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DNV GL Trend Report Feb 2015


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A report published by DNV GL on the current trends and developments of shipping.

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DNV GL Trend Report Feb 2015

  2. 2. DNV GL © 2013 MARKET SUMMARY ………………………..…………………………………… BUSINESS ENVIRONMENT ………………..…………………………….. CONTAINERSHIPS ……………..………………………………………………… OIL & PRODUCT TANKERS ……………………………………………… BULK CARRIERS .…………..………………………………………………………. OFFSHORE ….................…….………………………………………………… FOCUS ON: CRUISE VESSELS …….……………….………………………………………….. MULTI PURPOSE VESSELS ……………………………………............... GAS CARRIERS ……………………………………………………………………….. 3 4 5 11 17 23 30 32 34
  3. 3. DNV GL © 2013 Market Summary At the same time, liner operators welcome cheap bunkers with no less enthusiasm. On the negative side, cheap oil may put an end to many offshore projects, leaving a lot of ships and units unemployed or even obsolete. In addition, cheap bunkers tend to favour older ships! New “eco designs” offer considerable savings, providing that bunkers are expensive. In the current scenario, an 5-10 year old ship, with considerably lower capital expenses, will require lower break- even rates, thus in the overall picture may be cheaper to run compared to a modern, brand new vessel. In terms of new contracts, preliminary year-end numbers fully match our earlier forecast. With 2,755 ships (82,6 mGT) the newbuilding activity fell by 33% and 23% respectively. It gives an average monthly contracting of 230 vessels, compared to over 340 in 2013. The last quarter added 384 new contracts corresponding to 11,8 mGT. It was an active quarter for crude oil tankers (33) mainly within Suezmax and VLCC range. Strong activity within LNG tankers resulted in 25 more contracts. A contrary development was observed in the LPG sector where contracting slowed down noticeably. Twelve more container ships were signed, bringing the total annual number to 152. Lower activity in the bulk carrier sector, with 81 new contracts. Low activity levels in the offshore support sector, with 20 AHTS and 16 PSVs only. For offshore units, 10 drilling Jack-ups and 2 FPSOs deserve attention. Falling oil prices have certainly dominated the news recently. Although the dive started already in July 2014, very few anticipated that prices would plummet as low as 50$/bbl or even below! Record high oil production is blamed, however we believe that perhaps the underperforming economy should be blamed too. Most of other commodity prices are tumbling down as well, clearly indicating a lack of demand thus lower industrial activity. Low oil prices are in general great news for shipping as current bunker prices hoover around $275/t only. The benefits however are not so great, as freight rates are falling as well, wiping out potential savings on the fuel bill. Undisputed short-term winners are crude oil tankers, which thank to Asian countries stock-piling process, harvest rates close to $80 000/day. Cheap oil, good news or bad news? GLOBAL SHIPPING MARKETSGLOBAL SHIPPING MARKETSGLOBAL SHIPPING MARKETSGLOBAL SHIPPING MARKETS MONTHLY NEWBUILDING CONTRACTSMONTHLY NEWBUILDING CONTRACTSMONTHLY NEWBUILDING CONTRACTSMONTHLY NEWBUILDING CONTRACTS 0 100 200 300 400 500 FebJan Mar DecNovSep OctAugJulJunMayApr 20142013 3
  4. 4. DNV GL © 2013 PURCHASING MANAGERS INDEX 120 80 40 750 500 250 2014201320122011201020092008 500 1.000 1.500 2014201320122011201020092008 -20 40 20 -40 60 2014201320122008 2009 2010 2011 40 45 50 55 60 2012 20132010 20142011 Business Environment Oil prices tumble to fresh lows During the second half of 2014, the US dollar made significant gains against all major currencies. The US economy grew by almost 5% in the 3rd quarter which allowed the federal reserve to end its emergency stimulus. In the Eurozone, unemployment is near to a record high, the economy is still stagnating and the risk of deflation is growing. In Japan, officials are going all in with stimulus and during the 3Q2014, China has experienced its slowest GDP growth rate in five years at 7,3%. A surplus of global supplies and flat demand continue to pull the oil market down. Bunker prices and crude oil prices are now reaching a five-and-half year low. Brent crude has lost more than half of its value since mid-2014 and now stands at 53 USD per barrel. The 380 cst Rotterdam ended the year at 278 USD/Tonne, down by 323 USD, or 53% compared to the high of 601 USD reached on the 20th of June 2014. OIL / BUNKER STEEL / SCRAP Bunker $/tonne Crude $/bbl USD EXCHANGE RATES Crude (Brent)380cst R’dam Index Avg. Demolition Price VLCC (USD/ldt) Global Steel Price (USD/t) USD/KRW USD/JPN USD/CNYUSD/EUR % China Manufacturing Purchasing Managers Index 4
  5. 5. DNV GL © 2013
  6. 6. DNV GL © 2013 Executive Summary| Containerships So last year, there were lots of examples of liner companies finding new ways of cooperating, pooling resources, in order to offer a worldwide network of routes and save costs. For the liner industry in total, 2014 is expected to turn into a profitable year. This will probably mainly be achieved by the rather large contributions of a few strong companies such as Maersk and CMA CGM. At the same time, there are bound to be some liner companies that had to cope with a loss in 2014. For 2015, one of the hopes is that bunker costs will remain low. The 50% drop in bunker fuel prices year-on-year will benefit container liners this year as well, even if increased cost for SECA areas are incorporated. But the question is how long oil prices – and therefore bunker fuel prices - will remain at these levels. One possible fear is that liners will increase vessel speed again, thereby increasing the fleet capacity and adding to oversupply. For this year, a 7.0%-7.5% global fleet growth is expected, opposed to a cargo volume growth of 6.5%-7.0%, so this could put pressure on rates. But if it all works out positively, unit cost could decrease more than freight rates, leading to a rise in profitability for liner companies. Furthermore, the introduction of the mega-alliances in the industry could help improve liners operational performance (commercial result and reliability). A new trend seems to have been set with the ordering of ultra large containerships around 19,000 - 20,500 TEU. Currently, experts see the size limit in the short term at 22,500 TEU. The container liner industry is known for its very volatile track record when it comes to profitability. Looking at the top liner companies reveals that only half of them were able to turn out a profit for the 2009-2013 period. However, last year should have been much better, helped by a strong 6.5% increase in cargo volume and significant lower fuel cost. Containership industry regulators played an important role in 2014 as companies reshaped their alliances. We have witnessed the failure of P3, and the creating of both the 2M and the Ocean Three alliances. The two other big alliances for the main East- West routes tightened their cooperation and took on new members to increase their market power. UASC and Hamburg Sud announced a global agreement to access each other’s trades. And when Hapag-Lloyd and CSAV have completed their merger, they will be the fourth largest liner in the world. CONTAINERSHIPSCONTAINERSHIPSCONTAINERSHIPSCONTAINERSHIPS Liners increase competitiveness by operating even larger vessels and building stronger alliances 6
