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Opportunities and Outlook
for the Shipping Markets
James Frew - Maritime Strategies International (MSI)
8th Capital Link Greek Shipping Forum – 15th February 2017
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Outlook and opportunities
1. Sector Correlations
2. Demand outlook
3. Supply side
4. Price Drivers
5. Recovery?
Agenda
Sector correlations
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Outlook and opportunities
Shipping – a correlated industry
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Commodity shipping sectors well correlated with each other, but not offshore and LPG
1) 2) 3) 4) 5) 6)
1) Containerships
2) Bulkers
3) Tankers
4) Chems
5) LPG
6) OSV
7) Drilling Rig
>75% Correlated
>50% Correlated
<50% Correlated
Negatively Correlated
Demand only explains part of the story
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Most sectors are positively correlated, but not tightly so
>75% Correlated
>50% Correlated
<50% Correlated
Negatively Correlated
1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
1) Crude Oil
2) Product
3) Chemicals
4) LPG
5) LNG
6) Bulker
7) Container
8) PCTC
9) Cruise
10) AHTS
It is supply that is wrecking the markets
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Sup
ply
Sup
ply
Sup
ply
Sup
ply
Demand
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Outlook and opportunities
Headline Trade Ratio has Stalled
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Tradewinds, May 26th 2016
And the container trade/GDP multiplier has broken down?
© Maritime Strategies International www.msiltd.com 9
0
1
2
3
4
5
6
7
8
9
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
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
Trade/GDP MultiplierYoY Ch
Global GDP
"Multiplier" (RH Axis)
Recovery from recessions
© Maritime Strategies International www.msiltd.com 10
0
20
40
60
80
100
120
Ye
ar
0
Ye
ar
1
Ye
ar
2
Ye
ar
3
Ye
ar
4
Ye
ar
5
Ye
ar
6
Ye
ar
7
Ye
ar
8
Ye
ar
9
Ye
ar
10
Ye
ar
11
Ye
ar
12
Trade to GDP ratio, Year 0 = 100
1927-1939 1980-1992 2007-2015
The bigger picture
© Maritime Strategies International www.msiltd.com 11
0%
10%
20%
30%
40%
50%
60%
70%
1870
1874
1878
1882
1886
1890
1894
1898
1902
1906
1910
1914
1918
1922
1926
1930
1934
1938
1942
1946
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
2014
Trade as a %age of Global GDP
Cyclical
Cyclical?
Structural
Supply
© Maritime Strategies International www.msiltd.com
Outlook and opportunities
Orderbook/Fleet ratio – looking good??
© Maritime Strategies International www.msiltd.com 13
0%
10%
20%
30%
40%
50%
60%
70%
80%B
ulk
er
2003
Bu
lke
r 2
008
Bu
lke
r 2
016
Ta
nk
er
200
3
Ta
nk
er
200
8
Ta
nk
er
201
6
Orderbook to fleet ratio
How Many Ships?
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Routes Distance
Size Changes Carrying Capacity Ballast Ratio
Waiting/Port Time Speed
Operating Days
The key is the demand side…
© Maritime Strategies International www.msiltd.com 15
0
50
100
150
200
250
300
350B
ulk
er
2003
Bu
lker
2008
Bu
lker
2016
Tan
ker
2003
Tan
ker
2008
Tan
ker
2016
Mn Dwt
Orderbook Incremental demand over following three years
…which doesn’t look so good
© Maritime Strategies International www.msiltd.com 16
0%
50%
100%
150%
200%
250%
300%
350%
400%
Bu
lke
r 20
03
Bu
lke
r 20
08
Bu
lke
r 20
16
Ta
nk
er
20
03
Ta
nk
er
20
08
Ta
nk
er
20
16
Ratio
Orderbook to Fleet ratio
Orderbook relative to vessel demand
Shipyard Capacity Is a Worry
© Maritime Strategies International www.msiltd.com 17
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
Mn CGT Other Europe China Korea Japan
© Maritime Strategies International www.msiltd.com 18
Yards Don’t Just Disappear
Yards have become ghost
towns… but haven't disappeared
Shipyard Capacity – Déjà Vu
© Maritime Strategies International www.msiltd.com 19
0
2
4
6
8
10
12
14
16
18
20
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
Mn CGT Other Europe China South Korea Japan
Price drivers
© Maritime Strategies International www.msiltd.com
Outlook and opportunities
© Maritime Strategies International www.msiltd.com 21
What drives asset price formation?
