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www.drewry.co.uk
Global Shipping Markets
Capital Link Greek Shipping Forum
February 8, 2017
Gautam Khurana
Director, Drewry Maritime Financial Research
www.drewry.co.uk 2
Drewry Maritime Financial Research
Welcome to Drewry
Drewry is a leading provider of research and consulting
services to the maritime and shipping industry. The
company has unrivalled experience and expertise across
all market sectors from containers and ports to tankers
and dry bulk.
From our origins in 1970 in London to a 21st century
maritime and shipping consultancy, Drewry has
established itself as one of the most widely used and
respected sources of impartial market insight and industry
analysis. This in-depth understanding and objectivity
provides our clients with actionable advice and
recommendations they need to achieve their ambitions
and stay ahead of the market.
We provide our services through four business units:
Drewry Maritime Advisors supports the needs of
shipping and financial institutions; Drewry Supply Chain
Advisors provides sea freight procurement support to
retailers and manufacturers; Drewry Maritime Research
publishes market-leading research on every key maritime
sector; and Drewry Maritime Financial Research
delivers investment research services on listed companies
operating in the industry.
www.drewry.co.uk 3
Drewry Maritime Financial Research
Our four Business Units
Our research provides
robust analysis and balanced
opinion for those within
shipping, finance and
logistics who need to make
informed business decisions.
The range of titles and
reports we publish keeps our
clients up to date on every
key maritime sector, from dry
bulk to chemicals and from
LPG to ferries, with detailed
analysis and insightful
commentaries on past,
present and future sector
performance.
Our Maritime Advisors offer a
wealth of experience across
maritime sectors and lead
the industry in their
respective areas of
specialisation. Our sector
expertise covers ports, bulk
shipping, liner shipping,
shipyards, ferry and RoRo,
and technical ship
management.
Our combination of deep
sector understanding,
technical expertise and
market-leading
insight increases our
confidence in our actions and
ability to deliver the right
results for our clients.
We focus on advising users
of international multi-modal
transport services, taking our
extensive understanding of
the industry and applying it to
all stages of the supply chain.
Through our supply chain
research catalogue and
industry knowledge, we offer
a range of procurement
support services that
empower importers and
exporters. Our services
provide them with the tools,
resources and tailored advice
they need to more effectively
manage their transport
service provider and
international supply chains.
Combining our market-
leading resources with
seasoned sector expertise
and commercial awareness,
we are now able to offer
highly differentiated and
comprehensive investment
research service to
prospective investors in
publically listed maritime and
shipping companies.
Our services cover a range of
report formats, supporting
resources and sector-
orientated webinars aimed at
providing our clients with a
complete picture of the
organisations under our
coverage.
4 www.drewry.co.uk Drewry Maritime Financial Research
Cyclicality in shipping sectors
Recovery in LPG, Dry Bulk to continue
Source: Drewry research
Product Tankers
Dry Bulk
LPG (VLGC)
LNG
Container
Crude Tanker
LPG (coasters)
www.drewry.co.uk
Dry bulk shipping
Container shipping
Crude tankers
Product tankers
LPG shipping
LNG shipping
6 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Fragile recovery
0
400
800
1,200
1,600
2,000
Ja
n-1
5
Feb
-15
Ma
r-1
5
Apr-
15
Ma
y-1
5
Ju
n-1
5
Ju
l-1
5
Au
g-1
5
Se
p-1
5
Oct-
15
No
v-1
5
De
c-1
5
Ja
