Tanker Market Outlook

Transcription

1 Tanker Market Outlook December 217 Dag Kilen Senior Shipping Analyst Fearnresearch IMPORTANT / DISCLAIMER: This presentation is prepared by Fearnresearch and Fearnley Consultants, companies in the Astrup Fearnley Group. Copyright protected. Any retransmission or distribution is prohibited. An Astrup Fearnley Company

2 Tanker Market Outlook, December Recent development 2

3 Tanker Market Outlook, December 217 VLCC trading, avg. liftings per month by trade WAF-N.America 8% 6% 4% 2% % Europe-Asia 5% 4% 3% 2% 1% % 4 MEG-West 25% 2 MEG-Asia 5% % 15% 1% 5% % 4% % 35% 3 WAF-Asia 15% Americas-Asia 2% 15% 1% 5% % % 5% % Other trades 15% 1% 5% % Sources: Fearnleys 3

4 Tanker Market Outlook, December 217 Suezmax trading, avg. liftings per month by trade 5 WAF-Europe 2 % 25 MEG-Europe 1 % 4 3 WAF-U.S. 2 % 15 % % 1 % 5 % % % 6 % 4 % 2 % % 2 1 % 1 5 % % 5 MEG-Asia 15 % % % % 1 Americas-Asia 12 % 1 WAF-Asia 8 % % 8 % 6 % 4 % 2 % % % 4 % 2 % % Other trades 65 % 6 % 55 % 5 % 2 45 % Sources: Fearnleys 4

5 Tanker Market Outlook, December 217 USD/Day USD/Day USD/Day USD/Day VLCC, seasonal perspective Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg Aframax, 217 versus 216 Suezmax, 217 versus Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MR, 217 versus 216 (Atlantic basket) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sources: Fearnleys 5

6 Tanker Market Outlook, December Supply outlook 6

7 Tanker Market Outlook, December 217 LR2 1-year TC Smallest vessel size % of total fleet in dwt Correlations Supply should be reviewed combined with other segments. Although periodic differences occur, like how Suezmax earnings outperformed VLCC earnings 3 out of the past 7 years, data over the lifespan of the asset show strong correlations. Limited diversification effect from being in several segments over the life of the assets. Outlook for the biggest segments measured in transportation capacity crucial for the smaller. Periodic arbitrages may however occur and on the asset side we believe there will be an underperformance for the Suezmax segment in 217/18, hence opportunities to pick cheap assets and TCs relative to the other segments. Aframax vs LR2 correlation, monthly Correlations, segment vs segment 6 VLCC vs Suezmax 5 Suezmax vs Aframax Aframax vs LR2 R² =,99 4 LR2 vs LR1 R² =,94 LR1 vs MR 3 R² =,98 2 R² =,88 1 R² =, Largest vessel size % of total transportation capacity 45 45% 41,7 % 4 4% 35 35% R² =, Aframax 1-year TC LR2 fleet; 314; 32 % Aframax fleet; 658; 68 % 3% 25% 2% 15% 1% 5% % 15,2 % 13,5 % 12,6 % 6,6 % 5,2 % 4,3 %,9 % VLCC Suezmax Aframax Panamax LR2 LR1 MR Handysize Sources: Fearnleys 7

8 Tanker Market Outlook, December 217 Million dwt kdwt historic deliveries & orderbook, excluding shuttle & chemical tankers VLCC Suezmax Afra/ LR2 Pmx/ LR1 MR Handy Sources: Fearnleys 8

9 Tanker Market Outlook, December 217 Million dwt Number of vessels % of current orderbook Global Sulphur Cap 22 Four alternatives for the ship owners: Scrubber & HFO: Most vessels can retrofit, but takes space. 2-5% fuel penalty. VLCC cost ~$3-3.5 USDm all-inclusive. Chemicals for closed loop system. Future waste disposal cost? Can continue to use HFO and well proven bunkering ports. Sources: Fearnleys MGO/ new compliant fuels: Can be used for most engines. Higher fuel cost but ~6% lower fuel consumption versus HFO. Availability? European SECA implementation took longer time but still the premium spiked to $45/mt at peak. Operational issues due to low viscosity? LNG/Dual fuel: Environmental and EEDI positive. Can reach Tier III performance. High investment cost. Retrofit also possible but expensive and requires deck space. Regional variances in LNG price and availability. Scrapping: Older vessels depending on sufficient supply of compliant fuels without huge price premium to HFO. Older vessels may alternatively find life as FSO s for a HFO surplus, or to be scrapped. More scrap candidates coming up (basis 4 th SS by year) More scrap candidates coming up (basis 4 th SS by year) VLCC Suezmax Aframax LR2 Panamax LR1 MR/Handy % of current orderbook 7 18 VLCC Suezmax Aframax/LR % 3% 25% 2% 15% 1% 5% % 32 9