  7. 7. DNV GL © 2013 -8 -4 0 4 8 12 16 201620142012201020082006200420022000 Just recently, both the World Bank and International Monetary Fund have cut their expectations for worldwide economic growth, despite lower oil prices. The IMF revised its global GDP growth forecast to 3.5% in 2015 and 3.7% in 2016, compared with previous forecasts of 3.8% and 4% respectively. The World Bank expects growth of 3% this year and 3.3% in 2016, compared with previous forecasts of 3.4% for 2015 and 3.5% next year. For the USA, GDP levels are expected to increase at a higher rate than previously. For the Euro area, China and Russia, GDP growth levels were all revised downwards. Global containerized trade is forecast to grow by 6.5%-7.0% in 2015, after global growth rates of 6% in 2014 and 5% in 2013. In 2015, for two main tradelanes (Far East-Europe and Far East- USA), an average growth of 6.0% is expected. For the third mainlane trade, the transatlantic Europe-USA trade, a 2015 growth of 3.0% is predicted. Non-mainlane East-West trades and the North-South trades are expected to increase by 6.2% and 7.7% respectively in 2015. According to the demand forecast, high hopes are set on the Far East-USA trade, which is forecast to increase by 1.3 mTEU in 2015 (after an 2014 increase of 0.7 mTEU). % p.a. 200 50 0 100 150 250 +7% +5% +6% 201620152014201320122011201020092008 +7%Other Transpacific (FE-US) North-South Transatlantic (EU-US) Non-Mainlane East-West Far East-Europe mTEU Containerships | Demand USA EUGlobal China GDP EXPECTATIONS GLOBAL CONTAINERISED TRADE Global containerized trade is forecast to grow by 6.5%-7.0% in 2015 7
  8. 8. DNV GL © 2013 Newbuilding contracting in 2014 amounted to 152 vessels with 1.1 mTEU, a decline of more than 40% compared to 2013 (both in capacity and number of vessels). The estimated investment in 2014 sums up to $10.6 billion. For 2015, a newbuilding volume around 1.5 mTEU is expected. Newbuilding activity was very high in the first half of 2014, with a strong focus on ultra large containerships, but then tapered off for the rest of the year. At the end of 2014, and at the start of 2015, ordering for vessels of 19,000-20,500 TEU began. The main reason for these ultra large containerships comes from the ambitions of the four largest containership alliances. In order to stay competitive, they all want to have lower slot cost due to economies of scale. And that means sailing with larger vessels. The group of owners with +18,000 TEU vessels now consist of Maersk, MSC, CMA CGM, CSCL, UASC and lately Evergreen. Companies MOL and OOCL are expected to follow soon in 2015. New financing systems, like the one occurring in Japan with shipyard Imabari and subsidiary Shoei Kisen, are being seen more nowadays. In this structure, after collecting capital from investors, the subsidiary company of the shipyard orders vessels. The vessels are then fixed on long term bareboat charters to liner companies. For the yard, the advantage is to be in complete control regarding the choice of and cooperation with suppliers. mTEU Containerships | Supply (EXPECTED) CONTRACTING EAST-WEST ALLIANCES NEED +18,000 TEU VESSELS TO STAY COMPETITIVE 2,0 1,5 1,0 0,5 201620152014201320122011201020092008 <3k TEU8-12k TEU 3-8k TEU>12k TEU Newbuilding activity tapered off in the second half of 2014. Strong focus on ultra large vessels. Maersk Line MSC China Shipping CMA CGM UASC APL Hapag-Lloyd Hyundai MOL NYK OOCL Coscon Evergreen Hanjin K-Line Yang Ming 2M Ocean Three G6 CHKYE +18,000 TEU vessels available or ordered Without +18,000 TEU vessels, but probably ordering soon 8
  9. 9. DNV GL © 2013 2014 newbuilding contracting for ships above 12,000 TEU remained on previous year’s level (47 units), as well as the smaller sized vessels below 3,000 TEU (82 units). Newbuilding activity in the size cluster of 8,000-12,000 TEU plummeted to only 23 ships last year (2013: 100). No orders were placed for 3,000-8,000 TEU sized containerships. Containership deliveries are expected to reach around 1,75 mTEU in 2015, a strong increase compared to a year ago. Vessel deliveries will be heavily based toward the ultra large vessel sizes, with more than 40 vessels of +12,000 TEU planned for delivery. Scrapping of containerships has helped to some extent in reducing global fleet growth. In the 2012-2014 period, a total of 1,15 mTEU of containership capacity was scrapped, adding up to 7,5% of the fleet capacity at the start of 2012. In 2014, containership scrapping amounted to 400,000 TEU, almost 10% less than in 2013. For 2015, an equal scrapping volume of around 400,000 TEU is expected. Containership fleet growth is forecast to reach 7.0%-7.5% at the end of 2015. In the past two years, the fleet growth was +6.5% and +5.5% respectively. This means the liner industry will have to put even more effort in balancing supply with slow steaming, network optimizations and the scrapping of vessels. mTEU mTEU Containerships | Supply EXPECTED DELIVERIES & REMOVALS FLEET DEVELOPMENT 0,0 -0,5 2,0 1,5 1,0 0,5 201620152014201320122011201020092008 <3k TEU 3-8k TEU 8-12k TEU >12k TEU 2015 will see a strong fleet expansion due to deliveries but at the same time lower bunker cost 10 5 20 15 201620152014201320122011201020092008 8-12k TEU>12k TEU <3k TEU3-8k TEU 9
  10. 10. DNV GL © 2013 Containerships | Prices & Chartering 200 150 100 50 0 20142013201220092008 2010 2011 Secondhand prices remained relatively stable in the first months of 2014, but then started to drop. The average y-o-y price decrease was 10%. For instance, the price of a 8,500 TEU 5- years old vessel dropped from $67 million to $60 million in 2014. Freight rates remained volatile as market fundamentals have not changed significantly. Freight rates for the Asia-Europe route are down 27% and the Asia-Med route noted -13% year-on-year. Asia-US West coast is down 7%, but Asia-US East coast was up due to port congestion on the other side. The early 2015 General Rate Increases and the peak season surcharge did not work fully, which is not a good sign for the rest of the year. The next possibility for a rate increase will be in February 2015. mUSD .000 USD per day Newbuilding prices for large container ships increased only slightly in 2014. At the end of the year, the average newbuilding price for the largest containerships was around 3% higher than 12 months before. Price increases have not been that strong as seen in 2013 (+8,9%), and the current price level is still low in a historical context. On the secondhand market, almost 200 container vessels changed ownership in 2014, an increase of 27% compared to the previous year. Most notable, the amount of Panamax vessels has more than doubled (40 ships), and for the first time ever, a significant number of vessels (12) between 8-12k TEU were sold. 15 5 25 30 20 0 10 2010 2011 20142012 20132008 2009 1,700 TEU 2,750 TEU 3,500 TEU 4,400 TEU 13K TEU new 8.5K TEU 5yrs 8.5K TEU new 6.6K TEU 5yrs 6.6K TEU new 2K TEU 5yrs 2K TEU new NEWBUILDING & SECONDHAND PRICES TIME CHARTER RATES Prices remain stable, rates still on a low level 10
