapore
Shanghai Paris
Genoa
S AfricaHouston
Australia
HongKong
Athens
DUBAI
Pacific Atlantic
Where Now, Where Next?Dubai Seminar, 26th November 2005
Martin Stopford
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 2
1. The market today2. Why the market’s so good3. The Forecasting Model4. Ship Demand Trend 5. Ship Supply Trend6. Tanker forecast7. Bulk carrier forecast8. Conclusions
Every time I look there’s
MORE money
• It’s still a very good market after a weak spot in the summer
• The Clarksea index which touched $18,000/day in the summer is now $28,000/day
• Asset prices still very firm, and sales volumes have recovered
It says here it’s still the best market for
a century
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 3
The Bulk Shipping Era (Handy Ship)
0
5
10
15
20
25
3019
4619
4819
5019
5219
5419
5619
5819
6019
6219
6419
6619
6819
7019
7219
7419
7619
7819
8019
8219
8419
8619
8819
9019
9219
9419
9619
9820
0020
0220
04
earn
ings
$00
0/da
y (e
stim
ate)
1952"Undreamed offreight rates"
1956"Healthy
atmosphere"
1969-70"Firm &healthy"
1973-4"An exciting
market"
1979-80"Rates
boomed"
1982-6"Worst
ever"
1989"Firm"
1995“Boom"
2000“Strong"
2004WOW!
Dry cargo Rates
Source: “Maritime Economic” Martin Stopford
Freight Rates• The Clarksea
Index averaged of $12,400/day in the 1990s,
• Last year, after dipping in the spring, it surged to a new peak of $42,700 a day in November 2004
• This year Clarksea index is back at $28,000/day
05
1015202530354045
Jan-
90Ja
n-91
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$000/day
The Clarksea Index (tankers, bulkers, The Clarksea Index (tankers, bulkers, containers, gas)containers, gas)
Financial crisis
Asiacrisis
Dot.comcrisis
Dry cargo boom
THEtrough
9/11Asia Crisis
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 4
Cycle Position End Oct 2005still above trend
This chart shows average earnings today for the ship type, as a % of the average earnings during the last 7 years
-70% -20% 30% 80% 130% 180% 230%
VLCC 1990sSuezmax
AframaxProducts
CapesizePanamax
Handymax
ChemicalOffshore
VLPGContainer
% deviation from 7 year trend
Investment in New Ships
• Until 2003 investment was running at $23 billion a year
• In 2003/4 $137 billion of new ships ordered
• In 2005 about $75 billion expected
0102030405060708090
1997
1998
1999
2000
2001
2002
2003
2004
$ bill
ion
newb
uild
ing
orde
rs
Tankers BulkGas Container
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 5
Second Hand Prices
05
10152025303540455055606570
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n '79
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n '81
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n '85
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$ Milli
on p
rice
Aframax Tanker Panamax Bulker (5 yrs)
5 Year old Ships
3 developments “pump primed” the present market
How did I get so smart?
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 6
1. Shipping Market Tight Balance • In the 1980s there
was 30% overcapacity
• That finally disappeared in 1997, triggering the first real tanker spike
• Since then the available supply of ships has been very tight 400
500
600
700
800
900
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
M. dwt
Demand Supply
Asia Crisis
?Dot.com
crisis
30%Over
capacity AB
C
D30% 10% 5% 1%
% Overcapacity
2. Chinese Growth
• Sea trade growth started seriously in 1994, following internal reforms in the 1980s
• Imports accelerated in 2000
• Positive OECD Survey published last week
Key Stages in China's Trade Growth
050
100150200250300350400450500550600650
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Sea ExportsSea Imports
Mt
2. Trade takes offin 1994
3. Asia Crisis
setback
1. Internal reforms
4. Steel Investment
overheating?
