Shipping Cycles & COVID-19 · Features of Shipping Cycles Rate correlation (2) Benchmark Tanker 1 Yr T/C Rates ($ k/Day) Benchmark Tanker 1 Yr T/C Rate Correlation, 1990 –2018 Cycles

Shipping Cycles & COVID-19Baltic - ICS Lunchtime Lecture, 13th May 2020

Mr David K. Jordan – Regional Director, MSI

Prepared for Attendees of the Baltic-ICS Lunchtime Lecture by MSI Asia Private Limited. Internal Reference Only.

Contact Details

© Maritime Strategies International 2

Shipping Cycles & COVID-19Agenda

10

17Market Cycles, 2000 – 2019

25Scenario Based Analysis

29Dry Bulk Market

Cycles in Shipping

Regional Director, Asia

[email protected]

Moving Beyond COVID-19 52

37Containership Market

42Oil Tanker Market

David K. Jordan

3Introduction to MSI

Tel: +65 8754 3450



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Cycles in Shipping

A quick look at fundamentals



Cycles in ShippingAn inescapable reality

Baltic Exchange Indices, 2010 – PresentCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

0

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Index

BDI

BCTI

BDTI



Cycles in ShippingA four stage process

Baltic Exchange Dry Index, 2000 – 2019Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

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Index

1 2 3 4

1

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4

Trough

Recovery

Peak / Plateau

Collapse



Features of Shipping CyclesRate correlation (1)

Benchmark Bulk Carrier 1 Yr T/C RatesCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

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$ k/Day

Handymax

Panamax

Capesize



Features of Shipping CyclesRate correlation (2)

Benchmark Tanker 1 Yr T/C Rate Correlation, 1990 – 2018Benchmark Tanker 1 Yr T/C Rates ($ k/Day)Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Handy MR LR1 LR2 Aframax Suezmax VLCC

Handy 1.00

MR 0.99 1.00

LR1 0.98 0.97 1.00

LR2 0.91 0.91 0.95 1.00

Aframax 0.94 0.93 0.97 0.97 1.00

Suezmax 0.91 0.91 0.95 0.95 0.98 1.00

VLCC 0.87 0.87 0.92 0.93 0.97 0.98 1.00

0

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$ k/Day

MR (Product)

Aframax (Crude)

VLCC (Crude)



Features of Shipping CyclesVolatility (1)

Handymax Bulk Carrier: Annual Standard DeviationCapesize Bulk Carrier: Annual Standard DeviationCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

0.0

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1 Yr TC

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Spot Rate

1 Yr TC



Features of Shipping CyclesVolatility (2)

Suezmax Crude Tanker: Annual Standard DeviationCapesize Bulk Carrier: Annual Standard DeviationCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

0.0

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Spot Rate

1 Yr TC



Market Cycles, 2000 – 2019

Simpler times?



The Demand SideGlobal Seaborne Trade

Global Seaborne Trade Growth Rates, CAGRGlobal Seaborne Trade, 1990 – 2019Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

1990s 2000s 2010s

Crude Oil 2.9% 1.3% 0.6%

Oil Products 2.2% 5.1% 3.5%

Chemicals 7.4% 7.0% 3.8%

LNG 6.8% 7.0% 7.0%

LPG 4.7% 1.4% 7.4%

Dry Bulk 2.1% 4.8% 4.8%

Container 8.6% 8.1% 4.8%

Total Cargo 4.1% 3.5% 3.1%0

1,000

2,000

3,000

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5,000

6,000

7,000

8,000

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11,000

12,000

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MnT

Dry Cargo

Wet Cargo



The Demand SideGrowth in the last 20 years has been underpinned by China

Chinese GDP Growth, 2000 – 2024Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

0%

2%

4%

6%

8%

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12%

14%

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20%

0%

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% Ch yoy% share of nominal GDP

Stockbuilding Total Fixed Investments Net Exports

Private Consumption Government Consumption Chinese GDP (RH Axis)


© Maritime Strategies International

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Mn GT (Start Yr)

20

The Supply SideGlobal fleet of merchant vessels

Global Fleet, 1990 – 2020 (Start Year)Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

CAGR Cargo Growth Fleet Growth

1990s 4.1% 2.5%

2000s 3.5% 5.3%

2010s 3.1% 4.9%



The Supply SideWhy was fleet growth in 2010s so high?