  11. 11. DNV GL © 2013
  12. 12. DNV GL © 2013 Executive Summary| Oil & Products Tankers 92 million bbl/d, it sounds insignificant, but apparently it is enough to demolish prices by as much as 60%! OPEC’s so called “open market” game seems to work pretty well for the time being. Cost of the marginal barrel in the Middle East remains the lowest, so the region can easily cope with lower oil prices, at least in the short to medium term. In the US however, it may prove to be difficult to maintain the output from new sources. It is believed that 25% of all unconventional wells in the US have stopped their operations already, as the banks stopped their credit lines due to low oil prices. On the other side of the world, Russia which is heavily dependent on oil exports, suffers tremendously. Russia’s involvement in the Ukraine’s conflict has been condemned by the international community and resulted in many economic sanctions. If you add low oil prices to the equation, the result for the country is nothing but dramatic. On the flip side, cheap oil means heaven for the net importers. In theory yes, however the potential beneficiaries such as Europe or Asia demonstrate rather moderate economic results (particularly Europe). One undisputed effect is oil stock-pilling, especially by Asian countries. It has dramatically increased the demand for crude oil tankers, lifting their earnings three-fold. In addition there is a growing floating storage as contango develops rapidly. There are 21 VLCCs and 12 Suezmaxes currently storing oil and this number is likely to increase in the next months. Our previous tanker report was dominated by oil prices, which by then had plummeted by some 25%. Little did we know that the final quarter of the year would bring the prices as low as 45$/bbl! But how come? One of the reasons is that we got used to OPEC taking appropriate measures every time the oil prices would divert from the “desired” trend. This time around, OPEC decided to do nothing! The oil producing countries with Saudi Arabia in particular decided no to intervene and announced that “they are prepared to compete in an open market”. As a consequence oil prices continued to decline. High OPEC production, combined with increasing volumes of oil in the US, created an estimated oversupply of some 2 million bbl/d. Compared to the worlds daily consumption of some Too much oil will kill you… OIL & PRODUCTS TANKERSOIL & PRODUCTS TANKERSOIL & PRODUCTS TANKERSOIL & PRODUCTS TANKERS DNV GL “ORTHIS” delivered 2011, 320 105 DWT, 333.05m Loa 12
  13. 13. DNV GL © 2013 -6% -4% -2% 0% 2% 4% 6% 8% 10% 400 300 200 100 0 -100 -200 20162014201220102008 Preliminary figures suggest that in 2014 the world oil demand grew by 0.8% to 91,8 mbpd. Not surprisingly, the demand was driven by non-OECD countries, particularly gaining momentum in the last quarter due to stock-piling. Looking ahead we expect 1% growth in consumption in 2015, reaching some 92,8 mbpd. The decline in oil prices is likely to increase the demand across many importing nations. In China and India, a 4% growth is expected. This is due to opening new refinery capacity. It is expected to add 0,3 mbpd to the existing trade. On the other hand, Europe is forecast to have a 1% decline in imports due to weak economic conditions. In the US we expect 1% growth of demand, due to increased vehicle usage. The crude tanker demand increased substantially in the last quarter with rates surging over 80,000$/day in the spot market. The overall DWT demand is estimated to have risen by 2.7% driven mainly by the growth in AG-Japan, Korea and China, where the trade has grown by 10% y-o-y. In 2015, a further growth is expected on the WAF-FE and India (8% and 7% respectively). Although the product tanker earnings improved in the last quarter, the market was generally weaker than expected. The DWT demand was around 3.5% but it is expected to grow to 3.8% in 2015, mainly in the long-haul trades. Million bpd mDWT Great “home run” in the 4th quarter Oil & Products Tankers | Demand GLOBAL OIL DEMAND TANKER DEMAND DEVELOPMENT 80 60 0.0 100 40 20 0 -20 -40 3.0 2.0 4.0 -2.0 -1.0 1.0 2010 20122008 2014 2016 mio bpd y-o-y change in % Product tanker demandCrude tanker demand y-o-y change product in %y-o-y change crude in % 13
  14. 14. DNV GL © 2013 It seems like it only takes a couple of months of good earnings in order to entirely change the sentiment. As many as 39 contracts have been signed in the last 3 months (5 VLCC, 20 Suez, 4 Afra and 4 Panamaxes). It represents 32% of the annual contracting in the shortest (due to Christmas) quarter. Contrary on the products side, where the market has not been that strong, contracting was very low, with only 11 contracts placed in the yards (2 LR1 and 9 small Chem/oil tankers). It represents only 7% of the total 162 product tankers contracted in 2014. In the last year there were 50 crude oil tankers corresponding to 10.7 mDWT delivered. It represents a decline of 20% and 25% respectively when compared to the 2013 result. On the product side, 265 ships corresponding to 6.1 mDWT hit the water. Although it represents a 15% decline in number of ships, in terms of DWT, due to higher average size of newly delivered tonnage, the output was on the same level as in 2013. There were 115 crude and products tankers sold for scrapping last year. It is worth mentioning that 50% of them were single hull tankers, as from 2015 they are no longer allowed to operate even within bilateral trades. Total DWT capacity removed was 7.3 mDWT which represents 44% of newly delivered tonnage. mDWT mDWT Newbuilding contracting – change of hearts? Oil & Products Tankers | Supply EXPECTED DELIVERIES & REMOVALS (EXPECTED) CONTRACTING 40 30 20 10 0 50 20092008 2016201520142013201220112010 VLCC PanamaxSuezmax HandyAframax 10 30 0 20 -20 40 50 60 -10 2013 201420122010 2011 201620152008 2009 Suezmax Handy Panamax AframaxVLCC 14
  15. 15. DNV GL © 2013 11,4 10,4 0 5 10 15 20 LR1 Panamax Grand Total 14,0 VLCC 13,6 Suezmax 13,6 LR2 Aframax 300 400 100 700 0 500 200 600 2009 +3%+2% 20162010 2012 2013 20142008 +3% 20152011 It is nice when things just click. Crude oil tankers owners could not wish for a better finish of the year. High earnings were triggered by at least three different factors kicking in at the same time. First of all the seasonal peak in rates which always come around November. The effect of that was magnified by extremely low oil prices which triggered off much higher demand as many countries (particularly Asia) started stock piling oil. The third factor that also played significant role in earnings was tonnage availability. The increased demand for tonnage came in the time of limited fleet growth, which was caused by low contracting in 2011 and 2012. As a result it created a shortage of available tankers on the market sending spot rates in to high 80,000 $/day. The oil tanker orderbook consists of 820 ships corresponding to 66.9 mDWT. It currently represents 8% and 12% of the existing fleet respectively. There are 262 Crude oil tankers (48.2 mDWT) and 558 products tankers (18.6 mDWT). In 2014 the crude oil tanker demand has grown by 0.7% compared to the fleet growth of 1.4%. On the product side the demand for tonnage was weaker than expected at around 3%. At the same time, the fleet has grown by 4%. In 2015 the demand for tonnage is estimated at 2.2% on the crude side and 3.8% within for the product tankers. Expected fleet growth will be 1.1% and 5.7% respectively. mDWT Oil & Products Tankers | Supply FLEET DEVELOPMENT Order book versus fleet [in %] Suezmax Handy Panamax AframaxVLCC % It is all about crude oil tankers nowadays 15