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 7
China Boosted Trade Growth
• China reached 10% world imports in 2004
• Imports in the rest of the world grew 1.5% pa 1998-2004
• Chinese imports averaged 21% pa growth 0
1
2
3
4
5
6
7
8
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
Billi
on T
ons t
rade
0%2%4%6%8%10%12%14%16%18%20%
Chin
a's sh
are o
f sea
impo
rts %
World less China China Imports
Chinese imports
BUT: Highly Focussed Growth
• Between 2002 and 2004 two thirds of China’s import growth was in two commodities;-
• iron ore: which accounted for 39%
• Oil which accounted for 29%
3%4%
16%29%
39%
-2% 8% 18% 28% 38% 48%
% growth 2002-4
Iron oreOil
OtherSoyabeans
CoalSteelGrain
NFM oresWaste paper
Fertilisers
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 8
3. End of the Supply Cycle
1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
010203040506070
ScrappingDeliveries
Deliveries 61 m dwt in 1976
Deliveries 60.2 m dwt
in 2004
Last phase of 1970s
scrapping!
Million Dwt
Shipyards expand to replace the ships built in the 1970s boom
27 Year Cycle
Clarkson Research forecasting model
• We only ask for forecasts when the outcome is uncertain
• So forget about being right all the time
• It’s just part of the process of dealing with future uncertainty
• The important thing is to have a well thought out system….
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 9
Market Model
• The supply/demand model drives rates– Demand driven by
world economy– Supply driven by
investment and the orderbook
• Volatility increases exponentially as the balance tightens
Trade
Demand
World Fleet
ScrappingOrders
Shipowners
Charterers
FreightRates
Shipprices
Balance$ $
We’re at the top of a business cycle and the economy’s slowing
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 10
World Economy
0 0
4% 4% 4%3%
2%
0%
-2%
5%
9%
7%
5%6%
0%
4%
7%
0%
2%
5%
7%
4%
-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%
10%
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
% g
rowt
h In
dust
rial o
utpu
t in
year
% OECD & Asia Forecast
1998Asia crisis
2001Dot.com
crisis
1991Financial
crisis
ISSUES•Interest rates•Energy prices
•US deficit•US savings
Sea Commodity Trade
• Dry trade has grown by 600% in the last forty years
• Today 6.3 billion tons of cargo is shipped by sea. That’s one tonne for each person in the world
• The main commodities are coal, grain, minor bulks and containers
• In the last five years the growth trend has speeded up and we have 400 million tons more cargo than the trend forecast suggests 0
1000
2000
3000
4000
5000
6000
7000
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Milli
on to
ns c
argo
OtherGrainCoalIron oreProductsCrude oil
1980sRecession
The China Factor
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 11
0102030405060708090
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Bre
nt $
per
Bar
rel
Oil Price (Brent)Oil Price (real)
High Oil Price (Brent)
• Oil price over the 1980 peak
• Driven by record oil demand increase in 2004 & supply worries (Ivan, Nigeria, N Sea)
• $50/bbl has .5% negative effect on economy
AsiaCrisis
Lots of “Wild Cards” 2003-5• Strike in Venezuela• Congestion in Bosphorus• Hurricanes• Nigerian tribal war• Japanese nuclear
closedown• Fuel switching • Reconstruction of Iraq• Pipelines
These have a bigger impact in a tight market!