n-1
6
Feb
-16
Ma
r-1
6
Apr-
16
Ma
y-1
6
Ju
n-1
6
Ju
l-1
6
Aug-1
6
Se
p-1
6
Oct-
16
No
v-1
6
De
c-1
6
Ja
n-1
7
Feb
-17
Ma
r-1
7
Apr-
17
Ma
y-1
7
Ju
n-1
7
Ju
l-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
BDI
Bottomed out in February 2016
- BDI 290. Rates below opex
Rebound as
Chinese demand
crept up Correction
after a strong
Rally got strong in the second
half of 2017 on firm iron ore
imports by China amid
seasonal strength
Market should rebound
after 1Q weakness
Source: Bloomberg, Drewry research. Based on monthly average
• Strong recovery following the dip in 2016
• Recovery sputters as China cuts steel production in winter
• Demand expected to pickup after the 1st quarter
Baltic dry Index (BDI)
7 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Benign fleet growth in 2018 and 2019
Source: Bloomberg, Drewry research
• Dry bulk fleet growth of 1% compared to 3.7% in 2017
• We forecast 23m dwt actual fleet growth in 2018 (adjusting for slippage)
• Orderbook stands at 9.9% of the current fleet
11.7%
6.2% 5.3%
2.7%
1.5%
3.7%
1.0% 1.2%
0%
2%
4%
6%
8%
10%
12%
0
150
300
450
600
750
900
2012 2013 2014 2015 2016 2017 2018e 2019e
m d
wt
Fleet (LHS) Fleet growth (RHS)
Dry bulk fleet growth
8 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Drybulk shipping demand – iron ore remains the mainstay
Source: Drewry research
• Iron ore main tonne mile demand driver with share increasing to 49%
• Coal share declined to 24%
• Minor bulk and grain trade steady
Dry bulk tonne-mile demand by commodity
45% 46% 48% 48% 48% 48% 49%
28% 27% 26% 25% 24% 24% 24%
8% 8% 8% 9% 10% 10% 10%
19% 19% 18% 18% 18% 18% 18%
0%
20%
40%
60%
80%
100%
120%
2012 2013 2014 2015 2016 2017 2018e
Iron Ore Coal Grain Minor Bulk
9 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
China’s iron-ore imports to moderate
Source: Bloomberg, Drewry research
Chinese steel production and iron-ore imports to be lower in 2018
• 28 cities accounting for 30% of China’s steel production offline from
November’17 to March’18.
• This reduction is likely to result in 3-4% iron ore import growth in 2018, down
from 6% import growth in 2017.
• China iron ore imports flatten
-12%
-8%
-4%
0%
4%
8%
12%
0
15
30
45
60
75
90
No
v-1
5
Ja
n-1
6
Ma
r-1
6
Ma
y-1
6
Ju
l-1
6
Se
p-1
6
No
v-1
6
Ja
n-1
7
Ma
r-1
7
Ma
y-1
7
Ju
l-1
7
Se
p-1
7
No
v-1
7China's steel production (m tonnes) y/y growth
-12%
-6%
0%
6%
12%
18%
24%
0
20
40
60
80
100
120
Oct-
15
De
c-1
5
Feb
-16
Ap
r-1
6
Ju
n-1
6
Au
g-1
6
Oct-
16
De
c-1
6
Feb
-17
Ap
r-1
7
Ju
n-1
7
Au
g-1
7
Oct-
17
De
c-1
7
China's iron ore imports y/y growth
10 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Grain trade growth expected to slow in 2018
Source: Bloomberg, Drewry research
• Over the last two years, Asia and the Middle East drove strong growth in grain
trade
• Grain trade growth expected to moderate in 2018
Higher grain exports to support smaller vessels
2% 2%
18%
2%
9%
6%
1%
0%
4%
8%
12%
16%
20%
0
75
150
225
300
375
2012 2013 2014 2015 2016 2017p 2018e
Top grain exporters (m tonnes) growth (y/y)
11 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Minor bulk trade to remain firm in 2018/19
Source: Bloomberg, Drewry research
• Growth in Soybean, Bauxite, Nickel etc trade to support small bulk segment
• Increased long haul trades for minor bulk commodities such as US/ China,
Brazil/ China, Guinea/ China
Growth in minor bulk trade to be steady
3.6%
9.7%
-2.8%
-1.6%
9.4%
3.1% 3.1% 4.3%
-6%
-3%
0%
3%
6%
9%
12%
0
200
400
600
800
1000
1200
2012 2013 2014 2015 2016 2017* 2018 2019
Minor bulk seaborne trade y/y growth
12 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Spodumene trade
0
800
1600
2400
3200
4000
2013 2014 2015 2016 2017
Th
ou
sa
nd
to
nn
es
2%
18%
80%
40,000-65,000 dwt
65,000-100,000 dwt
100,000-120,000 dwt
Share of vessel (in dwt) in port headland's
