Product Tanker ket Outlook IMSF Geneva - 217
Global Presence 16 staff in strategic locations LONDON HOUSTON BEIJING SEOUL HONG KONG SINGAPORE Product Tanker ket Outlook 217 2
Where are we now? Product Tanker ket Outlook 217 3
Clean Tanker Earnings Clean earnings pressured (until recently) by: Rising tanker supply/newbuild crude tankers carrying CPP High product stocks limiting arbitrage and trading Slow down in Middle East refinery expansions Higher interregional Asian trade competing with deep sea imports Heavy refinery maintenance Currency issues in Nigeria LR Earnings $/day 6, 5, 4, 3, 2, 1, LR1 UKC-West Africa Cln LR1 AG-East Cln LR2 AG-East Cln (TC1) Recent strength in the MR market caused by: West African demand (improved $ access) Refinery outages and disruptions in Latin America US refinery maintenance Higher demand for summer grade gasoline in the US, and a gradual drawdown in stocks. Delays in the Mediterranean and Bosporus Slowing MR supply growth MR Earnings $/day 4, 35, 3, 25, 2, 15, 1, 5, 3 Med-Med Cln (TC6) TC2 + TC14 (UKC-USAC + USG-UKC) 37 UKC-US Cln (TC2) 215 216 217 215 216 217 Product Tanker ket Outlook 217 4
1 Year TC Rates $/day 6, 55, VLCC - 1 year Suezmax - 1 year Aframax - 1 year LR2-1 year LR1-1 year MR2-1 year 3 Year TC Rates $/day 6, 55, VLCC - 3 years Suezmax - 3 years Aframax - 3 years LR2-3 years LR1-3 years MR2-3 years 5, 5, 45, 45, 4, 4, 35, 35, 3, 3, 25, 25, 2, 2, 15, 15, 1, 1, 215 216 217 215 216 217 Product Tanker ket Outlook 217 5
Key Themes in Supply Product Tanker ket Outlook 217 6
Scheduled Tanker Deliveries New Tanker Orders No. 4 35 3 25 2 15 1 5 39 14 71 53 46 94 44 38 168 168 61 37 69 31 126 63 44 59 29 82 49 45 45 15 58 3 24 28 8 19 2 5 1 81 2 1 47 27 3 53 2 21 11 124 92 52 66 85 32 79 MR/Handy LR1/Panamax LR2/Aframax Suezmax VLCC 44 33 47 16 44 2 3 2 3 15 8 26 28 29 21 211 212 213 214 215 216 217 218 219 22 No. 7 6 5 4 3 2 1 9 81 153 37 46 VLCC Suezmax LR2/Aframax LR1/Panamax MR/Handy 16 62 6 48 98 3 55 69 37 63 9 46 51 47 55 22 57 116 55 295 13 9 246 28 26 74 18 3 43 225 27 13 42 163 7 43 19 3 36 21 14 13 115 18 7 18 48 36 5 61 79 1 6 25 29 16 72 25 26 27 28 29 21 211 212 213 214 215 216 217 Product Tanker ket Outlook 217 7
Orderbook as a % of Existing Fleet 18% 16% 14% 12% 1% 8% 6% 11% 13% 15% 14% 1% 4% 7% 2% % 1% Handy (25-4 dwt) MR (4-55 dwt) LR1/ PANAMAX LR2/ AFRAMAX SUEZMAX VLCC Total Tankers Product Tanker ket Outlook 217 8
Scrapping set to increase from 217 Tanker Scrapping Forecast No. 18 16 14 12 1 8 6 4 2 12 9 2 VLCC LR2 / AFRAMAX Handy / MR 9 14 12 38 14 11 21 25 76 12 8 27 9 4 14 19 37 7 31 21 8 3 8 36 1 8 24 1 23 SUEZMAX LR1 / PANAMAX Ballast Water Convention introduced t 17 7 7 18 21 6 1 19 4 29 Global sulphur limits reduced to.5% 14 14 22 4 34 14 12 18 3 27 22 17 26 7 29 21 36 11 39 42 28 29 21 211 212 213 214 215 216 217 218 219 22 221 Very low scrapping in 215/16 due to a strong market. However scrapping is expected to return towards normal levels in 217. Scrapping activity could increase from 217 owing to the BWMC; however, the change in sulphur limits in 22 is likely to be more impactful. Scrapping activity will also be influenced by earnings, scrap prices, bunker prices and of course the fleet age profile. For product tankers, the age of the fleet may be more relevant, i.e. vessels over 15 years of age switching to DPP. Tanker Fleet Age Profile VLCC Suezmax LR2/Aframax LR1/Panamax MR Handy 19% 13% 14% 27% 25% 27% 28% 35% 42% 35% 31% 37% 35% 21% 24% 28% 36% 24% 15% 13% 14% 14% 7% 6% 4% -5 yrs 6-1 yrs 11-15 yrs 16-2 yrs 21-25 yrs 26+ yrs Product Tanker ket Outlook 217 % 2% 4% 6% 8% 1% 9
Key Themes in Demand Product Tanker ket Outlook 217 1
