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The Platou report 2013

  1. 1. the platou report 2013
  2. 2. Contentsintroduction........................................................................................................ 3the shipping environment ................................................................................. 7the shipbuilding market .................................................................................. 12the tanker market ............................................................................................ 16the dry bulk market ......................................................................................... 21the container ship market .............................................................................. 26the car carrier market.................................................................................... 28the lng market................................................................................................... 29small-scale lng................................................................................................. 30the demolition market...................................................................................... 31mobile offshore drilling units...................................................................... 32the offshore support vessel market............................................................ 35the offshore contruction vessel market..................................................... 38Offshore Wind .................................................................................................. 40rs platou markets............................................................................................. 42rs platou finans................................................................................................ 45rs platou real estate........................................................................................ 48statistics............................................................................................................. 50Contacts.............................................................................................................. 56 Cover photo: Farstad Shipping
  3. 3. Shipping & Offshore: Shaping the world of energyShipping OffshoreCommercial shipping companies transport 90 percent of global The recent tragedy at the gas produc-goods by weight and volume. Considering its importance, if the tion facility in Algeria brought homeworld was just ONE country, shipping would most likely have the vulnerability of onshore installa-been a public utility! tions in North Africa and the Middle East when it comes to terrorist at-Instead, private owners and capital dominate international tacks. The Arab Spring has turned intoshipping. It is up to them to solve the logistical challenges that a shaky Winter, as unrest continues toarise in our constantly changing markets. spread and escalate in this important energy- exporting region.For example, there is currently an intense debate in the USCongress over whether to approve exports of (shale gas) LNG Some oil company executives believefrom the US. The Department of Energy has approved several offshore energy production is easier toLNG export licenses, but the majority of Democrats, and quite defend from terrorist attacks, than fora few Republicans, would like to keep this “new” gas inside na- example onshore installations in Northtional borders. Africa and the Middle East.Meanwhile, independent ship owners have ordered additional There was a succession of major off-LNG tonnage in anticipation of US exports from 2015/16. The shore discoveries during 2012 and weworld needs all the energy it can get from politically low-risk continue to believe in increased ac-countries, so it is important that Washington does not ham- tivity for offshore rigs in general andstring oil and gas exploration and production in the US. The ultra-deep water rigs in particular. The peter m. anker, Managing Partner & CEOcountry’s stunning transformation from the world’s biggest im- growth in demand for subsea construc-porter of petroleum products to its (almost) biggest exporter, tion vessels will continue to accelerate in the years to come. Thefeeding the emerging economies in Latin America and Africa, fleet is not only growing by numbers, but also by complexityis a case in point. of the vessels. We are entering into the development phase of many deep water projects that demands larger subsea structuresThe prospect of serious long-haul LNG volumes coming out of and more complex installation operations.Canada also looks very promising. It raises the question, couldCanada be the new Qatar of the Americas? Conclusion While the world has been focused on various macroeconomic cri-The first quarter of 2013 is characterized by a mixture of signifi- ses during the last few years, the energy markets have undergonecant uncertainty and opportunity for shipowners and investors. dramatic changes in supply and trading patterns ‘under the radar’.The markets are in a bottom cycle, with second hand and newbuilding prices at cyclically low levels. At the same time, the We believe these changes will become much clearer once theworld economy is showing some potential for a strong recovery world economy picks up steam, and could offer positive sur-soon, and new fuel-efficient designs are an added incentive for prises for both the shipping and offshore markets.calling the shipyards. Taking this into consideration, we maywell see a nascent recovery in most shipping markets in 2014 Yours Sincerely,and 2015. Peter M. Anker, Managing Partner & CEO, RS Platou ASA introduction 3
  7. 7. the shipping environment World shipping 2012; Down, but not out2012 turned out to be just as difficult for the shipping markets as we feared it would be. The performance of the world economy was evenweaker than reflected in downbeat expectations at the start of the year, while fleet expansion remained above any reasonably sustainablelong-term growth trend for the fourth consecutive year. Despite another stellar performance from the LNG market and a modest tighteningof the tanker market, capacity utilization for the world’s merchant fleet fell by an estimated 1 percentage point to 84 percent, the lowestlevel since the full force Financial Crisis hit in 2009.Nevertheless, the past year was not without bright spots, despite the fascinating complexities of tonnage demand. Most notably,the very challenging conditions for many segments. Most obvi- there were significant shifts in transportation distances for bothously, the fact that both the tanker and dry bulk freight markets tankers (longer) as well as dry bulk (moderately shorter), whilesaw periodic rallies through the year is a clear indication that the markedly longer distances seen in the LNG market in 2011the level of over-capacity is relatively moderate, compared to were sustained in 2012. Furthermore, fleet productivity fell inwhat was seen in the 1970s and ‘80s. This is partly due to ton- response to higher bunker prices and increased average vesselnage demand having enjoyed a surprisingly strong year despite size. Lastly, it was a big year for inventory swings with both tankan overall weak world economy, as the increased weight of the and dry bulk seeing bigger than normal inventory related tradecommodity intensive