spodumenne export
Australia’s spodumene exports
Exports took
off in 2017
Source: GTIS, Drewry research
• Sixfold increase in Australian Spodumene exports
• Spodumene used for producing Lithium batteries
• China aims to manufacture 2 million electrical vehicles by 2020
13 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Coal trade to moderate on lower import growth by Asian countries
Source: Bloomberg, Drewry research
• Thermal coal imports trade expected to moderate
• Switch to renewables and LNG
• Increased domestic production in India
Global coal imports
-9%
-6%
-3%
0%
3%
6%
9%
12%
740
760
780
800
820
840
860
880
2012 2013 2014 2015 2016 2017 2018 2019
Thermal coal imports (LHS) (y/y growth, RHS)
-10%
-5%
0%
5%
10%
15%
0
100
200
300
400
500
2012 2013 2014 2015 2016 2017 2018 2019
Global coking coal imports (m tonnes, LHS)
(y/y growth, RHS)
14 www.drewry.co.uk Drewry Maritime Financial Research
Dry bulk shipping
Industry profitability to increase
Source: Bloomberg, Drewry research
• Industry EBITDA expected to increase from 30% in 2017 to 35% in 2018
• Smaller vessels to benefit from higher utilization
0
10
20
30
40
50
2016 2017 2018e
Industry revenue (USD bn)
-10%
0%
10%
20%
30%
40%
2016 2017 2018e
Industry EBITDA margin
Revenue to increase but at lower pace than in 2017 Profitability to enhance further in 2018
www.drewry.co.uk
Dry bulk shipping
Container shipping
Crude tankers
Product tankers
LPG shipping
LNG shipping
16 www.drewry.co.uk Drewry Maritime Financial Research
Container shipping
Orderbook to fleet ratio at historical low
Order book-to-fleet at historical lows
• Supply to marginally exceed demand growth
• Orderbook at a record low of 13.4%
• Front-loaded delivery schedule to dampen near term rate increases
0%
10%
20%
30%
40%
50%
60%
70%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: Drewry research
Supply-demand gap has narrowed
-10%
-5%
0%
5%
10%
15%
20%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017e
2018e
2019e
Change in supply (%) Change in demand (%)
17 www.drewry.co.uk Drewry Maritime Financial Research
Container shipping
Capacity growth skewed to larger vessel sizes
475
40
458 527
1,286
0
200
400
600
800
1,000
1,200
1,400
<5,000 teu 5-10,000teu
10-14,000teu
14-18,000teu
>18,000teu
Containership deliveries by size (’000 teu)
248
6 38 37
63
0
50
100
150
200
250
300
<5,000 teu 5-10,000teu
10-14,000teu
14-18,000teu
>18,000teu
Containership deliveries by no of vessels
Source: Drewry research, Data as of 1 Jan, 2018 Source: Drewry research, Data as of 1 Jan, 2018
• 5.6% fleet growth in 2018
• Capacity skewed to >10k TEU
• Number of vessels greatest in
<5k TEU
Adjusted global containership orderbook (’000 teu)
Source: Drewry research, Data as of 1 Oct 2017
2015 2016 2017 2018F 2019F 2020F
Scheduled delivery* 1,889 1,321 1,540 1,965 1,450 1,279
Less slippage 171 432 303 491 290 128
Less cancellations 0 0 0 0 0 0 Delivery Total 1,718 889 1,237 1,474 1,160 1,151
Scrapping 193 654 400 315 340 430
Total global fleet 19,735 19,970 20,807 21,966 22,786 23,507
% orderbook delivered 90.9% 67.3% 80.3% 75.0% 80.0% 90.0%
Fleet growth 8.4% 1.2% 4.2% 5.6% 3.7% 3.2% Future orders 0 50 500 500
18 www.drewry.co.uk Drewry Maritime Financial Research
Container shipping
Carriers make significant investments in newbuildings
Source: Drewry research, Various * 2017 data to Nov 2017
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2011 2012 2013 2014 2015 2016 2017YTD
US
D m
illi
on
Carriers Independent owners
0
100
200
300
400
500
600
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
< 8,000 teu 8,000+ teu
Recent orders by vessel size (’000 teu) Industry investment in new builds (USD million)
• 3rd quarter 2017 most profitable for the liner industry in the past seven years.
All major carriers barring HMM posted a profit.
