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DRY CARGO CHARTERING
Capital Markets Day
Mikkel FruergaardVice PresidentCopenhagen, Denmark
Our business is global tramp shippingNORDEN – Dry Cargo Chartering | 1
Copenhagen, Denmark1 June 2012
AGENDA
Organisation
Business model
Strategy
COA focus
Counterparty quality
Optimisation of vessel utilisation
Major trades in 2012
Our business is global tramp shippingNORDEN – Dry Cargo Chartering | 2
ORGANISATION
Staff breakdown after functionOne of the world’s largest operators of Panamax and Handymax vessels Management & Handymax vessels
Total number of employees 122
12%
12%
9% 3% Management & Support FuntionsChartering
Operations
Overseas offices in:
US
41%23%
Control
Port Captains
Projects
Location of offices and port captains
Brazil
India
Singapore Singapore
China
Port captains ensure ptimely handling of cargoes in ports across the globe
Headquarters
Overseas offices
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Port Captains
ASSET LIGHT BUSINESS MODEL
Coverage and customer focusFlexible fleet
Sale and purchase
Capacity
C t t f
Employment
Customer relations
*Active (on order)
Sale and purchase Technical competencies in-house
Owned 29 (5)
LT chartered w. POP 40 (13)Option-based flexibility
Contracts of affreightment
TC out
Custo e e at o sLogistical efficiencies
2-10 year firm periods( )
Other h t d
p y3-7 year firm periods
Flexibility and scaleA bit
FFA market
Spot market
Quick and easy coverLT chartered 23 (1)
chartered (90)
ArbitrageSingle-trip charters
Spot market
BrandPeople Systems
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* Active fleet per 30 June 2011Active fleet per 31 March 2012
EXECUTING ON STRATEGY
Long term growth in challenging times
Dry Cargo Tankers Joint Overall targets
Growth in cargoes carried of 15%
p.a.
Growth in owned fleet to 25+ units
Tight cost control on shore and at
sea
Higher shareholder return than peers
Growth in contractually secured cargo
volumes of 15% p.a.
Daily earnings above market
ratesIncreased eco/fuel efficiency focus on
all vessels
Global leader in tramp shipping
Joint ventures and strategic alliances
High standards for quality, safety,
etc.
Flexible financial resources to
pursue opportunities
Added value creation as operator
Increasing EBIT in strategy period
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CARGO FOCUS
2011:
61 million tons of transported volumes – 40% up from 2010
87 million tons of contractually secured cargo – 16% up from 2010
Continued focus on profitable growth in cargo volumes
Contractually secured cargo volumes, 2013+Transported volumes 2012
MT MT
50
60
70
80MT
80
100
120MT
10
20
30
40
50
20
40
60
0
10
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Week
R li d l YTD
01 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Week
Accumulated COAs YTD
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Realized cargo volume YTDTarget cargo volume (+15%)
Accumulated COAs YTD
Accumulated target (+15%)
IS 15% CARGO GROWTH REALISTIC?
NORDEN has a customer base of approx. 300 clients
Key selection criteria when bidding for COAs:
Financial strength
Proven track record – living up to our values
Size quality and diversity of the fleetSize, quality and diversity of the fleet
CSR focus
NORDENs cargo programmeO s a go p og a
161820Mill. tons
68
101214
024
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Aggregates Bauxite Biomass/wood products Cement products Coal Grain Other Salt Slags
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* Per 15 May 2012
Aggregates Bauxite Biomass/wood products Cement products Coal Grain Other Salt Slags
COUNTERPARTY QUALITY
Top 20 counterparties by exposure end-2011 Top 20 counterparties accounted for 78% of the forward cargo bookings 8% 4% Mining companies bookings
Credit risk process:49%
13%
8% Mining companies
Energy Companies
Shipping Companies
Counterparties which have potential exposure of more than USD 5 million must have a credit rating
26%
Industrial Enterprises
Coal distributor
Top 20 counterparties by ownership type
rating
The rating is based on both financial and non-financial parameters
7%3%
Publicly listed
Private
The overall rating translates into a USD exposure limit and a fixture duration limit
90%
State
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90%
JOINT VENTURES
Focus on joint ventures with core customers
JVs tighten the bond and give valuable insights into various commodity markets
Provides client with an alternative to vertical integration
L t f l Last refusal on cargo requirements
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OPERATOR MODEL
Chartering
How do we optimise earnings in the operator model?