non-OECD economies offset weaknesses movement in response to geopolitical factors (tank) and rela-in the OECD. tive commodity prices (dry bulk).Another important development was the continued sharp de- Another year of above-trend fleet growth,cline in the fleet orderbook which declined from 20 percent of but delivery pipeline is emptyingthe fleet a year ago to 14 percent at the end of 2012, as new or- The world’s merchant fleet continued its pattern of robustders fell to a decade low. Whatever the reasons for this – more growth, adding another 7.8 percent, only slightly less than theprudent owners, insufficient cash flow, continued challenging record 8.2 percent seen in 2011. This marked the eighth con-financial conditions – the fact that fleet capacity is responding secutive year where growth exceeded 7 percent. The contribu-rationally to market conditions raises hope that the industry tors to growth were widely spread among key segments, withwill avoid a repeat of the protracted structural downturn seen dry bulk in front at 12.6 percent and LNG carriers in the back atin the past. a modest 1.4 percent, which made that segment the place to be for the second straight year.Tonnage demand slowed less than theworld economy Overall fleet utilization dropped by2012 was yet another year dominated by crisis headlines on the 1 percentage point to 84 percenteconomic front, as the Euro Crisis not only rolled on but gath- A sizable 4 percent drop in dry bulk fleet utilization, the larg-ered in strength through the first half of the year. Despite world est segment of the merchant fleet, dragged down overall fleetGDP growth coming in at a lackluster 3.2 percent, tonnage de- capacity utilization. The container fleet also contributed tomand registered a healthy rise of 7.1 percent, down from 7.7 this decline, while improvements for the LNG, car carrier andpercent in 2011. The year gave us important demonstrations of tanker segment moderated the drop.The level of 84 percent uti- ➤ THE SHIPPING ENVIRONMENT 7
  8. 8. lization is nonetheless weak. According to our records it is the erage earnings rose from $14,800 per day in 2011, to $17,100 second lowest level seen in the past decade, although it is still per day in 2012. well above the bottom level of 82 percent, seen in 2009. Dry bulk in 2012: Substantial drop in freight Asset values continued falling but rate of rates decline eased Market fundamentals deteriorated further during 2012 caused It was yet another year of falling asset values, but the pace of by another year with record high deliveries. Even though scrap- decline slowed and the performance across sectors was more ping also rose to the highest level registered, the net fleet ex- varied than in 2011. The least variation was seen in newbuilding pansion was above 12 percent from the year before. Despite prices, which fell across the board by 5 - 10 percent for most size weaker global economic growth, tonnage demand increased classes. Secondhand values declined as well, due not only to the by a healthy 7 percent thanks to China, which utilized huge ar- weaker freight market but also because of the emergence of fuel bitrage in iron ore and coal prices, importing much more dry efficient newbuildings, a possibly important shift in shipping bulk commodities than the underlying demand for steel, energy technology and design. Values declined, with dry bulk vessels and so forth would suggest. However, the fleet utilization rate recording significant declines of 20-30 percent, tankers fell by dropped from 87 percent in 2011 to 83 percent in 2012, and this 5-10 percent. It was the fourth straight year of declining asset caused a drop in freight rates of between 40 and 50 percent and values, and accompanied by poor cash flows it put the indus- in ship values by 20- 30 percent. try’s balance sheets under further, severe pressure. The container market in 2012: Box rates and Tankers in 2012: Little relief, despite demand timecharter rates part company boom The container ship market in 2012 was characterized by higher The tanker market experienced some improvement, although average box rates than in 2011, but substantially lower char- this was unevenly spread between segments and seasons, dem- ter rates. Operators managed to raise the utilization rate, and onstrating the fragile nature of this market. The good news was thereby freight rates, of the operating fleet by idling more ton- an estimated 8 percent spike in tonnage demand. This was due nage and creating a higher demand increase through lower fleet to a combination of increased volume growth and longer dis- productivity. Non-operating owners faced a very difficult year tances as importers rushed to cover the loss of Iranian oil. Pro- as liners had limited need for the chartering of extra tonnage. ductivity also fell, as it did for all other segments. These factors Total container ship capacity increased by 7.7 percent, while the boosted the crude market during the first months of the year, operating fleet grew by 4.5 percent. Tonnage demand is estimat- and the clean market during the last months. The period in be- ed to have escalated by around 7 percent, with 5 percent higher tween, on the other hand, was dismal, with most crude carriers trade volume and a drop of 2 percent in fleet productivity. The in particular consistently trading at, or below, operating costs. low growth in container movements was related to a drop of 3 Fleet growth remained high at 7.2 percent, which prevented any percent in European containerized imports. sustained increase in rates. For the year, our Tanker Index of av- tonnage demand growth World merchant fleet 2003–2012 vs world economic growth 2003–2012 Annual Changes Tonnage demand growth world merchant fleet, annual changes in percent Percent 12 9 10 10 04 8 03 07 8 7 11 06 12/08 6 05 6 5 4 4 2 3 0 2 -2 09 1 -4 0 -1 0 1 2 3 4 5 6 03 04 05 06 07 08 09 10 11 12 World output growth8 THE SHIPPING ENVIRONMENT
  9. 9. LNG in 2012: Longer and stronger World economy and world shippingThe LNG shipping market tightened further during 2012 de- 2012 was not a good year for the world economy with, growthspite the fact that demand growth slipped into single digits for slipping to little more than 3 percent, the lowest level for a de-the first time in seven years. The 6 percent growth in tonnage cade, barring the Financial Crisis. Under these circumstances,demand was mainly due to longer average distances, as the it came as no surprise that the year also witnessed a slowdowninter-basin trade from the Atlantic to the Pacific continued to in tonnage demand growth. That said, growth of 7.1 percentexpand. Trade volume, in fact, declined by 1 percent. Lower was better than might have been expected, as it representedfleet productivity also contributed to the demand increase. a more moderate slowdown than that experienced by GDP.Productivity fell by an estimated 2 - 3 percent owing to high While there were some special situations, as always, we viewbunker prices and increased average vessel size. The LNG fleet this relatively strong performance in trade growth as a con-grew only 4 percent and thus lifted the fleet utilization rate to 95 firmation of the changing, and more shipping intensive,percent, which resulted in an average spot rate of $125,000 per composition of the world economy. The commodity inten-day, up from $93,000 per day in 2011. sive non-OECD economies are increasing in size in relation to the mature, service-oriented OECD economies. Based onCar carriers: Uneven improvement the IMF’s current forecasts the former group is on course toThe car carrier market has seen another year of fluctuations in overtake the latter in absolute size, in 2013. This long-termtonnage demand. 