from the weeds to the trees where to look for opportunities - global … · 2018-03-21 · from the...

From the Weeds to the Trees – Where

to Look for Opportunities

Dr Adam Kent - Maritime Strategies International (MSI)

29th Annual Marine Money Money Week – New York City June 21st to 23rd 2016

© Maritime Strategies International www.msiltd.com2

1. Demand

2. Supply

3. Earnings

4. Newbuilding Prices

5. Secondhand Prices

6. Where to Plant your Cash?

From the Weeds to the Trees – where to look for opportunities?

Demand

From the Weeds to the Trees

© Maritime Strategies International www.msiltd.com

CAGR Trade


-3%

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-1%

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CAGR History (2011-15) Forecast CAGR (2015-19)

Trade versus Ship Demand (2015-2019)


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CAGR Cargo Shipping Requirement

Middle East Products Exports


0

10

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2010

2011

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MnTpa

Americas Europe Africa OECD Asia* Non-OECD Asia

Long haul product tanker story still exists supported by refining capacity additions in the Middle East and

reductions in planned capacity (Latin America), low levels of construction (Africa) and consolidation (Europe)

Deployment patterns redrawn – 8 k TEU


0.0

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Tra

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tic

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ns

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cif

ic

Mn TEU

End-2011

End-2015Deployment of 8k TEU vessels

more widespread - North-South

trades are increasingly the

home for these assets

Why the Cascade Will Ultimately be Efficient


There are very few real limits to cascading, and where there are (Onne, Iquique) these ports will be bypassed. Service consolidation will lead to upsizing and 8 k + TEU vessels will replace smaller ships, with

Panamaxes then dominating long-haul intra-regional routes

600 metre quay with 4xRTGs + 4 more on order

Pointe Noire only used to be able to handle geared ships. Now,

theoretically the only restrictions are port efficiency/container yard.

NE Asia Chemical Imports – Ship Demand

9© Maritime Strategies International Ltd.

www.msiltd.com

80%

90%

100%

110%

120%

130%

140%

150%2015

2016

2017

2018

2019

Index (100=2015) Organics Inorganics Vegoil

Includes explicit bilateral trade forecasts for: Methanol, Ethanol, Mono Ethylene Glycol, Para-xylene, Styrene, MTBE, Benzene, EDC, Acetic acid, Mixed xylenes, Phenol,

Acrylonitrile, VAM, Alkylbenzene, Propylene Oxide, Toluene, Phosphoric Acid, Sulphuric Acid, Caustic soda, Palm Oil, Molasses, Canola Oil, Soyabean oil, Sunflower oil

Significant ship demand growth

is out there - it’s a question of

identifying the cargo and route

Supply



Replacement Tonnage Requirements


www.msiltd.com

-200%

-100%

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Mn GT Old (20Yr +) Orderbook % 'Over Ordered' (RH Axis)

Orderbook by Yard Tier


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80%

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100%

2016

2017

2018

2019

Tier 3 Tier 2 Tier 1

Cancellation prospects high

especially with a number of large

yards now in financial difficulty and

owners looking to walk away from

contracts

Contracting Comparison – By Vessel Type


www.msiltd.com

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Mn GT 2015 (Jan to May) 2016 (Jan to May)

30 x VLOC orders

= 5.8 Mn GT

2016 Age at Scrap versus Historical*


*Annual averages 1990 to 2015

Regulatory requirements (e.g. BWT

and an increase in scrap price will

help with demolition volumes

Kamsarmax / Post-PanamaxOpportunity


Fleet growth outlook favourable in

the 65-120 k Dwt segment when

compared with others

Upsizing opportunities to larger stems and positioned well in long term growth markets – grains (e.g. South America to Asia) and key minor bulks (eg Bauxite from Guinea). Also new trades through new Panama Canal (e.g.

US grains and Colombian coal to Far East).

Earnings



Where on the Earnings Cycle Are We?


Cru

de a

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roduct T

anker

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Vs

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er

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G

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Conta

iner

Chem

ical T

anker

RoR

o

Rig

s

… and where are we heading?


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roduct T

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onta

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anker

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s

Newbuilding Prices



Are the Yards Panicking Yet?


