The VLGC Market - IMSF · The VLGC Market Latsco Shipping Limited Prepared for the IMSF, ALBA, Athens, May 2016 Presented by Dr. Mariniki Psifia, Market Analyst ... Platts LPGaswire,

Prepared by Dr. Mariniki PSIFIA, 2016

The VLGC Market

Latsco Shipping Limited

Prepared for the IMSF, ALBA, Athens, May 2016

Presented by Dr. Mariniki Psifia, Market Analyst

Latsco Shipping Limited

IMSF Forum (9th – 11th May 2016)


Disclaimer

This presentation (including any oral presentation) (the “presentation”) is intended solely for the purposes of the IMS Forum 2016 and its participants. This presentation is confidential and must not be copied, reproduced, published, distributed, disclosed or passed to any other person at any time without the prior written consent of Dr. Mariniki Psifia. Without prejudice to the generality of the foregoing, this presentation may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States. This presentation is for information purposes only. The information and opinions provided in this presentation are, unless otherwise stated herein, provided as of the date of this presentation and are subject to change. Certain statements are forward-looking statements. The forward-looking statements include statements typically containing the words “intends”, “expects”, “anticipates”, “targets”, “plans”, “estimates” and words of similar import. These forward-looking statements speak only as at the date of this presentation or as otherwise specifically provided herein. The forward-looking statements are based on numerous assumptions and such assumptions may or may not prove to be correct. No one undertakes to update or revise such forward-looking statements. This presentation does not constitute legal, valuation, tax, or financial consulting advice, nor is it a statement on the performance, management capability or future potential (good or bad) of the company(ies), industry(ies), product(s), region(s) or country(ies) discussed. Those interested in specific guidance for shipping, legal, strategic, and/or financial or accounting matters should seek competent professional assistance from their own advisors. Any commentary, observation or discussion contained in this presentation about a country, industry or company does not constitute a recommendation to buy or sell company shares or make investment decisions. Although the statements in this presentation are derived from or based upon various and credible information sources and/or economic models that the author believes to be reliable, the author does not guarantee their accuracy, reliability, or quality, and any such information, or resulting analyses, may be incomplete, rounded, inaccurate or condensed. All estimates included in this presentation are subject to change without notice. This presentation is for informational purposes only and may or may not be intended as a recommendation to invest or an offer or solicitation with respect to the purchase or sale of a security, stock, limited partnership instrument, or financial vehicle. This presentation reflects the views of its author and not of any one else (including of any former or current employer).


LPG Shipping


Liquefied Petroleum Gas (LPG) is a global industry

Natural

Gas wellGas Plant Pipeline Power Generation

LNG liquefaction

LNGResidential /

CommercialPetrochemical gases

Industrial

Auto

Oil well Refinery Further refining

Chemicals

Agricultural

UserSources Transport

LPG

Dirty Products

Processing industries

Natural Gas

LPG

Ammonia

Condensates (CPP)

Clean Products

Source: Various

LPG consists of propane and butane, petroleum gases that originate either from crude oil and/or natural gas

Despite being gaseous at ambient pressure and temperature, propane and butane both liquefy relatively easily under pressure, refrigeration or combination of the two

LPG is a clean energy source compared to many other fossil fuels and it has numerous applications

LPG is substitutable in many of its applications, and its pricing is influenced by its competition with other fuels or feedstocks


The Baltic Liquefied Petroleum Index (BLPGI) through the years

Source: The Baltic Exchange


The U.S. poised to become the top LPG exporter within a few years

U.S. Exports of Propane and Propylene are expected to hit unprecedented levels by 2017 due to additional export projects

Source: U.S. E.I.A, 2016

…to the fastest growing LPG exporter in the world over a 6 year time span!

From the LPG sector’s importer of last resort…

???


The US confirmed its place as the world’s leading exporter of LPG in 2015 with over 19.7 mio mt of exports – a 40.1% y/y growth

Data Source: GTIS, IHS


2015 – What happened last year

Data Source: Clarksons SIN, Platts LPGaswire, Factsset, GTIS, IHS


2016 – Where are we this year?


