Transcript Document

Freight market: development forecasts,
influence factors & Butterfly effect
Nikos Marmatsouris. FICS
Maritime Days Odessa, May 2013
GAC Global Network
Europe, Med & Black Sea
Americas
 Argentina
 Brazil
 Chile
 Colombia
 Ecuador
 Mexico
 Panama
 Peru
 Trinidad & Tobago
 USA
 Uruguay
 Venezuela
 Cyprus
 Czech Republic
 Denmark
 France
 Greece
 Italy
 Kazakhstan
 Lebanon
 The Netherlands

Africa

 Algeria
 Angola
 Benin
 Cameroon
 Congo
 Democratic Rep. of Congo
 Egypt
 Gabon
 Guinea
 Ivory Coast
 Kenya
 Mauritania
 Mozambique
 Nigeria
 Senegal
 South Africa
 Tanzania
 Togo

 Norway
 Poland
 Russia
 Spain
 Sweden
 Turkey
 Turkmenistan
 UK
 Ukraine
Middle East
 Bahrain
 Iraq
 Jordan
 Kuwait
Asia Pacific

 Oman
 Qatar
 Saudi Arabia
 United Arab Emirates
 Yemen
Indian Subcontinent
 Bangladesh
 India
 Pakistan
 Sri Lanka


 Australia
 Cambodia
 China
 Hong Kong
 Indonesia
 Japan
 Korea
 Malaysia
 Philippines
 Singapore
 Taiwan
 Thailand
2
Who can tell us - what’s next?
A brief market summary
• Deepening financial market problems cause an exaggerated effect on shipping.
• Dry cargo shipping sector – quite severely hit due to excess over supply.
• China business downturn playes a major role on world shipping as China
accounts for almost 45% of total world trade.
•Commodity prices severe fluctuation not a factor for freight stability.
•BDI is way ahead from recovering it’s May 2008 peak of 11700 points, which
now seems like ..science fiction!
•The “Butterfly Effect”
Grains business – a stress story?
World Major Crop Production
Source: AGResource Company
2002-2012 Change in Primary
Grain Production - Up 325.4 MMTs
2012: 1,475,719 MMTs
53,095
2002: 1,150,320 MMTs
29,113
165,891
39,650
32,235
Source: AGResource Company
North America
South America
European Union
Former Soviet Union
Africa
Asia
Australia
2012 World Droughts & Floods
= Central US drought has been the worse since 1956. An approx. 100 MMTs
of corn have been been lost.
= Russian crop losses amount to 27-29 MMTs with wheat production
to be below the 2010 export ban level, at 38 MMTs.
= N.America seems to be the leading supplier of world grain importers
during ’13.
= It is feared that extreme world weather conditions will persist during
2013 thus adding to lack of world crop cushions!
The Dire ‘12 Russian Drought
FSU 12 Grain and Oilseed
Stocks; Lowest since 2007
MMTs
50
45
40
35
30
25
20
15
10
5
0
Source: AGResource Company
Grains
Oilseed
FSU-12 Corn/Wheat/Barley
Export; Down 23 MMTs!
70
MMTs
60
50
40
30
20
10
0
Source: AGResource Company
Wheat
Corn
Barley
FSU a Reliable Grain Supplier?
Weather twice as variable comparing to US!
Mil MT
& HA
120
112
104
96
88
80
72
64
56
48
40
32
24
16
8
0
Russia is an Less reliable Grain Exporter Because of Weather
(Although Area Fluctuates, Changes in Russian Grain Production MT/HA
Largely A Function of Yield)
Source: AGResource Company
Harvested Area (Mil Ha)
Grains Production (Mil MT)
Yield (MT/HA)
2.45
2.30
2.15
2.00
1.85
1.70
1.55
1.40
1.25
1.10
0.95
0.80
2012/13 World Grain Stocks
Drop a Record 41 MMTs
100 MMT
80
60
40
20
-20
-40
-60
Source: AGResource Company
World Corn/Wheat Trade;
Down a Record 45 MMTs!
180,000 1,000 MT
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Source: AGResource Company
Corn
Wheat
Soybeans
2013 Wheat forecasts
2013 Wheat forecasts
= Ukraine and Russian Wheat exports exhausted based on diminished crop yield
(drought). EU wheat export sales are on the rise.
= The US/Canada will be the benefactors and are setting world price direction in
2013.
= The world wheat stocks are in decline and market prices should naturally be on
the rise. Adverse new crop weather in the US and Europe adds to upside potential
= The Black Sea exported 14 MMTs in the Nov-May period of 11/12, while S.
Hemisphere wheat exports down 17 MMTs. There is a 31 MMTs of import
potential that has to be filled by US/Canada/Australia and India.
= Can expect very unstable & rising prices if US/EU/Russian crops are affected by
any reason within 2013, as there are very little other supply alternatives.
World Wheat Trade by Origin
45
MMTs
40
35
30
25
20
15
10
5
0
Source: AGResource Company
Argentina
Australia
Canada
EU-27
FSU-12
Shipping to the future
Dry Bulk Deliveries + Orderbook by Size
(only units over 20,000 dwt, in mln dwt)
Source: Banchero Costa
- A significant number of new buildings has been delivered over the last five years.
- Actual deliveries in 2013 expected to be less than the total for 2012.
Total Dry Bulk Fleet Growth
only units over 20,000 dwt, in mln dwt)
Source: Banchero Costa
The excessive number of new building deliveries resulted in strong growth in shipping cargo
capacity over the last few years. However, a combination of fewer deliveries over the next few
years and strong demolition activity is expected to reduce overcapacity and help rebalance the
supply - demand environment.
Bunker costs constitute a large % of the freight cost
Typical Panamax bunker cost on the grain route from Paranagua to Qingdao
150
75%
140
70%
130
65%
120
60%
110
55%
100
50%
90
45%
80
40%
70
35%
60
30%
50
25%
40
20%
30
15%
20
10%
10
5%
0
0%
Freight: Paranagua to Qingdao
Source: Clarksons
Bunkers as percentage of freight
Scrapping set new records due to weak freight market
Ratio of gross annual earnings to scrap value
Drybulk demolition activity
7
550
500
6
450
5
400
4
350
300
3
520
250
150
2
392
200
2
78
100
1
141
50
0
2009
Source: Clarksons
2010
2011
2012e
Capesize
Panamax
Handymax
Handysize
The older ships which are smaller get scrapped
Panamax average scrapping size
Handymax average scrapping size
50,500
50,000
140
49,935
49,812
49,500
130
72,000
120
71,500
110
49,000
100
48,500
48,000
47,500
47,274
47,336
47,000
46,500
46,000
45,939
70,500
80
70,000
70
60
69,500
50
69,000
40
30
68,500
10
45,000
19911995
19962000
20012005
20062010
No of ships scrapped
Average scrapping size
Source: Clarksons
20112012
0
180
71,948
160
140
71,000
90
20
45,500
72,500
70,792
120
100
80
68,796
68,000
40
67,776
67,473
67,500
60
20
0
19911995
19962000
20012005
20062010
No of ships scrapped
Average scrapping size
20112012
Conclusions
• World economic activity and therefore demand for shipping has slowed down
last year, but things are improving for 2013 and outlook is not necessarily as bad
as it seems, especially for the smaller size vessel operators.
• Freight to remain volatile and on the low side due to excessive world fleet
growth, with dry cargo fleet still expanding significantly in 2013.
• This is rather good news for grain traders however not so good for ship operators
who will have to sustain another year of consolidation.
• Smaller vessel operators may get luckier in relative future freight terms due to
minimal renewal of this type of tonnage.
Positive for better days ahead…