INTERTANKO - ISTANBUL TANKER EVENT 2008MARKET SESSION 23 APRIL
CRUDE OIL TANKER MARKET
- CURRENT MARKET CONDITIONS
- TRENDS IN TANKER TONNAGE DEMAND
- CONVERSIONS / PHASE-OUT OF SINGLE HULL TANKERS - MARKET OUTLOOK TO 2011
- WORLD SHIPPING AND CLIMATE CHANGE
R.S. Platou Economic Research a.s
R.S. Platou Economic Research a.s
A STRONG FIRST QUARTER IN THE TANKER MARKET...
97.198.1
99.12000.1
01.102.1
03.104.1
05.106.1
07.108.1
70
75
80
85
90
70
75
80
85
90
MBD
GLOBAL OIL PRODUCTIONMONTHLY 1997-2008
Heavy stock-drawing
Heavy stock-drawing
Stock-drawing
Sharp outputrise
19971998
19992000
20012002
20032004
20052006
2007 2008 YTD0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
1,000 $/DAY
* Weighted by dwt.
TANKER MARKET INDEX* ANNUAL AVERAGES 1997-2008
UPDATED TO: APRIL 18
Sharp outputrise
Heavy stock-drawing
Stock-drawing
Sharp outputrise in M East
Sharp outputrise in M East
Heavy stock-drawing
J F M A M J J A S O N D J F M A .
0
25
50
75
100
125
150
175
200
225
250
0
25
50
75
100
125
150
175
200
225
250
$ 1,000/DAY
SUEZMAX AFRAMAX PANAMAX VLCC
T/C-RESULTS FOR CRUDE CARRIERS 2007- 08 WEEKLY
20022003
2004 2005
2006 2007 2008 YTD
0
20
40
60
80
100
0
20
40
60
80
100
$ 1,000/DAY
VLCC SUEZMAX AFRAMAX PANAMAX DIRTY.Notes: Rates are calculated at fixing dateWaiting days for cargo are not included
AVERAGE T/C-RESULTS FOR CRUDE CARRIERS2002-08
UPDATED TO: APRIL 18
20082007
.....ESPECIALLY FOR CRUDE CARRIERS
R.S. Platou Economic Research a.s
9798
99
00
01
02
03
04
0506
0 20000 40000 60000 80000 100000
VLCC RATES
0
20000
40000
60000
80000
SUEZ
MA
X R
ATE
S
CORRELATION BETWEEN SUEZMAX AND VLCC RATES1997-2008
R2=0.94
07 * 08q1
......AND VLCC WAS THE WINNER!
First quarter 2008:Compared with the historical relationVLCC got a premium vs Suezmax of$17,000 per day in the first quarter.
VLCC fleet growth on a declining trendcombined with a 6 % output growthin the Middle East are supportingmarket conditions for this segmentsignificantly.
*07q4
*07q3
*07q2
*07q1
R.S. Platou Economic Research a.s
96.197.1
98.199.1
2000.101.1
02.103.1
04.105.1
06.107.1
08.116
18
20
22
24
16
18
20
22
24
MBD
MIDDLE EAST CRUDE OIL PRODUCTIONMONTHLY 1996-2008
04.1
05.1
06.1
07.1
08.1 .
-6
-4
-2
0
2
4
6
8
10
12
14
-6
-4
-2
0
2
4
6
8
10
12
14
PERCENT
MIDDLE EAST CRUDE OIL PRODUCTIONYEAR-ON-YEAR GROWTH
MONTHLY 2004-08
MIDDLE EAST PRODUCTION UP 6% IN THE FIRST QUARTER....
R.S. Platou Economic Research a.s
96.197.1
98.199.1
2000.11.1
2.13.1
4.15.1
6.17.1
8.1-5
0
5
10
-5
-2.5
0
2.5
5
7.5
10% GROWTH FROM SAME QUARTER YEAR BEFORE
SEABORNE OIL TRADEQUARTERLY 1996 - 2008
96.197.1
98.199.1
2000.11.1
2.13.1
4.15.1
6.17.1
8.1
20
30
40
50
20
30
40
50
MBD
CRUDE OIL PRODUCTIONQUARTERLY 1996 - 2008
OPEC CRUDEExcl Angola and Ecuador
NON-OPEC
SEABORNE OIL TRADE
...DRIVING SEABORNE OIL TRADE - UP 6% IN THE FIRST QUARTER
5 YEARS MOVING AVERAGE GROWTH RATE
R.S. Platou Economic Research a.s
TRENDS IN TANKER TONNAGE DEMAND
R.S. Platou Economic Research a.s
1997 1998
1999 2000
20012002
20032004
20052006
2007-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
PERCENT CHANGE
.