Crude oil prices, Naphtha vs Propane


Correlations between WTI, Henry Hub Natural Gas and Propane Mont Belvieu

Propane Mont Belvieu vs WTI WTI vs Henry Hub Natural Gas

Propane Mont Belvieu vs Henry Hub Natural Gas

Propane prices

are highly correlated to

Crude oil prices

by


The West – East Arb is firmly closed

200,0

250,0

300,0

350,0

400,0

450,0

500,0

550,0

600,0

650,0

700,0

750,0

800,0

850,0

900,0

950,0

1 000,0

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

$/mt FOB Houston FOB Arab Gulf

($125)

($100)

($75)

($50)

($25)

$0

$25

$50

$75

$100

$125


ARB OPEN ARB CLOSED

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%


Houston to Japan AG to Japan

The West- East Arb FOB Propane Houston vs Arab Gulf

Percentage of the Freight element to Japan CFR Price

Data Source: FactSet, Platts


Weaker crude prices and ample supply pulled down the LPG prices in Asia

Data Source: FactSet, Platts, GTIS


The VLGC Freight Market


Today, VLGC Net Time Charter rate are below $20,000/day (-79% y/y)

Freight: AG-Chiba / Houston - Chiba VLGC Net Timecharter Rates

Source: The Baltic Exchange


VLGC Timecharter Rates (TC) fell below long-term historical averages

2002-des; $400,0

2015-jul; $2 219,0

2016-apr; $816,0

$1 257,9

$938,9

250

500

750

1 000

1 250

1 500

1 750

2 000

2 250

Oct

-95

Oct

-96

Oct

-97

Oct

-98

Oct

-99

Oct

-00

Oct

-01

Oct

-02

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oct

-14

Oct

-15

Oct

-16

Oct

-17

Oct

-18

,000 per Month

1 Yr Time-Charter

5 years average

10 years average

$4 038,8

$704,0

$1 646,9

$1 174,8

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Jan

-08

Au

g-0

8

Mar

-09

Oct

-09

May

-10

De

c-1

0

Jul-

11

Feb

-12

Sep

-12

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Mar

-16

Oct

-16

May

-17

De

c-1

7

Jul-

18

,000 per Month

82/84K CBM LPG TCE

5 years average

8 years average

1 Year VLGC TC Rates decreased by 63.2% since Jul. 15 84,000 cbm LPG TC Equivalent decreased by 84% since Jul15

Source: Clarksons SIN


Massive cost savings for the owners because of the dramatic decline in bunker costs in 2015….do not apply anymore

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

De

c-0

2

Ap

r-0

3

Au

g-0

3

De

c-0

3

Ap

r-0

4

Au

g-0

4

De

c-0

4

Ap

r-0

5

Au

g-0

5

De

c-0

5

Ap

r-0

6

Au

g-0

6

De

c-0

6

Ap

r-0

7

Au

g-0

7

De

c-0

7

Ap

r-0

8

Au

g-0

8

De

c-0

8

Ap

r-0

9

Au

g-0

9

De

c-0

9

Ap

r-1

0

Au

g-1

0

De

c-1

0

Ap

r-1

1

Au

g-1

1

De

c-1

1

Ap

r-1

2

Au

g-1

2

De

c-1

2

Ap

r-1

3

Au

g-1

3

De

c-1

3

Ap

r-1

4

Au

g-1

4

De

c-1

4

Ap

r-1

5

Au

g-1

5

De

c-1

5

Ap

r-1

6

Bunkers Cost to Gross TCE ~ Ratio


The LPG Trade during 2015 and 1Q-2016


World LPG Trade Development For 2016 LPG exports are expected to increase by 12% to 82 mio mt

