Capesize market outlook

Transcription

1 Capesize market outlook China Iron Ore 2016, Metal Bulletin, Beijing Cheng Shan LI, dry bulk analyst 3 March 2016

2 Disclaimer The material and the information (including, without limitation, any future rates) contained herein (together, the "Information") are provided by H. Clarkson & Co. Ltd ("Clarksons Platou") for general information purposes. The Information is drawn from Clarksons Platou's database and other sources. Clarksons Platou advises that: (i) any Information extracted from Clarksons Platou's database is derived from estimates or subjective judgments; (ii) any Information extracted from the databases of other maritime data collection agencies may differ from the Information extracted from Clarksons Platou s database; (iii ) whilst Clarksons Platou has taken reasonable care in the compilation of the Information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain errors; (iv) the provision of the Information does not obviate any need to make appropriate further enquiries; (v) the provision of the Information is not an endorsement of any commercial policies and/or any conclusions by Clarksons Platou and its 'connected persons', and is not intended to recommend any decision by the recipient; (vi) shipping is a variable and cyclical business and any forecasting concerning it may not be accurate. The Information is provided on "as is" and as available basis. Clarksons Platou and its connected persons make no representations or warranties of any kind, express or implied about the completeness, accuracy, reliability, suitability or availability with respect to the Information. Any reliance placed on such Information is therefore strictly at the recipient's own risk. This Information is confidential and is solely for the internal use of the recipient. Neither the whole nor any part of the Information may be disclosed to, or used or relied upon by, any other person or used for any other purpose without the prior written consent of Clarksons Platou. Especially, the information is not to be used in any document for the purposes of raising finance whether by way of debt or equity. All intellectual property rights are fully reserved by Clarksons Platou, its connected persons and/or its licensors. To the extent permitted by law, Clarksons Platou and its connected persons shall not be liable to the recipient or any third party for any loss, liability or damage, cost or expense including without limitation, direct, indirect, consequential loss or damage, any loss of profit, loss of use, loss of or interruption in business, loss of goodwill, loss of data arising out of, or in connection with, the use of and the reliance on the Information whether in contract, tort, negligence, bailment, breach of statutory duty or otherwise, even if foreseeable. These exclusions do not apply to (i) death or personal injury caused by the negligence of Clarksons Platou and its connected persons or (ii) the liability of Clarksons Platou and its connected persons for fraud or fraudulent misrepresentation. In this disclaimer 'connected persons' means, in relation to Clarksons Platou, its ultimate holding company, subsidiaries and subsidiary undertakings of its ultimate holding company and the respective shareholders, directors, officers, employees and agents of each of them. This disclaimer shall be governed by and construed in accordance with English law. H. CLARKSON & CO. LTD, COMMODITY QUAY, ST. KATHERINE DOCKS, LONDON, EW1 1BF 3 March 2016 Meal Bulletin iron ore Conference Freight market outlook 2

3 Content Freight market collapsed Seaborne demand Seaborne iron ore lacks tonne-mile demand Seaborne demand suffers due to the lack of coal Alignment of the fleet 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 3

4 Index Value Freight market collapses Baltic Dry Index 12,000 10,000 8,000 6,000 4, BDI falls -35% Supply glut (ships & cargo) Weaker Economic growth; China slows Seaborne trade contracts; major cuts to Coal Commodity price deflation Sentiment weakens Pre 2003: Life before the Supercycle Supercycle Boom : Surging Demand + Lack of Ships + Lack of Ship Yard capacity Markets reach record lows 2, March 2016 Metal Bulletin iron ore Conference Freight market outlook 4

5 US $ per day Cape rates market suffers even more after a weak 4Q15 Baltic Average Capesize TC Earnings -41% Year-on year decline 45,000 40, ,000 First quarter seasonal low: 30, Weather related supply disruptions 25,000 20, Delayed ship deliveries 15,000 Chinese New Year industrial production low 10,000 5, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec *Data for 2015 onwards based on BCI March 2016 Metal Bulletin iron ore Conference Freight market outlook 5

6 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 ytd US $/day Capesize seasonal downturn Baltic Cape Average TC Quarterly Earnings 60,000 55,370-38% 50,000 40,000 34,120 34,913 30,000 23,070-76% 28,557-76% 27,072-40% 20,000 13,004-53% 16,298 14,355-68% 10,000 8,391 6,970 6,058 4,582-70% 7,055 2, March 2016 Metal Bulletin iron ore Conference Freight market outlook 6