2012 started off well with export volumes trend will underpin overall shipping demand in the yearsrising from the recovery of the Japanese automobile industry, to come and gives reasons for optimism regarding recovery.strong Korean exports and growing US auto sales. However, the The increasing weight of the non-OECD economies was ablyEuro crisis took its toll on European car sales and along with demonstrated this year by the extent to which mere inventorystrikes in Korea, contributed to a fall in export volumes dur- swings in iron ore and coal in China moved the entire dry bulking the second half of the year. Due to reasonably modest fleet market.growth, the average market balance improved somewhat from2011, climbing to an estimated 84 percent fleet utilization rate. Status and prospects for the world economyProspects for tonnage demand going forward depend heavily 2012 began with forecasters in a downbeat and highly uncer-on the economic development in key sales markets, as well as tain mood, after 2011 turned into yet another false dawn for thethe possibility of relocation of car production from Japan to world economy. Most notably it became clear that politiciansoverseas markets as a result of the strong Yen. were still behind the curve in the Eurozone crisis. In addition, ➤ THE SHIPPING ENVIRONMENT 9
  10. 10. the US seemed unable to move out of its 2 percent sluggish anything, falling farther behind the curve. It took a more prag- growth rate range, regardless of any kind of monetary stimulus matic approach from the ECB with regards to supporting the thrown at it, while, in the face of all this, China (as well as other region’s bond markets, in order to nudge politicians into agree- emerging markets) was showing signs of a significant slow- ing on several difficult issues, including debt write down and down. Forecasters turned out to be relatively accurate in their continued restructuring of the most fragile economies. That in downbeat view of the world economy, as (preliminary) full year turn improved market sentiment regarding the risk of a breakup growth figures show an estimated 3.2 per cent increase, not too of the entire Eurozone. far off the 3.3 percent forecast at the start of the year. Prospects for 2013 are for a moderate pickup in growth but this will still The troubles in Europe shielded the US from the storm for most be below the long-term trend. of the year, but the country’s tepid, and disappointing, growth of around 2 percent slowed further in the fourth quarter, as poli- The challenges for the world economy differ between the ma- ticians battled over how to avoid the Fiscal Cliff of automatic ture economies of the OECD and the ‘growth’ economies of tax hikes and spending cuts. Although a last minute deal was the non-OECD. The former group is struggling with the very reached, unsurprisingly, no fundamental problems were solved difficult combination of reducing national debts and deficits, and the challenges of dealing with the deficit and national debt while at the same time avoiding a relapse into recession, mak- are set to re-emerge in 2013. ing that very task next to impossible. Emerging economies, on the other hand, are feeling some growth pains from their force- Emerging markets became emerging ful response to the Financial Crisis, which boosted inflationary risks to growth pressures in the respective economies via higher commodity A year ago, we discussed the risk of a slowdown in emerging and property prices. markets and the impact on tonnage demand. The scenario turned out to be all too realistic, as 2012 featured a broad based The more positive sentiment visible at the start of 2013 can be slowdown across-the- board in such countries: China’s growth attributed to two main factors. Number one, that key econo- slowed from 9.5 percent in 2011 to a run rate of 7.5 percent in mies were pushed to the brink in 2012 – and survived. Sec- 2012. India slowed from 7 percent to 5 percent; Brazil from 4 ondly, leadership changes in the world’s two largest economies percent to 1 percent; and Russia from 5 percent to 4 percent. went smoothly, reinforcing the notion that the leaders in the US The combination of tighter monetary policy, due to budding and China are firmly committed to sustained and uninterrupted inflationary pressures in recent years and weaker export mar- growth. kets, had visible effects and combined to bring GDP growth for the group classified as ‘developing economies’ below 6 percent Europe and the US: Muddling through for only the second time in a decade. This, unsurprisingly, had a In terms of ‘stress tests’, Europe was in the spotlight, as talk of a negative impact on trade growth due to the commodity inten- ‘Grexit’ increasingly dominated the front pages, while, for every sive nature of these economies. new ‘crisis’ meeting, it became clear that the politicians were, if ANNUAL GROWTH IN REAL GDP world seaborne trade and economic growth 1970-2012 Percentage change from previous year Index 1970=100 Jan 2012 Jan 2013 Jan 2013 500 World output Forecast Estimates Forecast 450 2012 2012 2013 Seaborne dry trade USA 1.8 2.3 2.0 400 Seaborne oil trade JAPAN 1.7 2.0 1.2 350 EURO AREA -0.5 -0.4 -0.2 C AND E EUROPE 1.1 1.8 2.4 300 RUSSIA 3.3 3.6 3.7 250 CHINA 8.2 7.8 8.2 INDIA 7.0 4.5 5.9 200 ASEAN 5.2 5.7 5.5 150 M EAST AND N AFRICA 3.2 5.2 3.4 SUB-SAHARA AFRICA 5.5 4.8 5.8 100 L AMERICA 3.6 3.0 3.6 50 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 WORLD 3.3 3.2 3.5 Source: IMF 10 THE SHIPPING ENVIRONMENT
  11. 11. Signs of encouragement as 2013 got underway tone in the world economy, discussed above, is obviously a veryThe improvement in sentiment seen at the start of 2013 reflects important factor. The ability for the world economy to influencestronger underlying data. The biggest, and for shipping, most shipping must in turn be seen against the backdrop of currentimportant, change is in China. When the economy first began overcapacity conditions that are far more moderate than in theto slow authorities appeared hesitant to do anything to stimu- dark days of the 1980s. The various freight markets’ demon-late growth, most likely worried about the lingering inflationary strated ability to respond to changes in trading conditions duringpressures which came as a result of the truly giant stimulus pack- 2012 is a key sign in that regard. The most positive surprise mayage in 2009. However, in September another stimulus package have been on the supply side of the market, however, which haswas revealed and, combined with a softening of banks’ capital responded very rationally to the weak business climate by sharplyrequirements, this led to an improvement in the tone of the eco- reducing new orders. The overall orderbook thus fell steadily andnomic data. ended the year at 14 percent of the fleet, the lowest relative level in fifteen years and down from 20 percent a year ago.In the US, the severely deflated housing market gradually im-proved through the year and, combined with continued growth Finally, the structure of the world economy continues