sailing on lpg’s new tides: strategies - global …...vlgc demand/supply balance & utilisation...
TRANSCRIPT
Sailing on LPG’s New Tides: Strategies
for adapting in a new era of diversification
in Supply & Demand
March 18 Clarksons Platou Gas/Japan LPG Conference March 2018
Clarksons Platou Gas
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
Dramatic change in the VLGC fleet continues…
Age Profile of the VLGC Fleet Forward Availability
-2 -5
-2 -4 -3
-10
-5
0
5
10
15
20
0
50
100
150
200
250
300
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f
No
. o
f V
es
se
ls
Fleet Development Base Scrap Scenario
2 3
7
11
27
12
9
3 2
13
8
35
44
20
4 3
5 7
3
8
1 2
3 2
5 5 5
8 6
7
16
11
0
5
10
15
20
25
30
35
40
45
50
<=
198
8
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
18
20
20
No
. o
f v
essels
15-19
yrs
0-14 yrs
Orderbook
20-24
yrs
25 +
yrs
-2
-9
-2
-10
-6
-15
-10
-5
0
5
10
15
20
0
50
100
150
200
250
300
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f
No
. o
f V
es
se
ls
Fleet Development High Scrap Scenario
Deliveries Removals
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
The VLGC Freight Market: How low did it go?
Baltic VLGC Index: AG-Japan Assessed Earnings Take a Hit
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Spot
Rate
- $
pm
t
Average 1990-Ytd 2018
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
Jan-1
6F
eb
-16
Ma
r-1
6A
pr-
16
Ma
y-1
6Jun-1
6Jul-1
6A
ug-1
6S
ep-1
6O
ct-
16
No
v-1
6D
ec-1
6Jan-1
7F
eb
-17
Ma
r-1
7A
pr-
17
Ma
y-1
7Jun-1
7Jul-1
7A
ug-1
7S
ep-1
7O
ct-
17
No
v-1
7D
ec-1
7Jan-1
8F
eb
-18
TC
E ‘000 $
per
month
VLGC's OPEX Range
Average 1990-Ytd 2018 (exc 14/15)
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
U.S exports continue to gain market share in Asia…
35.6
20.4
11.3
8.3
2.8
1.6
38.4
25.3
10.0
8.6
3.4
2.0
36.2
29.7
10.5
9.6
2.4
1.5
0
5
10
15
20
25
30
35
40
45
AG US Africa North Sea Non-USAmericas
Asia
MM
T
2015 2016 2017
Seaborne LPG Exports
18.1
11.2 10.6
6.5
5
7.7
China
India
Japan
South Korea
Indonesia
Others
60%
10%
23%
7%
Asia
Americas
Europe
Balance
Seaborne LPG Imports Asia/Global
Approx 67%
Imports
(excluding
coastal
movements)
www.clarksons.com March 18 Clarksons Platou Gas/Japan LPG Conference March 2018
Source: Clarksons Platou
2017/18 VLGC Volumes ex US & Middle East v Freights
0
100
200
300
400
500
600
700
800
900
1,000
0
10
20
30
40
50
60
70
80
Week
1
Week
4
Week
7
Week
10
Week
13
Week
16
Week
19
Week
22
Week
25
Week
28
Week
31
Week
34
Week
37
Week
40
Week
43
Week
46
Week
49
Week
52
Week
3
Week
6
‘000 M
T
$ PMT
Volume Lifted US-ARA US-Chiba (via Panama)
Ex US Ex Middle East
0
100
200
300
400
500
600
700
800
900
1,000
0
5
10
15
20
25
30
35
40
Week
1
Week
4
Week
7
Week
10
Week
13
Week
16
Week
19
Week
22
Week
25
Week
28
Week
31
Week
34
Week
37
Week
40
Week
43
Week
46
Week
49
Week
52
Week
3
Week
6
‘000 M
T
$ PMT
Volume Lifted AG-Japan
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
West/East Arbitrage volumes increasingly important
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Jan'1
3
Apr'13
Jul'1
3
Oct'1
3
Jan'1
4
Apr'14
Jul'1
4
Oct'1
4
Jan'1
5
Apr'15
Jul'1
5
Oct'1
5
Jan'1
6
Apr'16
Jul'1
6
Oct'1
6
Jan'1
7
Apr'17
Jul'1
7
Oct'1
7
Mil
lio
n M
T
Tbc
Africa
East
N.W.E
Med
Americas
% East
VLGC US Liftings by Destination
% going East
• 2012 12%
• 2013 19%
• 2014 22%
• 2015 41%
• 2016 47%
• 2017 59%
95
%
93
%
87
%
80
%
85
%
91
%
92
%
90
%
97
%
95
%
87
%
85
%
100,000
150,000
200,000
250,000
300,000
350,000
400,000
75%
80%
85%
90%
95%
100%
Millio
n T
on
ne M
iles (
Av
g L
ad
en
Dis
tan
ce x
To
tal T
on
nes)
%
Uti
lisati
on
of
the F
leet
% Utilisation Tonne-Miles
Utilisation falls, despite rising laden distances
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
U.S Cargo Cancellations & Netback Prices
…Export volumes also driven by pricing
-3.0
-2.4
-1.8
-1.2
-0.6
0.0
0.6
1.2
1.8
