prospects for key shipping markets and implications for the bunker industry … · 2019-09-06 ·...

Prospects for key shipping markets and implications for the bunker industry in 2009 14th May 2009

By J. McilroyCredit Manager

Peninsula Petroleum Ltd

Last Quarter 2008 – “Perfect storm”

• Global financial meltdown propelled by exposure to US sub-prime

• Near standstill in global credit markets

• Evaporation of market confidence • Collapse of key commodity prices

• Significant number of business failures • Perception of heightened credit risk profile

PHYSICAL STRENGTHGLOBAL REACH

Bulk Carrier Spot Earnings ($,000'S/day) PHYSICAL STRENGTH

GLOBAL REACH

• Unprecedented collapse in global shipping markets

• BDI high mid-2008: 11,793

• BDI low Dec 2008: 663

• 94% drop in BDI


Last Quarter 2008 – “Perfect storm”

Mid Second Quarter 2009 “Emerging green shoots of recovery”

• Apparent halt in collapse of global financial system • Slow improvement in credit conditions

• Tentative rally in certain key commodity prices

• First positive signs of impact of international stimulus packages


The Dry Bulk Market

• Market leader into the collapse of late 2008

• Headlined by cape market implosion

• 2008 cape market highs of $220,000 per day

• 2008 cape market lows of less than $5,000 per day


The Dry Bulk Market

• BDI 1Q 2009 average: 1,562

• BDI 2Q 2009 average: 1,734* (*projected)

• Current week cape fixtures $27,000 - $30,000* (*reported)

• Average cape rates past 6 months - $17,500 per day


STEEL PRODUCTION & CAPE EARNINGS PHYSICAL STRENGTH

GLOBAL REACH

The Dry Bulk Market

• Chinese iron ore demand - 130m MT imported Q1 2009

• Impact of global stimulus packages - China US$600bn domestic infrastructure plans - G20 agreement on $1.1 trillion package • Renewed interest in S&P activity

- Mid-late 90’s built panamax - $19-22m- Mid-late 90’s built handymax - $14-15m


Positive Sentiment boosted by:

The Dry Bulk MarketPHYSICAL STRENGTHGLOBAL REACH

Major concerns on market fundamentals remain.

Of these the newbuilding overhang is the most significant• Current Cape / panamax / handymax / handysize fleet• 6,980 ships• 423m DWT • Cape / panamax / handymax / handysize order book 2009-2011• 3,405 ships • 295m DWT

69.8% DWT capacity increase

WORLD FLEETS & ORDERBOOKSPHYSICAL STRENGTHGLOBAL REACH

The Dry Bulk Market

• April 2009 current cape fleet - 842 vessels - 147m DWT

• Ordered for delivery 2009-2011 - 833 vessels - 155m DWT


Cape sector specifics

105% fleet DWT increase 2009-2011

The Dry Bulk Market

• April 2009 current cape fleet - 1561 vessels - 115m DWT

• Ordered for delivery 2009-2011 - 742 vessels - 60m DWT


Panamax sector specifics

52% fleet DWT increase 2009-2011

The Dry Bulk Market

• Scrapping - Oct 2008 – Feb 2009 167 vessels of 8.3m DWT scrapped - 111m DWT of vessels over 20 years of age

• Postponement / cancellations of orders - rumoured 30% cancellations

PHYSICAL STRENGTHGLOBAL REACHFactors mitigating the newbuilding surge

The Liner Market

• Current fleet: 4,700 vessels 12m TEU

• Current order book 1,200 vessels 6m TEU

• 25.5% increase in number of vessels

• 50% increase in TEU


LINER MARKET RATES ($,000'S/DAY)PHYSICAL STRENGTHGLOBAL REACH

The Liner Market

• -2% to -4% decline in global trade forecast 2009

• World Bank estimate of -6.1% in global economy in 2009


10% growth in demand per year required between 2009 and 2014 to equalise supply growth.

Against a background of:

INDUSTRIAL PRODUCTIONPHYSICAL STRENGTHGLOBAL REACH

The Liner Market

• Scrapping - 200,000 TEU estimated in 2009 - 180,000 TEU estimated in 2010

• Problems with scrapping - Average age of fleet 10 years - Only 1 ship in 6 over 20 years of age - Only 1 ship in 30 over 25 years of age


SCRAPPING PRICE TRENDSPHYSICAL STRENGTHGLOBAL REACH

The Liner Market

• Cancellation / postponement - Indications of major owners / operators in crisis talks with shipyards, mainly in S Korea - No firm data on numbers of cancellations

• Problems with cancellation / postponement - Most orders at established shipyards - Strong resistance of shipyards


Implications for the bunker industry

• Emerging from recession• Prospects of weak industrial growth• Constrained by lack of finance• Potential for credit impaired counterparties• Ongoing lack of strength of confidence• Major and worsening supply demand fundamentals• Increased pressure on profitability• With weaker balance sheets – compromised assets, higher levels of debt


In 2009 / 2010 the industry faces the prospect of working with counterparties in all shipping sectors trading in volatile markets

prospects for key shipping markets and implications for the bunker industry … · 2019-09-06 ·...

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