Major LPG Importers Major LPG Exporters

Data Source: GTIS. ^forecasting as per various sources


In Q1-2016, propane and butane trade fell by 1.7% y-o-y to 16.53 mio mt*

Data Source: GTIS. * Preliminary data as per data collection on 4th May 2016


All of US 2015 LPG exports found homes with Asian countries (China, Japan, S. Korea) absorbing the main increment of those cargoes

Data Source: GTIS - IHS, May 2016


US Terminal Export Capacity & VLGC liftings from Targa & Enterprise (2014 – Feb 2016)

6,81 7,37 11,69

16,00 1,88 5,1

6,70

6,70

3,40

6,20 6,20 6,20 6,20 6,20

4,25

0

5

10

15

20

25

30

35

40

45

50

2013 2014 2015 2016 2017 2018 2019 2020

Mio MT

KinderMorgan

Sage

Phillips 66

Oxy

Sunoco

DCP

Petredec/Martin Gas

Trafigura

Sunoco/MarkWest

PetroGas

Targa

Enterprise

Estimated North America LPG Export Volume Capacities US LPG Export Scenarios based on Terminal Capacity

VLGC Estimated Liftings from Targa and Enterprise, TX (mio mt)

Data Source: GTIS / IHS. Lifting data are from AIS

26,16

19,69

37,14

26,00 27,95

29,71

15

20

25

30

35

40

TerminalCapacity

Exports 70.0% 75.3% 80.0%

2015 TerminalCapacity 2016

2016 Export Scenarios(% of Terminal Capacity)

Terminal utilization

75.3%

-

0,20

0,40

0,60

0,80

1,00

1,20

J-14 F-14 M-14 A-14 M-14 J-14 J-14 A-14 S-14 O-14 N-14 D-14 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15 J-16 F-16

Mio Mt 2015: On average 18.6 liftings per month Est. total lifted quantity 9.8 mio mt

2014: On average 18.2 liftings per month Est. total lifted quantity 9.64 mio mt


Middle East LPG Exports during 2015 and 1Q-2016

Split between Long-Haul and Short-Haul Importers

Who has exported the most during Q1-2015 & Q1-2016 Middle East LPG Exports y/y comparison in mio mt*

AG to China: +15.6% y/y

0,02

1,18 0,95

2,43

1,39

3,23

0,01

0,73 0,77

1,95

0,86

2,71

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

Bahrain Iran Kuwait Qatar Saudi Arabia UAE

Mio mt

[Q1-2015]

[Q1-2016]

70% 65%

60% 56% 51%

37% 31%

40%

22% 24% 30%

35% 40% 44%

49%

63% 69%

60%

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

2007 2008 2009 2010 2011 2012 2013 2014 2015 3M-2016

Long-Haul Short-Haul

2014 2015 y-o-y 3M-2015 3M-2016 y-o-y

China 7.79 10.91 39.9% 2.24 2.59 15.6%

India 7.51 8.28 10.3% 2.03 0.77 -62.0%

Japan 8.20 7.99 -2.6% 2.62 2.32 -11.5%

Indonesia 3.23 3.84 18.8% 0.84 0.63 -25.1%

Korea, South 3.77 3.08 -18.2% 0.88 0.47 -46.3%

Thailand 1.79 1.30 -27.6% 0.34 0.21 -39.7%

Other 0.917 1.04 13.7% 0.25 0.05 -81.7%

Total* 33.21 36.44 9.7% 9.20 7.03 -23.6%

Data Source: GTIS. * Preliminary data as per data collection on 4th May 2016


Iran LPG Exports following the removal of International Sanctions and South Pars 24-phase development plans

0,23 0,52 0,40

0,63

1,5

8 2

,52

2,8

9 3

,74

2,3

1

0,7

1

2,8

1

3,7

4

0,7

1

0

1

2

3

4

5

6

7

8

9

10

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

(f)

20

17

(f)

20

18

(f)

20

19

(f)

