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Charlie Huckerby, Braemar Seascope: Volatility in the dry bulk freight market explained

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Information about Charlie Huckerby, Braemar Seascope: Volatility in the dry bulk freight...

Published on November 20, 2013

Author: informaoz

Source: slideshare.net

Description

Charlie Huckerby, Bulk Shipping Research Analyst, Braemar Seascope delivered this presentation at the 2013 Regional Ports Conference. The event showcased the latest port developments and assessed the policy, planning and operating strategies designed to maximise the efficiency of Australia's regional ports: gateways for facilitating trade, engagement and regional growth. Featuring local and national case studies, the two day event provided a spotlight on port developments across the country, highlighting the infrastructure, investment and long-term planning necessary to meet Australia’s current and potential competitiveness. For more information on the annual event, please visit the conference website: https://www.informa.com.au/regionalportsconference
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Volatility in the Freight Market Lloyds List Regional Ports 2013 Charles Huckerby – Braemar Seascope 20th November 2013 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 Braemar Seascope

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Freight Rate Review Braemar Seascope

Record Spot Rates An historical perspective 17/11/2013 250,000 Record Chinese Iron Ore imports US $/ Day 200,000 Global Financial Crisis 150,000 Chinese Credit Crunch 100,000 Cooling Chinese Steel Demand & Reducing Congestion Commencement of Chinese Rapid Development 50,000 0 Capesize Source: The Baltic Exchange Panamax Supramax Handysize Handymax Braemar Seascope

Spot Rates (1 July 2011 – Present) 17/11/2013 45,000 40,000 35,000 US $/ Day 30,000 25,000 20,000 15,000 10,000 5,000 0 Cape Source: The Baltic Exchange Panamax Supramax Handysize Braemar Seascope

Capesize Spot Rates (1 July 2011 – Present) 17/11/2013 45,000 40,000 35,000 US $/ Day 30,000 25,000 20,000 15,000 10,000 5,000 0 Cape Source: The Baltic Exchange Braemar Seascope

Chinese Iron Ore Re-Stocking… Why now? Braemar Seascope

Chinese Iron Ore Imports vs. Spot Price Monthly 14/10/2013 80 200 180 160 140 60 120 50 100 80 40 US$/ Tonne Million Tonnes 70 60 40 30 20 20 0 Iron Ore Imports Source: Braemar Seascope Research Iron Ore Fines 62% FE spot (CFR Tianjin port) Braemar Seascope

Chinese Iron Ore Stockpiles 12/11/2013 110 Million Tonnes 100 90 80 70 60 50 Source: Braemar Seascope Research Braemar Seascope

Australian Iron Ore Exports to China 18/11/2013 50 45 40 Million Tonnes 35 30 25 20 15 10 5 0 Source: Braemar Seascope Research Braemar Seascope

Panamax Spot Rates (1 July 2011 – Present) 17/11/2013 18,000 16,000 14,000 US $/ Day 12,000 10,000 8,000 6,000 4,000 2,000 0 Panamax Source: The Baltic Exchange Braemar Seascope

Panamax Employment 18/11/2013 60 Million DWT per Year 50 40 30 20 10 0 Iron Ore Coal Grain Steel Bauxite /Alum Phos Rock /Fert Coke Scrap Cement/Clinker Salt Forest Products Other Dry Trades Source: Braemar Seascope Research Braemar Seascope

Coal Market: At home and abroad Braemar Seascope

World Coking Coal Exporters 22/10/2013 350 300 Million Tonnes 250 200 150 100 50 0 Australia United States Canada Mongolia Source: Braemar Seascope Research Russia Indonesia Mozambique Poland Czech Republic ROW Braemar Seascope

World Steam Coal Exporters 17/11/2013 1,200 Million Tonnes 1,000 800 600 400 200 0 Indonesia Australia Russia South Africa Source: Braemar Seascope Research Colombia United States Kazakhstan Canada North Korea ROW Braemar Seascope

Total Australian Coal Exports 07/11/2013 400 350 Million Tonnes 300 250 200 150 100 50 0 Steam Source: Braemar Seascope Research Coking Braemar Seascope

Trade Drives Shipping Demand Braemar Seascope

Dry Bulk Trade Growth 24/07/2013 5 5 4 Billion Tonnes 4 3 3 2 2 1 1 0 Iron Ore Bauxite/ Alumina Phosrock/ Fertilizers Source: Braemar Seascope Research Coal Minor Ores Forest Products Agribulk Steel Industry Minor Bulks Other Minor Bulks Braemar Seascope

Dry Bulk Trade Growth Iron Ore, Coking & Steam Coal 24/07/2013 3.0 Billion Tonnes 2.5 2.0 1.5 1.0 0.5 0.0 Iron Ore Source: Braemar Seascope Research Coking coal Steam coal Braemar Seascope

Fleet Review Braemar Seascope

Braemar Seascope

Bulker Removals – 2013 YTD Capesize 37 Vessels Mini Capesize Total 2013 YTD: 18.9m DWT Post-Panamax 4 2012 Total = 36.5m DWT Panamax 57 Supramax 3 58 Handymax Large Handy 128 Small Handy 59 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2013 – To Date, DWT Scrapped (‘000 tonnes) Braemar Seascope