to be-in the auto and energy producing industries, overall labor mar- come more shipping intensive. Chinese import growth re-ket conditions began to show signs of more consistent improve- mained close to GDP growth, even during a year of slowdown.ment late in 2012. Furthermore, the size of the economy is such that even tactical considerations, like stock building and/or arbitrage inspiredExpectations for the world economy in 2013 are muted. Growth trades, can move entire markets. Also, the shale energy revolu-is expected to nudge up to 3.5 percent, still well below its long- tion in the US has contributed to a net rise in shipping activity,term potential. However, calmer financial markets signal an im- by raising the country’s exports of refined oil products and coalprovement in overall business and consumer confidence - vital (and, soon, LNG), while also contributing to longer trading dis-factors when it comes to making investment decisions that pro- tances for crude oil.mote growth and employment. The relative stability of the oilmarket, despite the fact that the 2012 average price for Brent Market conditions are likely to remain difficult in 2013 for thewas the highest on record - also contributed to a moderately segments that struggled in 2012. However, we believe there areimproved growth situation and the hope that the worst is over. good reasons to hope that shipping has retained its cyclicality through this difficult period, and will be able to share the fruitsShipping market prospects: of any improvement in the world economy, once it arrives, rela-Cyclicality is not dead tively quickly.On the face of it, there seem to be few reasons to expect muchimprovement for world shipping markets in 2013. However, we Ole-Rikard Hammerbelieve there are reasons to think that a change is, if not in the Head of Researchair, certainly visible on the horizon. The cautiously improved RS Platou Economic Research GLOBAL ECONOMIC GROWTH 2003-2013 supply, demand and utilization rate 1990-2012 Forecasts and actual growth rates World merchant fleet Percent change Mill cgt Utilization rate 6 Forecast 500 130 Supply Actual Demand 5 400 120 Utilization rate 4 3 300 110 2 200 100 1 100 90 0 -1 0 80 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12Source: IMF (Forecast per Oct. the year before) THE SHIPPING ENVIRONMENT 11
  12. 12. the shipbuilding market Building prices at a ten-year low Ordering activity fell by 30 percent in 2012, for the second year in a row. The main issues were slower economic growth and high fleet growth in most shipping segments, resulting in low freight rates and thus lower demand for newbuildings. The level of new orders amounted to less than 50 percent of our carriers and container ships. However, based on a freight in- estimated building capacity at the time of delivery. This resulted dex of $13,000 per day in 2012, we would have expected a in a continued decline in average delivery time and, as a con- higher ordering activity than the 16 mill cgt recorded. An- sequence, downward pressure on newbuilding prices. During other factor that affected demand was the availability of capi- 2012, our newbuilding price index fell by 12 percent and ended tal. The banks have become quite restrictive for new loans to at the lowest level seen in ten years measured in real terms. shipowners. Demand for new tonnage We have roughly estimated that owners invested 30 bill USD Demand for newbuildings was slow in the first half of 2012, with in conventional ships in 2012, a significant reduction from the only 3 mill compensated gross tons (cgt) of new orders regis- previous year’s 50 bill USD. tered per quarter. During the second half of the year, the order- ing activity picked up to above 5 mill cgt per quarter, which was Chinese shipyards were awarded 40 percent of all orders this still significantly below the estimated quarterly building capac- year, closely followed by the Koreans, who took 38 percent. A ity of 8 to 9 mill cgt. third of all new orders in China were from domestic owners, while in Korea the share was only 10 percent. Japanese yards The ordering activity has historically been closely correlated took 15 percent of the orders, of which three quarters were from with our freight rate index based on earnings for tankers, bulk domestic accounts. building prices for bulk carriers 2003–2012 building prices for tankers 2003–2012 Mill $ Mill $ 100 Capesize 170 VLCC 90 Panamax Suezmax 150 Handymax Aframax 80 130 MR Clean 70 110 60 90 50 70 40 30 50 20 30 10 10 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 1212 THE SHIPBUILDING MARKET
  13. 13. TankerS Korean yards have traditionally been the dominant builder inDuring 2012, we registered 15 mill dwt of new orders for tank- this segment, but in 2012 Chinese yards secured 53 percent ofers, representing a 40 percent increase from 2011 - a much high- all new orders, while Korea took 38 growth rate than the 17 percent seen in our tanker rate index.The shipyards delivered 32 mill dwt and towards the end of the lngyear the orderbook amounted to 51 mill dwt, representing 10 LNG was a segment where freight rates reached historical highpercent of the existing fleet. levels in 2012 and, subsequently, the demand for new tonnage remained high. This year we registered 33 new orders and, sinceIn 2012, Korean and Chinese shipyards maintained their 60 and only two vessels were delivered, the orderbook grew significantly.30 percent respective market shares in the tanker segment, while It ended the year at 92 vessels, or 27 percent of the existing fleet.Japan took 8 percent of the orders measured in dwt. A new fea-ture this year was the fact that Korean owners were the most ac- Korean shipbuilders were awarded 76 percent of all new LNGtive and were responsible for 16 percent of all new contracts. carrier orders.bulk CarrierS building CapaCiTyThe number of bulk carriers ordered in 2012 declined by almost The trend in deliveries of tonnage, measured as a 12 months40 percent from the year before - in line with the decline in freight moving average, held fairly steady at a level of 4 mill cgt perrates - and was tallied at 19 mill dwt. During the year, 98 mill dwt month from the middle of 2010 to half way through 2012.was delivered and at the end of 2012 the orderbook amounted to Deliveries peaked in June 2012, due to the fact that all new ves-105 mill dwt, equivalent to 14 percent of the existing fleet. sels delivered after 30 June had to be in compliance with IMO’s Performance Standard for Protective Coating (PSPC) for bal-Chinese shipbuilders were again the most active in this segment last water tanks. During the second half of the year, deliveriesin 2012, securing 59 percent of all new orders. Almost all other declined to an average of 2.4 mill cgt per month.contracts, 38 percent, went to Japanese yards. An estimated 21percent of the orders came from Japanese owners, followed by If we compare the orderbook for each of the major shipbuildingGreek and Chinese owners, who had a share of 13 and 11 per- countries at the beginning of the year to what they actually de-cent, respectively. livered, the slippage (the ratio not delivered) in 2012 is surpris- ingly similar to what we registered in 2011. Chinese yards deliv-COnTainer ShipS ered 71 percent of the orderbook, while Korean and JapaneseDemand for container ships in 2012 declined to less than a yards were able to deliver 80 and 93 percent, respectively. In to-third of the level seen in 2011 (in line with a subdued freight tal, 80 percent of the orders scheduled for 2012 were and totaled 0.47 mill TEU. During the year, 1.25 millTEU was delivered from the shipyards and at the end of 2012 According to the orderbook, a further decline in deliveries inthe orderbook stood at 3.4 mill TEU, representing 20 percent the coming years should be expected. At the end of 2012, someof the existing fleet. 32 mill cgt was due to be delivered in 2013, representing a 20 ➤ bUilding Prices for container shiPs 2003–2012 neW orders in mill cgt 2003–2012 Mill $ Mill cgt 120 6,000 teu 80 Others 110 4,500 teu LNG 70 100 3,000 teu Container 90 1,700 teu 60 Bulk carriers 80 1,000 teu 50 Tankers 70 40 60 50 30 40 20 30 10 20 10 0 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 the shipbuilding market 13
