Transcript Speech Nor-Shipping DNV

Tanker Supply and Demand
Graham Westgarth
Chairman INTERTANKO
Nor-Shipping DNV Seminar
Oslo 25 May 2011
• Looking beyond the next two years toward 2015, what
sort of balance will there be in the tanker market?
• Will there be a similar consolidation in the tanker market
as we have seen in the container market? What are the
drivers for and against consolidation?
• Assuming that the large energy importing countries
increase their control of the total value chain, to what
extent will there be a role for the independent tanker
owner?
Tanker Supply and Demand
What to watch
• Freight rates for some tanker segments at rock bottom
• Fundamentals still strong, but great uncertainty
caused by
– High oil price
– Political unrest
– Debt crises, unemployment, housing crises
• Many deliveries (but delays), young fleet
• Slack in supply of tankers
– slow steaming (ballast)
– Lowering C/P speed
– Fewer tanker transits through Suez Canal
– Piracy effect – longer routes/inefficiency
• New refineries in Saudi Arabia
World GDP and Oil Demand Change
%
15
GDP
Oil demand
10
Tonne miles
5
0
-5
1984
1985
1986
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
-10
Oil/tanker demand correlates with economic growth
Positive growth projected – but there is great uncertainty
Signs of oil slower growth demand due to high prices
Source. IMF/BP/IEA/Fearnleys
Oil Price and Freight Rates 1970-2011
$ per barrel
100
Nominal price Arab Light
Real price Arab Light
Nominal freight rate AG-West
80
Real freight rate AG-West
Deflated by the Consumer Price Index (USD)
CPI* index 1982-84=100
60
40
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
0
1970
20
VLCC Newbuilding Prices
and Break Even Rates
m$
$/day
160
45,000
29
Break even rate
140
41,000
Newbuilding prices
18
Source: Clarkson Shipyard Monitor
31
120
37,000
29
41
54
55 70?
100
33,000
215 VLCCs
68,000
dwtdwt
47,000
New tankers coming on to the market ordered at high prices
Based on LRFairplay
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
25,000
1998
60
1997
29,000
1996
80
Tanker Demand
Increase in World Oil Demand
in ME*, USA, China and ROW**
bn tonne-miles
3.0
* *Rest of world
*Middle East
USA
China
World
2.6
2.2
1.8
1.4
1.0
0.6
0.2
-0.2
-0.6
-1.0
-1.4
-1.8
-2.2
Based on IEA
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-2.6
Tanker Trade
bn tonne-miles
90,000
80,000
70,000
60,000
50,000
+20%
40,000
+36%
30,000
-38%
20,000
10,000
0
1970s
Based on Fearnleys
1980s
1990s
EST00s
Seaborne Oil Trade
and Middle East Oil Production
mbd
000 bn tonne-miles
24
13,000
21
11,200
Middle East
Oil Prod mbd
18
9,400
Tonne miles
15
7,600
Asia 80% dependent on Middle East,
Europe 18% and US 17% - some 15
mbd crude oil through Hormuz 2010
12
Based on Fearnleys/IEA
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
4,000
1970
9
5,800
Middle East Oil Production
January 2000 to March 2011
mbd
24
23
Primo July 2008
$181,600/day
20 July 2006
$87,000/day
29 Dec
2009
$9,000/
day
19 Sept
2003
$74,500/
day
End Apr
2011
$365/day
22
Primo Jan
2007
$27,000/day
21
Primo
Sept
2009
$5,000/
day
20
8 July 2003
VLCC AGJapan
$14,000/day
19
Source: IEA
Based on Fearnleys/IEA
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jul-00
Jan-00
18
Jan-01
20 Aug 2003 VLCC AG-Japan
$3,800/day
VLCC rates have approximately over the last years tracked
Middle east oil production – no longer!
Trade Movements
mbd
60,000
Rest of world 47%
US
Europe
Japan
Rest of World
50,000
40,000
Rest of world 26%
30,000
20,000
10,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
Demand shifting from west to east
Based on BP
Tanker Supply
Tanker Fleet Development
(Assumed max phase out, orderbook March 2009, include chemical tankers)
m dwt
number
545
6,400
491
5,780
dwt
Number
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
3,300
1998
275
1997
3,920
1996
329
1995
4,540
1994
383
1993
5,160
1992
437
Tanker fleet increase 2003-2013 some 75%
Tanker Phase Out, Deliveries, Scrapping Tankers 10,000 dwt
+ Balance Assuming Various Demand Increases
m dwt
95
Max phase out
Deletions
75
Assumed market balance end 2008
Delveries
Surplus zero
trade grow th
Surplus 2.5%
trade grow th
Surplus 4%
trade grow th
Surplus 6%
trade grow th
55
35
Minus 2% growth
in 2009 and the
above scenarios
later
15
-5
Assumed removal
of double hull
tankers
-25
-02
03
04
05
06
07
08
09
10
11
12
13
14
15
year
Strategic Considerations
and Conclusions
Oil Demand, Tonne-mile,
and Tanker Fleet Indices
Index value
155
150
145
140
Oil demand index
Tonne miles crude tanker index
135
Tanker fleet index
130
125
120
115
110
105
Tanker fleet increase
2002-2010: 46%
100
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
95
Fleet surplus has been disguised by storage, slow steaming and special events
Demand increased strongly in 2020, but
Demand increase abating?
Fleet increasing
Source: IEA, Fearnleys, INTERTANKO
Strategic Tanker Considerations
• A young fleet - 70% will be with us for at least another
10-15 years (built >2000)
• China expected to drive demand and the Middle East
has the reserves
• World economy still under threat, the high oil price
adds to the uncertainty
• Market balance set to weaken the next couple of years
• Successful Green House Gas emission reduction will
mean reduced oil consumption
• Costs reduction needs careful risk management
• Product tanker market may be the strongest, fewer
delivers, new Saudi refineries
Long and Short Term Considerations
Positive
• Population increase
• Slow steaming and reduced C/P speed
• GPD increase
• Around the cape transits
• Little use of Suez canal for crude transits
• Long term oil demand forecast up
• Increased dependence on Middle East oil
• Oil use per capita still low in China, India, Africa
Short term
Wild cards:
Oil price
$ risik
Disruptions: insurgency,
hurricanes, strikes,…….
Storage/stocks
Long term
• Peak oil?
• Fuel efficiency
• Large shipyard capacity
• Alternative use of energy
• Young fleet, little scrapping
• Many deliveries
•GHG emission
• Still fragile economy
• Energy security
Negative
A Fragmented Industry
Largest operators/shares
VLCCs
560
Some 140 owners
NITC
28
NYK
31
Mitsui
Nordic American
Suezmaxes
420
Some 110 owners
17
Euronav
20
Teekay
40
Teekay
41
AET
10%
59
0
Based on LRFairplay
7%
43
Sovcomflot Group
Aframaxes
890
Some 230 owners
7%
40
10
20
30
40
50
60
Four Scenarios