• Profits ploughed back into new vessel orders
• Orders predominantly in the ultra large vessel segment
• Most recent orders are from carriers rather than independent owners
19 www.drewry.co.uk Drewry Maritime Financial Research
Container shipping
Load factors and port throughput should remain healthy
Port throughput growth is expected to be positive
on all trade lanes
Load factor on East-West trade remains at
comfortable level
• Port throughput grew 6% or 42m TEU in 2017
• Growth expected to moderate in 2018
• East-West head-haul ship utilization continuing upward trend
-4%
0%
4%
8%
12%
No
rth
Am
erica
Eu
rop
e
Asia
Mid
-Ea
st
Latin
Am
erica
Afr
ica
Oceania
2016 2017e 2018e
76%
80%
84%
88%
92%
96%
100%
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17e
E-W headhaul utilisation
Source: Drewry research
20 www.drewry.co.uk Drewry Maritime Financial Research
Container shipping
Fewer idle vessels indicate buoyancy in demand
Lower than average idle fleet
Source: Drewry research
• Idle fleet down from 1.4m TEU after Hanjin to 500,000 TEU today
• 54 idle ships reactivated from September to December 2017
• Reactivated ships mainly deployed on short term charter and so could find their
way back to the idle vessel list if demand growth stagnates
0%
2%
4%
6%
8%
10%
12%
0
250
500
750
1,000
1,250
1,500
1Q
08
4Q
08
3Q
09
2Q
10
1Q
11
4Q
11
3Q
12
2Q
13
1Q
14
4Q
14
3Q
15
2Q
16
1Q
17
4Q
17
Laid up '000 teu Laid up as% of total fleet (R.H.S) Average
Average 3.6%
21 www.drewry.co.uk Drewry Maritime Financial Research
Container shipping
However, the risk of another price war remains…
• Revenue increases may lag bunker price increases
• World Container Index (WCI) below 5 year average despite high utilization
• More consolidation needed
Source: Drewry research
Estimated industry freight rates, unit costs
(USD)
WCI spot rates assessed by Drewry (USD / 40ft
container)
Source: WCI spot rates (assessed by Drewry), Drewry research
100
300
500
700
600
800
1,000
1,200
1Q
13
3Q
13
1Q
14
3Q
14
1Q
15
3Q
15
1Q
16
3Q
16
1Q
17
3Q
17
US
D/t
on
ne
US
D
Revenue/teu
Cost/teu
Rotterdam IFO 380 (RHS)
0
500
1000
1500
2000
2500
Ja
n-1
3
Ma
y-1
3
Sep
-13
Ja
n-1
4
Ma
y-1
4
Sep
-14
Ja
n-1
5
Ma
y-1
5
Sep
-15
Ja
n-1
6
Ma
y-1
6
Sep
-16
Ja
n-1
7
Ma
y-1
7
Sep
-17
Ja
n-1
8
WCI Average
5-year average = $1,562 / feu
www.drewry.co.uk
Dry bulk shipping
Container shipping
Crude tankers
Product tankers
LPG shipping
LNG shipping
23 www.drewry.co.uk Drewry Maritime Financial Research
Crude Tankers
Asian countries to drive global crude oil demand
• Consumption expected to grow 1.3 mbpd in 2018
• Upcoming Asian refineries expected to drive tonne mile demand growth
• Contango and resumption of stocking activity can boost vessel demand
Global crude oil demand (mbpd)
Source: Bloomberg, Drewry research
-2%
-1%
0%
1%
2%
3%
4%
0
20
40
60
80
100
120
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018e
2019e
2020e
Global oil demand Oil demand of OECD economies
Oil demand of non-OECD economies % change in Global oil demand (RHS)
24 www.drewry.co.uk Drewry Maritime Financial Research
Crude Tankers
Increased ordering activity
• Elevated ordering accompanied strong market in 2015
• Reduced stocking and OPEC production cuts hurt demand
• Ordering in 2017 will prolong current slump
Increased ordering activity could prolong an already weak tanker market
Source: Drewry research
0
75
150
225
300
375
450
0
12
24
36
48
60
72
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Nu
mb
er
of
ve
ss
els
Ord
eri
ng
(m
dw
t)
Handysize Handymax Panamax Aframax Suezmax VLCC ULCC Number of vessels
25 www.drewry.co.uk Drewry Maritime Financial Research
Crude Tankers
Fleet expansion continues
• 4.8% fleet expansion - 49 VLCCs, 50 Suezmaxes and 31 Aframaxes delivered
in 2017
• 35 VLCCs, 16 Suezmaxes and 40 Aframaxes to be delivered in 2018. Tonne
mile demand to grow 1.8% against 2.7% tonne mile supply growth.
