dnb markets shipping teamforums.capitallink.com/shipping/2016nymaritime/pres/dyvik.pdf · 2007/6/29...

Nicolay Dyvik +47 24 16 91 87 | [email protected]

Petter Haugen +47 24 16 91 86 | [email protected]

Jørgen Lian +47 24 16 91 88 | [email protected]

1PRESENTATION - MUST BE READ IN CONJUNCTION WITH PUBLISHED RESEARCH

DNB Markets Shipping TeamDry bulk panelModerator: Nicolay Dyvik





-10 %

-5 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %

VLCC MR Capesize LNG LPG Chemicals Container

2

The average ROCE earned by all segments during the period 1997- H1 2016 was 6.2%

Returns are volatile in shipping, hence why timing for investors (and owners) is key

ROCE given by:

EBIT (1yTCE earnings less OPEX and depreciation)

Vessel value ( yearly average newbuild price)

Source: DNB Markets, Clarksons




3PRESENTATION - MUST BE READ IN CONJUNCTION WITH PUBLISHED RESEARCH 3

All shipping segments suffer from rates below cash break even- how to pick the right entry point as cash burn with risk of equity dilution could be painful?

‘000 USD per day in costs and earnings

0

10

20

30

40

50

60

VLCC MR Capesize LNG VLGC Chemicals Container

k U

SD

/day

Opex Admin Interest Debt amortisation 2014 premium 1yTC Spot

Assumptions:• 65% leverage• 2.5% interest rate• 15 year amortisation profile• Current newbuild vessel prices

The 2014 premium reflects actual costs related to vessels currently being delivered, i.e. higher vessel prices for all segments






Dry bulk orderbook to fleet ratio stands now at 10% (DNB estimate)- Several generalists that looks at shipping often say that supply is key when deciding the time to invest as demand is easier to get wrong?

7% 19%

10%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Jan-

96Ja

n-97

Jan-

98Ja

n-99

Jan-

00Ja

n-01

Jan-

02Ja

n-03

Jan-

04Ja

n-05

Jan-

06Ja

n-07

Jan-

08Ja

n-09

Jan-

10Ja

n-11

Jan-

12Ja

n-13

Jan-

14Ja

n-15

Jan-

16

Axi

s Ti

tle






Dry bulk supply side





DNB Markets 2016 supply estimate revisions since January- 2016 deliveries likely to come inn 2.3% points lower compared to our January forecast

6.6%

8.9%

6.9%

4.3% 4.6% 5.1%

2.4%1.5%

2.7%

0%1%2%3%4%5%6%7%8%9%

10%

New Old

YTD

ann

ualis

ed

New Old

YTD

ann

ualis

ed

New Old

YTD

ann

ualis

edDeliveries Scrapping Contracting






Slippage in the dry bulk order book in 2010–2015 averaged 34% and slippage YTD (incl. July) is estimated at 40% - how flexible are the yards?

Dry bulk fleet and order book by shipyard country (mdwt)

-10 %

-5 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

-35

-15

5

25

45

65

85

105

125

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Sha

re n

ot d

eliv

ered

(%)

m d

wt

To be delivered current year Actual delivered Share not delivered (%) >>

Share of order book not delivered (%)

46 4985

25 25 2544

8099 10

062

48 4933

4134

187

0

20

40

60

80

100

120

1970

-95

1996

-00

2001

-05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

16R

OY1

620

1720

1820

19+

Fleet by year of delivery Grossorderbook

m d

wt

Other

SouthKorea

Japan

China






YTD 2016 (including July) dry bulk scrapping of 22.9m dwt equates to 5% of the fleet (annualised) - We expect 4.1% scrapping in 2016, 2.6% in 2017, and 2.4% in 2018- Average age of scrapped ships has declined significantly during 2016

0.0 %

1.0 %

2.0 %

3.0 %

4.0 %

5.0 %

6.0 %

7.0 %

0

5

10

15

20

25

30

35

40

1974

1978

1983

1988

1993

1998

2003

2008

2013

2015

YTD

16

Scr

appi

ng (%

of f

leet

)

Scr

appi

ng (m

dw

t)

