Transcript Market Actors & Behaviour

Market Actors & Behaviour
by
[email protected]
Manager Research and Projects
Copenhagen Business School
Oslo 19 February 2008 ‘
Tanker industry
Market
Technology
Finance
Regulations
Focus on the tanker industry
Tanker industry carries one of the
worlds most strategic commodities
from some of the politically most tense
areas in the world .
Oil can potentially cause serious
pollution .
After many years with negative or low
profitability over the last years, the
tanker industry has during this decade
made extremely good profit and has
even received attention in the world
stock markets
Tanker market
Cargo Owner/ Refiner/Trader
International
Regulations
Charterer
IMO
Shipbrokers
Shipowner
Pool/commercial man
IMO
What is IMO?
• The International Maritime
Organization (IMO) is the
specialized agency of the
United Nations (UN) concerned
with Maritime Affairs located
in London, England.
• IMO (Formerly known as IMCO) was established
under a 1948 United Nations convention that
entered into force on 17 March 1958.
• IMO currently has 168 member states, 2 associate
members, 51 Inter-Governmental Organizations
which have concluded agreements of
cooperation, and 66 Non-Governmental
Organizations in Consultative Status with IMO.
Why is there a need for IMO?
• Shipping is international
• Assets move between
jurisdictions
• Need for universally
applied standards
Without IMO trade would be
restricted
What does IMO do?
IMO’s main objective is to
facilitate co-operation
among governments on
technical and legal matters
affecting international
shipping
Work to achieve the highest level of international
standards for maritime safety, maritime security
and protection of the marine environment.
This is accomplished through the development
of international conventions, codes, and
recommendations.
IMO has adopted
55 conventions & protocols, including:
• Safety of Life at Sea
(SOLAS)
• Prevention of pollution
from Ships (MARPOL)
6 Annexes
• Preventing Collisions at Sea (COLREGS)
• Loadlines
• Standards of Training, Certification,
& Watchstanding (STCW)
IMO Has Developed 25 Codes, Including:
• Ship and Port Facility Security
(ISPS)
• Safety Management (ISM)
• Standards for Training and
Watchkeeping
• Maritime Dangerous Goods (IMDG)
• Construction and Equipment of
Ships Carrying Dangerous Chemical in Bulk
• Solid Bulk Cargoes
• High Speed Craft
• Construction and Equipment of Mobile Offshore Drilling
Units
IMO has developed more than 700
recommendations & guidelines, including:



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

Safe access to and working in large
tanks & large cargo holds
Emergency towing requirements – tankers
Medical first aid guide for use in accidents
involving dangerous goods
Safe use of pesticides in ships
Packing Cargo in Freight Containers
Provisions and Display of Manoeuvring
Some guidelines/recommendations are
required to be followed by charterers
IMO Facts
• Annual Budget 24 m
• Member States fund IMO budget
through assessments based
largely on size of fleet
(% of world’s gross tonnage)
• Secretariat –
320 Staff Members
50 Nationalities
IMO Secretariat
SECRETARY GENERAL
Maritime
Safety
Division
Legal Affairs and
External Relations
Division
Administrative
Division
Conference
Division
Marine
Environment
Division
Technical
Cooperation
Structure of IMO
Assembly (A)
Council (C)
Legal
Committee
Marine
Environmental
Protection
Committee (MEPC)
Facilitation
Committee
Maritime Safety
Committee
(MSC)
Technical
Cooperation
Committee
Subcommittees
Fire
Protection
(FP)
Ship Design
and
Equipment
(DE)
Dangerous Goods,
Radio
Solid Cargoes & Communications
Containers (DSC)
(COMSAR)
Training &
Watchkeeping
(STW)
Safety of
Navigation
(NAV)
Bulk Liquids
and Gases
(BLG)
Stability of
Loadlines &
Fishing Vessel
Safety (SLF)
Flag State
Implementation
(FSI)
IMO Process
Proposal by
Member
State
Maritime
Safety
Committee
Appropriate
Subcommittee
Working Group
Approval by
Assembly or
other Action
as
Appropriate
Major Issues on IMO’s Agenda
 Air Pollution from Ships
 Role of the Human
Element
 Goal-based new ship
construction standards
 Maritime Security
 Member State Assessment
 Ballast Water Management
 Recycling of Ships
New Approaches emerging at IMO?