0%

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2016

2017

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2016

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2019

% CapacityMn CGT Mn CGT Historical Max % of Max Historical Output (RH Axis)

South Korea Japan China

Beyond 2016 yards are significantly

underemployed

EmptyCapacity

EmptyCapacity

EmptyCapacity

Big 3 Korean Shipyards Forward Cover


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,0002015

2016

2017

2018

2019

2020

CGTDaewoo Hyundai HI Samsung

DSME’s forward cover

significantly better than

HHI and Samsung post

2017 – LNG driven

Contracting Volumes


No immediate salvation via

new contracts

Forward Cover & Newbuilding Price


201620172018

2019

Forward Cover = Global Shipyard Orderbook/Global Shipyard Capacity

NB Prices to Slide – Cost Floor Met


Commodity = oil tanker, bulker and container, Specialised = all other merchant shipping sectors

Newbuilding prices for commodity vessels

will bottom out before specialised vessels –

shipyard costs will dictate how low they go


SHIPS

Day of the Triffids?

Shipyard Capacity Is a Worry


0

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Mn CGT Other Europe China Korea Japan

Secondhand Prices



Price and Rate Relationship

28

Suezmax Tanker

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‘000 $/dayNRV10 year NRV Net Earnings (RH Axis)

Correlation = 0.92

© Maritime Strategies International Ltd.

Current NRV Depreciations Compared


Bulkers

Containers

Oil Tankers

Specialised Sectors

2018 5 Year Old NRV Depreciation - Net Position versus Today


www.msiltd.com

-10%

-5%

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EU

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6k

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EU

PC

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k D

wt

MP

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In NRV depreciation terms there will be

improvements in secondhand values over the

course of the next two years



Where to Plant Your Cash

MSI – FMV


• 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

http://www.msiltd.com/fmv

FMV Output


Quarterly Fair Market Value &1 Year Time Charter Rate (1Qhistory, current Q, 2Q forecast

Annual average:• Newbuilding contract price• Fair Market Value• 1 Year Time Charter Rate• Operating Cost5 years history and 15 yearsforecast

Price Development Chartdetailing forecast pricedevelopment in relation tohistorical metrics

www.msiltd.com/fmv

http://www.msiltd.com/fmv

$25 Mn to invest in shipping... which vessel should I buy?


MSI Rating Methodology


www.msiltd.com

Descriptive Statistics MSI ApproachTraditional

Shipping

Earnings forecasts (Cycles accommodated)

Yes No

Conditional (time varying) volatility Yes No

Opex and scrap value forecasts (model derived)

Yes Yes

Ability to stress the forecasts with endogenous and exogenous scenarios

Yes Only Proxy Based

Stable calibration procedures Yes No

Copula based dependency Yes No

Model based Enforcement delays Yes No

Costs estimates for enforcements YesOnly anecdotal

experience

Model based (time varying) recoveryestimates

Yes No

Risk based pricing tool for asset values Yes No

Accommodate credit enhancements (cash cushions, dividend playouts etc.)

YesSubjective or

experience based

Sensitivity to input parameters Yes No

The model is similar to those applied by rating agencies, but with

enhanced data, econometrics and inputs. The model incorporates

volatility wrapped around cyclical trends, enforcement and recovery

scenarios and targeted optimisation of loan structure

Increased likelihood of

default

Expected “softening” of the

markets increases likelihood of

default


“Keep an eye out for crosswinds,

when the weeds meet the trees”

Thank You

Kent, MM NYC 2016

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

MSI’s expertise covers a broad range of shipping sectors, providing clients with acombination of sector reports, forecasting models, vessel valuations and bespokeconsultancy services.

MSI is staffed by economists and scientists offering a structured quantitativeperspective to shipping analysis combined with a wide range of industryexperience.

MSI balances analytical power with service flexibility, offering a comprehensivesupport structure and a sound foundation on which to build investment strategiesand monitor/assess exposure to market risks.

MSI Background


While this document has been prepared, and is presented, in good faith, MaritimeStrategies International assumes no responsibility for errors of fact, opinion ormarket changes, and cannot be held responsible for any losses incurred or actionarising as a result of information contained in this document.

The copyright and other intellectual property rights in data, information or advicecontained in this document are and will at all times remain the property ofMaritime Strategies International.

Disclaimer


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Maritime Strategies International Ltd

from the weeds to the trees where to look for opportunities - global … · 2018-03-21 · from the...

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