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Unprecedented Ordering

Industry Fragmentation

Private Equity

Government Intervention

1

2

3

4

Why?



Shipbuilding CapacityRetreating from the peaks of the early 2010s

Global Shipbuilding Capacity, 1990 – 2019Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

CAGR Cargo Growth Fleet Growth

1990s 4.3% 2.5%

2000s 3.9% 5.3%

2010s 2.5% 4.9%

0

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Mn CGT

Others

Europe

China

Korea

Japan



The Supply Side EffectToo much tonnage has suppressed rates for the last decade

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Crude Tankers Product Tankers

Capesize Bulk Carrier Handymax Bulk Carrier

0

20

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US$/bbl$ k /Day

VLCC 1 Year TC Rate Oil Price (RHS)

80.0%

81.0%

82.0%

83.0%

84.0%

85.0%

86.0%

0

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%$ k /Day

40/50k Dwt Tanker 1 Year TC Rate

World Refinery Op. Rate (RHS)

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MnT$ k /DayCape 1 Year TC Rate China Ore Import (RHS)

-3.0%

-2.0%

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% Ch$ k /Day1.1k TEU 1 Year TC Rate World GDP, % Ch (RHS)

Su

pp

ly

Su

pp

ly

Su

pp

ly

Su

pp

ly



The Market Cycle: End-December 2019So, where exactly were we?

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Note: Schematic for illustrative purposes only

LP

G

Bu

lker

LN

G

MP

P

Oil

Ta

nke

r

Che

mic

al T

an

ke

r

PC

TC

OS

Vs &

MO

DU

s

Con

tain

er

Ro

Ro



Scenario-Based Analysis

MSI Horizon and Analysing Shipping Cycles


© Maritime Strategies International

Forecasting Models

26

MSI HorizonThe key to scenario-based analysis

MSI’s reports and forecasting models are available to subscribe to via our online platform:


Market Reports

Asset Valuations


Cycles in

Shipping

Market Cycles

in the 2010s

Scenario

Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19



Market Data, Forecasts and Reports Vessel Valuation Scenario Analysis Asset Stress Testing

https://horizon.msiltd.com/Prepared for Attendees of the Baltic-ICS Lunchtime Lecture by MSI Asia Private Limited. Internal Reference Only.


Global GDP: Constant Prices and Exchange Rate (USD 2015)

Global GrowthCOVID-19 hit the breaks hard

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario

Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

% Ch yoy

Q4 19 Base Case

Current Base Case



Dry Bulk Market

A delayed recovery



Dry Bulk MarketCOVID-19 is not happening in isolation…

Baltic Exchange Dry Indices, January 2019 – Present

• 2020 began with a precipitous drop for dry

bulk carrier spot earnings. A slide that began

in December accelerated through January

with the outbreak of the COVID-19 virus

towards the end of the month.

• The COVID-19 outbreak has clearly had an

impact on sentiment, and will continue to

disrupt both the demand and supply side of

the dry bulk market this year.

• However, low earnings in the first few months

of the year are not unusual, and weaker spot

markets are not solely a result of the virus.

• A range of seasonal factors undermined

rates before the escalation of COVID-19.

