SHIPPING QUARTERLY 1/2015

Transcription

1 Market Report ECONOMICS AND RESEARCH SHIPPING QUARTERLY 1/215 February 17, 215 Overview The shipping markets have performed in a very disparate manner recently. While freight rates in the container and tanker segments have shown a slight tendency to recover, bulker rates have dropped sharply. The relief in terms of costs resulting from the lower price of bunker oil is encouraging for the whole shipping sector. Large shipping lines such as Maersk have benefited particularly from the low bunker price. However, there is a danger that the positive effects will be lost again due to the prevailing strong competition. For tramp ship operators the level of charter rates is still unsatisfactory, mainly for ships with a capacity of less than 4, TEU, despite the improvements in recent weeks. By contrast, in the dry bulk and tanker segments the time charter rates are still sufficient to make a profit. For the time being there is little scope for improvements. On the contrary, the rate levels are likely to contract a little. The problem is excess capacity. Given that order books are well filled this situation will get even worse, above all if the shipping companies take advantage of the favourable bunker prices to increase the speed of their ships. Global economy The global economy is growing at a slower pace than expected. Not even the lower energy prices, which were actually supposed to act as an economic programme for some countries, will do anything to change this situation. The International Monetary Fund (IMF) has reduced its forecast for the growth of the global economy from 3.8 to 3.5% and projects no more 3.7% for 216. The causes of the weakness of the global economy are to be found in the slower growth in the eurozone and above all in China and other emerging market countries. A further factor comprises the losers from low oil prices, especially oilproducing countries like Russia. In China the pace of growth is slowing down. The principal reason for this can be seen in lower capital spending in the real estate sector, on infrastructure and on industrial plant, where a huge amount of excess capacity has been built up in recent years. This makes the way free for more qualitative growth by strengthening private-sector consumption. For 215 we expect the government to permit growth of just under 7% for the first time since 199. In the wake of this controlled descent GDP growth will probably fall to around 6.5% in 216. The world and China: GDP growth as a percentage World China Sources: IMF, HSH Nordbank GDP growth in the most important countries and groups of countries e 216e eurozone US Japan China World Source: HSH Nordbank HSH NORDBANK.DE SHIPPING QUARTERLY 1/215 February 17, 215 SEITE 1

2 Container shipping Market for container ships making only slow progress Charter rates have picked up a little recently at a low level Demand likely to increase in 215 and the following years Conversely, supply is set to grow faster Our forecast: Charter rates will only recover slowly in 215 and the following years The market for container ships has continued its recovery since the summer. However, this is not evident from freight rates, but from the results of the shipping lines. One major reason for this is the sharp drop in the price of bunker oil. According to Alphaliner this is the principal reason why the operating margin of the major liners improved from.5 to 3.3% in the third quarter. This positive profit trend is likely to have continued in the fourth quarter. Conversely, freight rates measured in terms of the Shanghai Containerized Freight Index (SCFI) have fluctuated considerably for months, but on balance the index shows a level of 1,88 points, below the highest level recorded in August (1,195 points). Regardless of the improved profit situation, consolidation of the sector has continued. For instance, since the beginning of the year the Korean shipping company Hanjin Shipping has joined the "Ocean Three" alliance consisting of CMA CGM, China Shipping and United Arab Shipping In contrast to the liners, the situation remains difficult for tramp shipping companies. Despite the continuing good capacity utilisation of the fleet, the trend in charter rates is unsatisfactory. Although the New ConTex charter rate index has picked up in recent weeks, for many ships the current level of the charter rates is insufficient to cover the repayment of capital. The encouraging growth of demand recorded in 214 is likely to continue for container ships in 215. The economic upturn in the United States in particular is proving to be a strong driver. This is affecting above all the routes between South-East Asia and the west coast of North America. The trend on the main routes between Asia and Europe is similarly positive. We also expect aboveaverage growth on the intra-asian routes. Furthermore the bottlenecks in the US west coast ports are currently tying up considerable ship capacity. All in all, demand for container ships should pick up a little in the course of 215 and the following years with growth from 6 to 7% projected for 215. Conversely, supply will grow faster and will not solve the problem of surplus ship capacity. Fleets are growing solely in the area of large vessels. MSC recently ordered two 19, TEU ships and CMA CGM has announced that the company has upgraded to this size with some new orders. The shipyard company Daewoo Shipbuilding & Marine Engineering, which is one of the biggest in the world, expects further shipping lines to follow this example. In our view, the situation on the charter market is set to remain tense given the increase in ships being delivered and decrease in those being scrapped. Should the shipping lines take advantage of the low bunker prices to increase the speed of their ships, the problems relating to excess capacity are likely to get worse. To date charter rates have failed to recover and this will only happen slowly in the years to come. As a result, adequate charter rates above all for smaller ship categories with a capacity of less than 4, TEU will hardly be feasible for the foreseeable future. Freight rates (SCFI) and time charter rates (New ConTex) 1,6 1,4 1,2 1, Container ship fleet and order book EUR 2, 15, 1, 5, New ConTex (Charter rates) SCFI (freight rates) % : Container ships 4, 35, 3, 25, 2, 15, 1, Container fleet Container orderbook Orderbook in % of fleet 4% 3% 2% 1% 5, One year time charter rate, index HSH NORDBANK.DE SHIPPING QUARTERLY 1/215 February 17, 215 SEITE 2