  14. 14. percent decline from 2012. As we assume that some slippage The steelplate price varies from country to country, and for a will also take place in 2013, we expect the decline in deliveries typical Aframax tanker in Korea this has resulted in an 8 mill to be even more than the 20 percent indicated by the orderbook. USD reduction in direct steel costs. Slippage per segment The price for main engines has remained at a very low level, as In the tanker segment, the orderbook at the start of 2012 there has been a huge overcapacity in the production of main ­indicated that 45.6 mill dwt was due to be delivered that year. A engines since 2008. In Korea, engine prices have maintained a tally at the end of the year showed that only 31.9 mill dwt was level of about 185 USD per BHP from the previous year, while actually built. The difference can be explained by the fact that the prices in China have been recorded at even lower levels. orders amounting to 11.1 mill dwt were postponed, 4 mill dwt cancelled or converted to other ship types, and 1.5 mill dwt of The development of a shipbuilder’s currency against the dollar is ‘new’ contracts were delivered. also an important aspect of the building cost. During 2012, the Chinese Yuan remained almost unchanged against the dollar, According to the dry bulk orderbook, in early 2012 we expect- while the Korean Won strengthened by some 8 percent. There ed 138.8 mill dwt to enter the market that year. The amount of was relief for Japanese builders, as the Yen weakened 13 percent tonn­ ge actually delivered amounted to 97.6 mill dwt, as 33.6 a against the dollar towards the end of the year. mill dwt was delayed and 12.9 mill dwt was cancelled, removed or converted. In addition, 5.4 mill dwt of completed vessels In total, we have estimated that overnight building costs re- were not in the orderbook at the start of the year, and are there- mained almost unchanged during 2012, but were still around fore registered as ‘new’ contracts. 20 percent below the record high level estimated for a Korean builder in 2008. The orderbook for container ships showed that 1.58 mill TEU of capacity was due for delivery in 2012. At the end of 2012 Expectations for 2013 we recorded 1.25 mill TEU of actual deliveries. The residual The main driver of the shipping industry, world GDP growth, amount can be explained by the 0.35 mill TEU postponed, 0.02 is expected to be marginally higher in 2013 than it was in 2012, mill TEU cancelled and 0.43 mill TEU of ‘new’ orders that were namely 3.4 percent. Based on the historical correlation between delivered in 2012. the world GDP growth and tonnage demand for the world mer- chant fleet, we expect a healthy growth of 5-6 percent in demand Building cost for 2013. We anticipate fleet growth at the same level, taking into Newbuilding prices have been on a downward trajectory since account some delays and cancellations of orders, combined with a the second half of 2008, caused by an overcapacity in the new- continued high level of removals. We therefore expect the utiliza- building market and declining building costs. tion rate for the merchant fleet to remain at 84 percent in 2013. This should result in freight rates below break-even in the major Steel is one of the most important materials in shipbuilding and shipping sectors and thereby mitigate owners’ willingness to or- from 2008 to 2012 our steelplate price index fell by 40 percent. der new ships. Another obstacle for owners who want to order world market price for heavy steel plates 2003–2012 10 mm+ $/ton DELIVERIES, NEW ORDERS AND ORDERBOOKS BY VESSEL TYPE 1,400 1,200 New Order Percent Deliveries orders book of fleet Type Capacity 2012 2012 end 2012 end 2012 1,000 Tankers Mill. dwt 31.4 14.2 49.4 10.7 Bulk carriers Mill. dwt 97.6 18.6 105.4 16.1 800 Container ships Mill. teu 1.25 0.5 3.4 21.0 LNG Mill. cbm 0.03 5.1 12.6 27.0 600 LPG Mill. cbm 0.6 1.5 2.5 12.7 Car carriers 1,000 cars 209 986 273 7.4 400 Chemical carriers Mill. dwt 0.5 0.9 1.6 4.4 Cruise 1,000 berths 16.1 18.3 74.3 14.8 200 03 04 05 06 07 08 09 10 11 1214 THE SHIPBUILDING MARKET
  15. 15. new tonnage is securing finance, as banks have become more roughly 35 mill cgt, within a couple of years as some shipbuild-reluctant to finance projects without any charter commitments. ers will cease to exist and others will do their utmost to reduce capacity in order to survive.With low demand from the major segments, a higher focus maybe seen on smaller, industrial segments. We also see an increas- In conclusion, we therefore expect a continued downward pres-ing interest in new eco-designed ships. However, all in all we sure on newbuilding prices in 2013. However, as the price levelexpect total demand to remain subdued. According to our esti- at the end of 2012 is getting close to the variable cost level, wemates, demand may reach 20 - 25 mill cgt in 2013. do not expect a significant drop in the already low prices, unless there is a meaningful change in input prices or exchange rates.Building capacity is expected to decline, as shipbuilders arestruggling in a low price environment. At the present price lev- Jørn Bakkelundel, we have estimated that building capacity may be reduced to RS Platou Economic Research the shipbuilding market 15
  16. 16. the tanker market Spike in tonnage demand offers only partial relief Tanker freight rates improved in 2012 from the exceptionally weak levels of 2011. Statistics show a spike in tonnage demand, but the majority of participants may not have felt it this way. We estimate that tonnage demand jumped by an exceptional 8 percent, but the most tangible part of demand growth, trade volume, made only a modest contribution. Longer average distance and reduced productivity were more important contributory factors. Continued high fleet growth, even higher than 2011, restricted the improvement in average fleet utilization to a modest 1 percentage point, virtually all of it during the first half of 2012. The year was split in two for the crude and the clean segments. disrupting refineries, locking up tonnage and rerouting trade Crude tanker rates experienced a fairly strong start to the year, flows, a combination of factors that caused fundamentals to particularly for VLCCs, as Saudi Arabia raised production and tighten further. Spot market rates rose markedly, particularly in importers scrambled to build inventory and adjust to the EU’s the Atlantic Basin, but TC rates remained relatively stable. pending embargo of Iranian oil. Once the market