Blue Event 10 - Present at On by Erik Bast Ian Sen

8/6/2019 Blue Event 10 - Present at On by Erik Bast Ian Sen

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MSR-Consult ApSMaritime Systems Research CBS Feb. 2008 : 1

Forum for Shipping konomi og Strategi28. Februar 2008

The Newbuilding MarketTheory, Tendencies and Projections

Erik Bastiansen

MSR-Consult


Contents of Presentation

History and Current Situation

Long-term newbuilding requirement 2008-2023

Medium-term newbuilding market outlook 2008-14

The geographical distribution of shipbuilding


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Demand for Newbuildings1970-2007

Boom in 1970-73 and in 2003-07:

Maximum values 1970s/2000sof contracts/year:

2,070 / 3,900 ships

129 / 242 mDWT

37 /79 mCGT

Maximum values 200s/2000sof world orderbook:

3,100 / 8,800 ships 242 / 507 mDWT

64 / 178 mCGT

World Newbuilding Ordering 197 0-2006Sources: Fearnley's, Lloyd's Register-Fairplay, Clarkson Research Studies & MSR

0,0

25,0

50,0

75,0

100,0

125,0

150,0

175,0

200,0

225,0

250,0

1970 1975 1980 1985 1990 1995 2000 2005

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

DWT (Left Scale) No. of Ships (Right Scale)

mDWT

Ships

World Newbuilding Orderbook 1970-2 007Sources: Fearnley's, LR-Fairplay, Clarkson Research Studies, & M SR

0,0

100,0

200,0

300,0

400,0

500,0

600,0

1970 1975 1980 1985 1990 1995 2000 2005

0

2000

4000

6000

8000

10000

12000

DWT (Le ft Sc ale ) No. of Sh ip s (Rig ht Sc ale )

mDWT Ships


Increasing World Fleet1970-2007

The World Fleet 1970/2007:

18,400 / 36,500 ships

321 / 1,115 mDWT

144 / 500 mCGT

Growth Factor (% p.a.) 1970-

2007:

Ships: 2.0 (1.8%)

DWT: 3,5 (3.3%)

CGT: 3,5 (3.3%)

World orderbook in % of DWTof the Fleet:

1973: 55%

2007: 45%

World Fleet 1970-2007Sources: Fearnley's, LR-Fairplay, Clarkson Research Studies, & M SR

0

200

400

600

800

1.000

1.200

1.400

1.600

1970 1975 1980 1985 1990 1995 2000 2005

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

DWT (Le ft Sc ale) No. of Ship s ( Rig ht Sc ale )

mDWTShips

World Orderbook In Percent of World Fleet 1970-2007Sources: Fearnley's, LR-Fairplay, Clarkson Research Studies , & MSR

0,0

10,0

20,0

30,0

40,0

50,0

60,0

1970 1975 1980 1985 1990 1995 2000 2005

Percent of DWT

Percent


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Current Newbuilding MarketBoom 2003-07, CGT

Follow the same tendenciesas the number of ships

The relative movement are,however, larger

Total Newbuilding Market, Mill. CGTMonthly Contracting

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

200 3 2 004 20 05 200 6 2 007 20 08

7 Mo nth s Aver ag e Actua l R eco rd ed

Mill. CGT

The Newbuilding Market By Main Ship Type7 months moving averages. Ships of 2,000+ DWT or GT

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

2003 2004 2005 2006 2007 2008

Al l Tan ke rs Bulk C ar rier s C on ta in er /GC O the r Types

Mill. CGT


General Freight Market Earnings, US$/DayOil Tankers, Dry Bulk Carriers, Gas Carriers and Container Ships

NB! Direct Link

!Latest week

22-02-2008

ClarkSea Index, USD/DayMonthly Average Earnings In the Major Shipping Segments

Sources: Clarkson Research Studies and MSR-Consult

0

10.000

20.000

30.000

40.000

50.000

60.000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

US$/Day


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The Current Newbuilding Market BoomBack Ground

Outsourcing and globalisation

The 3rd world countries are gaining weight

Strong cyclic upturn in the world economy from 2001/02

Long-term adjustment of the fleet to demand

Exceptionally strong freight market conditions

Underlying replacement cycle and S/H to D/H oil tankerreplacement

Low and declining interest rate and easy access to

finance Very strong market sentiment

Moderate and moderately increasing newbuilding prices

Influx of newcomers in shipping and shipbuilding


Long-Term Newbuilding Requirement 2008-23


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Overview of Forecast Process