3 Dry bulk shipping Freight rates have slumped recently Time charters are also going down Demand worse in 214, but positive outlook for 215 Supply will grow somewhat faster than demand in 215 Our forecast: Time charter rates will come under pressure in 215 Freight rates on the dry bulk market have slumped in recent weeks. At 522 points the Baltic Dry Index is currently at a historical low and has more than halved compared to the high last autumn. The Capesizer segment has come under particular pressure, with rates collapsing by three quarters over a threemonth period. In the smaller ship segments, by contrast, decreases have remained within reasonable limits. Although the charter market is not nearly so volatile, it was unable to avoid the trend shown by spot rates. Time charter rates have also dropped. Nevertheless Star Bulk managed to post a profit. This large Greek shipping company generated net earnings of USD 221 million in the third quarter of 214, the first since the takeover of Oceanbulk, which was completed in June. This company, which is listed in the United States, is currently carrying out an increase in capital in order to finance the enlargement of its fleet from the current 64 to more than 1 vessels in the coming year. The biggest shareholder with a holding of more than 5% is Oaktree Capital Management. Demand for bulker vessels proved worse than expected in 214. However, 215 is still viewed positively. In 214 the increase is not likely to have been more than 5%. The main reason for this was the fact that coal imports from China, Japan and the European Union fell far short of expectations. A further negative impact came from the ban on exports of nickel and bauxite by the Indonesian government. By contrast, Chinese iron imports proved to be dependable. Although the uptrend slowed down a little towards year-end, with growth of around 14% this sector was once again the major driver in dry bulk shipping. We believe that this will continue to be the case this year. However, it will probably be difficult to achieve double-digit growth rates. Conversely, the coal, nickel and bauxite segments should pick up a little. All in all we expect demand to increase by 6% in 215. Slow growth is to be expected as of 216. The underlying conditions for bulkers will also deteriorate on the supply side. The supply of bulk ship capacity will grow faster in 215 than in the previous year and also somewhat faster than demand as order books, which currently provide 23% of fleet capacity, are large. We expect capacity to increase by 6% in 215 and 216. Charter rates will therefore come under pressure in 215. Baltic Dry Index Freight rate index 2,5 2, 1,5 1, Dry bulk fleet and order book m dwt % : Dry bulk ships 7, 6, Dry Bulk fleet Dry Bulk orderbook Orderbook in % of the fleet 8% 7% 6% 5% 4% 3% 2% 1% 5, 4, 3, 2, 1, One year time charter rates Sources: Clarkson Research, HSH Nordbank HSH NORDBANK.DE SHIPPING QUARTERLY 1/215 February 17, 215 SEITE 3

4 Tanker shipping Freight and time charter rates have continued to recover Demand has shown a positive trend thanks to longer transport distances Increase in oil supply promises further demand potential However, supply will grow rapidly due to the full 215 order book Our forecast: The further recovery or charter rates is likely to come to an end in 215 The tanker market has continued to recover in recent months. Here crude oil tankers have displayed greater momentum than product tankers. However, the freight rates of neither of the tanker segments managed to maintain the high level attained in November. The Baltic Dirty Tanker Index currently stands at 853 points, almost 1 points below the highest level in the fourth quarter. The Baltic Clean Tanker index, which at 784 points reached its highest 214 level in November, has since dropped back to 579 points. This trend has not failed to affect one-year time charter rates. In the third quarter of 214 alone they increased by an average of 11% qoq. Whereas crude-oil tankers benefited to an above-average extent, product tankers only posted slight growth and in some case even small decreases. Nevertheless, Maersk Tankers substantially improved its net earnings with its product tankers. Compared to the previous year this figure improved from USD 18 to 84 million in the third quarter of 214. By contrast, the tanker shipping company Frontline, which focuses on crude-oil tankers, slid into loss territory. However, the Q3 loss of USD 59.6 million was due primarily to special write-downs of USD 41.5 million. These relate to older tankers for which there is not such a strong demand in the market. Baltic tanker indices Freight rate indices for crude oil and product tankers 1,4 1,2 1, Clean Tanker Index Dirty Tanker Index Tanker fleet and order book mn dwt % 25% 2% The demand for tankers has shown a positive trend thanks to longer transport distances. For the following years an increase in oil supply at low prices promises further demand potential. Moreover, at the moment the low price of oil and thus, for the first time since 29, the contango are again playing a role. Due to the fact that futures prices are higher than spot prices for crude oil it pays off to buy crude oil today, store it and sell it forward at higher prices than today. Here older large tankers that are no longer so marketable are used to store crude oil. This is likely to significantly increase demand, at least in 215. However, according to the International Energy Agency actual demand for oil will not initially profit from the lower oil prices due to the fluctuating global economy. The situation is better for oil products, where demand has increased. We expect the momentum of demand to slow down a little for the entire tanker segment. Thus growth, which came to somewhat more than 3% in 214, is likely to increase by somewhat less than 3% in 215 and trend further towards 2% in Tanker fleet Tanker orderbook Orderbook in % of fleet : Tankers 35, 15% 1% 5% % Due to the smaller number of ships delivered and larger number of ships being scrapped, last year fleet capacity increased more slowly than anticipated. However, demand will grow faster as of 215 because the order book is large and deliveries have been postponed. In 215 the fleet should grow more slowly than demand. As a result the further recovery of charter rates is likely to come to an end in 215. In 216 the market situation will then lead to a slight drop in charter rates. In this connection we believe that the prospects for product tankers in 215 and the following years is in principle better that those for crude-oil tankers. The United States in particular will contribute to this. Due to the ban on exporting crude oil the US is likely to export its oil surpluses resulting from the fracking boom in the form of more oil products. 3, 25, 2, 15, 1, One year time charter rates, index HSH NORDBANK.DE SHIPPING QUARTERLY 1/215 February 17, 215 SEITE 4

