Braemar Seascope
Freight Market Developments in
Iron Ore
Mining the Pilbara
Peter Malpas – Braemar Seascope
16th July 2013
Braemar Seascope
Disclaimer
The information contained within this report is given in good faith based on the current marke...
Braemar Seascope
Braemar Shipping Services Plc
Shipbroking
Dry Cargo
Tankers / LNG / FSPO
Containers
Sale and Purchase
New...
Braemar Seascope
Freight Rate Review
Braemar Seascope
Record Spot Rates
An historical perspective
0
50,000
100,000
150,000
200,000
250,000
US$/Day
Capesize
Com...
Braemar Seascope
Australian Round Voyage 2012-2013
Source: The Baltic Exchange
0
5,000
10,000
15,000
20,000
25,000
US$/Day...
Braemar Seascope
Cape Spot Rates – Fronthaul vs. Aussie RV
vs. Backhaul vs. Atlantic RV
Short Term
0
5
10
15
20
25
30
35
4...
Braemar Seascope
The Current Market
(Iron Ore, Cape WA - China)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,40...
Braemar Seascope
Iron Ore
Braemar Seascope
Chinese Iron Ore Imports vs. Spot Price
Monthly
0
20
40
60
80
100
120
140
160
180
200
20.0
30.0
40.0
50.0...
Braemar Seascope
Chinese Steel Production & Iron Ore Supply
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
BillionTonnes
China Iron O...
Braemar Seascope
Global Seaborne Iron Ore Trade
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
BillionTonnes
12/04/2013
Source: B...
Braemar Seascope
China’s Primary Iron Ore Sources
0
100
200
300
400
500
600
700
800
900
1,000
MillionTonnes
Australia Braz...
Braemar Seascope
Main Global Iron Ore Exporters
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
BillionTonnes
Australia Brazil South A...
Braemar Seascope
Main Global Iron Ore Importers
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
BillionTonnes
China Japan South Korea ...
Braemar Seascope
Fleet Profiles
Braemar Seascope
Bulker removals – 2013 YTD
36
79
32
2
37
4
2
29 ships
- 1,000 2,000 3,000 4,000 5,000 6,000
Small Handy
L...
Braemar Seascope
Bulker fleet & orderbook
768
1954
742
1906
1808
363
110
1427
33
329
64
360 367
51 17
203
0
200
400
600
80...
Braemar Seascope
Capesize (120,000+ Dwt)
19
2 10
23 12
28 38 36 37 48 36
11
26 30 30 20 29 41 47 57 55 43
107
196
211
178
...
Braemar Seascope
Mini Capesize (100-119,999 Dwt)
1 3 1 2 2 4
15
39 37
6
9
7
10
10
20
30
40
50
<=1987
1988
1989
1990
1991
1...
Braemar Seascope
Bulker fleet growth to date in 2013
Fleet Segment Capacity Capacity Delivery Demolition Capacity 2013 YTD...
Braemar Seascope
What has been ordered so far this year?
16
79
121
47
7
43
15
7
0
20
40
60
80
100
120
140
No.ofvessels
Braemar Seascope
Evolution of “standard” Cape dimensions
Year of Build Dwt k Beam LOA Draft
1981 138 43 270 16.8
1990 149 ...
Braemar Seascope
Evolution of Cape Dimensions
0
100
200
300
400
500
600
700
100 kt - 119.9 kt
Mini-Cape
120 kt - 139.9 kt ...
Braemar Seascope
Conclusion
• Import substitution is critical for the Cape market
• China’s switch from domestic iron ore ...
Braemar Seascope
Bulker Delivery Schedule
Jan 2011
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Peter Malpas, Group Research Director, Braemar Seascope - Freight market developments in iron ore

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Peter Malpas, Director, Group Research Director, Braemar Seascope delivered this presentation at the Mining the Pilbara 2013 conference. The conference aims to promote the sustainable development of mineral resources and the Pilbara region.

