SHIPPING MARKET OUTLOOK Industrial Production Seaborne Trades 1987-2009 %p.a. 15 m tonnes Pacific-S/SE Asia India 3,500 13 lron Ore ▣Coal Grain Minor Bulks 11 3,000 Crude Oil Oil Products 9 2,500 2.000 1,500 1.000 500 .7 Atlantic-US Europe -9 0 5 5gg吕g吝吕吕8吕66 6000 Source:Clarkson Research Services Source:Clarkson Research Services Figure 1.2.1 Figure 1.2.2 GDP(%yoy) 20052006200720082009 Seaborne Trades Forecast OECD 2.5 3.0 2.6 1.50.5 (mt/mTEU) 2005 2006 2007 20082009 Iron Ore 658 720 781 866 912 USA 3.1 2.8 2.0 1.6 0.1 12.1% 9.5% 85% 10.9% 53 Japan 1.9 2.4 2.1 0.7 0.5 Coking Coal 184 190 211 224 234 European Union 2.0 2.8 2.6 1.3 0.2 3% 3.2% 11.1% 5.9% 4.7% Steam Coal 507 543 576 593 616 Germany 0.8 2.9 2.5 1.9 0.0 5% 7.0% 6% 3.0% 3.9% France 1.7 2.2 2.2 0.8 0.2 Grains inc.s'beans 272 291 303 316 308 UK 1.8 2.8 3.0 1.0 -0.1 -1.2% 7.1% 4.1% 4.1% -2.4% Italy 0.1 1.8 15 -0.1 -0.2 Other Bulks 1,038 1093 1.147 1186 1203 7.0 2.2% 5.3% 4.9% Russia 6.4 7.4 8.1 5.5 3.5% 1.4% Total Dry Bulk 2.6602.838 3.018 3.185 3.279 China 10.411.6 11.9 9.7 9.3 Trades (mt) 4.7% 6.7% 6.3% 5.5% 3.0% Asian NIEs 4.7 5.6 5.6 4.0 3.2 Crude 1,885 1,933 1,984 2.043 2,079 South Korea 3.5 1.90 250 4.2 5.1 5.0 4.1 2.6% 3.0% 18% Products 671 712 736 755 767 Taiwan 4.1 4.9 5.7 3.8 2.5 8.2% 6.0% 3.3% 3% .5% Hong Kong SAR 7.5 7.0 6.4 4.1 3.5 Total Oil Trades 2,5562,644 2.719 2,798 2846 Singapore 6.6 8.2 7.7 3.6 3.5 (mt) 3.5% 3.4% 2.8% 2.9% 1.7% Thailand 4.5 5.1 4.8 4.7 4.5 Container Trade 77 82 98 Malaysia 5.2 5.8 6.3 Europe 5.8 4.8 % Asia 197 221 5 315 India 9.0 9.8 9.3 7.9 6.9 N.America 43 45 47 6 48 Africa 5.6 6.1 6.3 5.9 6.0 Others 66 72 78 8 5.5 Total (mTEU lifts) 383 420 464 503 550 S C America 4.6 5.6 4.6 3.2 Total Container 106 117 129 139 152 WORLD 4.8 5.1 5.0 3.9 3.0 de4nm3） 10.6%10.7%10.4%7.6%9.0% Forecast.Source:IMF Table 1.1 Economic Growth Table 1.2 Seaborne Trade Clarkson Research Services Autumn 2008 11
Clarkson Research Services Autumn 2008 11 SHIPPING MARKET OUTLOOK Table 1.1 Economic Growth Table 1.2 Seaborne Trade Figure 1.2.1 Figure 1.2.2 Industrial Production -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Source: Clarkson Research Services % p.a. Atlantic - US & Europe Pacific - S/SE Asia & India Seaborne Trades 1987-2009 0 500 1,000 1,500 2,000 2,500 3,000 3,500 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 (f) Source: Clarkson Research Services m tonnes Iron Ore Coal Grain Minor Bulks Crude Oil Oil Products GDP (% yoy) 2005 2006 2007 2008 2009 OECD 2.5 3.0 2.6 1.5 0.5 USA 3.1 2.8 2.0 1.6 0.1 Japan 1.9 2.4 2.1 0.7 0.5 European Union 2.0 2.8 2.6 1.3 0.2 Germany 0.8 2.9 2.5 1.9 0.0 France 1.7 2.2 2.2 0.8 0.2 UK 1.8 2.8 3.0 1.0 -0.1 Italy 0.1 1.8 1.5 -0.1 -0.2 Russia 6.4 7.4 8.1 7.0 5.5 China 10.4 11.6 11.9 9.7 9.3 Asian NIEs 4.7 5.6 5.6 4.0 3.2 South Korea 4.2 5.1 5.0 4.1 3.5 Taiwan 4.1 4.9 5.7 3.8 2.5 Hong Kong SAR 7.5 7.0 6.4 4.1 3.5 Singapore 6.6 8.2 7.7 3.6 3.5 Thailand 4.5 5.1 4.8 4.7 4.5 Malaysia 5.2 5.8 6.3 5.8 4.8 India 9.0 9.8 9.3 7.9 6.9 Africa 5.6 6.1 6.3 5.9 6.0 S & C America 4.6 5.5 5.6 4.6 3.2 WORLD 4.8 5.1 5.0 3.9 3.0 * Forecast, Source: IMF Forecast 2005 2006 2007 2008 2009 Iron Ore 658 720 781 866 912 12.1% 9.5% 8.5% 10.9% 5.3% Coking Coal 184 190 211 224 234 3% 3.2% 11.1% 5.9% 4.7% Steam Coal 507 543 576 593 616 5% 7.0% 6% 3.0% 3.9% Grains inc. s'beans 272 291 303 316 308 -1.2% 7.1% 4.1% 4.1% -2.4% Other Bulks 1,038 1,093 1,147 1,186 1,203 2.2% 5.3% 4.9% 3.5% 1.4% 2,660 2,838 3,018 3,185 3,279 4.7% 6.7% 6.3% 5.5% 3.0% Crude 1,885 1,933 1,984 2,043 2,079 1.9% 2.5% 2.6% 3.0% 1.8% Products 671 712 736 755 767 8.2% 6.0% 3.3% 3% 1.5% 2,556 2,644 2,719 2,798 2,846 3.5% 3.4% 2.8% 2.9% 1.7% Container Trade Europe 77 82 90 94 98 Asia 197 221 250 279 315 N.America 43 45 47 46 48 Others 66 72 78 83 89 Total (mTEU lifts) 383 420 464 503 550 106 117 129 139 152 10.6% 10.7% 10.4% 7.6% 9.0% Seaborne Trades (mt / mTEU) Total Dry Bulk Trades (mt) Total Oil Trades (mt) Total Container Trade (mTEU)