7 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Cal16 Cal17 Cal18 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Cal16 Cal17 Cal18 US $ per day US $ per day Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Cal16 Cal17 Cal18 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Cal16 Cal17 Cal18 US $ per day US $ per day Earnings outlook remains bleak Baltic Quarterly Average TC earnings & 25 th Feb ,000 15,000 Capesize FFA 12,000 9,000 Panamax FFA 10,000 5,000 Q4 15 7,055 Cal16 4,624 6,000 3,000 Q4 15 4,522 Cal16 4, ,000 Supramax FFA 12,000 Handysize FFA 9,000 9,000 6,000 Q4 15 5,779 Cal16 4,731 6,000 Q4 15 4,692 Cal16 3,929 3,000 3,000 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 7

8 Seaborne demand 1. Seaborne iron ore lacks iron ore tonne-mile demand 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 8

9 Million Tonnes Low cost Australia iron ore continue to dominate the market Expected Iron ore seaborne exports Total additional supplies: 2014 = 145 mt 2015 = 30 mt 2016 = 19 mt 2017 = 65 mt Australia: Roy Hill, FMG, RTS and BHP increase with smaller high cost mines to exit Brazil: Anglo American and Vale increase to offset Samarco loss, if not tonnemile demand will be comprimised South Africa: Kumba down by 9mt Sierra Leone: 6mt increase Low iron ore prices will continue to compromise high cost producers (f) 2016(f) 2017(f) Australia Brazil Other 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 9

10 Displacing higher cost international supplies China Iron Ore Marginal Imports: 2015 vs 2014 Others Sierra Leone Iran India Malaysia Canada Mexico Kazakhstan United States Indonesia Mauritania Vietnam Chile Honduras North Korea Myanmar New Zealand Liberia Mongolia Peru Venezuela South Africa Russia Ukraine Brazil Australia Total Imports 2015: +20.3mt year on year Major reduction from non-traditional sources (-66.5mt), often on smaller ships, replaced by +86.8mt increase from mainly Capesize sources March 2016 Metal Bulletin iron ore Conference Freight market outlook

11 Million tonnes Billion ton-miles Loss in Brazilian volumes compromise tonne-mile demand 450 Seaborne Iron Ore Exports Capesize Tonnes 1,800 Seaborne Iron Ore Exports Capesize Tonne-miles H16 vs 2H15 Brazil -33 mt Australia -19 mt 2H16vs 1H16 Brazil +34mt Australia +47mt 1,700 1,600 1,500 1,400 1H16 vs 2H15 Brazil -21% Australia -5% 2H16 vs 1H16 Brazil +26% Australia +12% 1, , , , Brazil Australia 800 Brazil Australia 1H15 2H15 1H16 2H16 FH 2015 SH2015 FH 2016 f SH 2016 f 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 11

12 Seaborne demand 1. Seaborne iron ore lacks iron ore tonne-mile demand 2. Seaborne demand suffers due to the lack of coal 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 12

13 World coal imports fall in 2015 World coal imports 2014 vs 2015f China China s import policy & slower industrial growth dampen the demand for coal. EU Other 8.0 Other Asia India India s near term growth slow down as domestic production expands NET Million tonnes Source: GTIS. *Other Asia include Japan, Korea, Taiwan, Vietnam, Hong Kong and Thailand 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 13

14 Million tonnes per month Million tonnes per month China coal Imports declined in 2015, but the downturn started to stabilise China Thermal Coal Imports Steam coal monthly imports 6-mth roll. avg China Coking Coal Imports Coking coal monthly imports 6-mth roll. avg 10 5 Rate of decline in imports slows during 2H Source: GTIS Total Coal imports in 2015 fall by -87mt. Thermal = c.-73.1mt Coking = c mt 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 14

15 Million tonnes % 7.1% 5.8% f 2016f 2017f Yet, seaborne demand suffers under the lack of coal Dry bulk seaborne trade growth 15% 13.0% Total Trade growth 10% 9.0% 8.8% 5% 0% 4.9% 1.3% 0.8% 5.1% 5.2% 3.6% -0.4% 0.6% 2.3% -5% CAGR Iron Ore Coal Agriculture related Construction related Other TOTAL % 5.4% 6.0% 1.7% 2.2% 5.8% 2015(f) 2.1% -6.8% 3.0% 1.5% 5.1% -0.4% (f) 3.3% -1.6% 2.4% 1.4% 3.6% 1.4% 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 15