For more information, visit http://www.informa.com.au/miningthepilbara

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Peter Malpas, Group Research Director, Braemar Seascope - Freight market developments in iron ore

  1. 1. Braemar Seascope Freight Market Developments in Iron Ore Mining the Pilbara Peter Malpas – Braemar Seascope 16th July 2013
  2. 2. Braemar Seascope Disclaimer The information contained within this report is given in good faith based on the current market situation at the time of preparing this report and as such is specific to that point only. While all reasonable care has been taken in the preparation and collation of information in this report Braemar Shipping Services Plc (and all associated and affiliated companies) does not accept any liability whatsoever for any errors of fact or opinion based on such facts. Some industry information relating to the shipping industry can be difficult to find or establish. Some data may not be available and may need to be estimated or assessed and where such data may be limited or unavailable subjective assessment may have to be used. No market analysis can guarantee accuracy. The usual fundamentals may not always govern the markets, for example psychology, market cycles and external events (such as acts of god or developments in future technologies) could cause markets to depart from their natural/usual course. Such external events have not been considered as part of this analysis. Historical market behaviour does not predict future market behaviour and shipping is an inherently high risk business. You should therefore consider a variety of information and potential outcomes when making decisions based on the information contained in this report. All information provided by Braemar Shipping Services Plc is without any guarantee whatsoever. Braemar Shipping Services Plc or any of its subsidiaries or affiliates will not be liable for any consequences thereof. This report is intended solely for the information of the email recipient account and must not be passed or divulged to any third parties whatsoever without the written permission of Braemar Shipping Services Plc. Braemar Shipping Services Plc accepts no liability to any third parties whatsoever. If permission is granted, you must disclose the full report including all disclaimers, and not selected excerpts which may be taken out of context. For more information, please contact Research at research@braemar.com
  3. 3. Braemar Seascope Braemar Shipping Services Plc Shipbroking Dry Cargo Tankers / LNG / FSPO Containers Sale and Purchase New Building Demolition Research Technical Port construction Naval Architecture Vessel & condition surveys Ship construction supervision Environmental Pollution control Incident response Logistics Port Agency Customs clearance Containers
  4. 4. Braemar Seascope Freight Rate Review
  5. 5. Braemar Seascope Record Spot Rates An historical perspective 0 50,000 100,000 150,000 200,000 250,000 US$/Day Capesize Commencement of Chinese Rapid Development Chinese Credit Crunch Cooling Chinese Steel Demand & Reducing Congestion Record Chinese Iron Ore imports Source: The Baltic Exchange 15/07/2013 Global Financial Crisis
  6. 6. Braemar Seascope Australian Round Voyage 2012-2013 Source: The Baltic Exchange 0 5,000 10,000 15,000 20,000 25,000 US$/Day C10 05/07/2013
  7. 7. Braemar Seascope Cape Spot Rates – Fronthaul vs. Aussie RV vs. Backhaul vs. Atlantic RV Short Term 0 5 10 15 20 25 30 35 40 US$/Tonne Atlantic RV Fronthaul Backhaul Pacific RV Source: The Baltic Exchange 15/07/2013
  8. 8. Braemar Seascope The Current Market (Iron Ore, Cape WA - China) 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 PH - N. China March 2012 PH - N. China April 2013 US$ Time Charter Bunkers Port & Misc $7.76 $7.08 10/05/2013
  9. 9. Braemar Seascope Iron Ore
  10. 10. Braemar Seascope Chinese Iron Ore Imports vs. Spot Price Monthly 0 20 40 60 80 100 120 140 160 180 200 20.0 30.0 40.0 50.0 60.0 70.0 80.0 US$/Tonne MillionTonnes Iron Ore Imports (LH) Iron Ore Fines 62% FE spot (CFR Tianjin port) (RH) 02/07/2013 Source: Braemar Seascope Research