10 Tanker Market Outlook, December Demand outlook 1

11 Tanker Market Outlook, December 217 Mbpd global stock change Q1'9 Q2'9 Q3'9 Q4'9 Q1'1 Q2'1 Q3'1 Q4'1 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 USD/Day TCE, VLCC MEG-FEAST Global implied oil stock changes versus VLCC earnings 2,5 2, 1H'12; Stock building aheadof Iran 214/15; booming on low 9 sanctions, despite forward market fleet growth and high stock builds backwardation. Tanker market oversupplied 8 1,5 1,,5, -,5-1, 29-11; High fleet growth and stock draw - owners nightmare... If OPEC maintain Q3'17 output ,5-2, 213; Tanker market suffering more from demand issue than oversupply. 1 Sources: Fearnleys, IEA, OPEC 11

12 Tanker Market Outlook, December 217 Million barrels Million barrels Million barrels Million barrels U.S. Comm. crude, gasoline & distillate stocks, weekly 95 U.S. Commercial crude oil stocks, weekly mb 55.8 mb Stocks reduced by mb/ -15.7% since February peak Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1-year High/Low year avg U.S. Gasoline stocks, weekly U.S. Distillate stocks, weekly Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1-year High/Low year avg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1-year High/Low year avg 1-year High/Low year avg Sources: EIA 12

13 Tanker Market Outlook, December 217 Billion barrels USD Billions Barrels found & FID d, by year E&P spending, basis coverage of 89 key O&G companies % 21 % 28 % 17 % 17 % 33 % -16 % 27 % 16 % 9 % 5 % -24 % -28 % -5 % FID approved New oil findings U.S. shale oil optimism sufficient supply in the long run? Time 1 year 2 years 3 years 4 years Depletion 2,5 mbpd 5, mbpd 7,5 mbpd 1, mbpd Consumption growth? 1,3 mbpd 2,6 mbpd 3,9 mbpd 5,2 mbpd All scenario numbers are accumulated New production needed? 3,8 mbpd 7,6 mbpd 11,4 mbpd 15,2 mbpd Depletion basis estimate by the IEA Chief economist in Q3 16. Mind that offshore need 3-5 years from FID to production. Known upstream start-ups through 22 excluding U.S. shale = ~6.6 mbpd peak capacity. IEA s forecast for U.S. shale is 1.4 mbpd $6/bll, and 2.5 $8/bll. Sources: Fearnleys, IEA 13

14 Tanker Market Outlook, December 217 Million EV/Hybrid cars % of World Energy Consumption # of cars in Norway New car sales market share, others Norway % of new car sales EV/Hybrid cars market share % World energy consumption by type, % of total # of cars by type in Norway 4% 35% Norway's oil consumption meanwhile grew 2.8% over the period... 4, % 3,5 % 3% 25% 2% 15% 1% 5% % 216 vs vs 2 Oil 13 % 24 % Nat.gas 2 % 46 % Coal 13 % 58 % Nuclear -4 % 1 % Hydro 24 % 49 % Ren. 25 % n.a Total 17 % 43 % EV & Hybrid car sales Oil Natural Gas Coal Nuclear Energy Hydro electric Renew- ables 3 1 3, % 3 2,5 % 2 9 2, % 2 8 1,5 % 2 7 1, % 2 6,5 % 2 5, % H'17 Gasoline/Diesel EV's Hybrids EV's % of total Hybrids % of total EV s & Hybrids, % of new car sales 1,6 % 35% 2, 1,4 % 3% 1,5 1, 1,2 % 1, %,8 %,6 % 25% 2% 15%,5,4 %,2 % 1% 5%, N.America Europe China Japan Others, % % World USA China UK France Norway Sources: BP, SSB, EV-volumes.com 14

15 Tanker Market Outlook, December 217 Million barrels per day Oil consumption about to reach 1 mb, more than 15 years earlier than one thought just few years ago IEA WEO NP in 211 IEA WEO NP in 213 IEA WEO NP in 215 IEA Oct'17 EIA IEO 213 EIA IEO 215 EIA IEO Sources: IEA, EIA 15