Scenario and trends of the world economy

World seaborne trade trends by commodity

Tonnage requirement trends by ship type and size-range

Long-term newbuilding requirement

Decommissioning of tonnage by ship type and size-range

Age profile of fleet segment

Average lifetime

Life expectancy distribution

Replacement tonnage: Productivity improvements, upsizing,

and substitution

Fleet increase requirement by ship type and size-range


Long-Term Requirement 2008-23: An ExampleDry Bulk Carrier Decommissioning

0,0

5,0

10,0

15,0

20,0

25,0

30,0

1988 1993 1998 2003 2008 2013 2018 2023

mDWT

History Estimate Base CaseLow Case High Case

Age Profile - Bulk Carriers, mDWT

0,00

5,00

10,00

15,00

20,00

25,00

30,00

1972 1977 1982 1987 1992 1997 2002 2007

Very Small small Medium Large

The Decommissio ning Frequency Function

Corresponding to an average lifetime of 25 Years

0,00

3,00

6,00

9,00

12,00

15,00

0 5 10 15 20 25 30 35 40

Percent

Age of a ship

Sources: MSR-Consult & LR-Fairplay


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Long-Term Requirement 2008-23: An ExampleDry Bulk Trades 1965-2025

Seaborne Trade, Iron Ore, Bill. TonMilesSources: Fearnley's, CRS& MSR

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Recorded T rend

Seaborne Trade, Coal, Bill. TonMilesSources: Fearnley's, CRS& MSR

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Recorded T rend

Seaborne Trade, Grain, Bill. TonMilesSources: Fearnley's, CRS& MSR

0

200

400

600

800

1.000

1.200

1.400

1.600

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Recorded T rend

Seaborne Trade, BAPhR, Bill. TonMilesSources: Fearnley's, CRS& MSR

0

50

100

150

200

250

300

350

400

450

500

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Reco rded T rend

Seaborne Trade, Minor Bulk, Bill. TonMilesSources: Fearnley's, CRS& MSR

0

1.000

2.000

3.000

4.000

5.000

6.000

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Recorded T rend

Seaborne Trade, All Bulk, Bill. TonMilesSources: Fearnley's , CRS& MSR

0

5.000

10.000

15.000

20.000

25.000

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Reco rded T ren d


Long-Term Requirement 2008-23: ResultsForecast Growth Rates By Segment, % of Tonnage

Ship Types Reference High Growth Low Growth

Crude Oil Tankers 2,7 3,7 2,2

Oil Product Tankers 3,9 4,9 3,4

Chemical Tankers 4,0 5,0 3,5

FPSOs 6,0 7,5 5,5

Miscellaneous Tankers 1,0 1,5 0,5

LPG Carriers 4,2 5,2 3,7

LNG Carriers 9,6 12,6 7,6Container Vessels 6,5 7,9 5,5

Semi-Container Vessels 1,7 2,2 0,7

Reefer Ships -1,5 -1,0 -3,0

Roro Cargo Carriers 2,6 3,6 1,6

Car Carriers 5,6 7,6 4,6

Other General Cargo Ships -4,5 -3,5 -5,5

Dry Bulk Carriers 3,2 4,2 2,2

Passenger Ships 2,2 2,7 1,7

Cruise Vessels 7,5 8,5 6,0

Offshore Vessels 4,4 4,9 3,4

Miscellaneous Types 1,3 1,8 0,8

Scenarios


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Long-Term Requirement 2008-23: ResultsAnnual Deliveries in CGT

Total Newbuilding Requirement, Mill. CGTSources: MSR-Consult and Clarkson R esearch Studies

0

10

20

30

40

50

1978 1983 1988 1993 1998 2003 2008 2013 2018 2023Delivered Orders 01-02-08 Replacement

To tal R equirement Reference Scenario Lo w Gro wth ScenarioHigh Gro wth Sce na rio F le et Inc re as e R equireme nt

M il l . CGT


Long-Term Requirement 2008-23: ResultsAnnual Deliveries In No. of Ships

Total Newbuilding Requireme nt, No. Of ShipsSources: MSR-Consult and Clarkson Research Studies

0

500

1000

1500

2000

2500

3000

1978 1983 1988 1993 1998 2003 2008 2013 2018 2023Delivered Orders 01-02-08 Replacem ent

To ta l Requirement F leet Increas e Requirem ent Reference Scenario

Lo w Gro wth Scenario High Gro wth Scenario

N o . O f S h i p s


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Medium-Term Newbuilding Demand 2008-14


Overview of Medium-Term Forecast Process

Objectives: To forecast the medium term cyclesand yearlymagnitudeof global and regional contracting

Segmentation:

Segmentation by major commodity and thus by major shiptype.