16 Alignment of the fleet 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 16

17 <= Million dwt Dry bulk order book is large, but high slippage expected Dry bulk fleet and orderbook according to year of build Cumulative Fleet at 1 February 2016: 10,534 ships (775.8m dwt) Orderbook: 1,470 ships (119.1m dwt) 15% Year of delivery Fleet and orderbook as on 1 February March 2016 Metal Bulletin iron ore Conference Freight market outlook 17

18 Dwt (m) delivered Chinese yard performance the key factor to output Dry bulk deliveries by Yard country Deliveries by Yard Country delivery progress China 51% Japan 77% S Korea 66% Others 57% 0 China Japan South Korea Other 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 18

19 No. of ships Contracting declined substantially Number of dry bulk contracts per year per sub-sector Contracting (181) 72% less y-o-y Newbuild prices at premium to second hand prices Newbuild prices on inflation adjusted basis historical low levels 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, % 35% 30% 25% 20% 15% 10% 5% Contract as % of fleet 0 0% Note: Contracts exclude options Capesize Panamax Supramax Handysize Contracts as % of fleet Basis: Historical Prices adjusted $/dwt to current ,000 dwt 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 19

20 f 2017f 2018f m dwt Demolition expected to reach new record levels Dry bulk fleet demolition vs BDI Large pool of older vessels due for special/interim surveys in the next 2 years record removals 587 vsls (34m dwt) 8,000 7,000 Value of older vessels converging with value at scrap New regulations due to be enforced Average demolition age continues to fall in 2015 Capesize = 21 Panamax = 23 Handy/Supra = 26 Handysize = ,000 5,000 4,000 3,000 2,000 1,000 0 Index Demolition Demolition forecast BDI Source: Clarksons Note: BDI until today 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 20

21 f 2017f 2018f Fleet growth Annual average expected fleet growth Dry bulk fleet growth 18% 16% 14% 17.0% 14.9% Total Fleet Growth 12% 10.0% 10.5% 10% 8% 6% 4% 5.9% 4.4% 2% 0% -2% 2.5% 0.9% 1.7% -0.6% CAGR Handysize Supramax Panamax Capesize TOTAL % 8.3% 8.4% 7.2% 6.9% % 7.7% 1.6% +0.5% 2.5% (f) -0.9% 4.8% 1.2% -0.1% 1.3% 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 21

22 Average vessel speed knts Fleet is slow steaming in order to reduce capacity Slow steaming by 2 knots reduces tonnage moved per ship by c. 11% Weaker earnings currently keeping speeds low despite reduced bunker costs Bunkers Rotterdam 380cst Bunker price $/t However any increase 300 in speed will unlock 11.5 further capacity onto Avg bulker speed the market, delaying 200 any longer term sustained recovery March 2016 Metal Bulletin iron ore Conference Freight market outlook 22

23 Demand and supply balance 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 23

24 Year-on-year growth Capesize demand and supply growth 25% 23.2% 20% 18.6% 19.6% 19.1% 15% 10% 5% 8.8% 8.9% 8.5% 9.0% 4.4% 4.1% 15.1% 8.7% 8.1% 17.3% 9.1% 7.5% 9.9% 4.9% 12.8% 8.0% 6.0% 12.0% 12.3% 7.8% 12.0% 11.4% 11.1% 8.3% 4.9% 4.9% 4.7% 2.1% 1.1% 3.3% 0% 0.5% 0.2% 1.0% -1.1% -1.2% -5% f 2016f 2017f Trade growth Net fleet growth Required dwt 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 24

25 Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315 Q116 Q316 Utilization Index Capesize market remains under pressure, but some seasonal volatility Capesize quarterly demand/supply utilisation index , , , Capesize Utilisation Index 120, ,000 80,000 60,000 Average of 4 TC s Avg 4 TCs 40,000 20, Slow steaming scenarios Capes started in Jan -2 knots and others in Oct -2 knots 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 25

26 Thank You 3 March 2016 Metal Bulletin iron ore Conference Freight market outlook 26