Tanker Markets Overview

Tanker MarketsOverview

31 May 2010, Jeddah

Peter M Swift,MD, INTERTANKO

INTERTANKO Today

260 + members operating ca. 3,100 ships > 75% of the independent oil tanker fleet and > 85% of

the chemical carrier fleet

300 + associate members: in oil and chemical tanker related businesses

15 Committees – 5 Regional Panels

Principal Offices – London and Oslo Representative Offices in US, Asia and BrusselsObserver Status at IMO, IOPC, OECD and UNCTAD

International Association of Independent Tanker Owners

Global dependence on oil tanker transportation

World Oil Consumption 3.8 billion ts

Transported by sea 2.4 billion ts

> 60% transported by sea

Tanker shipping today- an industry to be proud of

• Safe• Environmentally responsible• Energy efficient• Cost effective

Accidental oil pollution from tankers

Based on ITOPF/FearnleysBased on ITOPF/Fearnleys

1000 ts spilt 1000 bn tonne miles trade

0

1

1

2

3

4

1970s 1980s 1990s 2000s

0

4

9

13

18

22

1000 ts spilled

m ts transported

- 63% -3% -82%

Tanker Shipping’s GREEN Credentials

• This car, weighing one tonne, uses 1 litre of fuel to move 20 kms

• This oil tanker uses 1 litre of fuel to move one tonne of cargo 2,500 kms

– more than twice as far as 20 years ago

Source: OPEC/US pub. stats

USD per barrelUSD per barrel

Oil price and freight rates 1970-2010– real and nominal

0

10

20

30

40

50

60

70

80

90

10019

70

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

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

Nominal price Arab Light

Real price Arab Light

Nominal freight rate AG-West

Real freight rate AG-West

Deflated by the Consumer Price Index (USD)

Investment in New Tonnage - Move to Double Hulls

• More than USD 500 billion invested since 2000 with the result that ~95% of tanker fleet* double hulled by end 2010* over 10,000 dwt

622

5159

67 68 73 78 84 91 9694

78

4941

33 32 27 22 16 9 4

0

20

40

60

80

100

1991

1997

End 0

2

End 0

3

End 0

4

End 0

5

End 0

6

End 0

7

End 0

8

End 0

9

End 1

0

SH/DB/DS

DH

% dwt share:

Average age tanker fleet above 10,000 dwt

Based on LRFairplayBased on LRFairplay

6

8

10

12

14

1619

70

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

Years

Key Challenges for Tanker and other Ship Owners Today

• Establishing and maintaining an international framework of consistent regulations and standards

• Delivering best environmental performance

• Ensuring availability of good people (and quality ships)

• Ensuring the welfare and well-being of ships’ crews

• Meeting the challenges of Piracy

Key Environmental Challenges

• Air emissions

- Green House Gases

- Exhaust Gas emissions (Annex VI & its revisions)

- VOC emissions

• Spill Prevention and Response Planning• Ballast Water management • Biofouling• Antifouling systems• Ship Recycling• Port Reception Facilities (adequacy & affordability) • Waste management (onboard and ashore)• Radiated Noise pollution• Cetacean strikes

Tanker Markets Today ?

• Demand down, but recovering ?• Supply up, and still growing ?• Rates down, and ?

Tanker Markets Today

• Demand : World oil trade

• Supply : Ships on Order & Fleet development

• Tanker market

• Shipbuilding capacity

World Oil Demand vs. GDP

-4

-3

-2

-1

0

1

2

3

4

5

61

98

1

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

% c

ha

ng

e (

ye

ar

on

ye

ar)

IMF GDP

Oil Demand

Source: Clarksons (September 2009)

Demand uncertainties

• Global or regional economic stagnation

• New pipelines

• Natural and other disasters

• Climate Change legislation

• Oil price

• Inventory levels

Eastern Siberian Pacific Ocean Pipeline

Orderbook – All ships (>999GT)

Source: Clarksons, April 2010

Orderbook Development (All ship types)

Orderbook by ship type(as % existing fleet)


33

64

41

15

33

0

10

20

30

40

50

60

70

Tanker Chemical Bulk carrier Container ship LPG carrier

per

cen

tag

e o

f cap

acity

Tanker Contracting 1996-2010

0

10

20

30

40

50

60

70

80

901

99

6

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

mil

lio

n d

ead

wei

gh

t

Handy

MR

Panamax

Aframax

Suezmax

VLCC


Newbuilding Tanker Prices

0

30

60

90

120

150

180

Ja

n-7

6

Ja

n-7

8

Ja

n-8

0

Ja

n-8

2

Ja

n-8

4

Ja

n-8

6

Ja

n-8

8

Ja

n-9

0

Ja

n-9

2

Ja

n-9

4

Ja

n-9

6

Ja

n-9

8

Ja

n-0

0

Ja

n-0

2

Ja

n-0

4

Ja

n-0

6

Ja

n-0

8

Ja

n-1

0

$ m

illi

on

VLCC Suezmax Aframax Panamax MR Product


Tanker Fleet Development

0

50

100

150

200

250

300

350

400

450

500

550

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

dea

dw

eig

ht

(mill

ion

)