20

20

(f)

mio MT

Other Middle East Asia & Oceania Africa

The South Pars fields Iran LPG Historical and Future Estimated Exports

The South Pars Development Plans

Data Source: GTIS and Information from 10th LPG Trade Summit, Istanbul 2015, FGE. Prepared by Dr. Mariniki Psifia

Natural gas production from South Pars is critical to meet

increasing domestic consumption and Iran’s current

& future export obligations

Prepared by Dr. Mariniki PSIFIA, 2016 Data: GTIS / HIS. 2016 :̂ 3M-2016

During Q1-2016, China’s seaborne LPG imports totalled 4.4 mio mt, up by 47.8% y-o-y

0,60 0,54 0,60 0,41 0,63 0,82 1,09

3,69

5,04

1,31 0,38 1,14 1,21 0,77

0,44

2,56

3,58

0,68

0,77

3,57

1,19 0,73 0,59

1,47 1,21 1,06 0,99

1,48

1,78

2,49

1,01

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016^

Mio mt UAE Iran Kuwait USA Saudi Arabia Other

Africa 8,66%

Asia & Oceania 3,04%

Eurasia 0,05%

Europe 1,98%

Middle East 50,11%

North America 36,16%


India LPG Imports keep increasing

2014-2015 Monthly Indian LPG Imports Yearly Indian LPG Imports

Propane and Butane split

1,71 2,11

3,42 3,67

0,41 0,26 0,38 0,32

1,06

1,22

1,11

1,60 1,61

1,25 1,44 1,26 1,60

1,76

1,30

1,42

1,55

2,22

0,23 0,30 0,27

0,45

0,63

0,99

0,78

0,86

0,75

0

1

2

3

4

5

6

7

8

9

2007 2008 2009 2010 2011 2012 2013 2014 2015

Mio mt

Qatar United Arab Emirates

Saudi Arabia Kuwait

Bahrain Iran

Other

0,3

0,4

0,5

0,6

0,7

0,8

0,9

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mio mt [Imp 2014] [Imp 2015]

Data Source: GTIS/IHS

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15

Butane Propane


The VLGC Fleet


LPG Fundamentals: Supply

• VLGC units currently number 220 ships of a total 17.38m cu.m,

• The y-o-y VLGC growth is today equal to 29.4% in number of vessels and

it is expected to exceed the 34.17% by June 2016.

• The orderbook is quite heavy for the specific sector with 29.2% of the

fleet in cu.m terms currently on order (65 vessels).

• Since the beginning of 2016, 22 VLGC of a total 1.84 mio cu.m were

delivered and 3 new VLGC orders were placed to the shipyards

VLGC Supply Growth* in number of vessels

Source: Clarksons. * Slippage and Cancellations are not included

Deliveries and Orderbook in number of vessels

6

2

11

3

1

2 1

1

1

0

1

2

3

4

5

6

7

8

9

10

11

12

J-1

6

F-1

6

M-1

6

A-1

6

M-1

6

J-1

6

J-1

6

A-1

6

S-1

6

O-1

6

N-1

6

D-1

6

VLGC LGC MGC HGC

25 24

11

3 2

11

24

2

8

24

1

0

10

20

30

40

50

60

70

80

M A I . 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0

VLGC LGC MGC HGC

10

6

11

0

13

0

13

7

14

0

14

0

14

2

15

5

16

3

19

8

22

0

24

5

26

9

28

0

25

24

11

3

2015; 21,5%

2016; 23,7%

-3%

0%

3%

5%

8%

10%

13%

15%

18%

20%

23%

25%

28%

50

75

100

125

150

175

200

225

250

275

300

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

20

19

y-o-y growth # of vessels

VLGC

Estimated Deliveries

y-o-y growth

Prepared by Dr. Mariniki PSIFIA, 2016 Data: Clarksons SIN

LPG Fleet – Size Ranges, Cargo Capability & Tank Type

The fleet (in number of vessels)

Orderbook (in number of vessels)

Orderbook - to - Fleet Ratio (in number of vessels)