had made these adjustments, tonnage demand growth slowed and freight For the full year, our tonnage-weighted Tanker Index of freight rates for VLCCs and Suezmaxes immediately collapsed through rates rose from $14,800 per day to $17,200 per day, a rise of the summer before experiencing a modest seasonal rebound in 16 percent. With the exception of Suezmaxes, which bore the the fourth quarter. brunt of the decline in US imports, all segments contributed to the increase. For the crude carrier segment, VLCCs saw the The clean market experienced the opposite development: the largest improvement going from $15,000 to $21,000 per day, a first half of the year was weak and uneventful but trade growth rise of 40 percent. Meanwhile, for clean tankers LR1 earnings picked up in the second half as the rise in crude supply which rose more than 50 percent from $11,000 to $17,000 per day. took place in the first half of the year passed through refineries. Then, Hurricane Sandy hit the US East Coast in late October, Asset values still under pressure, but some divergences Vessel prices remained under pressure during the year. Whilefreight rates – single voyage 2003–2012 newbuilding prices fell across-the-board by 5 to 10 percent,Crude carriers trends in secondhand values were more mixed than in 2011. 1,000 $/day Values for modern VLCCs and Suezmaxes saw only moderate 200 VLCC declines, while prices for Aframaxes and smaller vessels fell by Suezmax a further 10 to 20 percent. Values for units 10 years and older, Aframax 150 average freight rates $1,000 per day 100 Single voyage 2010 2011 2012 50 VLCC 34.8 14.9 20.9 Suezmax 28.0 16.7 14.7 Aframax 21.4 12.9 15.4 LR 2 product 16.2 12.5 14.3 0 03 04 05 06 07 08 09 10 11 12 MR product 8.9 11.3 13.016 THE tanker MARKET
  17. 17. which had been converging on scrap value, experienced some EU’s announcement in January that it would undertake an em-improvement. bargo of Iranian oil effective from 1 July 2012 triggered a rush to build inventories, notably in China. Oil prices jumped as theA strong but uneven year for tonnage market refocused on the supply risk in an environment of lowdemand growth spare production capacity. ➤Tonnage demand rose markedly during the first months of theyear, but was unable to sustain this rate of growth, as the maindriver had been oil inventory building rather than consumption. Tanker market index 2003–2012 Annual averages (weighted by dwt)Longer trading distances made a major contribution to tonnage 1,000 $/daydemand growth, increasing by an estimated 3 percent, com- 70pared to trade growth of 1 percent. Average trading distances 60lengthened to China and, particularly, to the US. The latter wassurprising, given the focus on reduced overall imports. How­ 50ever, all of the reduction came from light, sweet oil imports, 40mainly from West Africa, while long- haul imports from the 30Middle East increased market share and allowed average dis-tances to the US to rise by 9 percent ( January to September). 20The shift still had important freight market consequences, how- 10ever, as VLCCs benefitted at the expense of Suezmaxes. 0 03 04 05 06 07 08 09 10 11 12Asian imports had yet another strong year, as China, Japan, In-dia and Korea all increased imports. All countries, at least pe-riodically, reduced imports from Iran and replaced these with tanker FLEET 2003–2012increased imports from West Africa and Latin America. As a Average annual changesresult, average trading distances increased to this region, as well. Percent 8Europe, on the other hand, reduced its average distances. In 7contrast to the US, import volume increased, mainly due to 6lower North Sea production, but the impact on ton-miles was 5more than negated by the return of short-haul Libyan crude.The Iranian embargo also allowed for increased shorter haul im- 4ports from West Africa and Russia. 3 2Reduced fleet productivity contributed to 1demand growthThere were important developments in the opaque area of fleet 0 03 04 05 06 07 08 09 10 11 12productivity. Most obviously, average fleet speed continued to de-cline, falling by an estimated 0.5 knots, to 12 knots. Higher bunkerprices, particularly early in the year, caused a significant drop in freight rates – single voyage 2003–2012optimal vessel speed. Changes in average vessel size and ballast Clean carrierstime also contributed. To surmise, we estimate that fleet produc- 1,000 $/daytivity was reduced by an estimated 3 to 4 percent, which increased 90 85/110,000 dwttonnage demand by the same amount. For more details on this 80 70/85,000 dwtand the complexities of fleet productivity, please see the enclosed 70 45,000 dwtbox article ‘Is the tanker market driven by fundamentals?’ 60 50Oil market remained stubbornly tight 40World oil production rose by 2.9 percent in 2012, the largest 30increase since 2004. This easily overtook the increase in world 20oil demand, which rose by only 1.1 percent, thanks to the weak 10world economy. However, the increase in production failed to 0dent prices, which remained stubbornly high for most of the 03 04 05 06 07 08 09 10 11 12year. Brent averaged 113 USD per barrel, a record high. The THE tanker MARKET 17
  18. 18. The increase in production was driven by Libya, but also by the In 2013 we predict relatively similar developments to what we US. For the tanker market, the latter restricted the increase in forecast a year ago, but with the important caveat that it will be seaborne trade to a moderate 1 percent, a smaller figure than more difficult to repeat the many positive surprises of 2012. We might normally have been expected from the observed rise in expect tonnage demand growth to slow significantly, as OPEC’s oil production. biggest producer, Saudi Arabia, already began to scale back pro- duction in late 2012. Fleet capacity growth: High, going on higher, but orderbook drop continues Fleet growth will, finally, begin to slow, but probably not Fleet growth developed in line with expectations and was, if any- rapidly enough to improve capacity utilization significantly thing, somewhat faster than anticipated. Although newbuilding already this year. Deliveries should be lower than in 2012 deliveries fell to 31 mill dwt, down from the record 40 mill dwt and we also expect an increase in scrapping. However, both in 2011, average fleet growth accelerated from 5.8 percent to 7.2 of these assumptions may prove tenuous. Deliveries will be percent. This was due to the relatively low level of scrapping, less affected by slippage, both from 2012 and 2013. Meanwhile, than 15 mill dwt. With single hull tankers having been removed scrapping has proved difficult to get off the ground, because from the active fleet, the average age of the fleet has declined to of the relatively young fleet. We expect the volume to increase, about eight years and there is thus a shortage of natural scrapping as more vessels are due for special survey from 2012 onwards. candidates. A drop in scrap prices, combined with a moderate in- However, any positive sentiment with regards to an impend- crease in asset values for the oldest vessels, as the freight market ing freight market recovery will also affect owners of older improved, made scrapping decisions more difficult for owners. tonnage and possibly delay their scrapping decisions. We ex- pect fleet growth to slow from 7 percent to less than 4 percent, The real news was another year of