2.4
3.0
3.6
4.2
4.8
5.4
6.0
6.6
0
2
4
6
8
10
12
14
Ja
n-1
6
Feb
-16
Ma
r-16
Ap
r-1
6
Ma
y-1
6
Ju
n-1
6
Ju
l-1
6
Au
g-1
6
Sep
-16
Oct-
16
No
v-1
6
De
c-1
6
Ja
n-1
7
Feb
-17
Ma
r-17
Ap
r-1
7
Ma
y-1
7
Ju
n-1
7
Ju
l-1
7
Au
g-1
7
Sep
-17
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
Feb
-18
Fla
t N
etb
acks c
en
ts/g
allo
n (
exc T
erm
inal
Fees)
Pri
mary
nu
mb
er
of
carg
oes c
an
celled
/defe
rred
Cargo Cancellations Mt/B Asia +1 (via Neo-Panama)
Source: Clarksons Platou
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
Source: Clarksons Platou Source: Clarksons Platou
89
%
88
%
84
%
95
%
10
0%
68
%
56
%
20
%
47
%
39
%
5%
6
%
6%
0%
10
%
4%
21
%
10
%
36
% 43
%
31
%
19
%
14
%
6%
13
%
4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
01
/20
16
02
/20
16
03
/20
16
04
/20
16
05
/20
16
06
/20
16
07
/20
16
08
/20
16
09
/20
16
10
/20
16
11
/20
16
12
/20
16
01
/20
17
02
/20
17
03
/20
17
04
/20
17
05
/20
17
06
/20
17
07
/20
17
08
/20
17
09
/20
17
10
/20
17
11
/20
17
12
/20
17
01
/20
18
02
/20
18
% US-Asia Transits via Cape
Split of U.S/East Liftings via Panama & Cape…. Neo Panama Utilisation levels
VLGC Eastbound Movements & Neo-Panama Utilisation
4
9 5
8
15 17
26
34 31 30 29
32
16 20
16 19
30 27
22
31
14
3 7
5 9
17 21
26 25 27
31 29
20 19 22
15 12
16
25
18
31
15
-40
-30
-20
-10
0
10
20
30
40
No
rth
bo
un
d/S
ou
thb
ou
nd
Neo Panama Transits - Number
Southbound Northbound
2H16 – 29% (post new locks)
2017 – 17%
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
Source: Clarksons Platou
10
15
20
25
30
35
40
2015
2016
2017
2018
2019
2020
2021
2022
M M
T
North America
Asia/Australasia
Regional Net Seaborne Trade Balances will impact shipping flows….
-10
-8
-6
-4
-2
2015
2016
2017
2018
2019
2020
2021
2022
M M
T
Caribs/S. America
-14
-12
-10
-8
-6
-4
2015
2016
2017
2018
2019
2020
2021
2022
M M
T
Europe
4
5
6
7
2015
2016
2017
2018
2019
2020
2021
2022
M M
T
Africa
20
25
30
35
40
45
2015
2016
2017
2018
2019
2020
2021
2022
M M
T
Middle East
-70
-60
-50
-40
-30
-20
2015
2016
2017
2018
2019
2020
2021
2022
M M
T
Source: Clarksons Platou
www.clarksons.com
VLGC Demand/Supply Balance & Utilisation Scenarios
Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
US Exports at Base Case Export Growth
Data Source: Clarksons
70
73
76
79
82
85
88
91
94
97
100
-10
0
10
20
30
40
50
60
70
80
90
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fleet Utilisation %
Number of Vessels Required/Change & $ ,000 /day
% Utilisation of Trading Fleet (Base) Higher Scrap Scenario
Requirement Change in Fleet Supply
Change in Fleet Supply (Higher Scrap Scenario) VLGC TCE ($ ,000/day)
VLGC 1 YR TC Rates ($ ,000/day)
www.clarksons.com
Sign of the Times: Environmental Regulations
Clarksons Platou Gas/Japan LPG Conference March 2018 March 18
Date
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Baltic Sea ECA in effect
ECA – Emission Control Area North Sea ECA in effect Global NOx Tier I Limit
NOx
1.0% ECA SOx Limit SOx
EEDI for newbuildings formally adopted
Global NOx Tier II Limit
3.5% global SOx limit
North American ECA entered into force
EEDI – Energy Efficiency Design Index
EEDI & SEEMP Mandatory (Phase 0)
Ratification of BWMC
BWMC - Ballast Water Management Convention
US Caribbean ECA enters into force
BWMC applies to newbuilds & ships constructed before 8th
September 2017 if an IOPPC is completed on or after 8th
September 2014 and prior to 8th September 2017
Lower EEDI reference line (Phase 1)
0.1% ECA SOx limit
NOx Tier III ECA limit *
Lower EEDI reference line (Phase 2) 0.5% global SOx limit
Lower EEDI reference line (Phase 3)
Key
*At the MEPC 66 it was decided that, as of 1st September 2015, Tier III limits within
future ECAs will only apply to ships built after the date of adoption of the ECA, or a
later date as may be specified in the amendment designating the NOx Tier III ECA.