• Proactive vs. Reactive
Goal Based Standards
Maritime Security
• Performance Based vs.
Prescriptive
Ballast Water Management
Delegations to IMO Meetings
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

Delegations consist of Government
and/or Industry/Public Sector Advisors
Decisions on who goes are made by
the Head of the Delegation to each
meeting
Decisions are based upon specific
issues to be discussed at each session
Individuals are recommended based
on a specific area of expertise or on
organizational representation
Expenses to attend IMO meetings are
normally covered by the individual
IMO demographics have changed
• Break up of USSR
• Establishment of “Bloc” groups
European Union
GOLACC (Latin America)
• Developing nations wanting a bigger say
• Change in world’s fleet
World’s Gross Tonnage
Top Ten – 1982
1. Liberia
6. USSR
2. Greece
7. Norway
3. Japan
8. United States
4. Panama
9. France
5. United Kingdom
10. Italy
World’s Gross Tonnage
Top Ten – 2007
1. Panama
(4)
6. Singapore
2. Liberia
(1)
7. Greece
3. Bahamas
4. UK
8. Malta
(5)
5. Marshall Islands
9. China
10. Cyprus
(2)
INTERTANKO’S ROLE
As an NGO*, we represent tanker
industry by:
•
•
•
•
•
•
Submitting proposals (w./without co-sponsorship)
Written comments on proposals
Verbal comments at meetings
Participating in working groups
Lobbying for support on issues
Demonstrating a proactive responsible role
*None Government Organisation
Tanker
market
Tanker market
200,000
VLCCs
Suemax
160,000
Aframax
Clean
120,000
80,000
40,000
1.1.08
1.1.07
1.1.06
1.1.05
1.1.04
0
1.1.03
Volatile
Dynamic, and
Open market
Congestions, storage slow
steaming, imperfect
information
1.1.02
•
•
•
•
• Large number of actors
• Great variety of players
• Unpredictable?
• Perfect market?
Development tanker ownership
Oil producers
Oil companies
Traders
Refineries
100
90
80
70
60
50
40
30
20
10
0
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2007
•
•
•
•
7%
End user
6%
• Wilh. Wilhelsen first tanker 1913 –
10 tankers by end 1st WW
• Norwegian pioneers (whale oil)
• Independent owners increased
activity in the 1920s, mainly long
term contracts
• Greeks, liberty ships after 2nd WW
4%
83%
Indep.
Oil
State Oil
Independent
State
Seaborne Crude Oil Trade Flows 2006
Seaborne trade and Middle East oil production
mbd
bn tonne-miles
25
13,000
Middle east oil production
20
10,400
Tonne miles
15
7,800
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
1978
0
1976
2,600
1974
5
1972
5,200
1970
10
Oil
market
World oil importers - 52.6 mbd - 2006
32%
RoW
China
Japan
Mainly open markets for tankers
China quickly building up tanker fleet
7%
8.3 m dwt 4.6% of world oil tanker fleet
10%
Europe
80% Japanese – long term contracts
26%
26%
USA
0
3
6
9
43.2 m dwt 11.1% of world oil tanker fleet
Open markets for tankers
12 15 18
mbd
Source: BP, various
World largest oil exporters – 30.3 mbd
35% of consumption - 58% of export
Canada
Mexico
Pemex
Iraq
PdVSA
Venezuela
Nigeria
Kuwait
KOTC
UAE
Statoil
Norway
Iran
NIOC/NITC
Saudi Ar.