Capesize PanamaxSupramax HandysizeTotal scrapping (% fleet) >>

Historical scrapping, by size and total as % of fleet

23.5 24

.4

27.0

29.2

20.9

22.4

26.5

28.3

20.3

20.1

23.0

28.5

20

21

22

23

24

25

26

27

28

29

30

Capesize Panamax Supramax Handysize

Ave

rage

age

whe

n sc

rapp

ed

2014 2015 2016

Average age of scrapped vessels






2824 25

29

38

55

6573

98

62

80

111 112 109

99

52

42

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US

D/b

bl

17 20 16 1826

19 21

42 45 45

74

92

55

17

47

3626

61

4538

12

0102030405060708090

100

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

run

rate

CG

T (m

)

World contracting down 70% YOY (run-rate) and at its lowest level in more than 20 years (nominal volume)

Ordering of ECO-vessels

The oil price boom caused the ordering boom

2013-2015 ECO vessel ordering boom a one-off in shipping history due to high oil price – not likely to be repeated?






We expect new orders of 2.3% of the fleet for 2016, 1.7% in 2017, and 1.8% in 2018

12 %

11 %

10 %

17 %

46 %

27 %

9 %

23 %

8 %

4 %

15 %

9 %

3 %

3 %

0 %5 %

10 %15 %20 %25 %30 %35 %40 %45 %50 %

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

16Con

tract

ing

(% o

f fle

et a

s st

art o

f yea

r)

Contracting as % of fleet Model contracting as % of fleet

Historical and model contracting as % of fleet






DNB Markets fleet growth estimates (%)

4.4%

2.7%

2.4%

6.8% 7.1%

6.7%

6.7%

6.7%

10.2

%

17.0

%

14.9

%

10.6

%

5.7%

4.4%

0.0%

2.2%

0.8%

-0.3

%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

e

2016

e

2017

e

2018

e

Annual fleet growth 2000-2014 average growth






Dry bulk demand side





The respondents to our annual iron ore- and coal survey expect 5–6% annual export growth in 2016–2018e which is more than we expect…

2.3%

4.7%

6.5%

4.7%

2.8%

4.4%

0.7%

0%

1%

2%

3%

4%

5%

6%

7%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2015 2016e 2017e 2018e 2019e 2020e 2021eYO

Y gr

owth

(%

)

Exp

ecte

d ex

port

(m to

nne)

Coal Iron ore YOY growth >>

11.9

%

2.6%

7.2%

12.8

%

2.8%

-1.8

%

14.3

%

10.2

%

4.8%

4.8%

3.3%

1.5% 1.8% 2.3% 3.

0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

e

2017

e

2018

e

Dry

bul

k de

man

d gr

owth

(%

)

Expected export growth of 5-6% annually from our survey respondents…

…is higher than the 2-3% dry bulk demand growth we expect.






… but if domestic declines in Chinese mining continue, a significant positive to dry bulk, our survey respondents can supply the commodities needed.

Chinese coal production down 13% YTD… …while imports are up 7%.

Chinese iron ore production down 6% YTD… …while imports are up 8%.

5 %

8 %

7 %

5 %

22 %

9 %

3 %5

% 6 %

6 %

6 %

9 %

9 %

8 %

0 %

5 %

10 %

15 %

20 %

25 %

Chi

nese

iron

ore

impo

rt gr

owth

201

6 vs

20

15

YOY YTD

-7 %

-1 %

-9 %

-6 %

-8 %

-7 %

-4 %

-6 %

-6 %

-6 %

-10 %-9 %-8 %-7 %-6 %-5 %-4 %-3 %-2 %-1 %0 %

Chi

nese

dom

estic

pro

duct

ion

of ir

on o

re

grow

th 2

016

vs 2

015

YOY YTD

-10

%

-15

%

-15

%

-12

%

-12

%

-13

%

-13

%-20 %-18 %-16 %-14 %-12 %-10 %

-8 %-6 %-4 %-2 %0 %

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

JulyGro

wth

in C

hine

se c

oal p

rodu

ctio

n (%

)

YOY YTD

-9 %

-11

%

16 %

-6 %

34 %

31 %

0 %

-9 %

-10

%

-1 %

-3 %

4 % 8

%

7 %

-20 %

-10 %

0 %

10 %

20 %

30 %

40 %

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Gro

wth

in C

hine

se c

oal i

mpo

rts (%

)

YOY YTD






Investors often ask us if dry bulk demand is up for a structural decline or if we will see demand growth in the years ahead- some fear a repeat of 2015 coal trade, how should we think about that?

