SHIPPING SECTOR OVERVIEW

May-19

Global Industry

Snapshot

Pakistan Industry

Snapshot

Global & Local Sea

Trade Volume

World Fleet

CapacityPricing Outlook

INDUSTRY SNAPSHOT

World Merchandise Trade:

• Merchandise trade has a high correlation with GDP.

• Global economic activity slowed down in 2HCY18 following strong growth trend since CY17. The slowdown trend

reflected confluence of factors affecting major economies including trade tensions amongst China and the US. As

a result, global growth is expected to slow down to ~3.3% in CY19 (~3.6% in CY18). Hence, global shipping

companies’ freights have also come under pressure. The market is expected to remain the same in the near term

and pick up a moderate growth in the medium term, dependent on easing of trade tensions.

World Seaborne trade*:

• Global Seaborne trade volumes reached to 10.7billion tons in CY17 with a 4% annual growth.

World Fleet Capacity**:

• On January 1, 2018, world commercial fleet consisted of 94,169 vessels, with a combined tonnage capacity of

1.92billion dead weight tonnes (DWT). *latest available figures: CY17

**latest available as of 1-Jan-18

Global

• Maritime trade plays a pivotal role in Pakistan’s economy as almost ~95% of the country’s International trade is transported through seas.

Pakistan’s Seaborne trade | FY18:

100mln tons

Liquid Bulk:

34mln tons

Dry Bulk:

66mln tons

PNSC:

11mln tons

(~32%)

Others:

23mln tons

(~68%)

PNSC:

2mln tons (~3%)

Others:

64mln tons

(~97%)

• Pakistan’s seaborne trade grew by ~12% YoY basis in FY18.

• With a slowdown in overall economic activity, growth in seaborne trade is expected to decline in FY19, with a major

reduction expected in liquid bulk trade, owing to a drop in RFO shipments.

• Pakistan National Shipping Corporation (PNSC) is the only shipping company operating with flag as a national flag

carrier. The company maintains a fleet of 9 vessels (4 oil tankers and 5 dry bulk carriers) and has recently added two

(2) more LR-1 tankers to the fleet in March’19 and April’19. The company is further planning for acquisition of one

Aframax tanker in CY19.

INDUSTRY SNAPSHOT Pakistan

31% 30% 29% 29% 30% 29%

16% 16% 16% 17% 17% 17%

53% 54% 55% 54% 53% 53%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0%

10%

20%

30%

40%

50%

60%

CY12 CY13 CY14 CY15 CY16 CY17

World Seaborne Trade | Segment Wise (%)

Oil Tankers Containers Dry Bulk Growth

Category (mln tons) CY12 CY13 CY14 CY15 CY16 CY17

Oil Tankers 2,841 2,829 2,826 2,932 3,055 3,146

Containers 1,458 1,532 1,622 1,660 1,734 1,834

Dry Bulk 4,898 5,153 5,396 5,432 5,500 5,722

Total 9,197 9,514 9,844 10,024 10,289 10,702

• World seaborne trade is

directly correlated to the

trends of global merchandise

trade and GDP growth.

• Dry bulk trade constitutes the

highest share in world

seaborne trade.

• CY16, CY17 and 1HCY18

were promising in relation to

the world seaborne trade.

However, with rising trade

tensions between the two

major economies of world i.e.,

US and China, growth has

slowed down in 2HCY18. The

market is expected to remain

the same in the near term.

SEABORNE TRADE VOLUMES Global

29 33 34

54

43

66

-

10

20

30

40

50

60

70

FY16 FY17 FY18

Seaborne Trade Volumes | Segment - mln tons

Liquid Bulk Dry Bulk

• Pakistan’s seaborne trade recorded a growth of ~12% in FY18 YoY basis clocking in at ~100mln tons,

particularly attributing to increase in dry bulk cargo. Growth is however, expected to slow down in FY19

following slowdown in overall economic activity and drop in furnace oil shipments.

• The sector has one flagship carrier – Pakistan National Shipping Corporation (PNSC), which operates on

a competitive basis.

SEABORNE TRADE VOLUMES Pakistan

1,694

1,749

1,806

1,862

1,924 4.2%

3.3% 3.2%

3.1%

3.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1,550

1,600

1,650

1,700

1,750

1,800

1,850

1,900

1,950

CY13 CY14 CY15 CY16 CY17

Total World Capacity (DWT -mln)

Total World Capacity (DWT -mln) Growth (%)

683 728 761 778 797 818

488 474 490 504 534 562

211 217 227 244 246 252

244 268 269 280 285 292

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CY12 CY13 CY14 CY15 CY16 CY17

World Fleet | Capacity (mln DWT) | Segment Wise

Dry Bulk Oil Tanker Container Other Cargo

• Total World fleet capacity stood at ~1.9bln Dead Weight Tons (DWT) as of 1st Jan, 2018 registering a growth of ~3.3% YoY

basis.

• Since almost ~53% of the world seaborne trade comprises dry bulk trade, world fleet capacity for dry bulk vessels is the

highest (~43%), followed by oil tankers (~29%).