Segmentation of the major ship types by size-ranges: 18 typesand 58 size-ranges

Side Benefits:

Conversion of forecast results for other uses


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The corner stone: A supply/demand-model for eachfreight market segment.

Historical fleet supply

Historical tonnage demand, a trend projection, and cycles indemand

The current market balance

Forecast: Feed-back simulation quarter by quarter:

Future decommissioning and contracting

Consequential deliveries Freight market balance

Limitations to the freight market models



Control variables:

Long term trends in decommissioning

Long term newbuilding requirement

A consistent picture of the freight market balance, i.e. thesupply/demand balance ???

Key parameters and thus the sources of majoruncertainties:

The growth in the trend of tonnage demand

The cyclic development of tonnage demand

Market sentiment


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Other uncertainties and limitations:

Technical problems:

Data limitations and quality

Ship type classification

Interconnection/substitution between segments

Delivery time modelling

Contracting, a marginal effect.

Planning horizons/delivery times.

The micro-picture of shipowners contra the macro-picture ofthe world fleet

The dynamics in the market.


Medium-Term Demand: An ExampleDry Bulk Carrier Freight Market

Base Case

DeviationFrom the Trend, Bulk Carrier, Base CaseSources:MSR-Consult

0,8

0,85

0,9

0,95

1

1,05

1,1

1,15

1,2

1990 1995 2000 2005 2010

Trend Deviation FromTrend

Number

0,0

100,0

200,0

300,0

400,0

500,0

600,0

700,0

1996 1999 2002 2005 2008 2011 2014

mDWT

Fleet Demand-trend

Demand-Actual Demand ex. Congestion

History Forecast

Bulk Carrier EarningsMonthly Average of Spot Market Earnings, USD/Day

Sources: Clarkson Research Studiesand MSR-Consult

0

10000

20000

30000

40000

50000

60000

70000

199419951996199719981999 20002001 200220032004200520062007 2008


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Medium-Term Demand: An ExampleDry Bulk Carrier Freight MarketHigh Case

0,0

100,0

200,0

300,0

400,0

500,0

600,0

700,0

1996 1999 2002 2005 2008 2011 2014

mDWT

Fleet Demand-trend Demand-actual

History Forecast

Bulk Carrier EarningsMonthly Average of Spot Market Earnings, USD/Day

Sources:Clarkson Research Studiesand MSR-Consult

0

10000

20000

30000

40000

50000

60000

70000

199419951996199719981999 20002001200220032004200520062007 2008

DeviationFromthe Trend,Bulk Carrier, HighCaseSources:MSR-Consult

0,8

0,85

0,9

0,95

1

1,05

1,1

1,15

1,2

1990 1995 2000 2005 2010

Trend DeviationFromTrend

Number


Medium-Term Demand: An ExampleDry Bulk Carrier Contracting and Decommissioning

Base Case

0,0

25,0

50,0

75,0

100,0

125,0

150,0

1996 1999 2002 2005 2008 2011

Very Small Small Medium Large

mDWT

History Forecast

0,0

10,0

20,0

30,0

40,0

50,0

60,0

1996 1999 2002 2005 2008 2011

Very Small Small Medium Large

mDWT

History Forecast

Contracting Decommissioning


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Medium-Term Demand: An ExampleDry Bulk Carrier Fleet ChangesBase Case

Fleet Changes, Dry Bulk Carriers - Base CaseSources: MSR-Consult and Clarkson Research Services

-18,0

-12,0

-6,0

0,0

6,0

12,0

18,0

24,0

2005 2006 2007 2008 2009 2010 2011 2012

-9,0

-6,0

-3,0

0,0

3,0

6,0

9,0

12,0

Delivered Orders as per 01-02-08New Contracts (010107) RecyclingFleet Growth, % (Ri ght) Demand Growth (Right)

Mill. DWT/Qrt Pct. P.A


Medium-Term Newbuilding Market Outlook2008-14

Forecast from September 2007


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Medium-Term Outlook Two Cases - Contracting

