tanker market presentation · 1 x vlcc 2nd hand sale 1 x vlgc (eco) newbuildings 9 x chem. tank 2 x...
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Tanker Market Presentation
Lloyd’s List Intelligence
Executive Meeting 2020
Gothenburg
January 16th 2020
2Lorentzen & Stemoco 2
L&S’ Global Presence
Oslo
New York City
Singapore
Shanghai
Hong Kong Corp Services
Athens
S&PNewbuildingOffshoreGasResearchFinance
Dry CargoS&P
Dry CargoS&P
S&PNewbuildingResearchFinance
Dry CargoS&P
Servicing clients on around-the-clock basis
Copenhagen Newbuilding
Highlight
Lorentzen & Stemoco - Track Record
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1 x VLCC2nd hand sale
1 x VLGC (ECO) Newbuildings
2 x Product Tank Newbuildings
9 x Chem. Tank 5y TC with option
3 x Chem. Tank Newbuildings
2 x Tanker Conversion
2 x Handysize Newbuildings
3 x Supramax Newbuildings
2 x Suezmax2nd hand sale
2 x VLGC Newbuildings
12 x UltramaxNewbuildings
2 x Chem. Tank Newbuildings
1 x SupramaxNewbuilding
2 x VLGC (ECO)Newbuildings
‘Åsta Hansteen’Process module
1+1 DP Shuttle tankers
4 x UT 771PSV’s
2 x Suezmax2 x Semi sub
(today Seadrill)
2 x FPSO
Gjøa FPU5 x Conversion of Suezmax
2 x Shuttle tankers
FPSOOctabuoy
3 x FPSOSevan
2 x Sevan UDW semi
2 x SevanAccomodation
2 x Sevan UDW semi
1+1+1 DP Accommodation
2 x DP Shuttle tankers
Selection of asset transactions
1 x Midsize LPGNewbuilding
4 x HandysizeNewbuilding
Shipowners considering new types of bunkers for next generation of vessels
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Executive summary
Source: L&S Research
• Recent oil events will:
• Redefine demand for dual-fuel propulsion• Drive requirements for new generation
newbuildings• Higher costs associated with oil will spell
redundancy of ageing existing vessels
World economy facing downside risks
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World economic outlook
Source: IMF, WTO, L&S Research, BIMCO
Column1 2016 2017 2018 2019 2020
U.S. 1.50 % 2.20 % 2.90 % 2.40 % 2.10 %
Euro Area 1.80 % 2.40 % 1.90 % 1.20 % 1.40 %
Japan 0.90 % 1.90 % 0.80 % 0.90 % 0.50 %
China 6.70 % 6.80 % 6.60 % 6.10 % 5.80 %
India 7.10 % 7.20 % 6.80 % 6.10 % 7.00 %
World 3.20 % 3.80 % 3.60 % 3.00 % 3.40 %
• IMF will update World Economic Outlook onJanuary 20th 2020
• Based on IMF’s WEO October 2019, worldeconomic growth of 3.0% expected in 2019and 3.4% in 2020
• Growth outlook for 2019 and 2020 wasrevised down by 0.2 and 0.1 percentage point
• Global economic growth has fallen,particularly for emerging markets
• Global trade has come to a near standstill,exacerbated by increased trade tensions
• Continued macroeconomic policy expected tolift growth moderately this year
Global demand for refined products, light and middle distillates
Source: L&S Research, BP Statistical Review, AXIOS
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• Global demand for refined productsis increasing particularly for lightand middle distillates
• Relatively sharp upturn in demand for gasoil associated with the IMO 2020 marine sulphur regulations
• Gasoline will be in higher demand, but may be slowly phased out because of more fuel efficient vehicles and penetration of electrical vehicles
• Fuel oil will be loosing out, with a dramatic reduction foreseen in 2020
• Demand for oil estimated to grow by >1 mbd in 2019 and 1.8 mbd in 2020, respectively
• OPEC oil production cut additonally by 0.5 mbd in addition to the 1.2 mbd already agreed
• Non-OPEC production growth to be led by the US, Brazil and Norway
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1) Oil demand growth still growing robustly
Oil market tightening into 2020
Source: Lorentzen & Stemoco Research, IEA
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China increasing crude oil imports
China’s crude oil imports have increased massively
Source: OPEC/L&S Research
• China’s crude oil imports increased substantially in Q4 2019
• In November 2019, imports were record-high at 11.1 mbd, growing from <10mbd in August ‘19
• By comparison, imports to Japan and India have remained relatively constant
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Chinese refineries have ramped up crude throughput
Refineries have prepared for IMO 2020 by increase crude oil imports and ramping up production
Source: OPEC/L&S Research
• Chinese refineries have increased crude throughput
• Higher runs as refineries have prepared for the IMO 2020 regulations with more compliant fuel
• Lower refinery intake of crude oil to produce heavy fuel oil largely shunned by the market
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2) Middle East unrest caused havoc in tanker market
Massive vacuum left by Saudi loss led to more ton-mile demand for tankers
Source: IEA/L&S Research
• Drone attacks on Saudi oil production, tankers trafficking the Middle East Gulf and top Iranian general
• Far East refineries scrambling to find other sources of supply, calling on the farther-away US for extra supplies
• OPEC taking the role as provider of last resort, cutting production as non-OPEC producers ramping up output
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3) Record number of tankers off-market
Increasing share of the tanker fleet effectively removed from the competitive market
Source: IEA/L&S Research
Venezuela/PDVSA
Iran/NITC
• US sanctions against Venezuela and NITC have left many tankers off-market