38 MGC

33 HGC

65 VLGC

98 HGC

2 LGC

Prepared by Dr. Mariniki PSIFIA, 2016 Data: Clarksons SIN

Currently the VLGC fleet stands at 220 vessels of 17.93 mio cu.M

80

62

23 17 20

13 5 0

10

20

30

40

50

60

70

80

90

0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 +

# of vessels

VLGC average age is 9.4 years old

VLGC Fleet Profile 38 vessels are older than 20 years old

The Fleet

220

0

25

50

75

100

125

150

175

200

225

250

VLGC

The Orderbook

60

5

-

20

40

60

80

100

120

140

160

180

200

VLGC

LPG Ethane Capable

In just 10 years, the average VLGC age fell by 47.7% to less than 9.4 years old

18,0

15,7 14,9

14,3 14,1 13,9

13,0 12,5

10,4

9,40 8,0

10,0

12,0

14,0

16,0

18,0

20,0

2007 2008 2009 2010 2011 2012 2013 2014 2015 Mar-16

Average Age

Fleet As of Start 2016 16.09 198

Deliveries 1.84 22

Demolitions - -

Fleet As of today 17.93 220

NET FLEET CHANGE 1.84 22

Orderbook [2016 - 2020] 5.24 65

Orderbook to Fleet 29.2% 29.5%

VLGC ≥ 61,000 cu.M.in million

cu.m.

in number of

vessels


VLGC Fleet Per Year of Built & Orderbook

- 2

- - 1 1 1 - 1

5 6 8

6

1 2 3 2 -

3 5

7

3

8

2 3

7

11

27

12

9

3 2

13

8

35

22

25

3

20

11

3

1

2 -

5

10

15

20

25

30

35

40

45

50

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

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

NUMBER OF VESSELS

YEAR OF BUILT

VLGC Fleet [Contract Year 2014] [Contract Year 2015] [Contract Year 2016]



The VLGC Orderbook per Yard

Hyundai; 27; 49,1%

Jiangnan SY Group; 4; 7,3%

Jiangnan Changxing; 12.5%

Kawasaki HI Sakaide; 4.2%

MHI Nagasaki; 8; 14,5%

Shanghai Waigaoqiao; 2;

3,6% DSIC Offshore; 5;

9,1%

8

11

3

2

15

2

2

1

4

2

1

2

3

2

0 10 20 30 40

Daewoo (DSME)

Hyundai

DSIC Offshore

Jiangnan SYGroup

Jiangsu New YZJ

Kawasaki HISakaide

MHI Nagasaki

ShanghaiWaigaoqiao

2016 2017 2018

2019 2020

The Orderbook per Yard

(in number of vessels)

Scheduled Deliveries per Year

(in number of vessels)



VLGC y-o-y fleet growth and timecharter equivalent rates (TCE)

apr.16; 30,51%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

$0

$10 000

$20 000

$30 000

$40 000

$50 000

$60 000

$70 000

$80 000

$90 000

$100 000

$110 000

$120 000

$130 000

$140 000

de

s.1

1

feb

.12

apr.

12

jun

.12

aug.

12

okt

.12

de

s.1

2

feb

.13

apr.

13

jun

.13

aug.

13

okt

.13

de

s.1

3

feb

.14

apr.

14

jun

.14

aug.

14

okt

.14

de

s.1

4

feb

.15

apr.

15

jun

.15

aug.

15

okt

.15

de

s.1

5

feb

.16

apr.

16

Y-o-Y Growth $/Day 82K CBM LPG TCE Rates VLGC Growth*

Historical Data: Clarksons SIN. * VLGC Growth in cu.m


As per current shipyard delivery schedule, it is estimated that the VLGC fleet y-o-y growth will peak in June 2016

Source: Historical Data Clarksons SIN


Thank you!

Documents

The VLGC Market - IMSF · The VLGC Market Latsco Shipping Limited Prepared for the IMSF, ALBA, Athens, May 2016 Presented by Dr. Mariniki Psifia, Market Analyst ... Platts LPGaswire,