Alternative Cases - Quarterly Contracting - Ships/Year3 Q u a rt e r s M o v i n g Av e r a g e

Sources : MSR-Consult and Clarkson Re search Services

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1996,1 1999,1 2002,1 2005,1 2008,1 2011,1

Recession Case Reference Case

No. Of

Ships


Medium-Term Outlook Recession Case - Contracting

Recession Case - Yearly Contracting, No. Of ShipsSources: MSR-Cons ult and Clarkson Research Studies

0

500

1000

1500

2000

2500

3000

3500

4000

1996 1999 2002 2005 2008 2011

Number

of Ships

History Forecast


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Overview of Forecast ProcessConverting Contracting Rates to Delivery Rates

Delivery times for ships depends on

Size and type of ship

Availability of shipbuilding capacity (dock- or buildingpositions)

Planning- and speculative factors

Two ways of calculation are used:

Fixed distributions per ship type and size-range depicting the

current situation, i.e. the freight market model: Owners View Yard capacity availability on a broad-based ship type

grouping, i.e. the shipyard model: Yards View [not shown]


Medium-Term Outlook Recession Case Deliveries - CGT

Historic & Future Total Del iveries, Mill. CGTSources: MSR-Co nsult and Clarkson Research Services

0

10

20

30

40

50

60

1996 1999 2002 2005 2008 2011 2014

Allready Delivered O-Bo o k 01-02-08

Fo recas t Deliveries Macro P ic ture, Owners

Million

CGT

History Forecast


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Medium-Term Outlook Recession Case Deliveries - Ships

Historic & Future Total Deliveries, No. Of ShipsSources: MSR-Co nsult and Clarkson R esearch Services

0

500

1000

1500

2000

2500

3000

1996 1999 2002 2005 2008 2011 2014

Allready Delivered O-Bo o k 01-02-08

Fo recas t Deliveries Macro P ic ture , Owners

No. of

Ships

History Forecast


Average Delivery Times By Yard Country/Area

Average De livery Times Over Time, Years5 quarters moving average

Sources: Clarkson Resea rch Se rvices & MSR-Consult

1,50

1,75

2,00

2,25

2,50

2,75

3,00

3,25

3,50

1999,1 2000,1 2001,1 2002,1 2003,1 2004,1 2005,1 2006,1 2007,1

Global Japan South Korea China Europe

Years

Year and Quarter of Contracting


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Geographical Distribution of Shipbuilding


Overview of Forecast ProcessGeographical Distribution of Shipbuilding

Long-Term Trends and Forecasts of capacity and marketshares

Medium-Term Forecast:

Orders and new contracting by year and ship type groups. Shipbuilding capacity: Individual yards (60.000+ DWT or 250+ meters LOA)

Medium yards by country (10,000-60,000 DWT or 140-250 metersLOA)

Small yards by country (2,000-10,000 DWT or up to 140 metersLOA)

Historical market shares by ship type group

Current overall relative competitiveness


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Geographical Distribution - Conclusions

Main parameters influencing competitiveness:

Cost-structure and Cost-competitiveness in US Dollar

Shipbuilding capacity, current booking, and delivery times

Local infra-structure re. design, equipment, etc.

Local tonnage demand, regulations, financial support etc.

Forward calculations: A likely picture of market shares,production and capacity utilisation


Geographical Distribution In ShipbuildingLong-Term Trends: Total World

Long Term Trends In Market SharesPercent of CGT, Analytically derived from trend-points

Sources: MSR-Consult and Clarkson Research Studies

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Ja pa n Sou th Korea Ch in a Euro pe Ot he r W orld


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Geographical Distribution Shipbuilding CapacityMill. CGT/Year and Percent Increase 2006 to 2012

Year All

Japan Korea China Europe Others Total

2005 9,0 9,5 4,5 8,0 3,0 34,0

2006 10,0 10,5 5,5 8,5 3,5 38,0

2007 10,5 11,5 7,5 9,0 4,0 42,5

2008 10,5 14,0 9,0 9,0 4,5 47,0

2009 10,5 16,0 12,5 9,0 5,0 53,0

2010 10,0 17,5 15,5 8,0 5,5 56,5

2011 7,5 17,5 16,0 7,0 4,0 52,0

2012 6,5 17,5 17,0 6,0 4,0 51,0

% 2006-2012 -35,0 66,7 209,1 -29,4 14,3 34,2


Geographical Distribution: China

Contracting, Chines e Yards

0,0

4,0

8,0

12,0

16,0

20,0

24,0

28,0

32,0

36,0

2003 2004 2005 2006 2007 2008

7 Months Moving A verage A ctua l Recorded

Mill. CG T

NB! Direct Link

Chinese Yards

0

3

6

9

12

15

18

21

2001 2003 2005 2007 2009 2011Contracting DeliveriesOn Order Current Capacity

Mil l . CGT


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Geographical Distribution: South Korea