EU Monitoring, Reporting & Verification
MRV – Monitoring Reporting and Verification
MRV becomes mandatory in EU ports
EU MRV certification comes into force
North Sea & Baltic Sea NOx ECAs in effect
BWMC applies to all other ships constructed before 8th
September 2017
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018
Comparison of Methods of Compliance
March 18
• Storage tanks required
for MGO/MDO
• Modifications to the
fuel oil system may be
required
• Are there any
implications for engine
efficiency and/or
maintenance?
• Requires limited
investment. However,
fuel costs likely to be
higher and availability of
MGO/lower sulphur fuel
unclear
• price spread between
low sulphur fuel oil &
HFO uncertain
• Requires space to
install the scrubber
• There are various
types and
manufacturers to
choose between
• Requires significant
capital investment
• However, can run HFO
• Will the market be
sufficiently strong to
cover these investment
costs
• or will the MGO/HFO
differential be
sufficiently wide to
justify it?
• Reports on scrubbers
with corrosion problems
• Requires gas or
dual/tri-fuel engines,
LNG tanks, booster
pumps, double-walled
piping etc
• Significant investment
costs for the engine &
modifications required
• Maintenance costs
likely to be higher
• Loss of cargo space
(more important for
some types of vessels v
others
• LNG infrastructure
limited, spec and costs
uncertain
MGO Scrubber LNG LPG/Ethane
• Requires investment -
engine has to be able to
run on Ethane or LPG,
piping etc
• Some of the new
Multigas/Ethane carriers
already using Ethane as
a fuel and has cost
advantages
• Significant investment
costs for the engine &
modifications required,
but lower than LNG
• Maintenance costs
likely to be higher
• Overcomes some of
the hurdles of requiring
the infrastructure in
place – particularly if
LPG or Ethane is the
cargo
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018
Engines
ME-GI (Gas Injection) engines typically burn LNG. However, the high pressure injection is indifferent to the
gas composition, so they can burn different mixtures with higher hydrocarbon content such as LPG (with
modifications to the auxiliary components as the density of LPG is higher than the density of LNG)
ME-LGI (Liquid Gas Injection) Engines were designed for Methanol, but can burn LPG as well as
Ethanol. To date, the orders have been for Methanol as a fuel, but Propane is possible.
- LGI engines would be powered by LPG as a liquid fuel (whereas GI engines are injecting LNG as a
gas). The liquid fuel is injected via a booster injection valve, which raises the fuel pressure and
eliminates the need for high pressure fuel lines. There is no need for cryogenic equipment used for LNG
systems. Therefore, less expensive & uses fairly standard equipment
- LPG components such as injectors/valves can be designed smaller than LNG components, therefore
less heavy and less expensive
“Future Proofing” - LPG as a Fuel
March 18
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018
• Meets the criteria for a lower SOx marine fuel solution, PM & CO2. NOx emission reductions & IMO Tier 3
targets can be achieved if combined with other systems
• LPG has a higher calorific value compared to most other oil products & LNG - has the same efficiency
gains as LNG
• No risk of oil spills whilst bunkering
• No need to spend additional time bunkering, if using the cargo
• No need for separate LPG storage tanks, if fuel comes from the cargo tanks
• LPG pumps, compressors etc are generally less expensive than LNG
• Lower maintenance costs than diesel/gasoline as burns more cleanly
• More efficient than fuel oil/gas oil
However, LPG needs a higher pressure. There are also some safety concerns – in gaseous form Propane
& Butane are heavier than air and could therefore potentially be more dangerous if it leaks in the engine
room
Benefits of using LPG as a fuel
March 18
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018
…Costs could also be cheaper
March 18
0
2
4
6
8
10
12
14
16
18
20
22
24
26
Ja
n-1
2
Ma
r-12
Ma
y-1
2
Ju
l-1
2
Sep
-12
No
v-1
2
Ja
n-1
3
Ma
r-13
Ma
y-1
3
Ju
l-1
3
Sep
-13
No
v-1
3
Ja
n-1
4
Ma
r-14
Ma
y-1
4
Ju
l-1
4
Sep
-14
No
v-1
4
Ja
n-1
5
Ma
r-15
Ma
y-1
5
Ju
l-1
5
Sep
-15
No
v-1
5
Ja
n-1
6
Ma
r-16
Ma
y-1
6
Ju
l-1
6
Sep
-16
No
v-1
6
Ja
n-1
7
Ma
r-17
Ma
y-1
7
Ju
l-1
7
Sep
-17
No
v-1
7
$/G
J
Propane N.W.E Low Sulphur MGO Rotterdam
www.clarksons.com Clarksons Platou Gas/Japan LPG Conference March 2018
• Environmental Legislation WILL impact the freight market, as it will impact how vessels trade & costs
• Investment decisions will have to be made by Owners – Adapt, Scrap or “Wait & See”?