Directional Analysis
© Maritime Strategies International www.msiltd.com 22
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
Q2
10
Q3
10
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1 1
2
Q2
12
Q3
12
Q4
12
Q1
13
Q2
13
Q3
13
Q4
13
Q1
14
Q2
14
Q3
14
Q4
14
Q1
15
Q2
15
Q3
15
Q4
15
Q1
16
Q2
16
Q3
16
Q4
16
QoQ % Change NB Price 1 Yr TC Rate 5 Yr Price
VLCC
Quarters where 2nd hand price moves with NB price only
© Maritime Strategies International www.msiltd.com 23
0
20
40
60
80
100
120S
up
ram
ax
Pa
na
ma
x
Ca
pesiz
e
MR
Afr
am
ax
VL
CC
# of Quarters
No Yes
Since 1990
© Maritime Strategies International www.msiltd.com 24
NB Price Outlook
FC Pricing Power - OWNERS
FC Pricing Power - YARD
FC = forward cover
Recovery?
© Maritime Strategies International www.msiltd.com
Outlook and opportunities
MSI - FMV
© Maritime Strategies International www.msiltd.com 26
• 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.
• Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs
for specific vessels.
• MSI FMV draws on MSI’s proven, proprietary models and a consistent cross-sectional view across all
principal shipping sectors. It puts asset values in the context of the near term market to enable reliable
benchmarking with outputs based on annual averages.
• Coverage:
Crude Oil Tanker
Product Oil Tanker
Dry Bulk Carrier
Chemical Tanker
LPG Carrier
LNG Carrier
Multi Purpose
Containership
PCC/PCTC
www.msiltd.com/fmv AHTS PSV
FMV Output
© Maritime Strategies International www.msiltd.com 27
Quarterly Fair Market Value & 1 Year Time Charter Rate (1Q history, current Q, 2Q forecast
Annual average: • Newbuilding contract price • Fair Market Value • 1 Year Time Charter Rate • Operating Cost 5 years history and 15 years forecast
Price Development Chart detailing forecast price development in relation to historical metrics
www.msiltd.com/fmv
Asset play opportunities
© Maritime Strategies International www.msiltd.com 28
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
MR
Tan
ker
Su
pra
ma
xB
ulk
er
Han
dy
Co
nta
iners
hip
DF
DE
LN
G
Sm
all A
nch
or
Han
dle
r
IRR (invest 2017, divest 2021)
Contracting New (Deliv. 2019)
Buying Secondhand (5 Yr Old)
Asset play timespan
© Maritime Strategies International www.msiltd.com 29
0%
5%
10%
15%
20%
25%
30%
MR
Tan
ker
Su
pra
ma
xB
ulk
er
Han
dy
Co
nta
iners
hip
DF
DE
LN
G
Sm
all A
nch
or
Han
dle
r
IRR by year of divestment
2019
2021
2025
© Maritime Strategies International www.msiltd.com 30
Thank you for listening
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, vessel valuations and bespoke consultancy services. MSI is staffed by economists and scientists offering a structured quantitative perspective to shipping analysis combined with a wide range of industry experience. MSI balances analytical power with service flexibility, offering a comprehensive support structure and a sound foundation on which to build investment strategies and monitor/assess exposure to market risks.
MSI Background
© Maritime Strategies International www.msiltd.com 31
While this document has been prepared, and is presented, in good faith, Maritime Strategies International assumes no responsibility for errors of fact, opinion or market changes, 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 remain the property of Maritime Strategies International.
Disclaimer
© Maritime Strategies International www.msiltd.com 32
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