Annual growth in dry bulk trade by commodity (m tonne)

Share of total growth by within major commodities

79

150

25 18 26 31

27

36

-66

7 5 3138

223

-43 27 3046

-100

-50

0

50

100

150

200

250

2013 2014 2015 2016e 2017e 2018e

Gro

wth

in d

ry b

ulk

trade

by

com

mod

ity (

m

tonn

e)

Grains

Coking coal

Steam coal

Iron ore 66 % 87

%

67 %

-40 %

-20 %

0 %

20 %

40 %

60 %

80 %

100 %

120 %

140 %

2016e 2017e 2018e

Sha

re o

f gro

wth

in d

ry b

ulk

trade

by

com

mod

ity (

% o

f tot

al g

row

th)

Grains

Coking coal

Steam coal

Iron ore






Increasing commodity prices, for the first time in years, imply wider geographical arbitrages…

Prices for the main dry bulk commodities is up 15-50% YTD…

…which makes all the difference in the world wrtwillingness to pay for transportation services

6 %

-28

%

-44

%

47 %

-15

%

-12

%

-22

%

38 %

-5 %

-9 %

-24

%

17 %

-60 %

-40 %

-20 %

0 %

20 %

40 %

60 %

2013 2014 2015 YTD

YOY

chan

ge in

com

mod

ity p

rices

(%)

Iron ore Coal Soybeans

11,524

101,408

-20,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

50 55 60 65 70 75 80

TC e

quiv

alen

t Aus

tralia

-Chi

na v

oyag

e (U

SD

/day

)

CIF price China (USD/tonne)Chinese prices was USD55/tonne in January and now stands at USD75/tonne. Calculation assumes cash-cost at USD50/tonne FOB in Australia






Dry bulk, utilization, asset values and rates





DNB Markets dry bulk utilisation forecasts (%)

84 %

90 %

85 %

85 %

99 %

96 %

88 % 92

%

92 %

87 % 89

%

89 %

90 %

88 %

87 % 89

%

83 %

80 %

75 %

70 %

69 %

68 %

67 %

66 %

67 % 70

%

50 %

55 %

60 %

65 %

70 %

75 %

80 %

85 %

90 %

95 %

100 %

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

e

2017

e

2018

e

Util

isat

ion

of th

e dr

y bu

lk fl

eet (

%)

Utilisation (adjusted for speed) (%) Conventional utilisation (not speed adjusted) (%)






We argue dry bulk is not-that-over-supplied-market due to historical speed reductions is what is needed for meaningful improvements in dry bulk earnings.

We reiterate our belief that the dry bulk market is not massively over-supplied when speed is accounted for

And we continue to expect a gradual recovery

25 %

44 %

24 %

19 %

1 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %

50 %

Growth intrade

Nominalfleet growth

Reducedspeed

Effectivefleet growth

Apparentdeficit fleet

growth

Gro

wth

from

201

0 to

201

5

6,86

6

8,00

0

11,0

00

15,0

00

6,91

8

6,80

0

11,0

00

16,0

00

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2015 2016e 2017e 2018e

US

D/d

ayCapesize (USD/day), old Capesize (USD/day), new






DNB Markets 9 September dry bulk rate forecast changes

- 2016 dry bulk rates developed in line with our January expectations, what next?