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan

19

Fe

b 1

9

Ma

r 19

Ap

r 1

9

Ma

y 1

9

Ju

n 1

9

Ju

l 1

9

Au

g 1

9

Sep

19

Oct

19

No

v 1

9

Dec 1

9

Jan

20

Fe

b 2

0

Ma

r 20

Ap

r 2

0

Index

BCI BPI BSI BHSI BDI

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk

Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19



Increment Dry Bulk TradeCOVID-19 is undermining previous expectations of stronger demand growth this year

Annual Increment Seaborne Dry Bulk TradeCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk

Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

• Dry bulk trade grew by just 1.2% yoy in 2019,

the lowest yoy growth since 2015. The

significant loss of iron ore trade (-46 MnT)

offset growth in coal (+42 MnT) and minor

bulks (+62 MnT) to some extent.

• At the start of this year, it was anticipated

that a recovery in iron ore trade in 2020 (+66

MnT) and further expansion in 2021 (+77

MnT) would support cargo growth of 3.7%

and 3.4% yoy respectively.

• However, the escalation of the COVID-19

outbreak has led to us slashing our short-

term outlook on demand. We now anticipate

a decline of c. 1% in overall trade in 2020,

with risks on the downside.

• We anticipate that trade levels will recover in

2021, passing the 5 BnT mark for the first

time. -3.0%

-2.0%

-1.0%

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6.0%

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% Ch yoyMnT

Minor Bulks GrainsCoal Iron OreTrade Growth (RH Axis)



Dry Bulk Trade (1) Demand and supply side risks of iron ore

2019 Seaborne Iron Ore Trade by Exporters (MnT)Historical Iron Ore Seaborne Imports

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MnT

China Rest of the World

Oceania866

Brazil347

Central Europe

65

South Africa57

Canada48

Others157

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk

Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19



Dry Bulk Trade (2)What about coal and agribulks?

Seaborne Agricultural Exports (MnT)2019 Seaborne Coal Trade by Importers (MnT)

China315

India259

Japan184

Other Asia178

Western Europe

157

Others359

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MnT

Grains Soybeans/Meal

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk

Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19



Bulk Carrier Fleet DynamicsOrderbook front loaded, scrapping paused and less vessels fitting scrubbers…

Bulk Carrier Supply / Demand BalanceBulk Carrier Fleet DynamicsCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk

Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

-40

-30

-20

-10

0

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2015 2016 2017 2018 2019 2020 2021 2022

Mn DwtDeliveries

Deletions

Contracting

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2015 2016 2017 2018 2019 2020 2021 2022

% Ch yoy

Supply

Demand



Bulk Carrier Earnings and Asset Price OutlookDifficult to recover…

Benchmark 5 Yr Old Asset PriceBenchmark 1 Yr T/C RatesCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk

Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

0

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$ k/Day

Capesize Capesize (Q4 19)

Handymax Handymax (Q4 19)

10

15

20

25

30

35

40

45

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

$ Mn

Capesize Capesize (Q4 19)

Panamax Panamax (Q4 19)


Market Data, Forecasts and Reports Vessel Valuation Scenario Analysis Asset Stress Testing

https://horizon.msiltd.com/Prepared for Attendees of the Baltic-ICS Lunchtime Lecture by MSI Asia Private Limited. Internal Reference Only.


Containership Market

Coming down from recent highs



Container TradeInitial problems with supply have spread to demand

Global Container Port Throughput by Region, 2018Chinese Export Share on Key Trade-Lanes, 2019

0 5 10 15 20

Asia-Eu

Transpac

FE-Latin Am

FE-Mid. East

FE-ISC

FE-Africa

FE-Oceania

Mn TEU, 2019

China

Other Far EastChina + HK

31%

SE Asia14%

Northern Europe

11%

Middle East/ISC9%

Med.9%

Other NE Asia8%

North America

8%

Latin America

6%

Africa2%

Oceania2%

Source: MSI / UNCTAD

Note: Includes transhipment and empties.