10-24 tanker

handy

MR

Panamax

Aframax

Suezmax

VLCC


Tanker Age Profile

0

100

200

300

400

500

19

70

-19

74

19

75

-19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

no

of

ve

ss

els

Handy

MR

Panamax

Aframax

Suezmax

VLCC


Tanker Fleet Comparisons

12 6 5 9 6

19

3833

21

29

1320

6968 6973 75

58

0

10

20

30

40

50

60

70

80

VLCC Suezmax Aframax Panamax MR Handy

pe

rce

nta

ge

of

ex

isit

ing

fl

ee

t

non-double hull On Order Built since 2000


Where next for Single Hull Tankers ? Current trading status

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VLCC Suezmax Aframax Panamax MR Handy TotalFleet

% o

f si

ng

le h

ull

flee

t

Storage%

Inactive%

DomesticTrading%

NormalTrading%

Source: Clarksons, April 2010 (datasource: Clarksons/LLI)

Where next for Single Hull Tankers ? Trading beyond 2010 ?

Australia NoChina NoEU NoMexico NoRomania NoS Korea No*Philippines No*UAE No*

(*No official note sent to IMO yet)

Bahamas Yes

Barbados Yes

Liberia Yes

Marshall Isl. Yes

Panama Flag Yes

Japan Yes

Singapore Yes

India Yes

Hong Kong Yes**

(** Max. 20 years old)

Flag/Port State positions re MARPOL 13G trading up to the age of 25 years

United States N/A (OPA90)

Source: Baltic Exchange/INTERTANKO

USD/DayUSD/Day

Average tanker freight rates (based on the Baltic rates)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

VLCC AG-Japan, 250,000 ts

Suezmax Wafr-US 130,000 ts

Aframax N Sea-UKCont, 80,000tsProduct Caribs-US, 38,000 ts

Series2

Series6

Series7

Series8

May 2010

Lower Freight Rates & Fleet surpluses

Implications ?

• Challenge to maintain quality and standards, - e.g. maintenance, training

• Challenge to address the issues of the day – e.g. including environmental challenges

Potentially made even worse if new ships are of low standard ?

Shipbuilding capacity

• A future unknown factor !

Shipbuilding output and forecast

Source: Worldyards/INTERTANKO Aug 09

m cgtm cgt

2631 33

38

26

26

55

42

15

3 0

914% 26

38%

4876% 62

95%67

99%

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Available capacity

Orderbook

Historical deliveries

Shipbuilding output potential

Source: Worldyards/INTERTANKO Aug 09

m cgtm cgt

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Availability small

Availability big

Orderbook small

Orderbook big

Deliveries small

Deliveries big

Worldwide estimates in m cgt - small and big ships (Aug 09)

Shipyard output potential - surplus

Implications ?

• Distressed sales / lower prices

• Quality and standards maintained or weakened

• Pressure on suppliers and sub-contractors

• Greater customer focus & customisation

• and any government interventions ?

Market Forecast !

Oil demand and tanker fleet indices

60

90

120

150

180

210

240

270

300

330

360

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Oil demand index

Fleet index (oil and chemical tanker fleet above 10,000 dwt)

VLCC freight rate index

Market Forecast !

or

Thank you اركش

For more information, please visit:www.intertanko.com

www.maritimefoundation.comwww.poseidonchallenge.com

www.shippingfacts.com

London, Oslo. Washington, Singapore and Brussels

Tanker Incidents and accidental pollution

Number incidentsNumber incidents

Based on data from LMIU, ITOPF + othersBased on data from LMIU, ITOPF + others

‘‘000 ts pollution000 ts pollution

0

210

420

630

840

1050

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

0

120

240

360

480

600

Misc/Unknown

Fire/Expl

Hull & Machinery

Grounded

Coll/Contact

Oil pollution

2010 projection based on 110 days

Fleet Growth

-5

0

5

10

15

20

VLCC Smax Amax Pmax MR Handy

% c

ha

ng

e y

-o-y

2000-2009 2009 2010 2011

*Includes slippage, cancellation and removal ideas


VLCCs* deliveries and deletions

Source: INTERTANKO , LR Fairplay current fleet, Clarkson deliveries

NumberNumber

1966 Idemitsu Maru, the first VLCC delivered by IHI, 206,000 dwt1976 Seawise Giant, the largest tanker delivered by Sumitomo H.I , 564,650 dwt1974 the largest number of VLCCs delivered, 1241982 only one VLCC was delivered

*Here VLCCs include all tankers above 200,000 dwt

** trading include short term storage, not lay-up or long term storage

-125

-100

-75

-50

-25

0

25

50

75

100

125

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

VLCCs for delivery - 184

Total built - 1,419

Removed from trading - 834

Existing trading** single hulls - 51

Tanker sales for demolitionand VLCC freight rate

Source: INTERTANKO

m dwt USD / day

* Until week ending 4 September** Sales for demolition until 4 September*** Clarkson Freight rate AG-Japan week ending 4 September

0

6

12

18

24

30

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09*0

20,000

40,000

60,000

80,000

100,000VLCCs sales for demolition

<200,000 dwt sales for demolition**

VLCC freight rate***

Documents

Tanker Markets Overview