  16. 16. DNV GL © 2013 Oil & Products Tankers | Prices & Chartering Average earnings in the crude sector improved substantially with VLCC spot rates growing from 14,974 $/day in September to a whooping 60,821 $/day in December! On the product side there was a two tier development. Clean MR grew strongly with average spot earnings reaching 25,117$/day in December (from 11,759 $/day in September). In the LR1 and MR range the increase of earnings was marginal, up by 5%. The newbuilding market has not reacted much and the prices remained unchanged. We did however observe an upswing of the second hand market where the prices have gone up by some 15%. An average 5 year old tanker cost 89% of the newbuilding one in December, but in January this ratio grew to 98%. 000.USD Per day Million USD TIME CHARTER RATES NEWBUILDING & SECOND HAND PRICES 000.USD per day CRUDE OIL TANKER EARNINGS Rates are up, lifting the S/H prices 70 60 50 40 30 20 10 201020092008 2014201320122011 Handy Panamax Afra Suez VLCC 140 120 100 80 60 40 20 2014201320122011201020092008 5yrs Handy 5yrs Aframax 5yrs VLCC 120 60 100 80 20 40 2014201320122011201020092008 VLCC AfraSuez 16
  17. 17. DNV GL © 2013
  18. 18. DNV GL © 2013 Executive Summary| Bulk Carriers Iron ore imports to China have been projected to reach more than 1Bn tonnes in 2016, but the slow-down in steel production in 2014 now indicates a much more modest growth. Still, iron ore mining companies are on a heavy expansion scheme which is expected to increase global iron ore supply heavily for the years to come, putting further pressure on prices. Coal imports requirement will depend on the growth in electricity demand, growth in hydro-power capacity and Chinese politics to combat their environmental challenges, such as the ban on import of coal with high ash or sulfur content. This may typically affect lower import of low-heating value coal from Indonesia and coal with arsenic content from Australia. It is assumed that coal prices will continue to remain under pressure as international supplies are in abundance and demand remains relatively low. The closure of high-cost mines will continue and total seaborne coal demand is forecast to grow by only 2%. Dry bulk fleet growth measured in DWT has reduced from 14,4% in 2011 and 10,3% in 2012 to 5,7% in 2013 and 4,9% in 2014. The number of deliveries in 2014 has slowed for the second consecutive year and scrapping is down 30% in DWT terms compared to 2013. It is expected that fleet growth will reduce further to 3,5% in 2015. Total dry bulk trade growth expectations remain positive with an average growth of around 4% p.a. for the 2015-2016 period, which balances expected fleet growth, but this in itself will most likely not be sufficient to initiate a major dry bulk recovery. The optimism in the dry bulk market was high going into 2014 due to the upbeat ending in 2013 which provided high earnings in a strong market. The year started on a high note but the reduced demand for coal imports to China, the Indonesian ban on exports of unprocessed minerals, the reduced Chinese GDP growth and the continued fleet expansion managed to derail freight rates. Earnings for panamaxes were pushed down to just above 3,000 USD/day in June 2014, well below operating costs. Compared to 2013, the average panamax and capesize spot market rates are down 5% and 15% respectively. Newbuilding and secondhand prices continued climbing during the first half of the year but started to lose ground afterwards. Critical factors for tonnage demand in 2015 will be Chinese import requirements of iron ore and coal, which are both quite uncertain. BULK CARRIERSBULK CARRIERSBULK CARRIERSBULK CARRIERS DNV GL bulk carrier “Aeolian Heritage” delivered 2011. 80,650 DWT. 229m loa Dry bulk market facing bleak prospects 18
  19. 19. DNV GL © 2013 The Indonesian ban on exports of unprocessed bauxite and nickel ore resulted in a weak handy/supramax market in the Far East. Towards the end of the year, the late arrival of strong exports of iron ore out of Brazil helped the market but proved to be insufficient to deliver on the promise of 2013, when rates went up in all segments. For 2014, Chinese seaborne iron ore imports grew by 15% year- on-year to total 912.9M tonnes accounting for 69% of global seaborne iron ore trade. The growth has been driven by a surge in supply out of Australia which contributed to a near 50% fall in iron ore spot prices. This in turn has led to the displacement of some of China’s domestic iron ore which is generally of lower quality than Australian ore and lies at the top end of the cost curve. Despite an 15% increase of iron ore import, China’s pig iron production remained the same as in 2013! Coal seaborne trade was one of the worst-performing sectors of the dry bulk industry with Chinese imports being the most disappointing, resulting in a year-on-year decline of about 26M tonnes, i.e. around 10%. On the other hand, India increased their import by around 30M tonnes in 2014. The 2014 year-end total dry bulk seaborne trade reached 4.5Bn tonnes, which is a 4% growth year-on-year (+172M Tonnes). Dry bulk seaborne trade in 2015 is forecasted to grow by 165M tonnes (4%) to reach 4.7Bn tonnes. Million tonnes Million tonnes Weak coal imports from China and Indonesian ban neutralized the strong iron ore demand Bulk Carriers | Demand CHINESE SEABORNE COAL IMPORTS CHINESE SEABORNE IRON ORE IMPORTS 0 10 20 30 40 50 60 70 400 600 200 800 0 1.000 %shares 20142013201220112010 % Others (RHS) % Brazil (RHS) % Australia (RHS) Others Brazil Australia 0 10 20 30 40 50 60 70 80 100 0 400 200 300 %shares 20142013201220112010 % Others % Indonesia (RHS) % Australia (RHS) Others Australia Indonesia 19
  20. 20. DNV GL © 2013 The number of deliveries in 2014 slowed to 47.7M DWT (618 ships), down from 61M DWT (786 ships) in 2013 and around 100M DWT in the previous two years. A total of 294 bulk carriers (15.9M DWT) were scrapped compared to 434 ships (22.7M DWT) in 2013 and a record volume in 2012 of 571 ships (34.1M DWT). In the handymax sector, most of the deliveries were ultramax bulkers between 60K to 65K DWT with 91 ships delivered. 166 panamaxes, 146 handysize bulkers as well as 54 capesizes and 40 VLBC also entered the fleet in 2014. Most of the vessels scrapped were handysize bulkers (120 ships) and handymaxes (80 ships). The average scrapping age in 2014 was 28 years old which is similar to the previous year. The weak freight market and firm newbuilding prices led to a deceleration in the number of newbuilding contracts during Q3 and Q4 2014. Total contracts in 2014 amounts to 765 ships (65.9M DWT). Within the handymax sector, almost 80% of contracts (224 orders) have been accounted for by vessels in the ultramax segment. 161 handysizes (5.9M DWT), 137 kamsarmaxes between 80K to 90K DWT (11.3M DWT) and 72 capesizes (13M DWT) were also ordered. VLBC contracting has been most prevalent in the newcastlemax sector (200K to 210K DWT) with orders for vessels in this segment accounting for 60% of all VLBC ordering in terms of DWT. mDWT mDWT Deliveries slowing down and deceleration in the number of new orders Bulk Carriers | Supply (EXPECTED) DELIVERIES & REMOVALS (EXPECTED) CONTRACTING 120 80 40 0 -40 201320122011201020092008 201620152014 100 0 120 20 40 60 80 2008 2009 2010 2011 2012 2013 2014 2015 2016 Capesize VLBC Handysize Handymax Panamax VLBC* > 200.000 dwt Capsize 100-200.000 dwt Panamax 65-100.000 dwt Handymax 40-65.000 dwt Handysize 10-40.000 dwt *contains Ore Carriers (avg 250.000 dwt) and „Newcastlemax“ bulk carriers (avg 208.000 dwt) HandysizePanamax HandymaxCapesize VLBC 20