What has been ordered so far this year? 300 Number of Vessels 250 200 150 272 204 100 154 127 50 21 6 0 Small Handysize Large Handysize Handymax Geared 9 Supramax Panamax 2 PostPanamax Mini Capesize Capesize Not Geared Braemar Seascope

Capesize (120,000+ DWT) 225 200 Number of Vessels 175 150 125 100 196 211 178 8 75 107 50 85 25 0 105 16 1 9 22 12 37 35 38 46 36 26 26 30 30 20 29 11 Fleet 41 47 57 55 43 81 45 Orderbook Braemar Seascope

Panamax (58-84,999 DWT) 250 Number of Vessels 200 32 150 250 100 162 111 50 57 0 56 55 28 23 25 15 6 6 76 43 57 62 56 91 73 82 51 20 Fleet 98 175 187 103 62 68 59 38 Orderbook Braemar Seascope

Supramax (50-64,999 DWT) 400 350 Number of Vessels 300 250 200 334 150 292 100 172 50 66 68 54 64 0 3 1 1 2 1 2 2 5 3 8 7 95 86 85 109 18 306 172 189 172 60 6 12 Fleet Orderbook Braemar Seascope

Large Handysize (25-39,999 DWT) 300 Number of Vessels 250 200 21 150 266 249259 219 100 185 122 50 0 4 14 12 9 16 6 15 35 41 56 36 29 30 39 44 39 Fleet 55 54 144 145 72 34 47 40 Orderbook Braemar Seascope

Handysize DWT Distribution - Existing Vessels As of October 2013 08/11/2013 500 Number of Vessels 450 400 350 300 250 200 150 100 50 0 38-39.99k dwt 36-37.99k dwt 34-35.99k dwt 32-33.99k dwt 30-31.99k dwt 28-29.99k dwt 26-27.99k dwt 25k dwt 24k dwt 22-23.99k dwt 20-21.99k dwt 18-19.9k dwt 16-17.99k dwt 14-15.99k dwt 12-13.99k dwt 10-11.99k dwt Small Handysize 10-24.99k dwt Large Handysize 25-39.99k dwt Vessels Currently Trading Source: Braemar Seascope Research Braemar Seascope

Handysize DWT Distribution - Newbuildings As of October 2013 08/11/2013 120 Number of Vessels 100 80 60 40 20 0 38-39.99k dwt 36-37.99k dwt 34-35.99k dwt 32-33.99k dwt 30-31.99k dwt 28-29.99k dwt 26-27.99k dwt 25k dwt 24k dwt 22-23.99k dwt 20-21.99k dwt 18-19.9k dwt 16-17.99k dwt 14-15.99k dwt 12-13.99k dwt 10-11.99k dwt Small Handysize 10-24.99k dwt Large Handysize 25-39.99k dwt Vessels on Order Source: Braemar Seascope Research Braemar Seascope

Supply and Demand Braemar Seascope

Cape Supply: Demand 14/11/2013 350 Million dwt/ Year 300 1 knot slow steaming became institutionalised across the worldwide fleet in 2012 Expected case @ 2kn slow steam 250 @ 1kn slow steam Supply 200 Demand 150 @ full speed • Supply: Demand Model suggests fleet utilisation increasing to c.84-87% over the next 3 years, showing an eventual positive outlook • However as shown the Supply: Demand gap could be closed by Q1 2016 due to various factors including: – Slow Steaming – Higher scrapping/ slippage scenario – Firmer pick up in Dry Bulk trades 100 Source: Braemar Seascope Research Braemar Seascope

Panamax/Post Supply: Demand 14/11/2013 200 Million dwt/ Year 180 160 1 knot slow steaming became institutionalized across the worldwide fleet in 2012 Expected case @ 2kn slow steam Supply @ 1kn slow steam 140 Demand 120 @ full speed 100 • Supply:Demand model scenarios suggests fleet utilisation for the expected case is to increase from c86-89% over the next three years, showing an eventual positive outlook • However Supply:Demand gap could be reduced due to various factors including: – Slow steaming – Higher scrapping/ slippage scenario – Firmer pick up in dry bulk trades 80 Source: Braemar Seascope Research Braemar Seascope

Market Outlook Braemar Seascope

The Year Ahead... 15/11/2013 • Cape Market: We forecast a typically slow start to 2014 with rates under US$10,000, however building to an increase in rates towards the end of the year for the traditional re-stocking period, which could be three or four times more than the market rates during the year. • Panamax Market: Oversupply continuing to apply pressure to the Panamax market, with flat forecasts for Q1 and Q2, however a modest recovery towards the back end of the year attributed to the US Gulf grain harvest. • Supramax Market: A flat year expected for the Supramax market, with rates forecast to differ by c.US$2,000-3,000 through the entirety of 2014. • Handysize Market: The Handysize market will continue to have downward pressure applied to it by the Supramax market, as such a sternly flat market is expected through-out 2014. Braemar Seascope

Bulker Delivery Schedule Jan 2011 Braemar Seascope

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