Unlawful distribution of this report is prohibited IFCHOR Group Research Marine Money Geneva Forum - 29 th June 2016
DRY BULK SUPPLY OVERVIEW Capacity Surplus... Yearly net fleet change..... FUNDAMENTALS TOWARD SUPPLY RE-BALANCE Order book.. Cancellations Scrapping activity. THE INFLUENCE OF SENTIMENT ON THE RECOVERY PROCESS Factors influencing the market sentiment.. CONCLUSION Ships in scrapping zone and scenarios for the future 4 5 6 8 9 10 16
BDI OVERSUPPLY - Mio dwt Dry Bulk Supply Overview 4'000 3'500 3'000 2'500 2'000 1'500 1'000 500 DRY BULK SURPLUS CAPACITY 250 200 150 100 50 0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 0 BDI OVERSUPPLY at (Weighted actual speed for average number of voyages per year) Source: IFCHOR Research, Seaweb IHS 3
Million DWT Dry Bulk Supply Overview 80 DRY BULK FLEET - NET INCREASE 70 60 50 40 30 20 10 0 Negative but by how much? -10 Dry bulk fleet size < Source: IFCHOR Research, Seaweb IHS 4
Number of Ships Fundamentals Toward Supply Re-balance A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE 180 DRY BULK ORDERBOOK (2017-2018 DELIVERY) 160 140 120 100 80 60 40 20 Supra Handy Panamax Capesize 0 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Apr-16 May-16 Source: IFCHOR Research, Seaweb IHS 5
Fundamentals Toward Supply Re-balance A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE ORDERBOOK CANCELLATION POTENTIAL NOT STARTED YET 45 Mio DWT 15 16 ORDERS AT CHINESE YARDS 9 34 Already cancelled 14 could be prior cancelling date CHINA PRIVATE YARDS 12 CHINA PUBLIC YARDS 11 Under construction UNDER CONSTRUCTION 57 Mio DWT Other countries China could have passed the cancelling date Source: IFCHOR Research, Seaweb IHS 6
Million dwt Fundamentals Toward Supply Re-balance A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE 7 6 MONTHLY SCRAPPING ACTIVITY 5 Improved freight conditions 4 3 2 1 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: IFCHOR Research, Seaweb IHS 7
Influence of Sentiment on the Recovery Process Factors influencing market sentiment: NON-STRUCTURAL POSITIVE TRENDS SHORT TERM RE-ADJUSTMENT MEASURES SLIPPAGE LAY-UP SLOW STEAMING EXPECTATIONS MARKET ROCK-BOTTOM PERCEPTION PAST EXPERIENCE BIAS DEMAND AND SUPPLY FUTURE EXPECTATIONS 8
Million DWT Influence of Sentiment on the Recovery Process SLIPPAGE LAY-UP AVERAGE SPEED 12 10 scheduled delivered on order but not commenced yet Accumulated slippage 8 11.85 Mio Dwt scheduled to be delivered in 2016, but not commenced yet 6 BDI 4 2 0 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 * as of June Source: IFCHOR Research, Seaweb IHS 9
Number of Capesize Influence of Sentiment on the Recovery Process SLIPPAGE LAY-UP BDI AVERAGE SPEED 60 50 NOS OF CAPESIZE IN LAY-UP (WEEKLY) 50 ships = 3% of the Capesize fleet 40 30 20 BDI 10 0 Week num. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 January February March April May June 10 Source: Marine Traffic, IFCHOR Research
Knots Influence of Sentiment on the Recovery Process SLIPPAGE LAY-UP AVERAGE SPEED 14 13.5 13 12.5 12 11.5 11 10.5 10 9.5 9 DRY BULK FLEET AVERAGE SPEED 2016 Ave. speed = 11.4 knots * *Singapore IFO 180 Source: Reuters, BIMCO reports, AXS Marine 11
