Dry Bulk Freight Market: Prospects For Recovery

Transcription

1 Dry Bulk Freight Market: Prospects For Recovery Platts 9 th Steel Markets Europe Conference London 24 Whilst care and attention has been taken to ensure that the information contained is accurate, it is supplied without guarantee. SSY Consultancy & Research can accept no responsibility for any errors or omissions or consequences arising therefrom.

2 freight story in the year to date capes experience major seasonal plunge in earnings for fourth consecutive year due to reduced cargo availability and re-acceleration in newbuilding deliveries panamax spot earnings briefly reach 1-month high as congestion exaggerates Latin America grain effect soft start to the year for geared vessels before seasonal upswing re-establishes supras as highest earning sector in year to date uneven shift in sentiment

3 Jan-3 Jul-3 Jan-4 Jul-4 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 $/t capesize iron ore spot rates to China: monthly averages W.Australia Brazil

4 Jan-6 Apr-6 Jul-6 Oct-6 Jan-7 Apr-7 Jul-7 Oct-7 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 % Share freight s share of delivered iron ore prices to China 7 6 Australia Avg Brazil Avg

5 freight s contribution to $/t steel production costs $/t weighted average freight ($/t) % Share % Share

6 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 $/t W.Australia-China capesize iron ore rates 2 18 Actual FFA (23 May 13)

7 does freight have any more surprises for the steel and iron ore industry? dry bulk market overwhelmed by excess newbuilding deliveries but positive Chinese-led trade growth continues with planned influx of additional iron ore export capacity planned adding to upside for dry bulk trade depressed freight rates have triggered supply-side responses - slower steaming, record scrapping and reduced newbuilding orderbook port congestion remains a feature of the iron ore trades and potential source for future volatility

8 1q8 2q8 3q8 4q8 1q9 2q9 3q9 4q9 1q1 2q1 3q1 4q1 1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13 2q13(f) 3q13(f) 4q13(f) Mdwt quarterly dry bulk carrier deliveries by size Capesize Handymax Panamax Handy

9 MDwt panamax has highest net fleet growth in year to date Additions Deletions 2.8 Mdwt +1.9% 6.8 Mdwt +4.1% 7. Mdwt +2.5% 4.1 Mdwt +.1% 2 Handysize Handymax Panamax Capesize New size range changes: Handymax=4-64,999dwt Panamax=65-99,999dwt

10 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Weighted average delays (days) SSY capesize iron ore port congestion index for China Capes = 1% of fleet Capes = 4% of fleet Capes = 3% of fleet

11 million tonnes Chinese dry bulk imports: sustained upward trend 1,4 1,3 1,2 1,1 1, All Others Total coal Grains Iron Ore "Other" comprises steel products, bauxite/alumina, pulp, fertilizers, ferrous scrap, nickel, copper, chrome and manganese ores Source: SSY a

12 Million tonnes $/Day Brazilian iron ore exports & Capesize earnings Exports Average TC Earnings 4, 35, 9. 3, , 8. 2, , 7. 1, 65. 5, 6. 1q1 2q1 3q1 4q1 1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13

13 Index (2 = 1) tonne-mile demand growth fails to match expansion in iron ore trade volumes Cargoes Tonne-miles

14 is fleet supply growth finally coming under control? dry bulk carrier demolition set a new annual record of 34 Mdwt in 212 and ship scrap prices remain at relatively firm levels falling asset values are expanding the demolition pool beyond 25+ years for Panamaxes, as well as Capes newbuilding orderbook has fallen to a 5 year low with financing of new orders a constraining factor but with shipbuilding prices at lowest since 23 and yards marketing eco-designs, more Capesize newbuilding contracts are emerging

15 Pre Mdwt capesize (1+ kdwt) fleet by year of build Pending/options On Order Existing

16 Pre Mdwt panamax (65-99 kdwt) fleet by year of build 35 3 On Order Existing

17 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Million Dwt dry bulk carrier demolition Monthly volume 3 month average

18 MDwt scrapping potential & tonnage on order On Order 25+ years 2+ years 15+years Handysize Handymax Panamax Capesize New size range changes: Handymax=4-64,999dwt Panamax=65-99,999dwt

19 MDwt projected net fleet change in Additions Deletions 16.9Mdwt +1.3% 1.6 Mdwt +3.8% Mdwt +2.8%. Mdwt 1..% 5.. Handysize Handymax Panamax Capesize New size range changes: Handymax=4-64,999dwt Panamax=65-99,999dwt

20 % Annual Change annual change in seaborne iron ore trade & capesize supply: new phase? Trade Fleet

21 conclusions by 4q13 rate of growth in seaborne iron ore trade set to outpace increases in dry bulk fleet supply, reversing trend of last 5 years prospect for divergence in relative rates of supplyside growth to widen in 214, adding to potential freight rate volatility and raising freight s share of delivered iron ore prices but only if (1) record scrapping, (2) slower deliveries and (3) sustained trade growth (requiring increased cargo availability, as well as end-user demand)

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