WORLD FLEET CAPACITY Global

17%

12%

12%9%

7%

6%

4%4%

4% 2%

Deadweight tonnage (%)

Panama Marshall Islands Liberia Hong Kong

Singapore Malta China Bahamas

Greece Japan

10%

8%

6%

5%4%4%

4%

4%

3%

3%2%

2%2% 2% 2%

Number of Vessels (%)

Indonesia Panama Japan China U.S

Singapore Marshall Islands Liberia Russia Hong Kong

Malta Korea Vietnam India Malaysia

• In terms of deadweight tonnage, top 10 countries contribute ~77% to the world’s total fleet capacity, of which Panama,

Marshall Island and Liberia take the lead.

• In terms of number of vessels, top 15 countries make up ~59% of the total world fleet size. Indonesia, Panama and

Japan take the lead.

• China, Korea and Japan accounted for ~91% of global deliveries in CY17.

• India continued to be the country where most ship scrapping takes place, followed by Bangladesh and Pakistan.

*latest available figures: CY17

WORLD FLEET CAPACITY | Country Share Global

99,358

94,411

89,464

90,917

93,167 94,169

0

5

10

15

20

25

84,000

88,000

92,000

96,000

100,000

104,000

CY12 CY13 CY14 CY15 CY16 CY17

Avg

. Age

| Y

ear

s

Nu

mb

er

WORLD FLEET | NUMBER AND AVG. LIFE

Number of Vessels (LHS) All Ships Dry Bulk Oil Tankers

• Total world fleet increased by

~1% YoY in CY17 recording a

number of 94,169 vessels as of

1-Jan-18.

• The average age of the fleet

registered in developing countries

is slightly higher than that

registered in developed countries

attributed to the following reasons

(i) less new deliveries to the fleet

(ii) low fleet modernization and

(iii) economic conditions.

WORLD FLEET | Number and Average Life Global

0

200

400

600

800

1000

1200

1400

1600

1800

2000

JUL

-16

AU

G-1

6

SE

P-1

6

OC

T-1

6

NO

V-1

6

DE

C-1

6

JAN

-17

FE

B-1

7

MA

R-1

7

AP

R-1

7

MA

Y-1

7

JUN

-17

JUL

-17

AU

G-1

7

SE

P-1

7

OC

T-1

7

NO

V-1

7

DE

C-1

7

JAN

-18

FE

B-1

8

MA

R-1

8

AP

R-1

8

MA

Y-1

8

JUN

-18

JUL

-18

AU

G-1

8

SE

P-1

8

OC

T-1

8

NO

V-1

8

DE

C-1

8

JAN

-19

FE

B-1

9

MA

R-1

9

AP

R-1

9

BALTIC DRY INDEX | MONTHLY TREND

FY17 FY18 10MFY19

• In 2HFY18, following slowdown in global economic activity, BDI reflected a gradual downslide, with the steepest

fall occuring in Jan-19. Thereafter, the index has regained its upward flow.

FREIGHT RATES | Dry bulk Pricing

0

20

40

60

80

100

120

140

160

JUL

-15

AU

G-1

5

SE

P-1

5

OC

T-1

5

NO

V-1

5

DE

C-1

5

JAN

-16

FE

B-1

6

MA

R-1

6

AP

R-1

6

MA

Y-1

6

JUN

-16

JUL

-16

AU

G-1

6

SE

P-1

6

OC

T-1

6

NO

V-1

6

DE

C-1

6

JAN

-17

FE

B-1

7

MA

R-1

7

AP

R-1

7

MA

Y-1

7

JUN

-17

JUL

-17

AU

G-1

7

SE

P-1

7

OC

T-1

7

NO

V-1

7

DE

C-1

7

JAN

-18

FE

B-1

8

MA

R-1

8

AP

R-1

8

MA

Y-1

8

JUN

-18

JUL

-18

AU

G-1

8

SE

P-1

8

OC

T-1

8

NO

V-1

8

DE

C-1

8

JAN

-19

FE

B-1

9

MA

R-1

9

AFRA INDEX | MOVEMENT

FY16 FY17 FY18 10MFY19

FREIGHT RATES | Liquid Pricing

• Global freight rates remained under pressure in FY18 due to a slowdown in global merchandise trade. The

index has picked up a moderate growth uptick in CY19.

SECTOR OUTLOOK

• World Real GDP is expected to grow @ ~3.6% through 2020-23, while Seaborne Trade is expected to grow @ ~3.8%.

• Amongst Seaborne trade, containerized trade is expected to grow at the highest pace, while crude oil trade is expected

to register the lowest growth, owing to global shift in energy mix. Refined products are expected to continue modest

growth.

Future

Prospects

Analysts Saniya Tauseef

Supervising Senior - Ratings

Saniya.tauseef@pacra.com

Jhangeer Hanif

Unit Head - Ratings

jhangeer@pacra.com

Contact Number: +92 42 3586 9504

DISCLAIMERPACRA has used due care in preparation of this document. Our information has been obtained from sources weconsider to be reliable but its accuracy or completeness is not guaranteed. The information in this document may becopied or otherwise reproduced, in whole or in part, provided the source is duly acknowledged. The presentation shouldnot be relied upon as professional advice.

Bibliography

• Review of Maritime Transport 2018

• Pakistan National Shipping Corporation

• https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD

• https://www.investing.com/indices/baltic-dry-historical-data

• https://nation.com.pk/28-Sep-2018/maritime-industry-s-role-in-world-economy-highlighted