• 242 vessels comprising 12.5% of the current fleet on the orderbook
Spate of newbuilding deliveries to outpace the demand growth
Source: Drewry research
0
500
1,000
1,500
2,000
2,500
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e
Nu
mb
er
of
ve
ss
els
Fle
et
cap
ac
ity (
m d
wt)
Handysize Handymax Panamax Aframax Suezmax VLCC ULCC Number of vessels
26 www.drewry.co.uk Drewry Maritime Financial Research
Crude Tankers
Rise in demolition could accelerate recovery
• 58 crude tankers of 8.9mdwt demolished in 2017
• We project 9mdwt to be scrapped annually in 2018 and 2019
• Scrapping expected to accelerate to 12mdwt in 2020
Demolitions to increase in weak tanker market
Source: Drewry research
0
20
40
60
80
100
0
3
6
9
12
15
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e
Nu
mb
er
of
ve
ss
els
De
mo
liti
on
s (
m d
wt)
Handysize Handymax Panamax Aframax Suezmax VLCC Number of vessels
www.drewry.co.uk
Dry bulk shipping
Container shipping
Crude tankers
Product tankers
LPG shipping
LNG shipping
28 www.drewry.co.uk Drewry Maritime Financial Research
Product Tankers
Structural changes on the horizon
• Increased vehicle efficiency, adoption
of electrical vehicles and the switch
from diesel to natural gas for power
generation to dampen growth
• 1-1.5% annual product demand growth
• Asian refineries to boost MRs
• Mid-east refineries to boost LRs
Global oil product demand
Source: IEA, Drewry research, Note: Oil products include Naphtha,
gasoline, jet fuel / kerosene, Gasoil / fuel oil and other oil products
0.0
1.0
2.0
3.0
85
92
99
106
2013
2014
2015
2016
2017
2018e
2019e
2020e
2021e
2022e
%
mb
pd
Global oil products demand (mbpd)
y/y % change (RHS)
Planned refining capacity 2015-22 (mbpd)
Source: IEA, Drewry research
97.0 96.8 98.0 98.7 99.8 100.8 102.5 103.8
0
20
40
60
80
100
120
2015 2016 2017e 2018e 2019e 2020e 2021e 2022e
mb
pd
Americas Europe Asia
Middle East Latin America Africa
OECD commercial stocks (million barrels)
Source: IEA
0
1,000
2,000
3,000
4,000
Crude Gasoline Middledistillates
Heavyfuel oil
Totalproducts
Total
5 year average since 1-Jan-2017 Nov-17 Stocks
29 www.drewry.co.uk Drewry Maritime Financial Research
Product Tankers
Electrical vehicles to rule the road
Source: IEA, DNVGL
• Electric vehicles usage expected to
grow exponentially over the next
decade.