Estimate revisions, Capesize rates Estimate revisions, Panamax rates

6,86

6

8,00

0

11,0

00

15,0

00

6,91

8

6,80

0

11,0

00

16,0

00

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2015 2016e 2017e 2018e

USD

/day

Capesize (USD/day), old Capesize (USD/day), new

5,47

3 7,00

0

7,00

0

10,0

00

5,50

7

5,50

0 7,00

0

10,0

00

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2016e 2017e 2018e

USD

/day

Panamax (USD/day), old Panamax (USD/day), new






3 year capesize TCE rate up 40% since March, but resale price up only 4%?- DNB Markets: “Recovery in earnings should also come with a recovery in asset prices; the Capesize resale can easily appreciate to USD44-45m (up ~20% from USD36-37m today)”

Asset prices are still considerably lower than the bottom in 2013…

…and a ketchup-effect can now easily materialise

40 %

4 %1 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %

3y TC rate Cape resale price Cape 5y old price

Cha

nge

sinc

e M

arch

201

6

Change since ultimo March

y = 0.0014x + 27.372R² = 0.6531

30.00

35.00

40.00

45.00

50.00

55.00

60.00

65.00

70.00

0 5,000 10,000 15,000 20,000 25,000 30,000

Cap

esiz

e re

sale

val

ue (m

US

D)

3y TC rate (USD/day)






Dry bulk asset values at an absolute low point – how much could values increase?- Capesize resale (newbuild just delivered from shipyard) is valued today at USD37m

- DNB Markets forecasts that one year forward a capesize resale could go up by + 20% (30% on average as older tonnage goes up more)

- If values goes up 50% than we are almost back the levels we saw during the peaks of 2014

37

44

55

30

35

40

45

50

55

60

65

70

75

80

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

US

Dm

Capesize resale today Capesize resale + 20% Capesize resale + 50%Source: DNB Markets, Clarksons





IMPORTANT/DISCLAIMERThis presentation must be read in conjunction with published research notes or DNB Analyst Communication of DNB Markets.This presentation (the “Presentation”) must be seen as marketing material and not as an investment recommendation within the meaning of the Norwegian Securities Trading Act of 2007 paragraph 3-10 and the Norwegian Securities TradingRegulation 2007/06/29 no. 876. The Presentation has been prepared by DNB Markets, a division of DNB Bank ASA, a Norwegian bank organized under the laws of the Kingdom of Norway (the “Bank”), for information purposes only. ThePresentation shall not be used for any unlawful or unauthorized purposes. The Bank, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (individually, each a “DNB Party”; collectively,“DNB Parties”) do not guarantee the accuracy, completeness, timeliness or availability of the Presentation. DNB Parties are not responsible for any errors or omissions, regardless of the cause, nor for the results obtained from the use of thePresentation, nor for the security or maintenance of any data input by the user. The Presentation is provided on an “as is” basis. DNB PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOTLIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE PRESENTATION’S FUNCTIONING WILLBE UNINTERRUPTED OR THAT THE PRESENTATION WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall DNB Parties be liable to any party for any direct, indirect, incidental, exemplary,compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Presentation, even if advised ofthe possibility of such damages. Any opinions expressed herein reflect the Bank’s judgment at the time the Presentation was prepared and DNB Parties assume no obligation to update the Presentation in any form or format. The Presentationshould not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. No DNB Party is acting as fiduciary orinvestment advisor in connection with the dissemination of the Presentation. While the Presentation is based on information obtained from public sources that the Bank believes to be reliable, no DNB Party has performed an audit of, noraccepts any duty of due diligence or independent verification of, any information it receives. Confidentiality rules and internal rules restrict the exchange of information between different parts of the Bank and this may prevent employees of DNBMarkets who are preparing the Presentation from utilizing or being aware of information available in DNB Markets/the Bank that may be relevant to the recipients of the Presentation. Please contact DNB Markets at + 08940 (+47 915 08940) forfurther information and inquiries regarding this Presentation, such as ownership positions and publicly available/commonly known corporate advisory performed by DNB Markets etc, in relation to the Norwegian Securities Trading Act2007/06/29 no. 75 and the Norwegian Securities Trading Regulation 2007/06/29 no. 876.The Presentation is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. Distribution of material like the Presentation is in certain jurisdictions restricted by law. Persons in possession ofthe Presentation should seek further guidance regarding such restrictions before distributing the Presentation.The Presentation is for clients only, and not for publication, and has been prepared for information purposes only by DNB Markets - a division of DNB Bank ASA registered in Norway with registration number NO 984 851 006 (the Register ofBusiness Enterprises) under supervision of the Financial Supervisory Authority of Norway (Finanstilsynet), the Monetary Authority of Singapore, and on a limited basis by the Financial Conduct Authority and the Prudential Regulation Authorityof the UK, and the Financial Supervisory Authority of Sweden. Details about the extent of our regulation by local authorities outside Norway are available from us on request. Information about DNB Markets can be found at www.dnb.no.