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 12
1. Orderbook hits record 231 million dwt
2. Deliveries will set new record of 70 million dwt in 2005
3. China’s market share up to 13%
4. Capacity set to increase 30% by 2010
5. Prices down 2.4% in last three months
Enter the Dragon
5 Key Facts
Deliveries & ScrappingBased of World Shipyard Monitor
2007200620052004200320022001
62
906
62
8.5
70.5
60
966
58.7
13.1
71.8
46
843.9
50.4
10.6
61.4
103.9
58
1,024
58.3
13
71.3
24
797.1
27.9
27.1
55
117.2
773.3755.3World Fleet yr end
1813Increase (m dwt)
20.8
28.7
49.5
52.8
17.3Delivery-Scrap
28.3Scrapping
45.6Deliveries
45.4Orders
Dwt of Ships Forecast November 2005
Look at this trend – it shows the increase in the fleet
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 13
World Orderbook Hits 236 m dwt
• Since 2002 the orderbook has jumped from 112 m dwt to 236 m dwt
• Orderbook is now 26.9% of the fleet, historically very high
• $59 bn orders in 2003, $80 bn in 2004, $38 bn to may ‘05 0
20406080
100120140160180200220240
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Millio
n Dw
t
LNGLPGMPPCellularCombosTankersBulkers
Almostdoubled 2002-4
0
10
20
30
40
50
60
70
80
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Mill
ion
Dw
t Del
iver
ies
Bulkers TankersCombo ContainerMPP OtherGas OrderbookRequirement
Deliveries To Hit 70 M Dwt in 2006
Shipbuilding output grew at 11% pa
compound 1988 to 2004
Forecast Requirement?
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 14
Newbuilding Capacity New High
• Six new yards planned will increase Chinese capacity by 15 m dwt
• Main New Yards are– Quingdao Haixi– Chongming Island– Changzing Islands– Longxue
0
5
10
15
20
25
2003
2013
ARE
A
Millio
n DW
T
Bohai Rim
Yangtze River
Pearl River
Newbuilding Prices Peaked
• Aframax tanker peaked at $53MM in 1990, but new price fell to $33MM in Dec 1999 and today it costs $58.5mill
• Inflation increases were less important than market factors in driving the big increase 2003-5
15
25
35
45
55
65
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'90Ja
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'92Ja
n '93
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'94Ja
n '95
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n '97
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'98Ja
n '99
Jan
'00Ja
n'01
Jan
'02Ja
n '03
Jan
'04Ja
n '05
Price
$ m
illio
n
Panamax bulkerAframax tankerCapesize
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 15
1. Earnings 2005 to date down 15% compared with 2004
2. Tanker demand up 3% in 2005 compared with 6.8% in 2004
3. Fleet forecast to grow 7% this year
Oil in China
Tanker Rates – where we are today
$0$20$40$60$80
$100$120$140$160$180
Jan
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n '01
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'02Ja
n '03
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'04Ja
n '05
$/da
y ea
rnin
gs
VLCC Suezmax Aframax Products
1
2
3
4
5
Asia Crisis
Dot Com Crisis
SARS Crisis
In 1990 we thought the big boom would happen in 1995 but we got the timing wrong due to Russia & North Sea
Five year recessionFive year recession
6
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 16
Products Earnings Predicted from Aframax Rates
$0$5
$10$15$20$25$30$35$40$45$50
Jan
'98
Jan
'99
Jan
'00
Jan
'01
Jan
'02
Jan
'03
Jan
'04
Jan
'05
$/day
earn
ings
Products
Model estimate using Aframax Tanker earnings
2000 Products spike
200
250
300
350
400
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Millio
ndwt
ForecastActual
Tanker Demand
• Tanker demand did not grow much between 1996 and 2003 due to two crises & tonmiles
• Forecast suggests growth of about 12 m dwt a year to 2010
Market will need about 12 m dwt pa extra tankers
Five years of weak demand growth
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 17
World Oil Demand Still Growing• Oil demand & trade
growth closely related• Growth volatile in the
1990s• Oil demand grew by