o According to IEA, some 66.1 mb of oil, > 30 VLCC equivalent vssls, in floating storage storing crude in Iran
• About 30% of VLCC fleet to be installed with scrubbers
o Some 30 VLCCs currently being installed with scrubbers
• Roughly 10% of VLCC fleet off-market
o Tightening demand-supply balance
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US shale oil production being ramped up, crude exports abt 4.5mbd
US crude exports radically increased to 4.5mbd, upward potential
Source: Baker Hughes
Sharp upswing in crude oil tanker freight rates
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VLCCs rates continue at abt. US$ 100k/day
Source: Baltic Exchange/ L&S Research
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L&S tanker market estimates, US$/day on TCE basis
Forecasts vessel earnings
Source: L&S Research
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Low orderbook of tankers compared with existing fleet
Particularly low orderbook for product tankers
Source: L&S Research
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Market takes firmer stance on oil prices following Middle East unrest
Downward slope in forward oil prices will be positive for tanker demand
Source: Lorentzen & Stemoco Research, Futures TradingCharts.com
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Yet market believes oil prices will hover over natural gas prices
Oil prices have increased more than natural gas prices for last ten years
Source: Baker Hughes
• International Maritime Organization (IMO) has progressively tightened the limits on Sulphur oxides
• For ships operating outside designated emission control areas the current limit for Sulphur content is 3.50% m/m
• From January 1st 2020, the limit for Sulphur in fuel used onboard ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass). This is meant to significantly reduce the amount of Sulphur oxides emanating from ships
• There is an event stricter limit of 0.10% m/m already in effect in emission control areas (ECAS) which have been established by IMO. This 0.10% m/m limit applies in the four established ECAS:
o The Baltic Sea area
o The North Sea area
o The North American area
o The US Caribbean area
• Fuel oil providers already supply fuel oil which meets the 0.10% m/m limit
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IMO Sulphur 2020
Source: IMO
• World demand for oil is reaching 100 million barrels per day (mbd)
• The merchant fleet is consuming somewhere about 3.5 mbd, meaning 3.5% of global oil demand
• The merchant fleet is counting about 60,000 vessels in total:
o About 2140 vessels of vessels operating or under newbuilding will be installed with scrubbers, according to figures by the scrubber manufacturers. These vessels will continue to run on HFO
o Another 200 vessels will run on LNG, and only 6 vessels will run on LPG, according to the latest available market figures
o The rest will run on MGO, or a blend of low Sulphur fuel oil.
• By implication, the merchant fleet will almost stop using HFO, and only a few will be using LNG or LPG, meaning most vessels will be running on MGO or a blend of low Sulphur fuel oil.
• This means that demand of 3.5 mbd of HFO will be substituted for by 3.5 mbd of MGO, creating havoc to the fuel prices
• The price delta between HFO will depend in large on how ready the oil companies are in coming to the market with 0.5% m/m spec MGO
• Moreover, if the price of HFO plummets to coal-equivalent levels, demand for scrubbers could pick up, improving demand for HFO and levelling out the differences
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Response to the 2020 deadline
Source: L&S Research
Shipowners considering new types of bunkers for next generation of vessels
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Conclusion
Source: L&S Research
• Recent oil events will:
• Redefine demand for dual-fuel propulsion• Drive requirements for new generation
newbuildings• Higher costs associated with oil will spell
redundancy of ageing existing vessels
• Prospects of relatively high oil pricesmeans shipowners and charterers arefearing bunker costs out of control
• International shipping contributes to2.5% of world emissions of CO2
• Aim to reduce emissions by 50% by2050, compared to 2008-levels
• Using natural gas will reduceemissions by 20%
• To cut further, alt. for ex. hydrogen
Oslo (head office)Lorentzen & Stemoco ASMunkedamsveien 45,0250 OsloNorway
Tel +47 2252 7700
AthensLorentzen & Stemoco (Athens) LtdErmis Building2nd floor82, Vass. Pavlou AveVoula 166 73Greece
Tel +30 210 89 000 59
SingaporeLorentzen & Stemoco Singapore38 Scotts Road, The Scotts Tower #10-02Singapore 228240Singapore
Tel +65 6349 8400
ShanghaiLorentzen & Stemoco Shanghai Representative OfficeRoom E2F, 15/F, Broad Silver International Building,No. 398 Huai Hai Zhong Rd,200020 ShanghaiChina
Tel +86 21 6391 5880
LondonLorentzen & Stemoco UK Ltd5th Floor, Dacre House19 Dacre StreetLondon SW1H ODJEngland
Tel +30 210 89 000 59
Hong KongLorentzen & Stemoco (Greater China) Hong Kong LtdFlat A, 22F Sing Ho Finance Building166-168 Gloucester Road Wan HaiHong Kong
Tel +852 2530 2164
For more information on Lorentzen & Stemoco and our global representation visit us at Lorstem.com
New York CityLorentzen & Stemoco AS (USA)501 5th Avenue – Suite 1707New York, NY 10017
Tel +1212 684 2503
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