Additional information for clients in SingaporeThe Presentation has been distributed by the Singapore Branch of DNB Bank ASA. It is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particularperson. You should seek advice from a financial adviser regarding the suitability of any product referred to in the Presentation, taking into account your specific financial objectives, financial situation or particular needs before making acommitment to purchase any such product. You have received a copy of the Presentation because you have been classified either as an accredited investor, an expert investor or as an institutional investor, as these terms have been definedunder Singapore’s Financial Advisers Act (Cap. 110) (“FAA”) and/or the Financial Advisers Regulations (“FAR”). The Singapore Branch of DNB Bank ASA is a financial adviser exempt from licensing under the FAA but is otherwise subject tothe legal requirements of the FAA and of the FAR. By virtue of your status as an accredited investor or as an expert investor, the Singapore Branch of DNB Bank ASA is, in respect of certain of its dealings with you or services rendered to you,exempt from having to comply with certain regulatory requirements of the FAA and FAR, including without limitation, sections 25, 27 and 36 of the FAA. Section 25 of the FAA requires a financial adviser to disclose material informationconcerning designated investment products which are recommended by the financial adviser to you as the client. Section 27 of the FAA requires a financial adviser to have a reasonable basis for making investment recommendations to you asthe client. Section 36 of the FAA requires a financial adviser to include, within any circular or written communications in which he makes recommendations concerning securities, a statement of the nature of any interest which the financialadviser (and any person connected or associated with the financial adviser) might have in the securities.Please contact the Singapore Branch of DNB Bank ASA at +65 6212 0753 in respect of any matters arising from, or in connection with, the Presentation.The Presentation is intended for and is to be circulated only to persons who are classified as an accredited investor, an expert investor or an institutional investor. If you are not an accredited investor, an expert investor or an institutionalinvestor, please contact the Singapore Branch of DNB Bank ASA at +65 6212 0753.We, the DNB group, our associates, officers and/or employees may have interests in any products referred to in the Presentation by acting in various roles including as distributor, holder of principal positions, adviser or lender. We, the DNBgroup, our associates, officers and/or employees may receive fees, brokerage or commissions for acting in those capacities. In addition, we, the DNB group, our associates, officers and/or employees may buy or sell products as principal oragent and may effect transactions which are not consistent with the information set out in the Presentation.

Additional Information for Recipients in the United States:The Presentation does not constitute an offer to sell or buy any financial instrument and does not provide, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer. This presentation isintended solely for Major U.S. Institutional Investors within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934 and to such other U.S. Institutional Investors as DNB Markets, Inc. may determine. Distribution to non-MajorU.S. Institutional Investors will be made only by DNB Markets, Inc., a separately incorporated subsidiary of DNB Bank that is a U.S. broker-dealer and a member of the Financial Industry Regulatory Authority (“FINRA”) and the SecuritiesInvestor Protection Corporation (“SIPC”). Any U.S. recipient of this report seeking to obtain additional information or to effect any transaction in any security discussed herein or any related instrument or investment should contact DNB Markets,Inc., 200 Park Avenue, New York, NY 10166-0396, telephone number +1 212-551-9800.

In BrazilIf the analyst or any close associates serves as an officer, director or board member, or have a personal relationship with any individual that works for a company which DNB Markets publish a research note, this will be mentioned under thedisclaimer in the relevant research note. The analyst or any close associates do neither hold nor do they have any direct/indirect involvement in the acquisition, sale, or intermediation of the securities discussed in each research note. Anyfinancial interests, not mentioned in the relevant research note, that the analyst or any close associates holds in the issuer discussed in the report is limited to investment funds that do not mainly invest in the issuer or industry discussed in thereport and the management of which these persons cannot influence.

dnb markets shipping teamforums.capitallink.com/shipping/2016nymaritime/pres/dyvik.pdf · 2007/6/29...

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