• Higher fuel costs will be borne by Receivers
• A formula for charging for the LPG as a fuel can be established
• Engine/vessel designs evolving as are agreements around LPG bunkering “hubs”
“JANUARY 29, 2018 — South Korea's plans to pioneer LPG as a marine fuel with a GE Combined Gas
turbine Electric and Steam System (COGES) powered car/passenger ferry are picking up pace.
Classification society Bureau Veritas has now given the design Approval in Principle and the Korea LPG
Association reports that a Memorandum of Understanding has been signed for what it says will be the
world's first LPG ship bunkering hub”
• A potential new Tide of LPG demand growth – only a matter of time!
Implications for the Market….
March 18
www.clarksons.com
Disclaimer
March 18 Clarksons Platou Gas/Japan LPG Conference March 2018
The material and the information (including, without limitation, any future rates) contained herein (together, the "Information") are provided by H. Clarkson & Co. Ltd
("Clarksons Platou") for general information purposes. The Information is drawn from Clarksons Platou's database and other sources. Clarksons Platou advises that: (i) any
Information extracted from Clarksons Platou's database is derived from estimates or subjective judgments; (ii) any Information extracted from the databases of other maritime
data collection agencies may differ from the Information extracted from Clarksons Platou’s database; (iii ) whilst Clarksons Platou has taken reasonable care in the
compilation of the Information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain
errors; (iv) the provision of the Information does not obviate any need to make appropriate further enquiries; (v) the provision of the Information is not an endorsement of any
commercial policies and/or any conclusions by Clarksons Platou and its 'connected persons', and is not intended to recommend any decision by the recipient; (vi) shipping is
a variable and cyclical business and any forecasting concerning it may not be accurate. The Information is provided on "as is" and “as available” basis. Clarksons Platou and
its ‘connected persons’ make no representations or warranties of any kind, express or implied about the completeness, accuracy, reliability, suitability or availability with
respect to the Information. Any reliance placed on such Information is therefore strictly at the recipient's own risk.
This Information is confidential and is solely for the internal use of the recipient. Neither the whole nor any part of the Information may be disclosed to, or used or relied upon
by, any other person or used for any other purpose without the prior written consent of Clarksons Platou. Especially, the information is not to be used in any document for the
purposes of raising finance whether by way of debt or equity. All intellectual property rights are fully reserved by Clarksons Platou, its ‘connected persons’ and/or its licensors.
To the extent permitted by law, Clarksons Platou and its ‘connected persons’ shall not be liable to the recipient or any third party for any loss, liability or damage, cost or
expense including without limitation, direct, indirect, consequential loss or damage, any loss of profit, loss of use, loss of or interruption in business, loss of goodwill, loss of
data arising out of, or in connection with, the use of and the reliance on the Information whether in contract, tort, negligence, bailment, breach of statutory duty or otherwise,
even if foreseeable.
These exclusions do not apply to (i) death or personal injury caused by the negligence of Clarksons Platou and its ‘connected persons’ or (ii) the liability of Clarksons Platou
and its ‘connected persons’ for fraud or fraudulent misrepresentation. In this disclaimer 'connected persons' means, in relat ion to Clarksons Platou, its ultimate holding
company, subsidiaries and subsidiary undertakings of its ultimate holding company and the respective shareholders, directors, officers, employees and agents of each of
them. This disclaimer shall be governed by and construed in accordance with English law.
H. CLARKSON & CO. LTD, COMMODITY QUAY, ST. KATHERINE DOCKS, LONDON, EW1 1BF