DEMAND FOR TANKERSANNUAL CHANGES 1997-2007
R.S. Platou Economic Research a.s
97
98
99
2000
01
02
0304
05
06
07
-3 -2 -1 0 1 2 3 4 5
OIL PROD GROWTH IN % (IEA)
-4
0
4
8
12
-4
0
4
8
12
TANKER TONNAGE DEMAND GROWTH IN % (RSP)
OIL PROD GROWTH VS TANKER TONNAGE DEMAND ANNUALLY 1997-2007
Tonnage demand was 4 to 5 percentage points higher in 2006 and 2007 than the historical correlation indicates. WHY?
IEA's med-term report July 07 predicts a 2.2% average growth pa 2007-12
WHAT IS THE LONG-TERM UNDERLYING TREND IN TONNAGE DEMAND?
Tanker tonnage demandincreased by 4.5 % per year in 2005-07
SUPPLY GROWTHDEMAND GROWTH
-2
0
2
4
6
8
PERCENT GROWTH
TANKER MARKET FUNDAMENTALS 2007 VS 2006
Trade volumes rose 1.0%
ADDITIONAL FACTORS HAVE SUPPORTED TANKER TONNAGE DEMAND IN THE LAST TWO YEARS.
Distances increased 1.5%
Ton-miles: + 2.5%
Less tankers used for floating storage -0.5%
Tonnage demand + 4.0%Reduced productivity 2.0% (two-tier market, slowsteaming etc)
Fleet growth 5.0%
Utilization rate fell by 1%
World oil production increased only 0.2% !
Tanker index fell from $44,600 to $39,800
R.S. Platou Economic Research a.s
TONNAGE DEMAND PROSPECTS
Average annual growth 2005-07 2007-12OIL PRODUCTION +0.8% +1.5% +2.2% (IEA, JULY 2007)SEABORNE OIL TRADE (VOLUME) +1.3% +2.0% TRANSPORT DISTANCES +1.1% +1.5%TONNAGE DEMAND +4.5% +4.5%
- Based on a 1.5% oil output growth (we think IEA is too optimistic), increased distances and a modest reduction in productivity we expect the underlying tanker tonnage demand growth 2007-11 to stay around 4.5% per year.
- Due to low oil inventories at the start of 2008, the current high OPEC production level and record-high oil prices we expect tonnage demand to increase by 6% in 2008. We assume OPEC will keep the current output level with prices above $80.
R.S. Platou Economic Research a.s
CONVERSIONS / PHASE-OUT OF SINGLE-HULL TANKERS
R.S. Platou Economic Research a.s
REMOVAL OF TANKERS - IMO PHASE-OUT
DOUBLE HULL287.7
78.7%
DS/DB18.1
4.9%
SH CAT 2/358.8
16.1%
SH CAT 11.00.3%
PHASED OUT DATE APRIL 2005
TO BE PHASED OUT WITHIN END2010, UNLESS FLAG STATES AND PORT STATES MAY ALLOW FURTHER TRADING
TO BE PHASED OUT WITHIN END 2015
2008 2009 2010 2011 2012 2013 2014 20150
20
40
60
Mill. DWT
0
20
40
60
Platou scenario incl. conversions IMO phase-out schedule
TANKER REMOVALSYEARLY 2008 - 2015
All figures excluding chemical carriers in mill dwt
Scrapping
Conversion
R.S. Platou Economic Research a.s
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
MILL. DWT
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
PERCENT FLEET GROWTH
DELIVERIES OF TANKERS
REMOVALS OF TANKERS
SCRAPPING CONVERSIONS FLEET GROWTH
TANKER FLEET TREND 1997-2012
PERCENTAGE CHANGE :
07 08 09 10 11--------------------------------------------------10-200 7.1 6.7 9.4 4.9 0.8200+ 2.9 1.6 2.9 3.5 4.6 --------------------------------------------------TOTAL 5.3 4.6 6.9 4.3 2.3
---------------------------------------------------CRUDE CARRIERS 3.7 2.3 4.4 3.7 2.6
PRODUCTCARRIERS 11.8 13.1 15.0 6.3 1.3 ------------------------------------------------NOTE: EXCL CHEMICAL CARRIERSALL DATA ARE ANNUAL AVERAGES
CONVERSIONS THE WILD CARD
R.S. Platou Economic Research a.s
DELIVERIES 2008-12 BASED ON CURRENT ORDER BOOK
-5%
0%
5%
10%
15%
-5%
0%
5%
10%
15%
YoY change
Aframax Suezmax VLCC
FLEET DEVELOPMENT2003-10
Conversions to dry cargo and FPSOs No of vessels
Afra Suez VLCC2008 ytd 0 2 32008 rest 16 14 412009 16 16 44
Avg. size 93 145 270
2006 2007 2008 2009 2010200520042003
STRONG FLUCUATIONS IN THE FLEET GROWTH
R.S. Platou Economic Research a.s
MARKET OUTLOOK TO 2011
R.S. Platou Economic Research a.s
2004 2005
2006 2007 2008
20092010
2011
0
20
40
60
80
100
0
20
40
60
80
100
$ 1,000/DAY
VLCC SUEZMAX AFRAMAX
.