5 Basic data on the container, bulker and tanker fleet Containers Bulkers Tankers Number of ships¹ 5,15 1,313 5,917 Fleet capacity 18.2 m TEU 756 m dwt 59 m dwt Order book (capacity) 3.3 m TEU 171 m dwt 75 m dwt Order book as a percentage of the fleet 18% 23% 15% ¹: Container ships > 1 TEU, bulkers > 1, dwt, tankers > 1, dwt Freight and charter rates at a glance price 52 Week Performance in % prev. day high low 1 M 3 M 12 M Container CCFI 1,7 9 1,1 34 1, SCFI 1,88 1, New ConTex ConTex , ,7 2 9, ConTex ,95 1 1,95 8, Imprint Address HSH Nordbank AG Gerhart-Hauptmann-Platz Hamburg Martensdamm Kiel Economics & Research Stefan Gäde Phone stefan.gaede@hsh-nordbank.com Group Risk Management Portfolio Risk Research & Analysis Christian Reuter Phone: christain.reuter@hsh-nordbank.com closed: February 17, 215 ConTex 25 8,7 39 8,863 8, ConTex 1 7 7,99 7,99 7, ConTex 1 1 6,7 82 6,7 82 6, Dry Bulk Baltic Dry Index 522 1, Baltic Dry Capesize Index , n.a. Baltic Dry Panamax Index 55 1, Baltic Dry Supramax Index 48 1, Baltic Dry Handy size Index Tanker Baltic Clean Tanker Index Baltic Dirty Tanker Index Sou rce: Bloom berg Disclaimer The market information contained in this presentation is for informational purposes only. It can not substitute own market research or separate legal-, tax- and financial- advice and information. This presentation does not constitute an offer to buy or sell certain assets. HSH Nordbank AG points out that the herein published market information is only meant for investors with own economical experience, who are able to evaluate the risks and chances of the herein discussed market / markets and who are themselves able to conduct research through a variety of sources. The statements and data contained in this presentation are based on either thorough research by HSH Nordbank AG or on sources that are considered reliable but cannot be verified. HSH Nordbank AG regards the sources used as reliable but can not assess their reliability with absolute certainty. Single pieces of information could only be assessed regarding their plausibility; an assessment regarding their accuracy has not been made. Furthermore, this presentation contains estimates and predictions based upon numerous assumptions and subjective evaluations made by HSH Nordbank AG as well as outside sources. This information is only meant to provide non-binding perceptions of markets and products as of the time this presentation was issued. HSH Nordbank AG and its respective employees thoroughly conducted work on this presentation but can not guarantee completeness, actuality and accuracy of the provided information and predictions. This document may only be distributed in compliance with the legal regulations in the respective countries and persons obtaining possession of this document should inform themselves about and comply with the applicable local regulations. This document does not contain all material information needed for economic decisions and the information and predictions provided can vary from those made by other sources / market participants. HSH Nordbank AG as well as their organizational bodies and employees can not be held responsible for losses resulting from the use of this presentation, its contents or for losses which in any way are connected to this presentation. HSH Nordbank AG points out that it is not allowed to distribute this presentation or any of its contents to third parties. Damages to HSH Nordbank AG resulting from the unauthorised distribution of this presentation or any of its contents to third parties have to be compensated for by the distributor. The distributor has to keep HSH Nordbank AG free from all claims arising from the unauthorised distribution of this presentation or any of its contents to third parties and all legal cost in connection with those claims. This particularly applies to a distribution of this presentation to U.S. Persons or persons situated in United Kingdom. This is a publication. The publication has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. HSH Nordbank AG is subject to supervision by Bundesanstalt für Finanzdienstleistungen, BAFin, Marie-Curie-Str , 6439 Frankfurt am Main / Germany. HSH NORDBANK.DE SHIPPING QUARTERLY 1/215 February 17, 215 SEITE 5