The Economic Environment & its impact on the Shipping Industry

Chief Shipping Analyst Peter Sand

Digital Ship 11 February 2015, Bergen, Norway

Today’s agenda a. Global Economics Fragile recovery highlights the need for more political initiatives

b. Supply A stalling orderbook means reality has hit home

c. Dry Bulk Shipping New challenges await as demand slows down

d. Tanker Shipping What is the “new normal” demand level?

e. Container Shipping Will strong demand and slow steaming remain?

What’s BIMCO doing?

This is BIMCO! … and my disclaimer •

A voice of the industry since 1905

•

Owners, operators, managers, shipbrokers, agents and associates in 130 countries – 2,300 members in total

•

Shipowners representing 65% of the world’s commercial fleet

•

Shipping’s leading producer of documents and clauses

•

Our advisory services receive 3,500 enquiries per annum

•

3,4 Million web searches per annum relating to a vast database of vital shipping information

•

This means that your partners and your competitors are probably making use of our organisation (at least I hope so…)

•

This presentation may constitute forward-looking statements.

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Should you choose to believe any of it – you will do so at your own risk! Do contact me afterwards for more information about BIMCO!

A tricky development – mostly for the better, but… 120

1,000

110

900

100

800

90

700

80

600

70

500

60

400

50

300

40

200

Brent oil (LH-axis)

WTI (LH-axis)

Gas oil (MGO)

Spread (MGO-HSFO)

380cSt, HSFO

Source: BIMCO, Marine Bunker Exchange (MABUX)

USD per tonnes

USD per barrel

Oil prices, 2014-2015

It’s a global issue too …

• … and so is unemployment

Global trade slowdown

The peak season that never arrived … Quarterly TCE-earnings, 2013-2015, USD per day 30,000

25,000

20,000

15,000

10,000

5,000

0

2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Jan Capesize

Panamax

Supramax

Handysize

Overall volume growth seen weaker in 2015

A stalling orderbook means reality has hit home 100

20%

80

16%

60

12%

40

8%

20

4%

0

0%

-20

-4%

-40

-8% 2011A

2012A

To be delivered p.a.

2013A

2014A

Demolition

2015F

Conversions

2016E

Growth p.a.

Mill DWT

Dry Bulk Supply Growth Outlook

2017E

Growth rate (RH axis)

Source: BIMCO estimates on Clarksons raw data

VLCC Suezmax

Source: BIMCO, Clarksons Aframax

01-2015

12-2014

11-2014

10-2014

09-2014

08-2014

07-2014

06-2014

05-2014

04-2014

03-2014

02-2014

01-2014

12-2013

11-2013

10-2013

09-2013

90,000

08-2013

07-2013

06-2013

05-2013

04-2013

03-2013

02-2013

01-2013

The start of a good year Crude oil tanker earnings, 2013-2015 USD per day

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

7-year high freight rates Oil product tanker earnings, 2013-2015 USD per day

40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000

LR2 (Ras Tanura-Chiba)

LR1 (Ras Tanura-Chiba)

Source: BIMCO, Clarksons

MR

Handysize

01-2015

12-2014

11-2014

10-2014

09-2014

08-2014

07-2014

06-2014

05-2014

04-2014

03-2014

02-2014

01-2014

12-2013

11-2013

10-2013

09-2013

08-2013

07-2013

06-2013

05-2013

04-2013

03-2013

02-2013

01-2013

0

Has the future already arrived?

Another year of slow supply side growth awaits 40

8%

30

6%

20

4%

10

2%

0

0%

-10

-2%

-20

-4% 2011A

2012A

To be delivered p.a.

2013A

2014A

Demolition

2015F

2016E

2017E

Growth rate (RH axis)

Source: BIMCO estimates on Clarksons raw data

Growth rate p.a.

Mill DWT

Crude Tanker Supply Growth Outlook

The pressure mounts as supply side keep rising 10

10%

8

8%

6

6%

4

4%

2

2%

0

0%

-2

-2%

-4

-4%

-6

-6% 2011A

2012A

To be delivered p.a.

2013A

2014A

Demolition

2015F

2016E

2017E

Growth rate (RH axis)

Source: BIMCO estimates on Clarksons raw data

Growth rate p.a.

Mill DWT

Product Tanker Supply Growth Outlook

The strong recovery in US contribute to import growth US West Coast, Inbound loaded containers 2012-2014 20%

750,000

15%

500,000

10%

250,000

5%

0

0%

TEUs

1,000,000

-250,000

2012

-5%

2013

2014

Acc. Y-o-Y growth 2013 (RH-axis)

Acc. Y-o-Y growth 2014 (RH-axis)

The pressure mounts as supply side keep rising 12%

1,250

10%

1,000

8%

750

6%

500

4%

250

2%

0

0%

-250

-2%

-500

-4% 2011A 2012A 2013A 2014A 2015F 2016E 2017E

To be delivered p.a.

Demolition

Growth rate (RH axis)

Source: BIMCO estimates on Clarksons raw data

Growth rate p.a.

'000 TEU

Container Supply Growth Outlook 1,500

BIMCO Reflections 2015 • “2014 started with lots of optimism for a considerably better global economy and an improved shipping market. Things turned out somewhat differently.” • IMF forecast global GDP at 3.5% in 2015

• “Growth in emerging markets and developing economies is set for a comeback in 2015 with GDP-growth improving. Advanced economies are likely to stay on the recovery track, and improve its GDP-growth.”

… on supply & demand • Slow steaming needs to stick around • No respite for shipping from the slow growth of the global economy • The lower oil price is good for shipping as it brings down cost and boost demand • China remains at the centre of shipping activity also in 2015

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