Chartering
Client and brokering networks
Build up a portfolio of COAs
Optimise vessel utilisation
Long/short strategy in different vessel segmentssegments
Vessel positioning
Build up optionality in the fleet
USD 22 million in 2011
Operational
Optimise speed consumption of each voyagevoyage
Port captains optimise loading and discharge
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THE IMPORTANCE OF INCORPORATING OPTIONALITY INTO THE BOOK
Optionality provides a ”bottom line” safety against market movements
Value of the optional period can be locked in with FFA
Larger degree of flexibility of period contracts in low markets
NORDENs ship days under different market scenarios* (no. of days)
17 000
15.000
16.000
17.000
12.000
13.000
14.000
10.000
11.000
Q3 2012 Q4 2012 Q1 2013
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USD 5000 per day USD 10,000 per day USD 15,000 per day USD 20,000 per day* Per 15 May 2012
SVALBARD ISLAND COA EXAMPLE
Definition: Contract of affreightment (COA) is an agreement to t t
Contract duration:
5 seasons from around 1 July through around 31 O t b h h t h ti t
Cargo:Coal
transport one or more cargoes at a predetermined price per ton
October each year – charterer has an option to extend the contract for another 5 seasons
Coal
Quantity:75,000 mt per shipment – 1,750,000 mt per season
Loading ports:Svea and Longyearbyen
Discharging ports:g g pRotterdam, Immingham, Sines, Brunsbuttel and Esbjerg
Freight rates:Freight rates are based on USD per ton and vary based on loading/discharging ports
Optionalities
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Environmental issues
ASAHI TC COA EXAMPLE
Vessel type:
Panamax – max. 15 years oldDefinition: Time charter is a hiring of a vessel for a specific period of
Delivery:
Indonesia or Australia
vessel for a specific period of time at a predetermined rate per day
Redelivery:Japan
Contract duration:
4 voyages per annum over 3 years
Commodity:Commodity:
Coal
Freight rates:Freight rates:
Agreed hire on a standard vessel
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COAs – BACKHAUL FOCUS
Record high bunker prices increase the importance of minimizing the ballast ratio
Having secured backhaul COAs, even at low rates, can mean significant savings when the alternative is to ballast
Bachaul COA value example:Bachaul COA value example:
Japan – US Gulf
Duration 32 daysDuration 32 days
Ballast cost approx. USD 25,000 per day
Minimum cost of ballasting: USD 800,000
A d 80% f ll • Around 80% of all cargoes discharged
• All newbuildings delivered
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OPTIMISING VESSEL UTILISATION
Discharging in China on 10 g gJune
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OPTIMISING VESSEL UTILISATION
Discharging in China on 10 g gJune
Cargo fixed for loading in Indonesia on 20 JuneIndonesia on 20 June
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OPTIMISING VESSEL UTILISATION
Option 1:Ballast from China to Indonesia for 8 days at t t l t f a total cost of approx.
USD 220,000
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OPTIMISING VESSEL UTILISATION
Option 2:• Find a open cargo
closer to the vessel th t b i that becomes open in China
• Fix a open vessel closer to the loading port in Indonesia
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NORDENs MAJOR HANDYSIZE TRADES IN 2012
Wood pellets Wood pellets from USEC to Europe
Fertilizers Fertilizers from Baltic to ECSA
Grain from ECSA to WCSA, WCCA, NCSA, Europe and MED.
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NORDENs MAJOR HANDYMAX TRADES IN 2012
Salt from Chile to USEC
Clinker from Coal from Indonesia Med. to WCA
Slag from Japan to USG
to India, Thailand and Philippines
Clinker from
Coal from USA to WCSA
Clinker from Korea to WCA
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NORDENs MAJOR PANAMAX TRADES IN 2012
Coal from Svalbard to Europep
Coal from Russia to Europe
Coal from Indonesia to China, Taiwan,
Coal from Australia to Japan
Coal from Indonesia to ItalyBauxite from
Guinea to Ireland
, ,Japan and Philip.
Grain from ECSA to Far East
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RECAP
Cargo focus
Only at attractive levelsTanker
Operator activities
Using entire ”toolbox” to generate additional valuegenerate additional value
Long term vision
Use low market for future positioning
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Thank you for your attentionANY QUESTIONS?
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