Global Shipping Market Trends

Asia Ship Recycling & S&P Summit

Shanghai, 3 - 4 July 2014

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.

July 2014
Presentation structure

• Overview

• Dry bulk carriers

• Oil tankers

• Container ships

• Ship demolition
July 2014
Overview

July 2014
 12-month time-charter rates by ship type
180,000
Tanker T/C rates basis modern, double-hulled ships with oil company approvals
160,000 Capesize bulker

Clean MR tanker
140,000
Dirty Aframax tanker
120,000 2,750TEU container

138/155,000cbm LNGC
US$ per day

100,000

80,000

60,000

40,000

20,000

0
Jan-03

Jan-10

Jan-13
Jan-02

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-11

Jan-12

Jan-14
Jul-02

Jul-03

Jul-04

Jul-05

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13
July 2014
Vessel earnings summary: 2013-2014 to date

• Average earnings for most vessel types still far below pre-
recession levels, with little clear sign of rallying
• Average Panamax & Cape 12-month T/C rates in January-
May 2014 down by 80% from January-May 2008 levels
• Rates for VLCCs, dirty Aframaxes & clean MRs down by
around 65%, 50% & 35% respectively
• Sharp rise in LNGC rates in 2011/2012 reflected Japan’s far
higher LNG imports after Fukushima earthquake
• Rising ship supply now reducing LNGC earnings, but one-
year T/C rates still up by 9% in 2014 from early 2008 levels
July 2014
Vessel secondhand prices by ship type *
160
SOURCE: SSY
140 Capesize bulker
Clean MR tanker
120
Dirty Aframax tanker

100 1,700TEU container ship

US$ million

80

60

40

20

0
Jan-06

Jan-09
Jan-03

Jan-04

Jan-05

Jan-07

Jan-08

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14
Jul-04

Jul-07
Jul-03

Jul-05

Jul-06

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13
* Basis 5-year-old bulk carriers & tankers, July 2014
10-year-old container ships
New deliveries by ship type by year
60

Bulk carriers SOURCE: SSY

50 Oil tankers
Container ships

40
million gross tons

30

20

10

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F
year of ship delivery

July 2014
Scrapping potential & tonnage on order
90
> 25 years Figures as at June 2014
80 > 20 years
On order
70

60
million gross tons

SOURCES: IHS-Fairplay; SSY

50

40

30

20

10

0
Bulk carriers Oil tankers Container ships
main vessel type

July 2014
Dry Bulk Carriers

July 2014
Dry bulk carrier supply at June 2014
100
Ships on order Existing fleet
90

80
Excludes ships below 10,000dwt
70

60
million dwt

Excludes allowance for possible slippage from reported delivery dates

50

40
SOURCE: SSY
30

20

10

0
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
< 1984

> 2015
year of build / scheduled delivery

July 2014
Bulker demolition, 2013-2014 (actual & forecast)
8

2013 actual 2014 forecast

SOURCE: SSY
million dwt

0
10-39,999 40-64,999 65-99,999 100,000+
size range (dwt)

July 2014
Bulkers: scrapping potential & orderbooks
70

>25 years Figures as at June 2014

60 > 20 years

On order SOURCE: SSY

50
million dwt

40

30

20

10

0
10-39,999 40-64,999 65-99,999 100,000 & over
size range (dwt)

July 2014
Bulkers: 12-month time-charter rates
180,000
End-month figures
20/25,000dwt
160,000
25/32,000dwt
140,000 40/49,000dwt
SOURCE: SSY
120,000 50/56,000dwt

74,000dwt
US$ per day

100,000
170,000dwt

80,000

60,000

40,000

20,000

0
Jul-06
Jul-01

Jul-02

Jul-03

Jul-04

Jul-05

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Jul-13
Jan-02

Jan-09
Jan-01

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14
July 2014
World GDP & dry bulk trade growth
360 6
Annual Chg Total Seaborne Dry Bulk Trade
320 GDP growth
5
280
240
4
Annual chg million tonnes

200

% annual chg (GDP)

160 3
120
80 2

40
1
0
-40
0
-80
Sources:SSY, IMF
-120 -1
1985

1991

1997

2003

2009
1981

1983

1987

1989

1993

1995

1999

2001

2005

2007

2011

2015(f)
2013(e)
July 2014
 Dry bulk carriers: summary
• Global seaborne dry bulk trade currently projected to rise by
5-6% in both 2014 & 2015 – mainly via further growth of iron
ore & coal trades *

• With slower fleet expansion, trade growth offers prospect

for some improvement in fleet utilization

• But: fresh bulker ordering now proceeding apace, despite

lack of any clear recovery in vessel earnings

• Recent ordering implies potential for faster net fleet growth,

post-2015, that could further delay freight market recovery
* Source: SSY July 2014
Oil Tankers

July 2014
Oil tanker supply at June 2014
45
Excludes allowance for any slippage from reported delivery dates Ships on order
40
Existing fleet
Ships of 10,000dwt & above
35
EXCLUDES chemical carriers
30
SOURCE: SSY
million dwt

25

20

15

10

0
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016
< 1989

year of build / scheduled delivery

July 2014
Oil tankers: scrapping potential & orderbooks
30
> 25 years
Excludes chemical carriers
> 20 years
25
> 15 years
Figures as at June 2014
On order
20