  11. 11. Braemar Seascope Chinese Steel Production & Iron Ore Supply 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 BillionTonnes China Iron Ore Prod. Iron Ore Imports China Steel Prod. 07/06/2013 Source: Braemar Seascope Research
  12. 12. Braemar Seascope Global Seaborne Iron Ore Trade 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 BillionTonnes 12/04/2013 Source: Braemar Seascope Research
  13. 13. Braemar Seascope China’s Primary Iron Ore Sources 0 100 200 300 400 500 600 700 800 900 1,000 MillionTonnes Australia Brazil South Africa Malaysia Philippines Canada India 09/05/2013 Source: Braemar Seascope Research
  14. 14. Braemar Seascope Main Global Iron Ore Exporters 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 BillionTonnes Australia Brazil South Africa Canada Ukraine Russia India Largest Exporters of Iron Ore are Brazil and Australia 17/05/2013 Source: Braemar Seascope Research
  15. 15. Braemar Seascope Main Global Iron Ore Importers 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 BillionTonnes China Japan South Korea Germany Taiwan Oman Huge growth in Iron Ore Imports to feed economic expansion in the East Source: Braemar Seascope Research 17/05/2013
  16. 16. Braemar Seascope Fleet Profiles
  17. 17. Braemar Seascope Bulker removals – 2013 YTD 36 79 32 2 37 4 2 29 ships - 1,000 2,000 3,000 4,000 5,000 6,000 Small Handy Large Handy Handymax Supramax Panamax Post-Panamax Mini Capesize Capesize ‘000 Dwt Total 2013 YTD: 12.8m Dwt 2012 Total = 36.5m Dwt
  18. 18. Braemar Seascope Bulker fleet & orderbook 768 1954 742 1906 1808 363 110 1427 33 329 64 360 367 51 17 203 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 Small Handy Large Handy Handymax Supramax Panamax Post- Panamax Mini Capesize Capesize No.ofvessels Fleet Orderbook Total % of fleet on order = 16% OB/F 4% 17% 9% 19% 20% 14% 15% 14%
  19. 19. Braemar Seascope Capesize (120,000+ Dwt) 19 2 10 23 12 28 38 36 37 48 36 11 26 30 30 20 29 41 47 57 55 43 107 196 211 178 57 65 86 44 80 25 50 75 100 125 150 175 200 225 <=1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 No.ofvessels Orderbook Fleet
  20. 20. Braemar Seascope Mini Capesize (100-119,999 Dwt) 1 3 1 2 2 4 15 39 37 6 9 7 10 10 20 30 40 50 <=1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 No.ofvessels Orderbook Fleet
  21. 21. Braemar Seascope Bulker fleet growth to date in 2013 Fleet Segment Capacity Capacity Delivery Demolition Capacity 2013 YTD 2013 YTD 1 st Jan 2012 1 st Jan 2013 M Dwt M Dwt 1 st July 2013 Growth Growth M Dwt M Dwt M Dwt M Dwt % Capesize 242.20 266.55 13.04 5.05 274.54 7.99 3% Mini Capesize 7.76 11.76 0.67 0.00 12.43 0.67 6%
  22. 22. Braemar Seascope What has been ordered so far this year? 16 79 121 47 7 43 15 7 0 20 40 60 80 100 120 140 No.ofvessels
  23. 23. Braemar Seascope Evolution of “standard” Cape dimensions Year of Build Dwt k Beam LOA Draft 1981 138 43 270 16.8 1990 149 43 270 17.3 2000 171 45 288 17.7 2010 180 45 292 18.2 WOZMAX (Namura) 250 57 330 18.1
  24. 24. Braemar Seascope Evolution of Cape Dimensions 0 100 200 300 400 500 600 700 100 kt - 119.9 kt Mini-Cape 120 kt - 139.9 kt 140 kt - 159.9 kt 160 kt - 179.9 kt 180 kt - 199.9 kt 200 kt - 219.9 kt 220+ kt NumberofVessels Vessel DWT 2010 2011 2012 2013 28/06/2013 Average Capesize DWT 1970 = 122k dwt 1980 = 139k dwt 1990 = 175k dwt 2000 = 170k dwt 2010 = 181k dwt 2013 = 207k dwt (inclusive of 2013 NB’s) Source: Braemar Seascope Research
  25. 25. Braemar Seascope Conclusion • Import substitution is critical for the Cape market • China’s switch from domestic iron ore production to imports over a long period due to sustained low iron ore prices could strengthen the freight market in 2H 2014 into 2015 & 2016. • Firm freight market will increase the importance of freight in delivered price, but freight strategy utilising current low prices can help mitigate this exposure • Freight is expected to account for over 15% of the delivered price in 2016 compared with around 5% today • The timing of market recovery post 2013 depends on: – Industrialisation & urbanisation rates in emerging markets – The response of emerging markets to commodity price changes – Supply response to demand changes (scrapping, new orders) 18/03/2013
  26. 26. Braemar Seascope Bulker Delivery Schedule Jan 2011

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