NB! Direct Link

Contracting, South Korean Yards

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

2003 2004 2005 2006 2007 2008


Mill. CGT South Korean Yards

0

4

8

12

16

20

24


Mil l . CGT


Geographical Distribution: Japan

NB! Direct Link

Contracting, Japanese Yards

0,0

4,0

8,0

12,0

16,0

20,0

2003 2004 2005 2006 2007 2008


Mill. CGT Japanese Yards

0

2

4

6

8

10

12

14

16


Mill . CGT


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Geographical Distribution: Europe

NB! Direct Link

Contracting, Europe an Yards

0,0

3,0

6,0

9,0

12,0

15,0

2003 2004 2005 2006 2007 2008

7 Months Moving Ave ra ge Act ua l Re corded

Mill. CG T European Yards

0

1

2

3

4

5

6

7

8

9

10

2001 2003 2005 2007 2009 2011Contract ing DeliveriesOn Order Current Capacity

Mil l . CGT


Geographical Distribution: World

NB! Direct Link

World Sh ipyards

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

2001 2003 2005 2007 2009 2011

Contracting DeliveriesOn Order Current Capacity

Mill. CGTMarket Shares, Deliveries, Pct. of CGT

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

1999 2001 2003 2005 2007 2009 2011

Japan Korea All Europe China

Pct.


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Geographical Distribution: World

NB! Direct Link

Market Shares o f Major Yard Countries/AreasPercent of CGT

Sources: MSR-Consult and Clark son Research Studies

0,0

20,0

40,0

60,0

80,0

100,0

1970 1975 1980 1985 1990 1995 2000 2005 2010

Percent

of CGT

Japan

South Korea

ChinaWestern Europe

Eastern Europe

Other World


Newbuilding Prices


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Overview of Forecast ProcessMedium-Term Newbuilding Price Forecast

Model Factors:

Shipbuildingcapacity

Orderbook

Relativecompetitiveness

Steel prices

Labour costs

Productivity gains

Exchange rates Import share

Recorded and Estimated Newbuilding Price Index

0,0

20,0

40,0

60,0

80,0

100,0

120,0

140,0

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Model Values Recorded

Index

1990=100

Source: MSR-Consult


Newbuilding Prices, US$-IndexEnd-Year Prices

NB! Direct Link

Newbuilding Prices 1975-2010US Dollar Index, 1990 =100, At Year-End

Sources: MSR-Co nsuls, Fearnley's &Clarkson Research Studies

0

20

40

60

80

100

120

140

1975 1980 1985 1990 1995 2000 2005 2010

US Dollar

Index

Newbuilding Prices 1975-2007Currency Adjustet Index, 1990=100, At Year-End

Sources: Fearnleys, Clarkson, &MSR-Consult

0

20

40

60

80

100

120

140

1975 1980 1985 1990 1995 2000 2005

Index


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Medium-Term Outlook

The demand for newbuildings will continue on a strongnote in the very short-term

Strong ups and downs in the demand for individual types ofships will be seen

A declining tendency is regarded as most likely or eveninevitable over the next quarters.

The speed of decline depends on the economicdevelopment and market sentiment.

When (or if) the turning point is reached, a major downturn

in the ordering of newbuildings and an upturn indecommissioning are forecast


Medium-Term Outlook

Cancellations and some changing of ship type of currentorders

The timing and magnitudes are uncertain

The stronger the downturn the stronger the followingupturn

Newbuilding prices will start to decline and drop to a lowlevel

Some shipyard expansion projects will be dropped orscaled down

A shipbuilding industry crisis will develop as orderbooksare run down


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Medium-Term Outlook

Chinese and Korean will gain market shares

Japanese and European shipbuilding will loos marketshares

Certain up-coming shipbuilding nations may curtail theirambitions

Documents

Blue Event 10 - Present at On by Erik Bast Ian Sen