2.6 m bpd in 2004, • IEA predicting 1.2 m
bpd for 2005• The forecast is shown
by the dotted line
Million barrels per day increase
-2-1.5
-1-0.5
00.5
11.5
22.5
33.5
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
World oil demand 30 year record growth in 2004
Sea oil tradegrowth
World Oil Demand Forecast
• World oil demand is very cyclical
• Often the swing between the low in the first quarter and the peak in the last is 4 m bpd
• Much of this finds its way into trade, causing rate volatility
707172737475767778798081828384858687888990
1Q99
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
Million bpd world oil demandForecast next year extra 1.7 m bpd
Herenow
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 18
China Oil Imports
0.00.51.01.52.02.53.03.54.0
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03Ja
n-04
Jan-
05
Oil Products
Crude Oil
• China’s imports have plateaued this year after three years of rapid growth
Million bpd imports
Chinese Oil Trade Outlook
0123456789
10
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Milli
on b
arre
ls p
er d
ay
Import ForecastProduction ForecastImportsProductionDemand ForecastDemand
• Demand likely to reach 9-10 million bpd in 2010 as “wealth effect” clicks in
• Production only projected to grow 1% pa
• Indicates oil imports of 5-6 m bpd in 2010
Demand Forecast 9.6 m bpd
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 19
FSU’s Key Role in Oil Trade• In the last six years FSU
has accounted for a third of the growth of the oil seaborne trade
• This has had a profound effect on the tanker market:-1. Undermined ton miles2. Switched demand to smaller
ships3. Growing demand for ice
class tankers 0.0 1.0 2.0 3.0
USACanadaMexico
S. AmericaEurope
FSUM. East
N. AfricaW. Africa
AsiaROW
m bpd export increase 1999-2004
Chart shows who contributed to growth of oil supply since 1999 –FSU biggest
Russian Oil Export Forecast
• After adding 5 m bpd of exports in the last decade, slower growth is expected in future.
• IEA forecast suggests about 1 million bpd extra by 2010
• That will force Europe back to long haul suppliers 0
123456789
10
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Milli
on b
pd ex
ports
Blacksea
Baltic
Druzhba
Current forecasts show much less growth in the next 5 years (but Caspian up 2.5 m bpd)
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 20
Young Tanker Fleet
• The tanker fleet is now very young.
• Only 41 m dwt is 20 years old or more – caps scrapping at 5-6 m dwt per annum
• Category 2 tanker issue is tricky 0
102030405060708090
100110120
20+ 15-19 10-14 5-9 0-4
Milli
on D
wt
VLCCSuezmaxAframaxPanamaxHandy
05
101520253035404550
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Deliveries forecastDeliveriesDemolition forecastOrdersDemolition
Orders
Scrapping profile
More Deliveries, Less Demolition”5.6 m dwt of orders so far in 2005
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 21
Fleet Growth 6% 2005, 5.5% 2006 Million dwt
220240260280300320340360380400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Actual Forecast
Fleet forecast in model scenario
• On this analysis the active fleet will hit 358 m dwt by Dec 2006
• That’s a 35 m dwt increase in two years
Short Term Supply/Demand 2005/6
+11.629.6
18.0
10.0
8.0
2005
+10.126.1
16.0
12.0
4.0
2006Item of Investment
In m dwt
Scrapping 2005
add Demand Growth 2005
Surplus (+) of Deficit (-)
LessOrderbook for delivery Dec 2005
Equals Deliveries needed 2004/5
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 22
Medium Term: 2005 to 2010
0
20
40
60
80
100
120
140
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
$000
per
day
earn
ings
vlccSuezmaxAframaxProducts Suez FcstAfraProd
Quarterly earnings forecast Weakening Market as business cycle
turns down, but lots of spike potential NEXT CYCLEWHAT HAPPENS HERE DEPENDS
ON WHAT INVESTORS DO
1. Heavy deliveries 2. Slowing Asian economy, 3. How long will Chinese
steel demand hold up?