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19



Container Demand Trends

Global Seaborne Trade in Containers

COVID-19 will drive a substantial fall in containerised trade in 2020

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

0

50

100

150

200

250

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

Mn TEU

Intra-Regional Trades

North-South Trades

Non-Mainlane East-West Trades

Mainlane Trades

Q4 19 Forecast



Containership Fleet DynamicsA slowdown in fleet growth won’t compensate for trade loses

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Containership Supply / Demand BalanceContainership Fleet Dynamics

-1,000

-500

0

500

1,000

1,500

2,000

2,500

2015 2016 2017 2018 2019 2020 2021 2022

k TEU

Deliveries

Deletions

Contracting

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2015 2016 2017 2018 2019 2020 2021 2022

% Ch yoy

Supply

Demand



Containership Earnings and Asset Price OutlookDifficult to recover…

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Benchmark Newbuild PriceBenchmark 1 Yr T/C Rates

0

20

40

60

80

100

120

140

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

$ Mn

13/14 k TEU Gls 13/14 k TEU Gls (Q4 19)

2.5/2.8 k TEU Gls 2.5/2.8 k TEU Gls (Q4 19)

0

5

10

15

20

25

30

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

$ k/Day

8/9 k TEU Gls 8/9 k TEU Gls (Q4 19)

4.2/4.4 k TEU Gls 4.2/4.4 k TEU Gls (Q4 19)



Oil Tanker Market

How long can the good times last?



Oil Tanker MarketCOVID-19 is not happening in isolation…

Baltic Exchange Dirty and Clean Tanker Indices, January 2019 – PresentCycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

• Tanker earnings have surged at the back end

of Q1 and into Q2, driven the exceptional

imbalance between oil supply and demand

which is driving up floating storage demand.

• Tanker markets were squeezed upwards

over the last couple of months. Oil storage

activities were key to this.

• VLCC spot earnings hit “heroic” levels in mid-

March, just shy of an astounding $300 k/Day.

• However, increasingly front-weighted position

list in the last couple of weeks have resulted

in a severe correction in the levels of

achievable rates. As of 7th May 2020, BDTI

VLCC-TCE stood at around $40 k/Day.

-25

0

25

50

75

100

125

150

175

200

225

250

275

Jan

19

Fe

b 1

9

Ma

r 19

Ap

r 1

9

Ma

y 1

9

Ju

n 1

9

Ju

l 1

9

Au

g 1

9

Sep

19

Oct

19

No

v 1

9

Dec 1

9

Jan

20

Fe

b 2

0

Ma

r 20

Ap

r 2

0

Ma

y 2

0

$ k/Day

Th

ou

sa

nd

s

BDTI VLCC TCE

BDTI Aframax TCE

BCTI Atlantic Basket TCE



Oil DemandCOVID-19 driving collapse in oil use

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Global Oil Demand: Annual ChangeGlobal Oil Demand: Quarterly Change

-25

-20

-15

-10

-5

0

5

Q1 1

7

Q2 1

7

Q3 1

7

Q4 1

7

Q1 1

8

Q2 1

8

Q3 1

8

Q4 1

8

Q1 1

9

Q2 1

9

Q3 1

9

Q4 1

9

Q1 2

0

Q2 2

0

Q3 2

0

Q4 2

0

Mn b/d(% Ch yoy)

Non-OECD OECD

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

-500

-400

-300

-200

-100

0

100

200

300

400

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

Mn T

Mn Tonnes Change

% Ch yoy (RH Axis)



Oil ProductionDeclining output, but too slow to track demand

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Regional Oil ProductionIndicative Global Oil Production

20

25

30

35

40

45

50

55

60

65

70

H1 1

5

H2 1

5

H1 1

6

H2 1

6

H1 1

7

H2 1

7

H1 1

8

H2 1

8

H1 1

9

H2 1

9

H1 2

0

H2 2

0

Mn b/d

OECD

Non-OECD

600

800

1000

1200

1400

1600

1800

400

600

800

1000

1200

1400

1600

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

MnTMnT

North America North America (Q4 19)

FSU FSU (Q4 19)

Middle East (RH Axis) Middle East (Q4 19, RH Axis)