SHIPPING MARKET OUTLOOK 1.3 The Shipbuilding Market extends for years ahead,many shipping companies preferred to defer financing. The shipyards have a very big order book and Questions over pre-delivery finance,which the circumstances in which it was created requires a first-class bank guarantee,and the presents investors with a tricky task in assessing post delivery finance for vessels ordered at such how things will develop over the next two high prices remains a matter of conjecture, years.The problem is that the great expansion especially against the background of the in shipyard output scheduled over the next deepening credit crisis. couple of years was a rush job.The shipyards limped into the boom of 2003 with a short order For all these reasons,the growth of the world book and no thought of expansion. fleet,which is generally quite straightforward to predict a couple of years ahead,has taken on a Shipyard Capacity Plans new and "fuzzy"character.With a third of the order book in new facilities,we feel that As a result,when the freight boom took off in slippage of 20%or even 30%is quite likely.No 2003 the yards had little additional capacity to doubt there will be some cancellations also, offer and the surge of demand for new ships though once shipyard contracts are signed, was mainly channelled into prices,doubling the history says they are usually built -but in newbuilding price index from 90 to 180(see today's credit climate,who knows? Figure 1.3.4).The high prices made shipbuilding very profitable and,as the Order Book by Type shipyards became convinced the boom was here to stay,they set about expanding existing Investment during 2007 hit a record $240bn, facilities and building new yards.This new and in the year to August 2008 $104bn had capacity started to be marketed in 2006,and the been invested.Although this is a 35%fall it is first deliveries from it appeared in 2008. still higher than in any year prior to 2007.In September 2008 the tanker order book of 188m As a result shipbuilding deliveries developed in dwt accounted for 48.1%of the fleet;the bulk two separate phases.The first phase from 2003- carrier order book of 288m dwt for 70.3%of 2007 reflected the limited available capacity the fleet;LPG orders of 5.2m m3 for 31.6%of and a small increase in shipyard production.For the fleet:the LNG order book of 17.7m m3 for example,output increased by only 7%in 2006 48%the fleet;and containership orders of 6.5m and 5%in 2007.The second phase started in TEU for 54.4%of the fleet.By any standards 2008 with the commissioning of new capacity. these are very high order book figures Deliveries should increase by 32%,followed by 48%in2009,and18%in2010. Shipbuilding Prices The problem for market analysts is that, Newbuilding prices continue to edge up,with because the expansion plans were developed in the Clarkson Index up 3%in the year to haste,it is not clear whether implementation September 2008.Prices for VLCCs,which were will be as clear-cut as the order book suggests. in demand,increased by around 10%to $162m, There are questions about whether the and other sizes followed a similar trend.But production management;skilled labour;and the bulker prices,which were heavily ordered in supply of key components such as propellers, 2007,only edged up by 1-2%. stern frames,shafts and engines will be available in sufficient quantities to satisfy this In conclusion,the shipyards,now entering the great surge in production.In addition,there second phase of the investment cycle,must may have been“overselling”.The high prices demonstrate they can build the order book to created an incentive to sell as many ships as schedule and their customers must arrange possible,but the shipyards'sales forces may not finance in increasingly difficult circumstances. always have fully understood the practical If they are successful,the world fleet will grow difficulties of commissioning new facilities, by a third during 2007-10.If not,as the saying even in existing yards.Finally there is the goes "it's an ill wind that blows nobody any question of finance.Since the order book good". Clarkson Research Services 12 Autumn 2008
