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Tanker Supply and Demand Graham Westgarth Chairman INTERTANKO Nor-Shipping DNV Seminar Oslo 25 May 2011. Looking beyond the next two years toward 2015, what sort of balance will there be in the tanker market? - PowerPoint PPT Presentation
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Tanker Supply and Demand
Graham WestgarthChairman INTERTANKO
Nor-Shipping DNV SeminarOslo 25 May 2011
• Looking beyond the next two years toward 2015, what sort of balance will there be in the tanker market?
• Will there be a similar consolidation in the tanker market as we have seen in the container market? What are the drivers for and against consolidation?
• Assuming that the large energy importing countries increase their control of the total value chain, to what extent will there be a role for the independent tanker owner?
• Freight rates for some tanker segments at rock bottom• Fundamentals still strong, but great uncertainty
caused by– High oil price– Political unrest – Debt crises, unemployment, housing crises
• Many deliveries (but delays), young fleet• Slack in supply of tankers
– slow steaming (ballast)– Lowering C/P speed– Fewer tanker transits through Suez Canal
– Piracy effect – longer routes/inefficiency • New refineries in Saudi Arabia
Tanker Supply and DemandWhat to watch
World GDP and Oil Demand Change
Source. IMF/BP/IEA/Fearnleys
%
Oil/tanker demand correlates with economic growthPositive growth projected – but there is great uncertainty
Signs of oil slower growth demand due to high prices
Oil Price and Freight Rates 1970-2011
$ per barrel$ per barrel
0
20
40
60
80
100
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Nominal price Arab Light
Real price Arab Light
Nominal freight rate AG-West
Real freight rate AG-West
Deflated by the Consumer Price Index (USD)CPI* index 1982-84=100
VLCC Newbuilding Prices and Break Even Rates
Based on LRFairplayBased on LRFairplay
m $
25,000
29,000
33,000
37,000
41,000
45,000
60
80
100
120
140
160
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
Break even rate
Newbuilding prices
68,000 dwt47,000 dwt
Source: Clarkson Shipyard Monitor
215 VLCCs
29
18
29
41 54 55 70?
31
$/day
New tankers coming on to the market ordered at high prices
Tanker Demand
Increase in World Oil Demand in ME*, USA, China and ROW**
Based on IEABased on IEA
bn tonne-miles
-2.6
-2.2
-1.8
-1.4
-1.0
-0.6
-0.2
0.2
0.6
1.0
1.4
1.8
2.2
2.6
3.0
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
* *Rest of world*Middle EastUSAChinaWorld
Tanker Trade
Based on FearnleysBased on Fearnleys
bn tonne-miles
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1970s 1980s 1990s EST00s
-38%
+36%
+20%
Seaborne Oil Trade and Middle East Oil Production
Based on Fearnleys/IEABased on Fearnleys/IEA
mbd 000 bn tonne-miles
9
12
15
18
21
24
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
4,000
5,800
7,600
9,400
11,200
13,000
Middle East Oil Prod mbd
Tonne miles
Asia 80% dependent on Middle East, Europe 18% and US 17% - some 15 mbd crude oil through Hormuz 2010
Middle East Oil Production January 2000 to March 2011
Based on Fearnleys/IEABased on Fearnleys/IEA
mbd
VLCC rates have approximately over the last years tracked Middle east oil production – no longer!
Trade Movements
Based on BPBased on BP
mbd
0
10,000
20,000
30,000
40,000
50,000
60,000
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
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
US Europe Japan Rest of World
Rest of world 26%
Rest of world 47%
Demand shifting from west to east Demand shifting from west to east
Tanker Supply
Tanker Fleet Development(Assumed max phase out, orderbook March 2009, include chemical tankers)
Tanker fleet increase 2003-2013 some 75%
m dwt number
275
329
383
437
491
545
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
3,300
3,920
4,540
5,160
5,780
6,400
dwtNumber
Tanker Phase Out, Deliveries, Scrapping Tankers 10,000 dwt+ Balance Assuming Various Demand Increases
m dwtm dwt
-25
-5
15
35
55
75
95
-02 03 04 05 06 07 08 09 10 11 12 13 14 15
Max phase out
Deletions
Delveries
Surplus zerotrade grow thSurplus 2.5%trade grow thSurplus 4%trade grow thSurplus 6%trade grow th
year
Assumed market balance end 2008
Minus 2% growth in 2009 and the above scenarios later
Assumed removal of double hull tankers
Strategic Considerations and Conclusions
Oil Demand, Tonne-mile, and Tanker Fleet Indices
Source: IEA, Fearnleys, INTERTANKO
Tanker fleet increase 2002-2010: 46%
95
100
105
110
115
120
125
130
135
140
145
150
155
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
Oil demand index
Tonne miles crude tanker index
Tanker fleet index
Index value
Fleet surplus has been disguised by storage, slow steaming and special events
Demand increased strongly in 2020, butDemand increase abating?
Fleet increasing
Strategic Tanker Considerations
• A young fleet - 70% will be with us for at least another 10-15 years (built >2000)
• China expected to drive demand and the Middle East has the reserves
• World economy still under threat, the high oil price adds to the uncertainty
• Market balance set to weaken the next couple of years• Successful Green House Gas emission reduction will
mean reduced oil consumption• Costs reduction needs careful risk management • Product tanker market may be the strongest, fewer
delivers, new Saudi refineries
Long and Short Term Considerations
• Still fragile economy
Long term
Wild cards:Oil price$ risik
Disruptions: insurgency, hurricanes,
strikes,…….Storage/stocks
Short term
Positive
Negative
• Many deliveries
• Young fleet, little scrapping
• Large shipyard capacity
• Slow steaming and reduced C/P speed
• Around the cape transits• Little use of Suez canal for crude transits
• Energy security
•GHG emission
• Alternative use of energy
• Fuel efficiency
• Peak oil?
• Population increase
• GPD increase
• Long term oil demand forecast up
• Increased dependence on Middle East oil
• Oil use per capita still low in China, India, Africa
A Fragmented IndustryLargest operators/shares
Based on LRFairplayBased on LRFairplay
VLCCs560Some 140 owners
7%
Suezmaxes420Some 110 owners
Aframaxes890Some 230 owners
7%
Four Scenarios