SOURCE: SSY
million dwt

15

10

0
10-26,999 27-41,999 42-59,999 60-84,999 85-119,999 120-199,999 200,000 &
size range (dwt) over

July 2014
Oil tankers: 12-month time-charter rates
90,000
SOURCE: SSY
MR (clean)
80,000
Aframax (dirty)
70,000 VLCC

60,000
US$ per day

50,000

40,000

30,000

20,000

10,000
Rates for modern, double-hulled ships with oil company approvals
0
Jul-02

Jul-09
Jul-03

Jul-04

Jul-05

Jul-06

Jul-07

Jul-08

Jul-10

Jul-11

Jul-12

Jul-13
Jan-06

Jan-13
Jan-02

Jan-03

Jan-04

Jan-05

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-14
July 2014
 Dirty tankers: summary
• Fleet growth now easing: 2013 saw smallest annual rise in
fleet since 2008 & slower growth to persist in 2014 & 2015

• Modern fleet limits scope for demolition, but greater

scrapping emerging of first-generation double-hull vessels

• Net fleet growth to rise again in 2016, due to recent rise in

ordering: almost 50 VLCC orders confirmed since end-3q13

• Recent large-scale ordering of VLCCs a serious threat to

freight market recovery, especially if sustained

• Greater ordering partly reflects appeal of “eco-type” designs

July 2014
 Clean tankers: summary
• World oil demand forecast to rise by 1.4% p.a. in 2014 &
2015.* Demand very soft in mature industrial nations but
closure of older refineries could boost product imports
• Growth in oil use mainly limited to emerging nations:
IEA forecasts Africa’s oil demand to increase by 4.4% in
2014 & that of newly-industrialising Asian economies to
grow by 3.3% from 2013 levels
• Regional imbalances in global refining capacity & rising
demand to boost longer-haul product trades
* Source: International Energy Agency (IEA) July 2014
Container Ships

July 2014
Container ship supply at June 2014
1.8
Excludes allowance for possible slippage from reported delivery dates
1.6
Ships on order Existing fleet
1.4
Excludes ships below 1,000TEU
1.2
Figures as at June 2014
1.0
million TEU

SOURCE: IHS-Fairplay
0.8

0.6

0.4

0.2

0.0
1988

1998

2008
1984

1986

1990

1992

1994

1996

2000

2002

2004

2006

2010

2012

2014
< 1983

> 2015
year of build / scheduled delivery

July 2014
Container ships: scrapping potential & orderbooks

> 25 years Figures as at June 2014 SOURCE: IHS-Fairplay

> 20 years
5
> 15 years
On order

4
million TEU

0
1,000-2,499 2,500-3,499 3,500-5,999 6,000-9,999 10,000-13,999 14,000 & over
size range (TEU)

July 2014
 Container ships: summary
• Fleet subject to rapid growth, post-2004, due to very high
deliveries – especially after surge in ordering of ships over
8,000TEU capacity
• Ordering of very large units partly driven by scope for ships
up to 14,000TEU size to transit Panama Canal after 2015
• Contracting of sub-8,000TEU vessels very limited, post-2008
• Firm bunker prices have boosted ordering of “eco-design”
ships & led to greater scrapping of older vessels
• No sustained revival yet evident in imports of manufactured
goods by North America or Europe
July 2014
Ship Demolition

July 2014
Ship demolition sales by year
60
2014 total annualised on basis of year-to-date sales
55

50 Oil carriers
SOURCE: SSY
45 Dry cargo / other

40

35
mdwt

30

25

20

15

10

0
1992

2000

2005

2010
1991

1993
1994
1995
1996
1997
1998
1999

2001
2002
2003
2004

2006
2007
2008
2009

2011
2012
2013
2014
July 2014
Ship demolition by main vessel type
20
Bulk Carriers Oil Tankers Container Ships
18
2014 totals are for year to date
16
SOURCES: IHS-Fairplay; SSY
14
million gross tons

12

10

0
2007 2008 2009 2010 2011 2012 2013 2014ytd

July 2014
 US$ per lwt

0
100
300
500
700

200
400
600
800
Jul-04

Jan-05

Jul-05

Jan-06
China

Jul-06
Sub-Continent

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12
Ship demolition prices: bulk carriers

Jan-13

Jul-13

Jan-14
SOURCE: Baltic Exchange

July 2014
 US$ million

40
70

10
20
30
50
60

0
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11

* Basis Panamax vessels

May-11
Sep-11
Jan-12
15-year-old price

May-12
Sep-12
Jan-13
May-13
Sep-13
Scrap value

SOURCE: SSY

Jan-14
Scrap value basis demolition on sub-Continent

May-14
July 2014
Bulkers: 15-year-old prices & scrap values *
Ship demolition summary
• Demolition has surged since 2008, especially for bulkers
other than oil tankers
• Higher scrapping has reflected rapid net fleet growth for all
main ship types, low charter rates & firm bunker prices that
have penalized older, less fuel-efficient ships
• Tanker scrapping less marked, post-2008, as many older
ships had already been phased out due to double-hull rules
• Low charter earnings, continued high fleet additions, firm
bunker prices & rising prices for ships scrapped on sub-
Continent all encouraging further sales for breaking
July 2014
 SSY
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July 2014