Oil Market Supply / Demand Balance

70

75

80

85

90

95

100

105

Q1 1

5

Q2 1

5

Q3 1

5

Q4 1

5

Q1 1

6

Q2 1

6

Q3 1

6

Q4 1

6

Q1 1

7

Q2 1

7

Q3 1

7

Q4 1

7

Q1 1

8

Q2 1

8

Q3 1

8

Q4 1

8

Q1 1

9

Q2 1

9

Q3 1

9

Q4 1

9

Q1 2

0

Q2 2

0

Q3 2

0

Q4 2

0

Q1 2

1

Q2 2

1

Q3 2

1

Q4 2

1

Mn b/d

Supply

Demand

Oil Market BalancesOne word … oversupply

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19



Oil Market BalancesOil price collapse and floating storage build

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Proportion of Tanker Tonnage being Used for Floating StorageOil Price

0

10

20

30

40

50

60

70

80

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

$/BBL

Current

Previous (Q4 19)

0%

5%

10%

15%

20%

25%

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

10-70 k Dwt 70-125 k Dwt

125-200 k Dwt 200+ k Dwt



Refining and Oil TradeTrade dynamics driven by production response and refining activity

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Seaborne Trade GrowthGlobal Refining Throughput and Utilisation

-15

-10

-5

0

5

10

15

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

% Ch yoy

Seaborne Crude Trade

Seaborne Products Trade

70

72

74

76

78

80

82

84

86

3.5

3.7

3.9

4.1

4.3

4.5

4.7

4.9

5.1

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

%BnT

World Oil Consumption

World Refinery Throughput

World Refinery Utilisation (RH Axis)



Tanker Fleet DynamicsStable fleet growth spells trouble…

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Tanker Supply / Demand Balance (10+ k Dwt)Tanker Fleet Dynamics (10+ k Dwt)

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2015 2016 2017 2018 2019 2020 2021 2022

% Ch yoy

Supply

Demand

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

2015 2016 2017 2018 2019 2020 2021 2022

Mn Dwt

Deliveries

Deletions

Contracting



Tanker Earnings OutlookStrength of today based on the weakness of the future

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Benchmark 1 Yr T/C Rates: Annual AveragesBenchmark 1 Yr T/C Rates: Quarterly Averages

0

10

20

30

40

50

60

70

Q1 1

8

Q2 1

8

Q3 1

8

Q4 1

8

Q1 1

9

Q2 1

9

Q3 1

9

Q4 1

9

Q1 2

0

Q2 2

0

Q3 2

0

Q4 2

0

Q1 2

1

Q2 2

1

Q3 2

1

Q4 2

1

$ k/Day

VLCC VLCC (Q4 19)

LR1 LR1 (Q4 19)

0

5

10

15

20

25

30

35

40

45

50

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

$ k/Day

VLCC VLCC (Q4 19)

LR1 LR1 (Q4 19)



The Market Cycle: 13th May 2020So, where are we now?

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving Beyond

COVID-19

Note: Schematic for illustrative purposes onlyB

ulk

er

Oil

Ta

nke

r

Con

tain

er

Bu

lker

Oil

Ta

nke

r

Con

tain

er



Moving Beyond COVID-19

Factors affecting the longer term



Annual Growth in Seaborne Trade by Commodity Type

Future Trade GrowthA notable slowdown throughout the 2020s

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Cru

de

Oil

Oil

Pro

du

cts

Dry

Bu

lk

Co

nta

ine

r

Ch

em

ica

ls

LN

G

LP

G

To

tal

Carg

o

CAGR

2000s

2010s

1H 2020s

2H 2020s



Global Merchant Fleet Dynamics

Future Fleet GrowthA moderation in growth rates

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

-50

-25

0

25

50

75

100

125

150

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

Mn GT

Deliveries

Deletions

Fleet Growth % yoy (RH Axis)



Global Shipyard Capacity

Future Shipbuilding CapacityContinued rationalisation followed by moderate increases, with China dominating