Saudi Aramco/VELA
Russia
Gasprom/Sovcomflot
0.0
2.5
5.0
7.5
mbd
Development Shell controlled fleet
No tankers
450
400
TC smaller
Owned smaller
350
VLCCs on TC
300
Owned VLCCs
250
200
150
100
50
Marcus Samuel built Murex at Gray’s shipyard in UK 1892
07
99
96
94
92
90
88
86
84
82
80
78
76
74
72
70
68
66
0
Major oil company controlled VLCCs
Owned and on long term contract (1 year +)
m dwt
1972: 334 VLCCs/35% control
250
1980: 727
1990: 433
2000: 424
2003: 439
2007: 520
200
150
"
"
"
"
"
/25%
/23%
/19%
/13%
/ 6%
"
"
"
"
"
Tokyo Tankers
100
Texaco/Stentex
Chevron
50
0
1972
Mobil
Exxon(/Mobil)
1973
1980
1985
1990
Source: J.G. Olssen Kristiansand
1995
2000
2003
2007
BP
Shell
Major oil company controlled VLCCs
Owned and on long term contract (1 year +)
no VLCC
100%
750
80%
705
Spot
660
TC*
Oil**
615
No VLCCs
60%
570
525
40%
480
435
20%
390
345
0%
* fixed for one
year or more
**oil include
oil companies
and state
owend
companies
300
1972
1980 1985
1990 1995 2000 2002 2004
Chinese and Middle east companies
increasing their fleets
Source: J.G. Olssen Kristiansand
2007
2006
Oil
34%
TC
|
Spot
45%
Should oil companies own tankers
• Vertical integration is most attractive when
different types of market failure exist that
threaten profitability. Bringing production inhouse allows a company to internalise and
thereby overcome market failures. The strategy
is not without its own costs in terms of efficiency
and price .
• Vertical integration is best where the activity in
question is complex and hard to define under
conventional legal contracts.
• Vertical integration is attractive when outside
suppliers are few and likely to behave
opportunistic, exercise market power.
When economics means business, Sultan Kermally
Market value biggest oil cos $m
(+ world 2nd 3rd biggest co, one tanker co)
Frontline
Rank
Statoil
Exxon merged with Mobil,
small tanker fleet
Shell few tankers
BP merged with Amoco –
large tanker fleet
Total merged with
Final/Elf, - few tankers
Chevron merged with
Texaco - some tankers
ConocoPhilips US Jones
act fleet (expensive)
Petrobras – large tanker
fleet
Statoil sold tanker
company
125
Lukoil 95
Rosneft
68
Petrobras
50
Conoco Ph.
50
Chevron
42
Total
22
BP
11
Shell 10
Gazprom
6
Microsoft 3
GE
Exxon
2
1
0
100
200
300
400
$ bn
Source: FT500
Why oil companies by each other
• Horizontal integration merging of firms which are
at the same level of production or are involved in
similar processes
• Horizontal integration competitive to achieve
positioning of the firm vis-a-vis rivals.
• Horizontal integration to achieve economics of
scale.
• Horizontal integration to acquire technology and
knowledge
When economics means business, Sultan Kermally
20 largest spot charterers 2007– 57% of total
Shell 7.5%
Exxon 5.3%
BP 4.2%
Vitol
Total
Clearlake
ST Ship
ConocoPh
Chevron
IOC
Valero
Sun
SK
Unipec
Litasco
Petrobras
Repsol
Koch
Citgo
Ursa
0
100
Among the 20 biggest
charterers are:
- the major international oil
companies (Shell, Exxon,
BP)
- typical tradersVitol/
Clearlake),
- national oil companies
(Indian Oil Co/UNIPEC/
Petrobras and
- refiner Valero.