  21. 21. DNV GL © 2013 The dry bulk fleet of 11,121 ships (748M DWT) grew approximately by 4.9% in 2014 which is lower than the 5.7% growth in 2013. The highest fleet growth rate in DWT terms was reached by the VLBC sector (+8%) while Capesizes experienced the lowest growth rate (+2.9%). The panamax fleet growth slowed to 5.3% in 2014 down from a 10.5% growth in 2013. The kamsarmax fleet growth had the fastest expansion out of all bulker sectors with 14.5%. The current orderbook for bulk carriers stands at 1,848 ships (155.2M DWT). In DWT terms the orderbook had a net growth by 5% in 2014. 552 ultramaxes are currently on order which represent the biggest sector in numerical terms and similar in tonnage to the VLBC on order. 398 handysize bulk carriers and 389 panamaxes are under construction. 306 kamasarmax bulkers are on order which represent a stunning 79% of the panamax orderbook. At the end of 2014, the bulk carrier orderbook represented 20.7 % of the existing fleet in DWT terms compared to 16.8% at the end of 2013. The high ordering of Capesize/Newcastlemax in 2013 and up to mid 2014 has cooled off considerably. Instead, there is increased interest for Ore carriers and Kamsarmaxes, benefitting from scale of economy and more flexibility with respect to ports and trading respectively. mDWT % based on DWT Lower fleet growth still higher than trade growth Bulk Carriers | Supply FLEET DEVELOPMENT YEAR-ON-YEAR FLEET CHANGES IN % 600 400 200 800 201620152014201320122011201020092008 Handysize Handymax Panamax Capesize VLBC 25% 20% 15% 10% 5% 0% -5% 2015 2016201320122011201020092008 2014 HandysizePanamax HandymaxCapesize VLBC VLBC* > 200.000 dwt Capsize 100-200.000 dwt Panamax 65-100.000 dwt Handymax 40-65.000 dwt Handysize 10-40.000 dwt *contains Ore Carriers (avg 250.000 dwt) and „Newcastlemax“ bulk carriers (avg 208.000 dwt) 21
  22. 22. DNV GL © 2013 120 140 100 80 60 40 20 0 2012 2013 20142011201020092008 Bulk Carriers | Prices & Chartering Capesize newbuilding price peaked in May at 58M USD before gradually declining by 7% to end the year around 54M USD. Resale value and 5 year-old prices surged to 65M USD and 53M USD respectively in April before sliding down, in correlation with the market conditions. Average newbuilding prices for panamaxes increased by 4.5% in 2014 but started to be under pressure during the second half of the year. 5 year-old second hand prices declined steeply by 21%. Second-hand prices are likely to face some continued downward pressure for most sizes. In general, there appear to be few opportunities for shipyards to increase the relatively low price levels for bulk carriers. Bunker price cut of 50% since mid-year 2014 may dampen Eco-ship orders, and rather favor second-hand tonnage. .000 USD per day Million USD The reduced coal demand from China, the Indonesian ban on raw ore exports and continued robust fleet expansion were responsible for the supply/demand imbalance that drove the freight rates down in 2014. The decline in oil prices may put further fuel to the fire, potentially freeing up a substantial fleet reserve capacity caused by slow steaming. Spot capesize rates started the year with a quarterly high of 16,298 USD/day but the early gain was eroded and the lowest point was reach on December 19th at 3,735 USD/day. Average earnings are down 5% compared to 2013. The Panamax spot rate started the year at a peak of 14,188 USD/day but continued to lose value, reaching an annual low of 3,397 USD/day by the end of June. The annual average earnings are down by 15% year-on-year. ONE YEAR TIME CHARTER RATES NEWBUILDING & SECOND HAND PRICES Freight rates and asset prices on a downward spiral 22 80 60 120 0 20 100 140 40 20132012 201420112008 20102009 Capesize Handysize Handymax Panamax 61K Resale Prices 5 yrs P’max Handymax (61K) Panamax 5 yrs Cape Capesize
  23. 23. DNV GL © 2013
  24. 24. DNV GL © 2013 Executive Summary | Offshore Due to the current situation, the ordering volumes for offshore units were reduced substantially in 2014, and the outlook for 2015 does not look any better. Recently, Clarksons Research has reduced their contracting forecasts by 30-40% for the major segments mainly because of the falling oil prices. The offshore industry is now preparing for tougher times. Last year proved to be very difficult, but 2015 and 2016 are expected to be even worse! In the light of diminishing profits the rig owners are desperately trying to cut their costs. Increased scrapping of old rigs, suspended dividends, delays and/or cancellations of contracts as well as deferring costly maintenance are to be expected. We have already started to observe increased scrapping activity. As many as 20 units have already been announced to be removed from the market and we expect this number to continue to grow. In addition, cold-stacking of old units has increased in order to remove the excess capacity. The rig utilisation rate will continue to go down as the gap between supply and demand widens. Too many units have to compete for the same projects, which leads to falling day rates. As the day rates are moving towards break even levels, fixing activity is also low. The offshore market has been under pressure and is expected to remain oversupplied for at least the next 2 years. The current overproduction of oil (around 2 mbpd) has its impact on the oil price and hence the whole offshore industry. In addition more drilling vessels will enter this falling market in 2015 and 2016. The drilling contractors have taken the worst hit. Three of the five worst performers in the Standard and Poor’s 500 index in 2014 were in fact drilling contractors. For example Seadrill has lost 70% of its stock value, (NOK 85 billion). As oil companies keep reducing their spendings, more field developments are being postponed or cancelled. Challenging times COSL Prospector was built at Yantai CIMC Raffles in China and delivered at the end of 2014. Classed by DNV GL OFFSHOREOFFSHOREOFFSHOREOFFSHORE 24