Capesize heads for its terminal
BulkerForecast
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 23
Dry Bulk Cycle 1998-2005
05
101520253035404550556065707580859095
100
Jan
'98
Jul '9
8
Jan
'99
Jul '9
9
Jan
'00
Jul '0
0
Jan
'01
Jul '0
1
Jan
'02
Jul '0
2
Jan
'03
Jul '0
3
Jan
'04
Jul '0
4
Jan
'05
July
'05
$ 000
Per
day
Cape earnings Panamax Trans Atlantic TripHandymax
1
2
3
2 year 2 year recessionrecession
Bulk Transport Cost 1973-2005
0
5
10
15
20
25
30
35
40
45
Jan
'73Ja
n '74
Jan
'75Ja
n '76
Jan
'77Ja
n '78
Jan
'79Ja
n '80
Jan
'81Ja
n '82
Jan
'83Ja
n '84
Jan
'85Ja
n '86
Jan
'87Ja
n '88
Jan
'89Ja
n '90
Jan
'91Ja
n '92
Jan
'93Ja
n '94
Jan
'95Ja
n '96
Jan
'97Ja
n '98
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan
'05
$ Per
TON
Fg 18
Expected freight rate last 12 months $13.4/tonne
Iron Ore Tubarao to Japan
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 24
Dry Cargo Trade Changes Trend
• Dry trade has grown by 300% in the last forty years
• Today 1.4 billion tons of cargo is shipped by sea
• The main commodities are coal, grain, minor bulks and containers
• There has been a noticeable change of trend in the last five years
• The reason is of course China
0
200
400
600
800
1000
1200
1400
1600
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Milli
on to
ns c
argo
Iron ore CoalGrain
1980sRecession
China Takes off
1995
Steel Production
• Steel production is up over the last year.
• Increase by area:-– China up 15%– EU up 3%– Japan up 6%– S Korea up
3%
0
5
10
15
20
25
30
Jan
'92Ja
n '93
Jan
'94Ja
n '95
Jan
'96Ja
n '97
Jan
'98Ja
n '99
Jan-
00Ja
n-01
Jan-
02Ja
n-03
Jan-
04Ja
n'05
Millio
n to
ns p
er m
onth
Japan S.KoreaEC-12 China
China’s big growth started in March
2001
32 million tons a
month in Sept
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 25
China’s Steel Trade Corrects
• So far collapse of steel imports has been compensated by surge in exports
• During 2003 there was a surge of imports to 4 m tpm as supply could not keep up with demand
• Since January 2004 imports fell and exports have surged.
0
1
2
3
4
5
Jan-
95Ja
n-96
Jan-
97Ja
n-98
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05
Mt/Month
Steel ImportSteel Export
Import surge In 2003
China Steel Prices Slipping
• Steel prices increased by almost 50% between 2003 and early 2005
• In October they slumped back to their starting point
• The price of rolled steel is expected to rise slightly in the October-December period due to the fast growth of China's investment in fixed assets and industrial production.
3000
4000
5000
6000
Nov-
03
Feb-
04
May-
04
Aug-
04
Nov-
04
Feb-
05
May-
05
Aug-
05
RMB
per t
onne
HRC 2.75mmHRS 1mmPlate 6mm
Source: China Trade Report A
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 26
China Iron Ore Production & Imports
0
100
200
300
400
500
600
700
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Milli
on to
ns ir
on o
re
• China produced 279 mt of iron ore in the first three quarters of this year, up 29.6% year-on-year.
• “China will control the growth in iron and steel output in 2006 and give priority to upgrading of quality… and transformation of the growth pattern”.
• “The iron ore producers are expanding production capacity, which will help to strike balance between iron ore supply and demand in general”.
Domestic Iron ore Production
Iron ore imports
+30%
25 33 37 41 44 55 52 5570
92110
143
207
050
100150200250300350400
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Millio
ndwt
China Steel & Ore Imports• Steel production
forecast to reach 370 m tons in 2007
• China is already producing 30 million tons a month, so not much growth
• Iron ore imports set to grow about 20 m tons pa – demand for 3 m dwt?