T/C-RESULTS FOR CRUDE CARRIERSACTUAL AND FORECAST
2004-2011
OUR BASE CASE FORECAST FOR 2008-2011
TONNAGE DEMAND GROWTH2008: +6.0 %2009-11: +4.5% PA
R.S. Platou Economic Research a.s
2004 2005
2006 2007 2008
20092010
2011
0
20
40
60
80
100
0
20
40
60
80
100
$ 1,000/DAY
VLCC SUEZMAX AFRAMAX
.
T/C-RESULTS FOR CRUDE CARRIERS ACTUAL AND FORECAST
2004-2011
... AND A MORE PESSIMISTIC ONE WITH LOW TONNAGE DEMAND GROWTH
TONNAGE DEMAND GROWTH2008-11: +3.0% PA
R.S. Platou Economic Research a.s
Industry
14.0%Other energy related
5.0%Waste
3.0%
Agriculture14.0%
Land use
18.0%
Buildings
8.0%
Transport excl shipping
12.5%
Shipping1.5%
Power
24.0%
Greenhouse gas emissions in 2000, by source
Source: WRI (2006)
NON-ENERGYEMISSIONS
CLIMATE CHANGE: WORLD SHIPPING IS ONLY RESPONSIBLE FOR 1.5 % OF GLOBAL GREENHOUSE GASES, BUT.....
R.S. Platou Economic Research a.s
... IS PROBABLY THE FASTEST GROWING SECTOR
-2
0
2
4
6
8
10
12
-2
0
2
4
6
8
10
12
EMISSIONS OF GHGsANNUAL GROWTH RATE IN %
1990s
WORLDTOTAL
SHIPPING"BUSINESS AS USUAL"
SHIPPING
2008-2020
?
?
?
GHG REDUCTION POLICY
We assume that world shipping's emissionsof GHGs are closely linked to bunker consumptionand the fleet growth.
World merchant fleet is currently growingby 8 to 9 % pa in line with the tonnage demandgrowth trend.
Can world shipping reduce emissions of GHGs?
Reduction measures Reduced emissions
Main engine 2-3 %Optimal hull shape 6-12 %Improved propulsion syst 3-6 %
Speed reduction of 20 % 45 % (Gross) appr. 35 % (Net)* * More ships are needed to carry out the same number of ton-miles
R.S. Platou Economic Research a.s
CRUDE OIL TANKER MARKET
- A relatively strong crude carrier market is expected in 2008 due to higher OPEC production and a slow fleet growth.
- There will be a sharp acceleration in deliveries of newbuildings in 2009 leading to weaker freight rates.
- Most of the remaining single-hull tankers will be removed from active trading within the end of 2010 and result in a weak fleet growth in 2010-11 and a rate recovery these years.
- The trend in oil output, economic growth and bunker prices will determine the future growth in tanker tonnage demand. We expect the long-term underlying growth trend to be around 4 to 5 percent per year, but oil output "problems" and slower economic growth could lead to a significantly weaker demand growth.
- Possible new regulations to cut greenhouse gas emissions from ships could lead to slower speed and an increased need for newbuildings.
R.S. Platou Economic Research a.s
THANK YOU FOR YOUR ATTENTION!
If you would like to study the shippingmarkets even more thoroughly you could go to
www.platou.com
and find our annual market report.