exceptionally low ordering, 14 the lowest rate in four years. mill dwt, far below the rate of deliveries, which caused the order- book to decline further. The fact that yet another drop in new- China, Iran and the US capable of market surprises building prices failed to attract more interest only serves as an in- Positive surprises are again more likely to come from the de- dication of the tough financing conditions for shipping at present. mand side of the market. Chinese oil imports may increase more than expected as the economy appears to be picking up Given these developments, the tanker orderbook tumbled from steam, and, particularly, if plans for significant increases in re- 75 mill dwt to 49 mill dwt through the course of the year - the finery capacity go ahead. Likewise, any resolution to the Iranian lowest level, relative to the size of the fleet, in twelve years. conflict would most likely increase the volume of seaborne oil trade, at least temporarily. Market outlook: Challenging 2013, but finally some light at the end of the tunnel? On the negative side, if US production of light, tight crude con- A year ago we said the market in 2012 would be ‘flat, but not tinues to beat expectations, seaborne imports will come under the without potential for surprises.’ We outlined the potential further pressure. Global tanker demand will suffer unless the for a restocking of oil inventories as a possible surprise scenario. displaced oil can find other markets with at least equal trans- That indeed turned out to be the case, except to a much stronger portation distances or unless Middle East exporters to the US degree than expected. can continue to increase their market share. ➤ deliveries and removals of tankers 2003–2012 Excluding chemical carriers world oil production and trade 2003–2012 Mill dwt MBD 50 55 Non-OPEC Removals 45 production Deliveries 40 World oil 45 trade 35 OPEC 30 production 25 35 20 15 25 10 5 0 15 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 1218 THE tanker MARKET
  19. 19. IS THE TANKER MARKET DRIVEN BY FUNDAMENTALS?Analysts are not only struggling with the prospects for the tanker results in a market-dependent decline in productivity, which ismarket, they are also working hard to explain the past. The tanker a part of the overcapacity to be measured. Normally, an increasefleet is now 42 percent larger than in 2005, while seaborne trade, in in bunker prices also leads to lower speed, but we regard this as aterms of volume, is up only 6 percent. In 2005, we estimated the utili- structural drop in productivity. In other words, an increase in bun-zation rate for the tanker fleet to be close to the 90 percent we regard ker prices at a constant dollar rate will lead to slower speed and theas full capacity utilization. On this basis, we should apparently have need for more tankers to carry out the same transportation work.had a huge overcapacity of 20-25 percent this year, with permanent Speed is the most complicated element to handle when estimatinglay-up rates as a consequence. Even if 2012 definitely was a difficult over­capacity. Interested readers can find more about speed optimi-year for tanker owners, it was not that bad. We now estimate the zation in RS Platou Monthly, March 2012.overcapacity in 2012 to have been 6-7 percent, which we describe as • Another (structural) productivity element is the load factor,moderate, not in the neighborhood of what we experienced in the defined as the cargo size divided by the deadweight ton of a vessel.1970s and 1980s (see chart). The current overcapacity could be de- There has been a consistent trend over many years towards largerscribed as a typical cyclical one, not the type of structural overcapac- Aframaxes, Suezmaxes and VLCCs, while the cargo sizes haveity tanker owners fought against some decades ago. been more or less unchanged. This means that we need more dead- weight tons to take the same cargo as before. We have estimatedThis gives us reason to ask if the tanker market is now decoupled that this element has reduced the productivity of the fleet by 0.6from fundamentals? We believe not. The simple comparison be- percent per year, over the last 10 years.tween the change in the fleet and the change in trade volumes does • The ballast factor describes the share of days in ballast comparednot tell the whole story. There are obviously a number of additional with the total days at sea. Significant and rapid changes in thefactors. Let us try to explain: worldwide trade pattern normally lead to more repositioning of the fleet, more ballast days and consequently lower (structural)• Transport distances According to our estimates, average dis- productivity. In the last few years, the stop and go of Libyan tances increased by 8 percent from 2005 to 2012, resulting in a exports, the sharp drop in exports from Iran and the drastic cuts 14 percent increase in ton-miles in the same period. in US oil import are typical drivers of more ballasting and reduced• Floating storage employment Over the period from 2005 to productivity. 2012, there have been several years with significant use of tank- ers for storage purposes, in addition to their traditional trading Our analysis points to a decline of 13 percent in (structural) produc- employment. tivity and a tanker demand growth of 32 percent from 2005 to 2012,• Fleet productivity factors These factors are the most challenging compared to the tiny 6 percent growth in seaborne oil trade volumes. to identify and estimate. Normal productivity can be defined Thus we ended up with a utilization rate in 2012 of 83.5 percent - or as the number of ton-miles produced per deadweight ton, per an overcapacity of 6.5 percent - a level quite in line with freight mar- year, at a 90 percent utilization rate. Since our goal is to measure ket conditions in 2012. the utilization rate of the fleet, we have to differentiate between market-dependent changes in productivity and structural Erik M. Andersen changes. For example: In a weakening market, operators want Special Adviser to reduce vessel speed because optimum speed is falling. This RS Platou Economic Research TANKER MARKET BALANCE 2005-2012 Tanker overcapacity 1973-2012 Mill dwt (lines) Utilization rate (bars) Overcapacity in percent of total fleet 450 100 Supply 40 Total demand 36 (Based on ton-miles, 32 400 90 productivity and 28 floating storage) 24 Simple demand (Based on trade 20 350 80 volumes) 16 Utilization rate 12 (Based on total 8 300 70 demand) 4 Utilization rate (Based on 0 250 60 “simple” demand) -4 05 06 07 08 09 10 11 12 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 THE tanker MARKET 19
