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IFCHOR Group Research
Marine Money Geneva Forum - 29th June 2016
Un
law
ful d
istr
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tio
n o
f th
is r
ep
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DRY BULK SUPPLY OVERVIEW Capacity Surplus………………………………………………………….……………………………..
Yearly net fleet change………………………………………………………….....………………..
FUNDAMENTALS TOWARD SUPPLY RE-BALANCE Order book ……………………………………………………….…………………………………….
Cancellations……………………………………………………………………………………………
Scrapping activity………………………………………………………………………….…………
THE INFLUENCE OF SENTIMENT ON THE RECOVERY PROCESS Factors influencing the market sentiment…………………………………..……………
CONCLUSION Ships in scrapping zone and scenarios for the future…………………………………
0
50
100
150
200
250
0
500
1'000
1'500
2'000
2'500
3'000
3'500
4'000
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
OV
ERSU
PP
LY -
Mio
dw
t
BD
I
BDI OVERSUPPLY at actual speed(Weighted for average number of voyages per year)
3
DRY BULK SURPLUS CAPACITY
Source: IFCHOR Research, Seaweb IHS
Dry Bulk Supply Overview
4
-10
0
10
20
30
40
50
60
70
80
Mil
lio
n D
WT
DRY BULK FLEET - NET INCREASE
Negative…but by
how much?
<
Source: IFCHOR Research, Seaweb IHS
Dry Bulk Supply Overview
Dry bulk fleet size
5
A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE
0
20
40
60
80
100
120
140
160
180
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Apr-16 May-16
Nu
mb
er
of
Ship
s
Supra
Handy
Panamax
Capesize
DRY BULK ORDERBOOK (2017-2018 DELIVERY)
Source: IFCHOR Research, Seaweb IHS
Fundamentals Toward Supply Re-balance
6
A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE
Source: IFCHOR Research, Seaweb IHS
Fundamentals Toward Supply Re-balance
ORDERBOOK CANCELLATION POTENTIAL
Other countries
China
9
34
1112
14
15
16
Already cancelled Under construction
could be prior cancelling date could have passed the cancelling date
ORDERS AT CHINESE YARDSNOT
STARTED
YET45 Mio DWT
UNDER CONSTRUCTION57 Mio DWT
CHINA PUBLICYARDS
CHINA PRIVATEYARDS
0
1
2
3
4
5
6
7
Mill
ion
dw
t
MONTHLY SCRAPPING ACTIVITY
7
2008 2009 2010 2011 2012 2013 2014 2015 2016
CANCELLATIONS HIGH DEMOLITION RATEA FLAT ORDERBOOK
Improved freight conditions
Source: IFCHOR Research, Seaweb IHS
Fundamentals Toward Supply Re-balance
8
Factors influencing market sentiment:
“NON-STRUCTURAL” POSITIVE TRENDS
EXPECTATIONS
SHORT TERM RE-ADJUSTMENT MEASURES
• DEMAND AND SUPPLY FUTURE EXPECTATIONS
• LAY-UP
• SLOW STEAMING
• SLIPPAGE
• MARKET ROCK-BOTTOM PERCEPTION
Influence of Sentiment on the Recovery Process
• PAST EXPERIENCE BIAS
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SLIPPAGE LAY-UP AVERAGE SPEED
11.85 Mio Dwt scheduled to be
delivered in 2016, but not
commenced yet
* as of June Source: IFCHOR Research, Seaweb IHS
Influence of Sentiment on the Recovery Process
0
2
4
6
8
10
12
Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Mill
ion
DW
T
scheduleddeliveredon order but not commenced yet
BDI
Accumulated slippage
BDI
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
January February March April May June
Nu
mb
er
of
Cap
esi
ze
NOS OF CAPESIZE IN LAY-UP (WEEKLY)
10
SLIPPAGE LAY-UP AVERAGE SPEED
50 ships= 3% of the
Capesize fleet
Week num.