  25. 25. DNV GL © 2013 Crude oil prices have been on a steady decline for the second half of 2014. During the 4th quarter, prices reached the lowest level since May 2009. To much oil in the market and a lack of OPEC-intervention are the main reasons for the falling crude oil prices. In 2014 there has been a strong growth in oil production, adding 1.98 mbpd, mainly driven by the US shale oil production. Preliminary OPEC output indicates a fairly stable production. By the end of 2014, the global production was around at 93.16 mbpd. This is well ahead of the world oil consumption, which stood at around 91.2 mb/d. According to Rystad Energy, offshore CAPEX for 2014 have grown by only 4.9%. This year forecast shows a negative development of 3.5%. Several oil companies have announced significant cuts in their E&P spending (20-30%). Nevertheless, Rystad expects that the prolonged level of low upstream spending will eventually lead to a lower oil-supply and hence higher oil prices and also increased investments from 2017- 2018. Utilisation rates have been steadily falling for the past year, with jack-up units being less affected compared to the floaters. The current utilisation rate hoovers around 90%, which is regarded as low. X1.000 USD In %, change month on-month Offshore E&P CAPEX decline Offshore | Demand Offshore E&P CAPEX growth GLOBAL RIG DEMAND DEVELOPMENT -20 -15 -10 -5 0 5 10 15 20 25 2014201320122011201020092008200720062005 Floaters Jack-up 1990 1995 2000 2005 2010 2015 2020 2025 2030 0 100 200 500 400 300 Forecast 25
  26. 26. DNV GL © 2013 With 550 vessels entering the market in 2014, newbuilding deliveries have been high. Another 480 vessels are expected to be delivered in 2015. There will be fewer OSVs, but still a considerable amount of MOUs. As many as 200 drilling units are scheduled for delivery in the coming years. But several drilling units are built on speculation and are likely not to be delivered on time or even cancelled. Stacking and scrapping continues, as owners have to reduce their cost base. A total of 20 old, uncompetitive and capital intensive floaters have been retired recently. Most of them were semi-sub drilling units, built in the 70-ties (mainly owned by Transocean and Diamond). More removals are expected to be announced. In 2014 there were only 370 vessels contracted, which is far behind the number registered in the recent years. In fact it represents only 40% of the volume contracted in 2007, which was the record year in terms of ordering. The MOU contracting will probably also be lower in the next year (especially drilling units). The uncertainty in the market has held back OSV owners from contracting new vessels. They seem to have taken a “wait and see” approach. We expect limited ordering particularly in the PSV sector as the oversupply increases. No. of vessels No. of vessels Scrap, scrap and then scrap Offshore | Supply EXPECTED DELIVERIES & REMOVALS (EXPECTED) CONTRACTING 700 600 500 400 300 200 100 201720162015201420132012201120102009 OSVMOU 700 600 500 400 300 200 100 0 -100 -200 201720162015201420132012201120102009 MOU OSV 26
  27. 27. DNV GL © 2013 In 2014 the total offshore fleet has increased by 4.2%. The fleet growth was highest for the PSVs, where the fleet has increased by nearly 8%. However, the overall offshore fleet growth is expected to slow down in the coming years. The MOU fleet is forecast to grow by 3.5%. Within the drilling segment we will see the biggest changes. The drillship fleet is projected to increase by a whooping 15%. In the jack-up fleet, the growth is estimated to be 5% only, but it is worth mentioning that it represents as many as 70 units (mostly within the largest size). Contracting of production units will probably continue to be low, hence the fleet growth will be limited. The OSV fleet is expected to grow by 3.3%. The challenges influencing the drilling industry have started to affect also this sector. When looking at the support fleet one must not forget the regional differences. In the last quarter we have observed a typical slowdown in the North Sea region due to winter season. In December the first vessels were laid up. Elsewhere we also observe a slowdown, but it is triggered by different factors. In the Middle East, as well as in shallow waters GoM, the activity fell mainly because of low oil prices. Surprisingly, the deep sea GoM experienced a record high activity in 2014 that still drives the offshore support fleet. No. of vessels X 1.000 vessels Fleet development slowdown Offshore | Supply MOU - FLEET DEVELOPMENT OFFSHORE SUPPORT VESSELS – FLEET DEVELOPMENT 1.800 1.500 1.200 900 600 300 0 201720162015201420132012201120102009 6 8 10 12 4 2 0 201720162015201420132012201120102009 Construction vessels Platform Supply vessels OSV - Other AHTS Semi-Sub MOU - Other Jackup FPSO Drill ship 27
  28. 28. DNV GL © 2013 Offshore | Prices & Chartering Last quarter there were no major changes in the newbuilding prices. The most substantial trend was seen for the large PSVs. The newbuilding prices have been falling steadily since 2012, mainly due to the growing market share of Asian yards. Traditionally large PSVs were built in Europe. Lately more contracts have been awarded to the Asian yards, however they are still built to European designs (Ulstein, Rolls Royce and MMC). Since the newbuilding prices for floaters have never recovered after 2008-2009, further development is expected to continue mostly unchanged. Unfavourable market conditions are certainly not going to change that. .000USD Per day Million USD Charter rates for floaters have been on a sharp decline throughout 2014. Despite high rig availability, fixing activity has remained low. Oil companies have also started to renegotiate existing contracts. For example Ocean Rig Poseidon, which has renegotiated the charter with ENI from 600,000 USD/day down to 450,000 USD/day. In order to compensate for the loss on the day rate, the contract has been extended by another 12 months. Other examples are PEMEX renegotiating their jack-up contracts or Petronas and Saudi Aramco targeting up to 20-30% reduction on their charters. TIME CHARTER RATES NEWBUILDING PRICES Renegotiations of charters 0 200 400 600 800 1.000 140 120 100 80 60 40 20 0 2015201420132012201120102009 900 800 700 600 200 100 0 20152014201320122011201020092008 PSV AHTS Drillship Semi-sub Jack-Up PSV 4,000 dwt Floater West Africa- Med/ UDW AHTS 240t BP Floater Sth America UDW Floater GoM UDW 28
  30. 30. DNV GL © 2013 Focus on | Cruise vessels In Europe, there is the trend of cruise vessel shipbuilding consolidation. On the other side of the world, the question is when China will start to build their first cruise vessel? Last but not least, a ‘new kid on the block’ could show up in the cruise sector. Worldwide cruise vessels accommodated approximately 21.7 million passengers in 2014. More than half of them came from North America (55%), followed by Europe with 30%. UK/Ireland and Germany each contributed around 1.7 million passengers. Around 700,000 passengers from China booked a cruise last year, a figure that is forecast to increase to 1.0 million in 2015. The story of China and the cruise sector is twofold. First of all, China intends to build up a strong national cruise industry. The Chinese government itself is targeting 4.5 million in Chinese cruise traffic by 2020. For this target, a lot depends on what the government will do to enable it. Recently, the Chinese government stated that it want to develop the Beibuwan Bay towards “one of the world’s top tourist destinations by 2020” and that it wants to operate three cruise homeports by that time. Secondly, an increasing