Largest market share Shell
has 7.5% and Shell is among
the biggest charters in all
segments
200
300
Source: Poten&Partners
400
500
600
700
No fixtures
10 largest VLCC spot charterers – 47% of total
2007
Exxon
Among the 10 biggest charterers are:
- Oil importers Sinochem, SK IOC,
UNIPEC
-Major international oil companies,
Shell, Exxon, BP
- oil exporters, CPC, VELA
Unipec
Shell
IOC
SK
BP
Largest market share ExxonMobil
has 7.1% share
Sinochem
No Japanese charterers
CPC
Less than half the VLCC fleet is in
the spot market
ConocoPh
Vela
0
20
40
60
80
100 120
No fixtures
Source: Poten&Partners
10 largest Suezmax spot charterers – 48% of total
2007
Shell
Largest market share
ExxonMobil has 3.2% share
Sun
Clearlake
Sun US importer
BP
Total
Repsol
Petrobras
Exxon
IOC
Mercuria
0
20
40
60
80
100
120
140
160
No fixtures
Source: Poten&Partners
10 largest Aframax spot charterers – 47% of total
Shell
Largest market share Shell
has 8.2% share
Clearlake
Vitol
Whereas it is the VLCC
market which is
highlighted, the activity in
the Aframax market is 2.3
times bigger
Exxon
Total
BP
ST Ship
ConocoPh
Lukoil
Chevron
0
50
100
150
200
250
300
350
No fixtures
Source: Poten&Partners
10 largest Aframax spot charterers – 47% of total
Shell
Largest market share Shell
has 8.2%
Clearlake
Vitol
Whereas it is the VLCC
market which is
highlighted, the activity in
the Aframax market is 2.3
times bigger
Exxon
Total
BP
ST Ship
ConocoPh
Lukoil
Chevron
0
50
100
150
200
250
300
350
No fixtures
Source: Poten&Partners
10 largest Clean spot charterers – 36% of total
Vitol
Largest market share the
trader Vitol has 7.4%
share
Shell
ST Shipping
Litasco
BP
CSSA
Chevron
Trafigura
Clearlake
Exxon
0
50
100
150
200
250
300
350
400
No fixtures
Source: Poten&Partners
Oil Industry stock declining
Days forward demand
64
62
60
58
56
54
52
50
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006
Low stock – greater volatility – gives oil companies
less bargaining power
Source: IEA
VLCC freight rate/Brent Blend oil price
$/per day freight rate
$/per barrel oil price
200,000
80
VLCC rate, 250,000 dwt,
AG - Japan
160,000
64
120,000
48
Oil price, Brent
Blend
80,000
32
40,000
16
Strong volatility – great uncertainty
Source: IEA
26-Feb-08
26-Oct-07
28-Jun-07
21-Feb-07
17-Oct-06
16-Jun-06
13-Feb-06
7-Oct-05
10-Jun-05
7-Feb-05
1-Oct-04
3-Jun-04
30-Jan-04
25-Sep-03
28-May-03
23-Jan-03
18-Sep-02
17-May-02
15-Jan-02
10-Sep-01
8-May-01
0
2-Jan-01
0
Cost of oil freight insignificant
Gasoline prices at the
pump $/gallon Dec-07
Real and nominal oil
price and freight rate
8.0
80
Nominal price Arabian Light
Cost elements
making up the
gasoline price:
6.0
Real Price Arabian Light
70
Nominal freight rates PG-West
Deflated freight Rates PG-West
60
Long haul
freight rates
50
Marketing/
refining/etc
4.0
Oil price
Tax
2.0
0.0
40
30
20
13%
USA
39%
63%
Japan
UK
Based on Dec.
2007 figures
from IEA and
the Baltic
Exchange
10
0
73
79
85
91
97
03
Volatility in the oil market more important than volatility in freight rates
Oil price much more important for oil companies that freight rates
Source: IEA/Various
Oil company vetting



•
OCIMF* question whether flag, port and Class
inspection can be trusted.
OCIMF has established a comprehensive ship
database – SIRE** - sharing information
Both ships and operators inspected
If these entities enforced/followed the rules effectively
there would not be a SIRE Programme SIRE exists to
minimise as far as possible, the risk to oil companies
of chartering
*Oil Companies International Marine Forum host
**Ship Inspection Reports Programme database for inspection
reports submitted by charterers (some 1200 per year) started 1993
Source: Presentation by David Savage SIRE Director, Nov. 2007, INTERTANKO seminar
Oil company vetting

•
•
•
•
If these entities (Class, Flag/Port State)
enforced/followed the rules effectively there would not
be a SIRE Programme
SIRE exists to minimise as far as possible, the risk to
oil companies of chartering sub-standard tankers.