Clarkson Research Services 12 Autumn 2008 SHIPPING MARKET OUTLOOK The shipyards have a very big order book and the circumstances in which it was created presents investors with a tricky task in assessing how things will develop over the next two years. The problem is that the great expansion in shipyard output scheduled over the next couple of years was a rush job. The shipyards limped into the boom of 2003 with a short order book and no thought of expansion. Shipyard Capacity Plans As a result, when the freight boom took off in 2003 the yards had little additional capacity to offer and the surge of demand for new ships was mainly channelled into prices, doubling the newbuilding price index from 90 to 180 (see Figure 1.3.4). The high prices made shipbuilding very profitable and, as the shipyards became convinced the boom was here to stay, they set about expanding existing facilities and building new yards. This new capacity started to be marketed in 2006, and the first deliveries from it appeared in 2008. As a result shipbuilding deliveries developed in two separate phases. The first phase from 2003- 2007 reflected the limited available capacity and a small increase in shipyard production. For example, output increased by only 7% in 2006 and 5% in 2007. The second phase started in 2008 with the commissioning of new capacity. Deliveries should increase by 32%, followed by 48% in 2009, and 18% in 2010. The problem for market analysts is that, because the expansion plans were developed in haste, it is not clear whether implementation will be as clear-cut as the order book suggests. There are questions about whether the production management; skilled labour; and the supply of key components such as propellers, stern frames, shafts and engines will be available in sufficient quantities to satisfy this great surge in production. In addition, there may have been “overselling”. The high prices created an incentive to sell as many ships as possible, but the shipyards’ sales forces may not always have fully understood the practical difficulties of commissioning new facilities, even in existing yards. Finally there is the question of finance. Since the order book extends for years ahead, many shipping companies preferred to defer financing. Questions over pre-delivery finance, which requires a first-class bank guarantee, and the post delivery finance for vessels ordered at such high prices remains a matter of conjecture, especially against the background of the deepening credit crisis. For all these reasons, the growth of the world fleet, which is generally quite straightforward to predict a couple of years ahead, has taken on a new and "fuzzy" character. With a third of the order book in new facilities, we feel that slippage of 20% or even 30% is quite likely. No doubt there will be some cancellations also, though once shipyard contracts are signed, history says they are usually built - but in today's credit climate, who knows? Order Book by Type Investment during 2007 hit a record $240bn, and in the year to August 2008 $104bn had been invested. Although this is a 35% fall it is still higher than in any year prior to 2007. In September 2008 the tanker order book of 188m dwt accounted for 48.1% of the fleet; the bulk carrier order book of 288m dwt for 70.3% of the fleet; LPG orders of 5.2m m³ for 31.6% of the fleet; the LNG order book of 17.7m m³ for 48% the fleet; and containership orders of 6.5m TEU for 54.4% of the fleet. By any standards these are very high order book figures. Shipbuilding Prices Newbuilding prices continue to edge up, with the Clarkson Index up 3% in the year to September 2008. Prices for VLCCs, which were in demand, increased by around 10% to $162m, and other sizes followed a similar trend. But bulker prices, which were heavily ordered in 2007, only edged up by 1-2%. In conclusion, the shipyards, now entering the second phase of the investment cycle, must demonstrate they can build the order book to schedule and their customers must arrange finance in increasingly difficult circumstances. If they are successful, the world fleet will grow by a third during 2007-10. If not, as the saying goes "it's an ill wind that blows nobody any good". 1.3 The Shipbuilding Market