number of Chinese tourists is expected to book a international cruise trip, outside China, to see the world. Both developments promise a growing number of passengers on cruise vessels. The cruise industry is looking into 2015 with optimism, for several good reasons. This year’s passenger growth is expected to be around 2.0%, after a similar growth last year. The current price level of crude oil promises a lower fuel bill for cruise vessel operators. Furthermore, the overcapacity that was present in the Caribbean was reduced by redeploying vessels into other regions. The only possible downside is formed by the increasing value of the US dollar. For Europeans going on a cruise in the Americas, this has made it 15% more expensive. Right now, China is one of the key focus areas in the cruise world, due to the enormous growth potential. Further focus is on attracting the younger travelers to cruise trips. Since the average age of cruise travelers is 46 years, there is a great number of potential younger passengers not yet reached. CRUISE VESSELSCRUISE VESSELSCRUISE VESSELSCRUISE VESSELS DNV GL “Norwegian Epic” delivered 2010, 19 decks, 329 m loa 1,700 crew / 4,100 passengers The cruise industry expanding in Asia and looking to attract younger customers 30
  31. 31. DNV GL © 2013 Focus on | Cruise vessels Virgin will probably not go for second hand, but order two large cruise vessels for 4,000-5,000 passengers. If they order this year, they could be operational in 2018/2019. Considering Virgin, they are in a good position to attract younger cruise travelers, looking for service & entertainment. Worldwide, there are around 350 cruise vessels in operation and 40 ships on order. The 2014 increase in capacity was around 3%, or 25,000 passengers. The planned 2015 deliveries will add another 20,000 passenger capacity on top. Newbuilding orders for cruise vessels amounted to 14 vessels with 1.8 mGT in 2014. Although in numbers this is comparable to 2013, the average size of vessels doubled in 2014. In the short term, around 10-12 cruise vessel orders p.a. are expected for the period 2015-2017. The current orderbook of the largest cruise vessels represents a passenger capacity of 110,000 (20% of the existing capacity). The delivery of these vessels will add additional capacity equivalent to the current number two player in the cruise industry. Since vessel earnings are driven by revenue generating passenger capacity, it will be interesting to see how this future increase will affect cruise holiday pricing and in the end, cruise operator revenues. The number one player in the cruise vessel sector, Carnival Corp, is one of the companies with a strong focus on China. Last year, Carnival signed an MOU with China State Shipbuilding Corporation (CSSC) and Italian builder Fincantieri. Recently, Carnival Corp said it is in talks with state-owned China Merchants Group Ltd (CMG) to develop a new cruise line for the fast-growing Chinese market. Furthermore, Carnival has initiated a first major repair job for a one of its cruise vessel in China, done by Huaran Dong shipyard (Shanghai). The number two in the cruise vessel sector, Royal Caribbean International, has been building up capacity in China over several years and will send its newest ship, Quantum of the Seas, to year-round operations in Shanghai starting in summer 2015. Parent company Royal Caribbean Cruises Ltd., through a venture with, plans to launch SkySea Cruises in China with the vessel Celebrity Century. In Europe, a consolidation of cruise vessel shipbuilding expertise is taking place. After Meyer Werft took over STX Finland in 2014, there were rumors about Italian yard Fincantieri looking to take over STX France. This could open up opportunities for others to enter the shipbuilding market for smaller cruise vessels. A possible new entrant to the cruise market is Virgin Cruises, which has been planning an entry for a couple of years already. Will the planned capacity expansion put pressure on cruise vessel revenues? 31
  32. 32. DNV GL © 2013 Focus on | Gas Carriers For US ethane and propane production a similar story applies. Production of these products has increased strongly on the back of the boom in US tight oil- and shale gas production. In recent years, a lot of LNG and LPG carriers were ordered based on these high US export expectations. LPG carriers newbuilding orders increased strongly in 2013 and in 2014. LNG carrier ordering peaked in 2014, with newly ordered tonnage increasing by 65% compared to the year before. But then, in the midst of the last year, crude oil price started to drop, altering at least one factor that influences the prospects of US LNG exports. The outcome will depend on how long the oil price will stay low, and on the future level of the crude oil price, all of it very hard to predict. LPG Regarding the LPG sector, spot rates for VLGCs reached their heighest ever peak mid-2014, with $130,000/day for a 82,000 cbm vessel. Towards the end of last year, however, rates had returned to a level around $60,000/day. In the case of the USA, last year’s LPG export amounted to 11.5 million tonnes, which is further expected to increase to 20m tonnes in 2015 and to 30m tonnes in 2016. The other main exporting region in the world, the Middle East, has a relatively stable LPG export of 32-33m tonnes per year (although with prospects to increase it). In the past couple of years, no other country has caused such major change in the natural gas market as the USA. Their shale gas production, which accelerated already in 2006, is expected to increase by 55% between 2012-2040. The demand growth for US natural gas comes from the power generation sector (to replace coal fired electricity plants) and industrial sectors (fuel for trucks and trains). Further growth is expected to come from LNG exports, which could start this year. Future US LNG exports depend on a number of factors, which are difficult to foresee. It includes the speed and extent of gas prices moving closer together in global gas markets, as well as the competitiveness of gas compared to crude oil. Furthermore, the gas supply growth outside the US plays an important role too. U.S.U.S.U.S.U.S. NATURAL GAS PRODUCTION FORECASTNATURAL GAS PRODUCTION FORECASTNATURAL GAS PRODUCTION FORECASTNATURAL GAS PRODUCTION FORECAST US shale gas production stimulating vessel orders trillioncubicfeet Shale gas30 20 60 0 50 40 10 2025 2030 2035 20401990 20102000 20051995 2015 2020 Tight gas Other sourcesShale Gas Source: EIA, 2014 ForecastHistory 32