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

0

10

20

30

40

50

60

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

Mn CGT

Others

Europe

China

Korea

Japan



The Move Towards ProtectionismThe US-China Trade War “Phase One” Deal & COVID-19

Containers

Did not proceed with

schedule 15% tariff; cut

tariff rate on list of

Chinese goods to 7.5%

Dry Bulk has seen

limited impact on net

basis. Phase One

unwinds main market

impact factor

Tankers likely to see

resurgence in US-China

crude flows after

effective hiatus

LNG cargos diverted

away from China

LPG rearrangement

between Middle East

and US supplies within

North East Asia

Offshore not directly

impacted – potential for

higher input costs

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19



Shipping and the EnvironmentAn accelerating agenda

Jan 1st 2014 - Ballast Water US Ports Phase 1

Jul 1st 2014 – ECDISMandatory for cargoships

between 3,000 – 10,000 gt

Jan 1st 2015 – SOx LimitsECA sulphur limit at 01.% m/m

Jan 1st 2015 – EEDIPhase 1


above 50,000 gt

Jan 1st 2015 – Green RecyclingInventory of Hazardous Material

Apr 25th 2015 – CO2 EmissionsEU adopts MRV proposal

Dec 31st 2016 – Green RecyclingList of approved EU recycling

facilities deadline

Jan 1st 2014 – SOx Limits California fuel limits

2014

2015

2016

2017

2018

2019 2021

2020

Jan 1st 2016 – NOx LimitsEnforcement of Tier III limits

Jan 1st 2016 - Ballast WaterUS Ports Phase 2

Jan 1st 2017 – ECDISMandatory for cargoships

between 20,000 – 50,000 gt

Jan 1st 2018 – CO2 emissionsOwners to start recording CO2 emissions of vessels

Aug 1st 2017 – CO2 EmissionsOwners need CO2

monitoring plan


between 10,000 – 20,000 gt

Jan 1st 2017 – Polar Code Comes into force

Jan 1st 2018 – SOx LimitsGlobal fuel review deadline

Dec 31st 2020 – Green RecyclingEU ship recycling deadline

Apr 30th 2019 – CO2 EmissionsDeadline for 1st EU MRV report

Jan 1st 2020 – EEDIPhase 2

Jan 1st 2020 - Ballast WaterAll ships operating in US to

have BWM systems

Jan 1st 2020 – SOx LimitsGlobal fuel limit 0.5% m/m

Sep 8th 2019 – All vessels after their first special survey after this date will require a ballast water management systems

(D2)

Jan 1st 2019 - All ships over 5,000 gt on

international voyages to collect fuel

consumption data

Jan 1st 2021 – North Sea & Baltic Sea NOx ECA in effect

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19



IMO 2020The changing bunker fuel mix

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

Historical Singapore Bunker PricesGlobal Marine Fuel Consumption

0

1

2

3

4

5

6

7

201

8

201

9

202

0

202

1

Mn b/d

LNG MGO VLSFO HFO

0

100

200

300

400

500

600

700

800

Jan

18

Ma

r 18

Ma

y 1

8

Ju

l 1

8

Sep

18

No

v 1

8

Jan

19

Ma

r 19

Ma

y 1

9

Ju

l 1

9

Sep

19

No

v 1

9

Jan

20

Ma

r 20

$/T

HFO MGO VLSFO



Oil and Bunker PricesLower levels, narrower price spread

Oil and Bunker Prices, 2010 – 2022Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

• Assumes crude prices

average $30-40/bbl across

2020

• Bunker prices drop with

crude prices

• Spread between reference

HSFO and VLSFO narrows

to <$100/T in 2020

• Notable and major disparities

in regional prices for bunker

types.

0

200

400

600

800

1000

1200

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

$/T

Crude HSFO

MGO VLSFO



IMO 2050 & DecarbonisationMulti-faceted approach required

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

Alternative Fuels

A key area of technological development for sustainable transport and central to reducing shipping’s GHG emissions.