  20. 20. Crude and Clean markeTS likely TO COnTinue TO tanker fleet, five years vs eight for crude, argues against a surge TraCk eaCh OTher in scrapping. Product tanker rates increasingly outperformed crude rates during the second half of 2012, and have begun 2013 on a OddS fOr a CyCliCal upTurn have imprOved, stronger note. We see the improvement in clean rates as es- buT STrOnger wOrld eCOnOmy needed sentially a cyclical phenomenon, resulting from the high level We expect that the much-reduced orderbook will lead to a pro- of crude production and imports in the first half of the year. nounced slowdown in fleet capacity growth to less than 3 per- Without a significant recovery in oil demand, trade growth is cent per annum over the next three years. In such a scenario, thus likely to slow for the clean market as well in 2013. How- fleet utilization should begin to improve from 2014 and poten- ever, trading patterns are becoming more complex because of tially accelerate in 2015. However, this development depends tightening product specifications. In addition, the reduction on several assumptions, of which the most important is that the in refinery capacity in the Atlantic Basin, including Venezuela, world economy embarks on a self-sustaining recovery in line has made seaborne imports a more important swing factor. with its long-term growth potential. When that happens, but Tonnage demand is less transparent in this segment and may probably not before, oil demand and trade can be expected to offer upside surprises. accelerate and a cyclical recovery in the crude and clean mar- kets will arrive. Fleet capacity growth for product tankers will likely increase in 2013, however, as the level of newbuilding deliveries is sched- Ole-Rikard Hammer uled to rebound. The relatively low average age of the clean RS Platou Economic Research sUPPly, demand and Utilization rate 2003–2012 market valUes of tankers 2003–2012 tanker fleet 5 years old Mill dwt Utilization rate Mill $ 500 150 Supply 180 VLCC Demand 160 Suezmax 450 140 Aframax Utilization 140 400 130 rate MR Product 120 350 120 100 300 110 80 250 100 60 200 90 40 150 80 20 100 70 0 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 1220 the tanker market
  21. 21. the dry bulk market Substantial drop in freight ratesMarket fundamentals deteriorated further during 2012, as a result of another year with record high deliveries. Despite weakerglobal economic growth, tonnage demand increased at a healthy rate thanks to China, which utilized huge arbitrage in ironore and coal prices, importing far more dry bulk commodities than the underlying demand for steel, energy and so forth wouldusually dictate.FREIGHT RATES AND SHIP VALUES tern for other segments was the reverse; with a relatively weakerConsidering the year as a whole, our weighted dry bulk index second half compared with the first half.averaged $9,400 per day in 2012, down from $15,200 per day in2011. The Capesize sector saw a drop in earnings from $16,200 Ship values fell steadily throughout the year even though salesto $9,700 per day, while Panamaxes obtained $8,100 per day activity, especially for the larger sizes, increased significantlycompared with a day rate of $14,600 the year before. Supra- compared with the year before. We also registered high activitymaxes earned $9,400 per day against $14,400 per day in 2011, in re-sales of newbuildings, mostly from Chinese yards. Values ➤while Handysize day rates fell from $10,500 in 2011 to $7,600per day in 2012. average freight rates $ 1,000/dayCapesize tonnage was negatively affected by a slowdown in Bra- Trip charterzilian iron ore exports to Asia during the first part of the year. 2010 2011 2012Almost all growth in Asian iron ore imports was covered by Capesize 32.8 16.2 9.7Australia in this period, significantly impacting upon the ton- Panamax 25.8 14.6 8.1mile growth parameter. In the last quarter, however, Brazilian Supramax 22.4 14.4 9.4iron ore shipments to Asia recovered substantially, which con- Handysize 16.4 10.5 7.6tributed to a significant upturn in Capesize earnings. The pat- DRY BULK IMPORTS BY COUNTRY/REGION t/c rates bulk carriers 2003–2012 2003–2012 12 months Mill tons/year 1,000 $/day 1,400 China 180 Capesize Japan 160 Panamax 1,200 Oth Asia 140 Supramax 1,000 W.Europe Handysize 120 800 India 100 600 80 60 400 40 200 20 0 0 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 THE dry bulk MARKET 21
  22. 22. 22 THE DRY BULK MARKET22 THE dry bulk MARKET
  23. 23. for re-sales dropped 15-20 percent, while 5-10 year old tonnage In the rest of the world, dry bulk import rose by around 3 per-saw values decrease by 20-30 percent. cent from the year before. India continued its impressive growth in dry bulk imports, mainly in coal, registering a 12 percent es-SEABORNE TRADE AND TONNAGE DEMAND calation. Far East Asian countries, excluding China, recordedOn a global basis, steel makers raised their output by only only 2 percent higher total imports. European dry bulk imports1 percent from 2011 to 2012. Asia, the Middle East and North fell by 1 percent, as a result of 8 percent lower iron ore imports.America recorded moderate increases, while other regions reg- The impact of this was partly negated by 4 percent higher coalistered lower production. The largest setback was experienced the European region, with 3.5 percent lower production. In terms of the key exporters of iron ore, Australia raised exportsPreliminary data suggests that seaborne transportation of dry by 13 percent, while Brazil reduced its activity by 1 percent. Inbulk commodities rose above 5 percent from the year before. coal transportation, Australian shipments escalated 13 percent,Real tonnage demand is estimated to have increased around while Indonesia raised its volume by 5 percent. In grain and soy-7 percent. In addition to somewhat below 5 percent growth bean trade, Brazilian export volumes jumped 16 percent, whilein ton miles, the rise in Chinese coastal trade contributed to US exports fell by 11 percent.some additional demand. Fleet productivity appears to havedropped around 2 percent. Among commodities, a 5 percent SAILING DISTANCESjump was registered in the iron ore trade, while coal shipments On average, we registered slightly shorter hauls in iron ore loads,increased by 7 percent. Trade in grain and soybean escalated caused by reduced Brazilian market share in the Asian iron ore3 percent, while shipments of other commodities climbed market. In coal transportation, the average sailing distance was2 percent. marginally lower. This can be attributed to higher growth in intra-Pacific coal shipments, compared with trade between theChina increased its dry bulk imports by 12 percent, of which Atlantic and the Pacific regions.iron ore imports escalated by more than 8 percent, coal by28 percent and other cargoes by a total of 6 percent. In the More long hauls were registered in the grain and soybean of other commodities, the most pronounced jump was This was a result of increased South American exports in rela-recorded in grain, nickel ore and soybeans. The growth in Chi- tion to the activity of other key exporters.nese dry bulk imports was surprisingly strong taking into ac-count only modest increases in domestic steel and energy de- PORT CONGESTIONmand. Significantly lower world market prices of iron ore and Slower growth in the dry bulk trade slightly reduced waitingcoal - compared to higher domestic prices in China - provided times in ports compared with 2011. Chinese, South Americanstrong incentives for Chinese industries to cover a higher share and Indian congestion was lower than the year before, whileof their raw material demand through overseas import. both Australia and Indonesia experienced longer average port ➤ supply, demand and utilization rate 2003–2012 market Values of Bulk Carriers 2003–2012 Dry bulk fleet 5 years old Mill dwt Utilization rate Mill $ 700 180 Supply 180 Capesize 650 170 Demand 160 Panamax 600 160 Utilization Supramax 140 550 150 rate 500 140 120 450 130 100 400 120 80 350 110 60 300 100 250 90 40 200 80 20 150 70 0 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 THE dry bulk MARKET 23