16 Tanker Market Outlook, December Conclusion 16

17 Tanker Market Outlook, December 217 Conclusion We revised our forecast higher in Jan-17 on anticipation of a tighter market than previously expected, caused by the IMO sulfur cap implementation. Our previous forecast showed the same cyclical development but was based on a newbuilding parity coupled with supply/demand outlook approach. Our forecast for 217/18 remain firm at the levels that we have forecast since May-15. Expect Suezmax to underperform through 218 on high fleet growth relative to other segments. Expect MR to outperform through 218 due to low fleet growth relative to the other segments. We see upside risk for our 219/22 estimates, and downside risk for our 221/222 estimates. FEARNLEY Year VLCC* Suezmax Aframax LR2** LR1** MR** actual forecast Deviation vs. forecast 5,1 % 2,2 % 6,1 % 1,9 % -,5 % -9, % Year/Year % chg -36,3 % -38,2 % -43, % -16,8 % -17,6 % -1,7 % 217 forecast Jan-Nov'17 avg *) Volume weigthed average **) Basis 1-year TC to better capture triangulation effects and real earnings Sources: Fearnleys 17

18 USD/Day, 1y T/C Aframax USD/Day, 1y T/C MR USD/Day, 1y T/C VLCC USD/Day, 1y T/C Suezmax Tanker Market Outlook, December 217 Investment Analysis VLCC 1y TC vs 5y old asset value 1 The below illustrate current value estimate of a 5-year old asset vs current 1-year TC earnings, showing its strong historic correlations. Intention is to show in an easy way and create discussions what could be fair price levels at various rate levels. Last done levels can be found on the previous page. Suezmax 1y TC vs 5y old asset value «Last» in red 4 «Last» in red 4 2 R² =,82 2 R² =, Asset value, USDm 5y old VLCC Aframax 1y TC vs 5y old asset value Asset value, USDm 5y old Suezmax MR 1y TC vs 5y old asset value «Last» in red 3 2 «Last» in red R² =, R² =, Asset value, USDm 5y old Aframax Asset value, USDm 5y old MR Sources: Fearnleys 18

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20 Disclaimer Research The statistical and graphic information set forth in the analysis is compiled by Fearnley Consultants A/S based on the databases and time series supplied by Fearnresearch, the research division of Fearnleys A/S, and other external sources of information. Fearnresearch compiles, processes and publishes data for the benefit of the brokering departments of Fearnleys A/S and its clients. Its methodologies for collecting data, and therefore the data collected, may differ from those of other sources, and its data do not reflect all or even necessarily a comprehensive set of actual transactions occurring in the market. Certain estimates may be based on prevailing market conditions. There can be no assurance that such data reflect actual market conditions. Data compilation, especially for earlier historical periods, is subject to limited audit and validation procedures. Both closed and open sources, interviews and market intelligence to gain information on different topics may be used. Accordingly, there can be no assurance as to the accuracy or completeness of the estimates, advice, statements and any other information contained in the analysis. The analyses, estimates, advice, statement and any other information contained in the analysis are prepared and presented in good faith. However, neither Fearnley Consultants A/S, Fearnleys A/S nor any of their subsidiaries, associated companies, organisations, management personnel, employees, agents or independent contractors (collectively the "Fearnley Interests") shall under any circumstances be under any liability for any losses, damages or costs caused to any person, company or other legal entity arising or resulting directly or indirectly from reliance on any inaccurate, incorrect, incomplete or misleading analyses, estimate, advice, statement or any other information contained in the analysis resulting directly or indirectly from any negligent or gross negligent act(s) or omission (s), or wilful misconduct, committed by any of the Fearnley Interests. In the event that a court or tribunal, notwithstanding the above liability exemptions, should hold any, some or all of the Fearnley Interests liable in damages for any inaccurate, incorrect, incomplete or misleading analyses, estimate, advice, statement or any other information, the liability shall not under any circumstances whatsoever exceed in total ten (1) times the fees payable for the analysis in question, or US$ 1, (United States Dollar Hundred Thousand), whichever is the higher. Under no circumstances whatsoever shall the individual or individuals who have caused the losses, damage or costs be held personably responsible or liable in any way. The Fearnley Interests shall under no circumstances whatsoever be liable for punitive damages. The analysis is prepared to the benefit of the named addressee only. No other third party may rely on the analysis or any of its content without prior written approval of Fearnley Consultants A/S. Should any part of this clause be held unenforceable, non-operative or invalid by a court or tribunal, the remaining parts shall remain in full force.