Source: Marine Traffic, IFCHOR Research
BDI
Influence of Sentiment on the Recovery Process
9
9.5
10
10.5
11
11.5
12
12.5
13
13.5
14
11
2016 Ave. speed = 11.4 knots
DRY BULK FLEET AVERAGE SPEED
SLIPPAGE LAY-UP AVERAGE SPEED
Kn
ots
Source: Reuters, BIMCO reports, AXS Marine
Influence of Sentiment on the Recovery Process
*Singapore IFO 180
*
0
5
10
15
20
25
30
Ne
w o
rde
rs a
t ya
rds
–M
illio
n D
WT
BDI
2013 orders boom 87 mio DWT
China’s re-stocking cycle
Rock-bottom perception
2nd hand prices +65% YoY
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PAST EXPERIENCE’S INFLUENCE ON MARKET SENTIMENT
2010 orders boom 102 Mio DWT
2008 2009 2010 2011 2012 2013 2014 2015 2016
new orders
PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS
China releases its 5 years plan
with USD 1trln investments
Fleet ave. age: 14 yrs old
Memory of the recent prices
2nd hand prices +25% YoY
Influence of Sentiment on the Recovery Process
SUPPLY AND DEMAND GROWTH
2'500
3'000
3'500
4'000
4'500
5'000
5'500
6'000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 13
S +26%
D +14%
D +13%
S +13%
D +19%
D +10%
S +1.5%
D +0.5%
Supply
Demand BDI
PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS
Su
pp
ly a
nd
De
ma
nd
-M
illio
n t
on
ne
s
Influence of Sentiment on the Recovery Process
14
Age Profile
n.ships 3'585 36% 3'342 33% 1'219 12% 959 10% 950 9%
Mio Dwt 291.3 38% 267.2 35% 91.9 12% 59.7 8% 56.1 7%
0-5 5-10 10-15 TOTAL
10'055
766.4
>2015-20
Scenarios For The Future
15
17
19
21
23
25
27
29
31
33
35
-
5'000'000
10'000'000
15'000'000
20'000'000
25'000'000
30'000'000
35'000'000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Ave
rag
e s
cra
pp
ing
ag
e
Mio
DW
T -
sc
rap
ped
total DWT scrapped Average scrapping age
35
30
25
20
25
10
5
0
23 yrs old
- 40 Mio
0 50 100 150 200
15
Baseline Scenario
Scenarios For The Future
High Scenario
High Scenario
Hp:
o Jan 2017 fleet = 770 Mio DWT
o 2017 deliveries = 30 Mio DWT
o Stable financial conditions
o Seaborne demand 2017: + 0.7%
+ 30 Mio
+ 30 Mio
- 45 Mio
2017 deliveries
2017demolitions
SURPLUS OF CAPACITY – Mio DWT
0 50 100 150 200
2017 deliveries
- 40 Mio+ 30 Mio
- 45 Mio
16
High Scenario
Scenarios For The Future
Hp:
o Jan 2017 fleet = 770 Mio DWT
o 2017 deliveries = 30 Mio DWT
o Stable financial conditions
o Seaborne demand 2017: + 0.7%
+ 30 Mio
SURPLUS OF CAPACITY – Mio DWT
2017demolitions
Baseline Scenario
High Scenario
China does not acquire the status of market economy:
Water Ballast Treatment convention is implemented:
17
Fleet size most likely to increase in 2016. However, if the order bookremains flat and demolitions maintain the current pace, a net fleet decreaseis envisaged for 2017
As seaborne demand struggles to grow, the re-balancing of the Dry Bulkfleet will be heavily dependent upon scrapping activity
Non structural supply reductions do more harm than good
External disruptive factors affecting fundamentals can lead to a re-balancing sooner than later
LEGAL DISCLAIMER: The information contained in this report has been obtained from diverse sources. IFCHOR S.A. considers such information to be reliable but IFCHOR S.A. doesnot guarantee its accuracy or completeness. Whilst every care has been taken in the production of the report no liability can be accepted for any loss or damage incurred in anyway whatsoever. This report has been produced for the internal use of the intended recipients only and no reproduction is allowed prior the authorization of IFCHOR S.A.
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18
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