Opportunities and Outlook for the Shipping Marketsforums.capitallink.com/shipping/2017greece/ppt/frew.pdf · 15/02/2017 · Opportunities and Outlook for the Shipping Markets James

Opportunities and Outlook

for the Shipping Markets

James Frew - Maritime Strategies International (MSI)

8th Capital Link Greek Shipping Forum – 15th February 2017

© Maritime Strategies International www.msiltd.com 2

Outlook and opportunities

1. Sector Correlations

2. Demand outlook

3. Supply side

4. Price Drivers

5. Recovery?

Agenda

Sector correlations

© Maritime Strategies International www.msiltd.com


Shipping – a correlated industry


Commodity shipping sectors well correlated with each other, but not offshore and LPG

1) 2) 3) 4) 5) 6)

1) Containerships

2) Bulkers

3) Tankers

4) Chems

5) LPG

6) OSV

7) Drilling Rig

>75% Correlated

>50% Correlated

<50% Correlated

Negatively Correlated

Demand only explains part of the story


Most sectors are positively correlated, but not tightly so

>75% Correlated

>50% Correlated

<50% Correlated

Negatively Correlated

1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

1) Crude Oil

2) Product

3) Chemicals

4) LPG

5) LNG

6) Bulker

7) Container

8) PCTC

9) Cruise

10) AHTS

It is supply that is wrecking the markets


Sup

ply

Sup

ply

Sup

ply

Sup

ply

Demand



Headline Trade Ratio has Stalled


Tradewinds, May 26th 2016

And the container trade/GDP multiplier has broken down?


0

1

2

3

4

5

6

7

8

9

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

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

2012

2013

2014

2015

2016

2017

2018

2019

2020

Trade/GDP MultiplierYoY Ch

Global GDP

"Multiplier" (RH Axis)

Recovery from recessions


0

20

40

60

80

100

120

Ye

ar

0

Ye

ar

1

Ye

ar

2

Ye

ar

3

Ye

ar

4

Ye

ar

5

Ye

ar

6

Ye

ar

7

Ye

ar

8

Ye

ar

9

Ye

ar

10

Ye

ar

11

Ye

ar

12

Trade to GDP ratio, Year 0 = 100

1927-1939 1980-1992 2007-2015

The bigger picture


0%

10%

20%

30%

40%

50%

60%

70%

1870

1874

1878

1882

1886

1890

1894

1898

1902

1906

1910

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

Trade as a %age of Global GDP

Cyclical

Cyclical?

Structural

Supply



Orderbook/Fleet ratio – looking good??


0%

10%

20%

30%

40%

50%

60%

70%

80%B

ulk

er

2003

Bu

lke

r 2

008

Bu

lke

r 2

016

Ta

nk

er

200

3

Ta

nk

er

200

8

Ta

nk

er

201

6

Orderbook to fleet ratio

How Many Ships?


Routes Distance

Size Changes Carrying Capacity Ballast Ratio

Waiting/Port Time Speed

Operating Days

The key is the demand side…


0

50

100

150

200

250

300

350B

ulk

er

2003

Bu

lker

2008

Bu

lker

2016

Tan

ker

2003

Tan

ker

2008

Tan

ker

2016

Mn Dwt

Orderbook Incremental demand over following three years

…which doesn’t look so good


0%

50%

100%

150%

200%

250%

300%

350%

400%

Bu

lke

r 20

03

Bu

lke

r 20

08

Bu

lke

r 20

16

Ta

nk

er

20

03

Ta

nk

er

20

08

Ta

nk

er

20

16

Ratio

Orderbook to Fleet ratio

Orderbook relative to vessel demand

Shipyard Capacity Is a Worry


0

10

20

30

40

50

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Mn CGT Other Europe China Korea Japan


Yards Don’t Just Disappear

Yards have become ghost

towns… but haven't disappeared

Shipyard Capacity – Déjà Vu


0

2

4

6

8

10

12

14

16

18

20

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

Mn CGT Other Europe China South Korea Japan

Price drivers




What drives asset price formation?

Directional Analysis


-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1 1

2

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Q3

13

Q4

13

Q1

14

Q2

14

Q3

14

Q4

14

Q1

15

Q2

15

Q3

15

Q4

15

Q1

16

Q2

16

Q3

16

Q4

16

QoQ % Change NB Price 1 Yr TC Rate 5 Yr Price

VLCC

Quarters where 2nd hand price moves with NB price only


0

20

40

60

80

100

120S

up

ram

ax

Pa

na

ma

x

Ca

pesiz

e

MR

Afr

am

ax

VL

CC

# of Quarters

No Yes

Since 1990


NB Price Outlook

FC Pricing Power - OWNERS

FC Pricing Power - YARD

FC = forward cover

Recovery?



MSI - FMV


• MSI Forecast Marine eValuator (FMV) is the first web-based tool to provide forecast and historical price

data covering virtually all of the deepsea shipping fleet.

• Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs

for specific vessels.

• MSI FMV draws on MSI’s proven, proprietary models and a consistent cross-sectional view across all

principal shipping sectors. It puts asset values in the context of the near term market to enable reliable

benchmarking with outputs based on annual averages.

• Coverage:

Crude Oil Tanker

Product Oil Tanker

Dry Bulk Carrier

Chemical Tanker

LPG Carrier

LNG Carrier

Multi Purpose

Containership

PCC/PCTC

www.msiltd.com/fmv AHTS PSV

http://www.msiltd.com/fmv

FMV Output


Quarterly Fair Market Value & 1 Year Time Charter Rate (1Q history, current Q, 2Q forecast

Annual average: • Newbuilding contract price • Fair Market Value • 1 Year Time Charter Rate • Operating Cost 5 years history and 15 years forecast

Price Development Chart detailing forecast price development in relation to historical metrics

www.msiltd.com/fmv

http://www.msiltd.com/fmv

Asset play opportunities


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

MR

Tan

ker

Su

pra

ma

xB

ulk

er

Han

dy

Co

nta

iners

hip

DF

DE

LN

G

Sm

all A

nch

or

Han

dle

r

IRR (invest 2017, divest 2021)

Contracting New (Deliv. 2019)

Buying Secondhand (5 Yr Old)

Asset play timespan


0%

5%

10%

15%

20%

25%

30%

MR

Tan

ker

Su

pra

ma

xB

ulk

er

Han

dy

Co

nta

iners

hip

DF

DE

LN

G

Sm

all A

nch

or

Han

dle

r

IRR by year of divestment

2019

2021

2025


Thank you for listening

For over 30 years, MSI has developed integrated relationships with a diverse client base of financial institutions, ship owners, shipyards, brokers, investors, insurers and equipment and service providers. MSI’s expertise covers a broad range of shipping sectors, providing clients with a combination of sector reports, forecasting models, vessel valuations and bespoke consultancy services. MSI is staffed by economists and scientists offering a structured quantitative perspective to shipping analysis combined with a wide range of industry experience. MSI balances analytical power with service flexibility, offering a comprehensive support structure and a sound foundation on which to build investment strategies and monitor/assess exposure to market risks.

MSI Background


While this document has been prepared, and is presented, in good faith, Maritime Strategies International assumes no responsibility for errors of fact, opinion or market changes, and cannot be held responsible for any losses incurred or action arising as a result of information contained in this document. The copyright and other intellectual property rights in data, information or advice contained in this document are and will at all times remain the property of Maritime Strategies International.

Disclaimer


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Documents

Opportunities and Outlook for the Shipping Marketsforums.capitallink.com/shipping/2017greece/ppt/frew.pdf · 15/02/2017 · Opportunities and Outlook for the Shipping Markets James