• Cost of EVs expected to be
competitive by the mid 2020s
• Usage of the internal combustion
engine under threat
0
500
1,000
1,500
2,000
2,500
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
'00
0 C
ars
Electric car stock
Growth in electric car Expected market share of electric vehicles: 2040s
Total no. of cars in 2016: ~1 billion
% of electric cars in 2016: 0.2%
0
200
400
600
800
1000
2011 2016
US
$//
kW
h
Storage cost
Fall in battery cost
0%
20%
40%
60%
80%
100%
Bloomberg DNVGL
30 www.drewry.co.uk Drewry Maritime Financial Research
Product Tankers
Tonnage overhang to continue till 2019
• 55 vessels delivered in 2017
• 81 vessels of about 5.5mdwt expected to be delivered this year
• Tonnage supply likely to keep rates suppressed
• 30% increase in Chinese product export quote positive for MR demand
• Increased Latin American and African demand
Product tanker overbook delivery schedule
Source: Drewry research, **Includes only non-IMO class coated tankers
Product tanker fleet and orderbook (at end-4Q17)
Source: Drewry research, **Includes only non-IMO class coated tankers
5.5
3.3
1.8
0
1
2
3
4
5
6
2018 2019 2020 and beyond
mD
WT
Handysize MR1 MR2 LR1 LR2 Dirty Products
Fleet Orderbook
Size (dwt) No. mdwt No. mdwt % fleet
Clean Products
10-25,000 228 3.3 16 0.3 8.2%
25-40,000 150 5.1 6 0.2 4.4%
40-55,000 453 21.1 44 2.1 10.1%
55-80,000 326 23.9 29 2.1 8.8%
80-120,000 296 32.4 44 5.0 15.3%
120,000+ 3 0.5 3 0.5 100.0%
Dirty Products
55-80,000 77 5.3 5 0.3 6.5%
Total 1,533 91.7 147 10.6 11.5%
31 www.drewry.co.uk Drewry Maritime Financial Research
Product Tankers
Charter rates under pressure
• Tonne mile demand growth of 2.3%
vs tonne mile supply growth of 2.9%
• Utilization expected to decline
Overall product tanker fleet by trading status (mdwt)
Source: Drewry research
TCE rate for MR2 and LR1 Product Tanker Utilisation
Source: Drewry research Source: Baltic Index, Drewry research
10
40
70
100
130
160
2012
2013
2014
2015
2016
2017
2018e
2019e
2020e
2021e
2022e
Handysize MR1 MR2 LR1 LR2
0
7,000
14,000
21,000
28,000
35,000
De
c-1
5
Ma
r-1
6
Ju
n-1
6
Se
p-1
6
Dec-1
6
Ma
r-1
7
Ju
n-1
7
Se
p-1
7
De
c-1
7
US
D/ d
ay
MR2 TCE rate LR1 TCE rate
Weak charter rates in
2016 due to oversupply Steep rise due to
hurricane Harvey and
Gasoline import to US
81%
82%
83%
84%
85%
2016 2017 2018e 2019e 2020e
Total 25-55,000 dwt
55-80,000 dwt 80,000+ dwt
www.drewry.co.uk
Dry bulk shipping
Container shipping
Crude tankers
Product tankers
LPG shipping
LNG shipping
33 www.drewry.co.uk Drewry Maritime Financial Research
LPG shipping
Fleet growth moderates in 2018/2019
• Delivery pace expected to decline to 5% in 2018 after peaking at 17% in 2016
Source: Drewry research
LPG fleet growth forecast
0% 1%
7%
4%
16% 17%
9%
5% 3%
-5%
0%
5%
10%
15%
20%
0
8,000
16,000
24,000
32,000
40,000
2011 2012 2013 2014 2015 2,016 2017e 2018e 2019e
LPG vessel fleet ('000 cbm) y/y growth
34 www.drewry.co.uk Drewry Maritime Financial Research
LPG shipping
US exports and Asian imports are the key demand drivers
• US LPG exports increased 39% per year from 2012 to 2017
• Firm demand from India and China
• Arbitrage trades resuming
Source: Drewry research
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2012 2013 2014 2015 2016 2017
0
5,000
10,000
15,000
20,000
25,000
30,000
2012 2013 2014 2015 2016 2017
US LPG exports (’000 tons) China/India's LPG imports (’000 tonnes)
35 www.drewry.co.uk Drewry Maritime Financial Research
LPG shipping
Lower tonnage growth and improving demand prospects
LPG vessel supply and demand growth
• Vessel demand expected to increase 8.5% in 2018 against supply growth of
4.6%
• Industry profitability should gradually improve
Source: Drewry research
7.0%
4.4%
16.0%
17.1%
8.9%
4.6% 3.1%
11.2%
7.9%
17.9%
7.2%
4.6%
8.5% 8.1%
0%
4%
8%
12%
16%
20%
2013 2014 2015 2016 2017 2018e 2019e
LPG vessel supply growth LPG vessel demandgrowth
36 www.drewry.co.uk Drewry Maritime Financial Research