Rise in Management Cos. resulted in lack of
knowledge regarding operator, vessel condition and
standards of operation in the 1980s
Tankers that are never inspected
under SIRE comprise what is called “The Grey Fleet
(2,000 out of 8,00 tankers)
Source: Presentation by David Savage SIRE Director, Nov. 2007, INTERTANKO seminar
Tanker
owners
Tanker ownership
Greece, Norway, Germany; UK
Europe
Japan, China, Singapore; HK
Asia
N Amercia
Independent ownership concentrated in
few nations
M East
Other
FSU
0
40
80
120
160
m dwt
Source: LRFairplay database
20 largest tanker owners
33 % of total
more that 1000 owners
489 owners 1 tanker
146 owners 2 tankers
130 owners 10 tankers+
Mitsui
NYK
Teekay
Tanker Pacific
Ship Fina Int
Anangel
i.e. great fragmentation
OSG
Euronav
Dr Peters
Saudi Aramco
Iran Govt
BW Shipping
Dynacom
AP Moller
China Ship Gr
Sovcomflot
BP
Novoship
Nat Ship Arabia
India Govt
0
2
Source: LR/Fairplay
4
6
8
10
12
m dwt
Strategies:
* Shuttling oil to Japan
(Mitsui/NYK)
* Competing for cargoes in
the open market
* Bringing oil closer to the
market (Saud Aramco)
* Taking advantage if
increased domestic import
(CSG/India Gov)
* Strategic alliance (Dr.
Peters, OSG)
* Carrying own Cargoes (BP)
20 largest Aframax tanker owners
6% share
Teekay
AET
33 % of total
Some 190 owners
67 owners 1 tanker
32 owners 2 tankers
Novoship
Tanker Pacific
BP
Minerva
15 owners 10 tankers+
Centrofin
AP Moller
Torm
Strong fragmentation
Dynacom
Arcadia
Sovcomflot
Aframax tanker best suited for
US ports
Thenamaris
Genmar
PDVSA
Valles
Pools;
Aframax Internal 38 tankers
8 owners
Torm LR2 pool
India Govt
OSG
Lundqvist
Cardiff
0
1
Source: LR/Fairplay
2
3
4
5
Teekay 6%, market share,
increased fleet by
consolidation
m dwt
20 largest VLCC tanker owners
58 % of total
Some 120 owners
Mitsui
Nippon
Frontline/Ship Fin
Anangel
Saudi Aramco
BW Ship
Dr Peters
NITC
Euronav
Tanker Pacific
Nat Ship of S A
OSG
Titan Petroch
Hyundai
AP Moller
KOTC
Dynacom
Saudi Mari
TMT
SK Shipping
14 owners 2 tankers
52 owners 1 tanker
13 owners 10 tankers+
Two Japanese owners on top
Aramco largest oil co
One big pool:
Tankers International
47 VLCC 15 m dwt
TMT bought many tankers
for conversion to dry bulk
0
2
4
6
8
10
m dwt
Source: LR/Fairplay
End remarks
• Close to a perfect market
• A great deal of
consolidation but still
fragmented tankers
ownership
• National oil companies
are becoming stronger
• Many companies with
different strategies
makes the market
dynamic
Tanker market
CARGO OWNER/ Refiner/Trader
International
Regulations
Charterer
IMO
Shipbrokers
Shipowner
Pool/commercial man
Tanker market players
•
•
•
•
Oil producers (OPEC)
Oil companies
Traders
Refineries
• Tanker owners:
– Independent
– State owned
– Oil companies
Tanker
ownership
Tanker market – unique?
• Large number of
shippers/charterers
• Large number of
receivers