They include:• Ammonia / Hydrogen

• Biofuels• Methanol

• Electric Propulsion

Energy Efficiency Technologies

Technologies aimed at improving the efficiency of the ships themselves, the most popular solutions include:

• Hull Coating & Hull-Form Optimisation• Bubbling Surfing & Cleaning

• Rotor Sails• Mewis Duct

• Wind & Solar

Energy Storage Systems

Currently only feasible for limited applications, efforts are focused

on improving these technologies and making them affordable:

• Batteries (Lithium Ion)

• Ultra-Capacitor

• Fly Wheel

• Hybrid Systems

Operational Pathways

Arguably the easiest way to reduce emissions, the various

pathways open to owners / operators include:

• Speed Reduction

• Vessel size & Utilisation

• Route Optimisation

• “Just in Time” Shipping

1 2

3 4



Alternative Marine Fuels (1)No clear front-runner…

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

Technical

Feasibility

Infrastructure

CAPEX

Energy Cost

Fuel

Availability

Regulatory

Framework

LNG Ammonia Hydrogen Biofuels Methanol LPG Battery



Alternative Marine Fuels (2)Ammonia and hydrogen are amongst the most promising longer-term, but need testing on a larger scale

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

Ammonia: Combustion Engines / Fuel Cells Hydrogen: Combustion Engines / Fuel Cells

Ove

rvie

wC

urr

en

t Is

su

es

Cu

rre

nt

Us

e

On a vessel level, none are underway with units under

construction. However, several are in the developmental

stage. There is the Norwegian Ammonia Project. SHI, MISC,

LR and MAN also recently embarked on a JV project to

develop an ammonia-fuelled tanker.

Several green ammonia production projects are under

development or at pilot stage, e.g. Yara plants in the

Netherlands and Western Australia, and Siemens in the UK.

Cost: Not cost-competitive against existing fuel types (e.g.

MGO), but eventual cost-parity seems possible.

Safety: Ammonia is highly toxic. The use of toxic substances

as a bunker fuel under IGC code needs to be addressed.

Storage & Transportation: Must be stored in large volumes

and at very low temperatures.

Often cited as currently being the only viable option as a

stand alone zero-emission fuel for deep sea shipping.

Has a more mature supply chain than other alternative fuels.

Ammonia is already transported at scale by sea.

No ammonia-fuelled vessels are currently being built. But,

designs are available and ammonia fuelled combustion

engines are under development.

For short distances, hydrogen fuelled ferries are already in

development. The two projects are the Water-Go-Round

Project in the US and the Hjelmeland Ferry owned by Norled

A/S due to enter service in 2021.

Future Use: Cruise ships offer a pathway for demonstration.

Large scale projects for green hydrogen are underway, e.g.

Port of Hamburg and Port of Rotterdam.

Cost: Not cost-competitive against existing fuel types at

present, but eventual cost-parity seems possible.

Production: Expensive and energy intensive.

Storage & Transportation: Must be stored in large volumes

and at very low temperatures (-253°C).

Limited Range: Due to space constraints on vessels and

investments in tanks.

As a potentially abundant and clean fuel, hydrogen is widely

regarded as a longer term solution as its use does not generate

any GHG emissions.

Allows for more autonomy than battery / electric powered ships.

Fuel cells are already available, but costs remain high.

Combustion engines are under development and likely to be

commercially available in the next 5 years.



Example of a Tiered Earnings Market

Tiered Earnings Market1, 2, 3, 4…

Cycles in

Shipping

Market Cycles

in the 2010s

Scenario Based

Analysis

Dry Bulk Market

Containership

Market

Oil Tanker

Market

Moving

Beyond

COVID-19

0

5

10

15

20

25

200

7

200

8

200

9

201

0

201

1

2012

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

'000 $/day Non Eco Eco Scrubber

1 Tier 2 Tier 3 Tier 4+ Tier

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