New orders at yards Million DWT Influence of Sentiment on the Recovery Process PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS 30 PAST EXPERIENCE S INFLUENCE ON MARKET SENTIMENT 25 20 15 BDI 2010 orders boom 102 Mio DWT China releases its 5 years plan with USD 1trln investments Fleet ave. age: 14 yrs old Memory of the recent prices 2 nd hand prices +25% YoY 2013 orders boom 87 mio DWT China s re-stocking cycle Rock-bottom perception 2 nd hand prices +65% YoY 10 new orders 5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 12
Supply and Demand - Million tonnes Influence of Sentiment on the Recovery Process PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS SUPPLY AND DEMAND GROWTH 6'000 S +13% S +1.5% 5'500 5'000 S +26% D +19% 4'500 4'000 D +14% D +10% D +0.5% 3'500 Supply D +13% 3'000 2'500 Demand BDI 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 13
Mio DWT - scrapped Average scrapping age Scenarios For The Future 35'000'000 35 30 30'000'000 23 yrs old 35 33 31 25 25'000'000 29 20 20'000'000 27 25 15'000'000 total DWT scrapped Average scrapping age 25 23 10 10'000'000 21 5 5'000'000 19 17 0-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 15 Age Profile 0-5 5-10 10-15 15-20 >20 TOTAL n.ships 3'585 36% 3'342 33% 1'219 12% 959 10% 950 9% Mio Dwt 291.3 38% 267.2 35% 91.9 12% 59.7 8% 56.1 7% 10'055 766.4 14
Scenarios For The Future SURPLUS OF CAPACITY Mio DWT 2017 deliveries Hp: o Jan 2017 fleet = 770 Mio DWT o 2017 deliveries = 30 Mio DWT o Stable financial conditions o Seaborne demand 2017: + 0.7% + 30 Mio - 45 Mio Baseline Scenario 2017demolitions - 40 Mio High Scenario + 30 Mio High Scenario 0 50 100 150 200 15
Scenarios For The Future SURPLUS OF CAPACITY Mio DWT 2017 deliveries Hp: o Jan 2017 fleet = 770 Mio DWT o 2017 deliveries = 30 Mio DWT o Stable financial conditions o Seaborne demand 2017: + 0.7% Baseline Scenario China does not acquire the status of market economy: 2017demolitions + 30 Mio - 40 Mio High Scenario Water Ballast Treatment convention is implemented: + 30 Mio - 45 Mio High Scenario 0 50 100 150 200 16
Fleet size most likely to increase in 2016. However, if the order book remains flat and demolitions maintain the current pace, a net fleet decrease is envisaged for 2017 As seaborne demand struggles to grow, the re-balancing of the Dry Bulk fleet will be heavily dependent upon scrapping activity Non structural supply reductions do more harm than good External disruptive factors affecting fundamentals can lead to a rebalancing sooner than later 17
Thank You! Contact: Services: Lausanne +41213103131 Athens +30 210 68 59 799 Singapore +65 6908 150 Panamax Capes panamax@ifchor.ch panamax@ifchor.ch capes@ifchor.ch capes@ifchor.ch Projects/S&P Research snp.projects@ifchor.com panamax@ifchor.ch research@ifchor.com capes@ifchor.ch Hong Kong +852 2581 9559 Genoa +39 010 5959 201 Handy/Supra Panamax@ifchor.ch handy@ifchor.ch New York +151 63847371 tankers@ifchor.com Panamax@ifchor.ch operations@ifchor.com Panamax@ifchor.ch Tankers Ship Finance Operations shipfinance@ifchor.com Panamax@ifchor.ch LEGAL DISCLAIMER: The information contained in this report has been obtained from diverse sources. IFCHOR S.A. considers such information to be reliable but IFCHOR S.A. does not guarantee its accuracy or completeness. Whilst every care has been taken in the production of the report no liability can be accepted for any loss or damage incurred in any way whatsoever. This report has been produced for the internal use of the intended recipients only and no reproduction is allowed prior the authorization of IFCHOR S.A. 18