  33. 33. DNV GL © 2013 Focus on | Gas Carriers Ethylene carriers Thanks to the shale gas revolution, ethane is now available abundantly in the U.S. and the export market for ethane is growing. In 2013, the domestic demand for ethane in the U.S. was 960,000 barrel per day (bpd), while its supply was 1.155 million bpd. This situation of oversupply led to a sharp decline in the price of ethane, making it more attractive for the chemical industry. This has led to the a birth of a new class of vessels for transporting liquefied ethane, having significantly higher carrying capacities, over longer sea routes such as from the East coast of the U.S. to Europe and to Asian countries (for instance India). Beyond that, there are the shale gas and oil developments in many other parts of the world that could provide additional Ethane. Ethane is the base chemical used for making plastic and other synthetic material. The primary use of Ethane is in the petrochemical sector, where it is broken down in large processing systems called “crackers” (by steam cracking) in the production of Ethylene (which is an alternative to naphtha). 2014 saw a total of 26 newbuilding orders for Ethylene/Ethane carriers, summing up to 1,0 million cbm (2013: 21 vessels with 0,4 million cbm capacity). The LPG orderbook has increased strongly, especially for VLGCs. During the last two years, the capacity of ships on order reached a level of 46% of the fleet capacity. When delivered, the capacity increase in the 2015-2019 period would be twice the capacity that entered the fleet in the 2010-2014 period. For 2015, LPG fleet capacity expansion is expected to be 15%-17%. LNG Last year, total LNG trade reached 243.6 million tonnes, up 2% compared to 2013. Amongst other factors, the demand for LNG is pushed by the need to reduce pollution caused by using coal, but also by the lower price of LNG due to abundant volumes available in North America. The LNG orderbook has increased to the current level of 40% of the fleet, mainly on the back of 2014 strong contracting levels of almost 10 million cbm capacity (2013: 6 million cbm). The high number of orders in 2014 for LNG carriers developed as LNG export projects progressed worldwide (but foremost in the USA and in Australia). After this year, the LNG fleet will have expanded by 10%, as was the case in 2014. This is the reason for a lot of market players to start worrying about the future earnings outlook for LNG carriers. Worldwide gas carrier orderbook increased strongly 33
  34. 34. DNV GL © 2013 Focus on | Multi Purpose Vessels Further threats consist of the growing number of previously under-developed ports that are now installing box-handling infrastructure as well as the still continuing containerization process. But lets have a look at the cargoes where MPVs can play out their strongest hand, (heavy lift) cargoes related to engineering, project and construction business. Here, the story for this year may be different. These cargoes are, for example, strongly supported by construction projects in the US related to the growing volumes of oil and natural gas. Many of the components for the new construction projects have to be imported, meaning trading opportunities for heavy lift vessels. Also the import of tubular steel for oil and gas pipelines is expected to benefit the MPV sector in 2015. Furthermore, investments by foreign steelmakers in the US, which are building new plants to take advantage of cheap natural gas, could mean additional cargoes for heavy lift carriers. Demand from the wind power industry for projects in the US is strong as well and also expected to remain a driving factor as long as current tax incentives stay in place. In addition, construction projects in the Middle East and Asia are likely to create additional demand for heavy lift cargoes, which could improve the sector in the coming years. Last year turned out to be a difficult one for MPVs, with rates generally too low to secure a sustainable business. MPVs of 12,000 dwt with heavy-lift cranes were getting fixed for short periods at around $7,000-$9,000/day in 2014, far below what is needed. With so many owners losing money, further cost reduction will have to take place if the market situation does not change in 2015. The question is how? There is a certain irony in the story of the MPV sector, where the main problem is not a lack of cargoes, but strong competition from other vessel types. Ever since the containership and bulk carriers sectors have been suffering from oversupply, they try to fill the ship’s holds with typical MPV cargo, subsequently cutting rates, and in this way taking away MPV cargoes. MULTI PURPOSE VESSELSMULTI PURPOSE VESSELSMULTI PURPOSE VESSELSMULTI PURPOSE VESSELS MPV “Clipper Helvetia”, delivered in 2013, 17.500 DWT, LOA 161m, 3x 80t SWL cranes, DNV GL class MPVs stuck between a rock and a hard place 34
  35. 35. DNV GL © 2013 2 10 4 6 8 0 5,0 7,8 2006 5,7 3,8 2004 3,5 1,9 2002 1,1 2001 1,5 2000 1,9 2007 2005 2003 2009 2011 1,51,7 2010 4,5 1,2 2,0 2013 2014 2008 2,7 2012 Focus on | Multi Purpose Vessels In the future, we expect to see more orders for vessel which are designed for special purposes, for instance vessels sized and designed to transport wind turbine blades or for vessels having DP2 capabilities for offshore installations. Vessels often operating in ECA zones are likely to opt for LNG as fuel. The worldwide MPV delivery volume dropped from 3.8mDWT in 2013 to 2.1mDWT in 2014. Basically all of the deliveries from the contracting boom years 2006-2008 are now on water. Since the past years were modest in ordering volume, the MPV sector could now start to benefit from lower deliveries volumes. Scrapping activity increased in the post-crisis years 2009-2012 to around 5,0mDWT per year. In 2013, MPV demolition fell to 3.5mDWT. Last year only 2.7mDWT was demolished (327 vessels, with an average age of 33 years). With relatively few deliveries and a healthy orderbook (6% of the fleet), the fleet is hardly growing. The supply side of the MPV sector is therefore in a good shape. MPV earnings in 2015 will be highly dependant on the rate development in the containership and bulk carrier sector and on the state of the project market. An imminent threat for the MPV sector comes from the crisis in Russia, reducing the potential number of project cargoes. Furthermore, the low oil price could reduce offshore investment, reducing the need for seaborne transport of project cargo. Using a broad definition of multi-purpose vessels, ranging from small short-sea MPVs to traditional MPVs as well as the semi- submersibles and the heavy-lifters, total 2014 newbuilding orders accumulated to 2.0mdwt with 155 vessels (24% below the volume that was ordered in 2013). A total of 11 semi-submersibles were ordered last year, ranging from 17,000–90,000 DWT. The largest semi-sub was ordered by COSCO Ltd, China and will provide transport for the very largest offshore structures. Of the 2014 MPV orders, the larger ones (MPVs above 20,000 dwt were mostly ordered by Chinese, Dutch and German owners, whereas the orders for small MPVs (below 10,000 DWT) are mostly connected to Japanese interests. MPV WORLDWIDE CONTRACTING (MPV WORLDWIDE CONTRACTING (MPV WORLDWIDE CONTRACTING (MPV WORLDWIDE CONTRACTING (mDWTmDWTmDWTmDWT)))) MPV sector could start to benefit from the drop in contracting volumes after the 2006-2008 boom mDWT 35
  36. 36. DNV GL © 2013 SAFER, SMARTER, GREENER The Trend Report is published by the Sales & Market Intelligence department. Contact persons for the respective chapters are: Market summary, Oil & Product Tankers Jakub Walenkiewicz Containerships, Gas carriers, MPVs Jeffrey van der Gugten Bulk Carriers Pierre Pochard Offshore (Oil & Gas) Viktor Sinding-Larsen Cruise vessels Helge Hermundsgård, Jeffrey van der Gugten Philipp Westphal Head of Sales & Market Intelligence Business Development / Business Support Email: Telephone: +49 40 36149 6197