Product stocks are a barrier to a sustained clean market recovery Global product stocks remain at elevated levels. US gasoline stocks recently saw some draw downs, but may build again following higher arbitrage flows and the conclusion of maintenance season in the US. Whilst stocks are starting to be drawn down in some regions, the rebalancing is likely to take the majority of 217, and could still impact the markets into 218. ARA Clean Product Stocks ( tonnes) 6 5 4 3 2 1-13 -13 Jet Kero Gasoline -13-14 -14-14 Naphtha Gasoil -14-14 -14-15 -15-15 -15-15 -15 Source: Thomson Reuters/PJK -16-16 -16-16 -16-16 -17-17 USAC Clean Product Stocks ( bbls) 16, 14, 12, 1, 8, 6, 4, 2, -13-13 Jet Kero Gasoline Distillates -13-14 -14-14 -14-14 -14-15 -15-15 -15-15 -15 Source: Thomson Reuters/PJK -16-16 -16-16 -16-16 -17-17 Product Tanker ket Outlook 217 11
Refining Capacity Additions Net CDU capacity additions according to the IEA b/d 18 16 14 Africa Far East Indian Subcont Middle East Europe FSU Latin America North America Refining capacity expansions are primarily driven by projects in the Middle East, Far East and India. The next major wave of capacity additions starts in 219, driven by new plants in the Middle East (Jizan, Al Zour etc). 12 Strong growth in Middle East product exports are expected for 219-22. 1 After a lull in 218, Far Eastern refining capacity sees growth through to 222, increasing regional crude demand. 8 Increasing capacity in the Far East will cater for a portion of regional demand growth, with the balance served by rising imports. 6 4 2 Indian expansions are seen in 221, but are unlikely to be enough to cater for domestic demand growth, supporting product imports. The IEA anticipate the start up of the Lagos Lekki refinery in 222, which could have a big impact on West African product imports. However it is too soon to tell whether this refinery will be a success. 217 218 219 22 221 222 Product Tanker ket Outlook 217 12
Slower growth in long haul products trade/rising tanker supply MEG Product Exports vs. LR2 Fleet Growth UAE estimated* b/d 3,3 MEG Product Exports LR2 Fleet 3,1 2,9 No. 32 31 3 29 Asia Naphtha barrels from the West MT 25 Naphtha imports from West East - West Naphtha Spread 2 $/ton 4 35 3 2,7 28 27 15 25 2,5 26 2 2,3 25 24 1 15 2,1 1,9 23 22 21 5 1 5 1,7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2 211 212 213 214 215 216 217 Product Tanker ket Outlook 217 13
Higher exports from China competing with imports China CPP Exports Light and Middle Distillate Exports b/d Selected Intra-Asian Product Trade ' b/d 12 1 8 6 4 2 Total Diesel Exports Total Gasoline Exports Total Jet Kerosene Exports 5,5 5,25 5, 4,75 4,5 4,25 4, 3,75 3,5 3,25 3, 2,75 2,5 215 216 217 Product Tanker ket Outlook 217 Source: Reuters Eikon Source: IEA, countries include China, Japan, Korea, Australia 14
What Next? Product Tanker ket Outlook 217 15
Product Demand: Trade between the Middle East and Asia the major driver 216 vs. 222 ( b/d) Global Product Balances: 216 Global Product Balances: 222 mbd 3 mbd 3 2 2 1 1-1 -1-2 -2 Light Distillates Middle Distillates Fuel Oil Light Distillates Middle Distillates Fuel Oil -3 North America Latin America Europe Middle East Africa FSU Asia -3 North America Latin America Europe Middle East Africa FSU Asia Product Tanker ket Outlook 217 16
MR Earnings Forecast $/day 3 High Oil Production/Demand Base Case Base Case + High Ordering & Refinery Delays 25 2 15 1 5 21 211 212 213 214 215 216 217 218 219 22 221 222 Product Tanker ket Outlook 217 17
Questions Product Tanker ket Outlook 217 18
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