Steel production growth forecast to
slow in 2006/7
Iron oreimports
STEEL PRODUCTION
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 27
200
250
300
350
400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Millio
n dw
t
ForecastActual
Dry Bulk Demand - Forecast
• In 2003 demand grew 6.5% in 2003 and 5% in 2004
• Trend “expansion demand” 10.4 m dwt pa 2005 to 2010
Market will need about 10.4 m dwt pa extra bulkers
Dry Bulk Deliveries & Demolition
0
5
10
15
20
25
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Millio
n dw
t deli
verie
s / d
emol
ition
Delivery FCST
Deliveries
Demolition
Orderbook 22+ m dwt
pa
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 28
Bulk Carrier Age Profile Mar 04
0
5
10
15
20
25
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
000
dwt p
er m
onth
Chart shows deliveries in year26 years Ago
Bulk Carrier Age Profile Mar 04. Over the next four years age related scrapping will only average 6 m dwt per year
Bulk Carrier Deliveries & O/BOctober 2005
23.3
2.0
5.4
5.8
10.1
25.1
2.0
5.4
4.9
12.8
19.6
1.8
4.1
5.8
8
18.4
1.3
3.6
4.2
9.4
11.5
1.3
3.3
1.4
5.4
14.220.5TOTAL
1.5
4.4
4.2
4.1
1.6Handysize
5.1Handymax
8.3Panamax
5.4Capesize
2001 2002 2003 2004 2005 2006 2007
Low deliveries
kicked off the boom
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 29
Bulker Supply/Demand 2005/6
• The growth of bulk shipping is driven by China and Asia
• Demand expected to increase by about 15 m dwt in 2005,
• Only 810m dwt in 2006 due to China steel
• Scrapping still low
+6
22.8
16.8
15
1.8
2005
+12.1
25.1
13
10
3.0
2006Item of InvestmentIn m dwt
Scrapping 2005
add Demand Growth in year
Surplus (+) of Deficit (-)
Less Orderbook for delivery
Equals Deliveries needed 2005/6
010,00020,00030,00040,00050,00060,00070,00080,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
$000
per
day
earn
ings
HandyPanamaxCapesizeLine 4
Freight Rate Outlook
Her
e
NEXT CYCLEWHAT HAPPENS
HERE DEPENDS ON WHAT INVESTORS
DO
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 30
Peter Drucker “the one management thinker every educated person should read”
“We must start out with the premise that forecasting is not a respectable human
activity and not worthwhile beyond the
shortest of periods”
• Scenario 1: The boom goes on much longer as China/Asia goes from strength to strength
• Scenario 2: volatile market with major recession but with continued strong China growth
• Scenario 3: Supply overhang scenario, and China dented by macro developments
• Scenario 4: It’s the 1990s again
FOUR TANKER SCENARIOS
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 31
Handymax Scenarios
0
5
10
15
20
25
30
35
40
Mar '
91Se
p '91
Mar '
92Se
p '92
Mar '
93Se
p '93
Mar '
94Se
p '94
Mar '
95Se
p '95
Mar '
96Se
p '96
Mar '
97Se
p '97
Mar '
98Se
p '98
Mar '
99Se
p '99
Mar '
00Se
p '00
Mar '
01Se
p '01
Mar '
02Se
p '02
Mar '
03Se
ptMa
r '04
Sep
'04Ma
r '05
Sept
$ 000
Per
day
Handymax Earnings
Scenario 4Scenario 4
Scenario 1Scenario 1
Scenario 2Scenario 2Scenario 3Scenario 3
Conclusions1. The market remains tightly
balanced 2. Fundamentals will come
under supply side pressure over next two years
3. China still has growth potential but slowing of bulk and tanker volumes likely
4. World economy forecasts still positive but vulnerable to various risks
5. The expanding supply is “drip feeding” the market and makes the strong earnings difficult to sustain
6. So which of the 4 Scenarios would you go for?
It’s been a fantastic two years for shipowners
Bulk Chartering Ltd
Clarkson Dubai Seminar 26th November 2005
Martin Stopford, Clarksons 32
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