LPG shipping
Outlook improving though varies across sub-segments
Source: Drewry research
• VLGC rates expected to gradually recover as supply challenges wane
• Handysize rates expected to be bogged down by supply and muted
petrochemical trade growth
• Coasters expected to outperform given strong demand supply fundamentals
Source: Drewry research
27%
22%
5%
14%
19%
2%
0%
5%
10%
15%
20%
25%
30%
VLGCs (70k+cbm)
Handysize (12-25k)
Coasters (1-12k)
Orderbook to fleet - Dec 2015 Orderbook to fleet - Dec 2017
16%
12%
1.5%
10%
14%
1%
0%
3%
6%
9%
12%
15%
18%
VLGCs (70k+cbm)
Handysize (12-25k)
Coasters (1-12k)
Fleet growth 2016/17 Fleet growth - 2018
Orderbook has declined sharply since 2015 Fleet growth to moderate in 2018
37 www.drewry.co.uk Drewry Maritime Financial Research
LPG shipping
Profitability expected to improve
• Industry profitability expected to improve in 2018, albeit but still lower than
2016
• Average industry EBITDA margin expected to rise from 30% in 2017 to 35% in
2018
4.6
4.8
5.0
5.2
5.4
5.6
5.8
2016 2017 2018e
Industry revenue (USD bn)
0%
10%
20%
30%
40%
50%
2016 2017 2018e
Industry EBITDA margin
Higher rates to expand industry revenues in 2018 Profitability to improve over last year
Source: Drewry research
www.drewry.co.uk
Dry bulk shipping
Container shipping
Crude tankers
Product tankers
LPG shipping
LNG shipping
39 www.drewry.co.uk Drewry Maritime Financial Research
LNG shipping Deliveries to keep market in balance
Source: Drewry research, Note – Average new orders represents average of new orders between 2010 and 2017
• Highest percentage fleet growth since 2010.
• Fleet growth expected to moderate from 2019.
LNG fleet deliveries and New orders
0
10
20
30
40
50
60
70
2010
2011
2012
2013
2014
2015
2016
2017
2018e
2019e
2020e
2021e
Nu
mb
er
of
vessels
Deliveries New orders Average new orders
-2%
0%
2%
4%
6%
8%
10%
12%
0
100
200
300
400
500
600
2010
2011
2012
2013
2014
2015
2016
2017
2018e
2019e
2020e
2021e
Nu
mb
er
of
ve
ss
els
LNG fleet y/y% (RHS)
Highest y/y % fleet
growth since 2010
LNG fleet development
40 www.drewry.co.uk Drewry Maritime Financial Research
• 9% growth in seaborne trade for 2018
• Total seaborne trade to reach 310 million tonnes
Source: Drewry research
LNG shipping Brisk growth in LNG trade expected to continue
Global LNG trade (million tonnes)
-6%
0%
6%
12%
18%
24%
0
100
200
300
400
500
2010
2011
2012
2013
2014
2015
2016
2017
2018e
2019e
2020e
2021e
Mil
lio
n t
on
nes
per
an
nu
m
LNG Trade y/y % (RHS)
41 www.drewry.co.uk Drewry Maritime Financial Research
Source: Drewry research
LNG shipping Chinese coal to LNG switch to be a key driver
• Government push to switch from coal to LNG
• China expected to become leading importer in five years
China LNG import
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e
Mil
lio
n t
on
nes
per
an
nu
m
Chinese LNG import
42 www.drewry.co.uk Drewry Maritime Financial Research
Source: Drewry research
LNG shipping USA and Australia main drivers of export growth
• 16.8m tonnes of new liquefaction capacity to be added in Australia from the
Ichthys LNG project and Wheatstone LNG projects.
• 17 MT of new liquefaction capacity to be added in the US from Freeport LNG,
Cove Point LNG and Cameron LNG
Global liquefaction capacity
0
100
200
300
400
500
600
700
2017 2018e 2019e 2020e 2021e
mtp
s
Africa Asia & Middle East Europe & Russia LAM & Canada Australia United States
43 www.drewry.co.uk Drewry Maritime Financial Research
LNG shipping Weak freight rate outlook in the short term, though bullish in the long term
• 2018 spot rates expected to follow a similar profile to 2017
• Spot rates should pickup in 2019 as supply pressures ease
Source: Drewry research
Freight rates
K
20K
40K
60K
80K
100K
120K
140K
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
US
D p
er
day
Short-term rate (1-3 years) Long-term rate (10 year)
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