The Changing Calculus of the Tanker Market

Transcription

The Evolving Study of the Global Marine Transport System for
Crude Oil & Refined Products
INTERTANKO Annual Event
New York City | 6-9 May 2014
McQuilling Services, LLC.
Slide 1
McQuilling
McQuilling Services is the marine transportation consulting and advisory group of McQuilling
Partners, Inc. The primary focus of McQuilling Services is to provide clients commercial consulting
services related to global seaborne transportation and related disciplines in the supply chain. The
approach of the Company is to develop products and services based on specific client
requirements, data, and the systematic employment of quantitative methods, bringing individually
crafted solutions to client’s needs. The Company employs a collaborative business model
combining experienced internal resources with exceptional industry partners to produce a team of
directed experts. This model creates a targeted, content-rich knowledge and experience base to
serve clients’ needs cost effectively.
McQuilling Partners is a privately-owned marine services company, providing transportation
services to clients in the shipping, commodity and financial services industries. McQuilling
Partners is a respected tanker specialist globally and is one of a select few firms that sit on both
the International and the Asian Baltic Exchange Tanker Route panels. McQuilling Partners
facilitates the physical transportation of liquid and dry bulk commodities annually through the
provision of brokerage services and provides coverage in the wet freight derivatives market for all
the traded routes. The firm has assisted numerous clients in the sale or purchase of marine
assets, and advised them on their directed research and consulting requirements. Today,
McQuilling is a privately held firm numbering over 150 people, specializing in the marine
transportation of commodities for a global client base. Representing broad commercial experience
in the international shipping markets, McQuilling provides professional, reliable and personalized
service to clients from offices located in New York, Houston, Caracas, Lima, Mexico City, Athens,
Dubai, Singapore and Rio de Janeiro.
Slide 2
The Evolving Study of the Global Marine Transport System for Crude Oil &
Refined Products
“When you can measure what you are speaking about, and express it in numbers, you know
something about it, when you cannot express it in numbers, your knowledge is of a meager
and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in
your thoughts advanced to the stage of science.”
- William Thomson Kelvin - 1824-1907
Calculus:
A system or arrangement of intricate or interrelated parts
Tanker Market:
A description of the global marine transport system for crude oil and
refined products
Thesis: The tanker market is a classic operations research challenge ~
greater quantitative analysis is not only possible but a necessary step in
better understanding the global marine transport system and its drivers
Slide 3
Agenda
Tanker Demand
Economic Context, Demand Results,
North America, Demand Projection
Tanker Supply
Trading Inventory & Adjustments, Additions,
Deletions, Net Fleet Growth
Outlook
Past Forecast Performance, Current Market, Future
Expectations, Summary
Slide 4
Tanker Demand
Derivation
EXPLORATION
DRILLING
STORAGE
MARINE
TRANSPORT
REFINING
MARINE
TRANSPORT
PRODUCTION
STORAGE
TERMINALLING /
DISTRIBUTION
► At a global level, marine
transportation demand is highly
correlated to world trade which is
directly related to the world
economy: Demand for crude oil and
petroleum products grows with an
expanding global economy
► Marine transportation demand for
tankers is a derived demand, it
arises from the energy consumption
requirements of regional economies
► Petroleum product marine transportation demand arises from matching
consumption with refined product production in refining regions and crude
oil marine transportation demand for tankers arises from matching
refinery raw materials requirements with crude oil production
Slide 5
Tanker Demand
Global Economic Context
►
Global economy continues to recover from the 2009 financial crisis
►
Drivers of growth switching to mature economies, especially US
►
2014 world GDP growth of 3.7%, mature economies 2.2% and
emerging economies 5.1%: With world GDP growth rising, world
energy use will grow by 56% between 2010 & 2040; half of the
increase is attributed to China and India
►
Renewable energy and nuclear power are the world’s fastest-growing
energy sources, each increasing by 2.5% per year; however, fossil
fuels continue to supply almost 80% of world energy use through 2040
►
Oil market fundamentals suggest a moderation of crude price
increases in the near future in the absence of geopolitical influences
►
Natural gas is the fastest growing fossil fuel in the outlook, supported
by increasing supplies of shale gas, particularly in the US
Source: Energy Information Administration
Slide 6
Tanker Demand
Geopolitical Context - Demand Uncertainty
Ukraine
Outcome of recent turmoil and
Russian actions remain
unclear and should keep a risk
premium in energy prices, gas
supply to Europe, possible
sanctions on Russian oil
US
Oil export legislation,
pipeline permitting, rail
legislation, natural gas
exports
Brazil
Struggling economy,
government interventions
in state oil company, CPP
imports, election year,
drought & DPP exports,
E&P and crude exports
Libya
Internal strife between
government &
separatists will hinder
crude production /
exports and keep a
premium in Brent
Venezuela
Government / opposition
political tensions, CPP
imports, crude exports
West Africa
Expanding piracy threat,
Internal strife in oil
producing regions – limits
crude exports
Syrian Conflict
Continued potential to
escalate throughout region
North Korea
“Quiet” at present but
unpredictable regime
behavior
Iran
Conciliatory mood
presently but nuclear talks
breakdown could lead to
straits of Hormuz
blockage: AG imports &
exports
Indian Ocean / East Africa
Temporizing piracy threat but
potential for resurgence –
vessel utilization
Slide 7
Tanker Demand
McQuilling Transport Regions
Source: McQuilling Services
Slide 8
Tanker Demand
Global Ton-Mile Demand | Crude and Residual Fuels | 2000-2013
►
The vast majority of tanker
demand originates from the
movement of crude and
residual fuels
►
Since 2000, demand for crude
oil and residual fuels transport
has averaged a compound
annual growth rate of 0.42%,
growing 1.8% during the
period 2000-2008 then
contracting (1.9%) from 2008
►
The evolving trade matrix will
bring incremental changes to
total tanker demand
Slide 9
Tanker Demand
Global Ton-Mile Demand | Crude and Residual Fuels | 2013
►
Top 20 (about 10%)
trades represent about
80% of total ton-mile
demand – a fairly
consolidated market
►
Middle East/Far East
demand drives this
sector and will continue
to do so
Slide 10
Tanker Demand
Global Ton-Mile Demand 2012 vs 2013
Total Ton-Mile
Demand (Bill.)
VLCC
Suez
Afra
Pana
Total
2013
5,411
2,268
1,617
340
9,635
2012
5,300
2,142
1,702
350
9,494
2013
2%
6%
-5%
-3%
1%
►
Global ton-mile demand
increased by approximately
2% during 2013
►
Crude & residual tanker tonmile demand rose by 1%
►
Demand growth in 2013 was
pressured by extensive
refinery maintenance,
unplanned outages and
reduced EU demand
Slide 11
Tanker Demand
Evolving Trade Matrix
►
Individual trades expand and contract with the overall effect on tanker
demand being incremental year-on-year
Slide 12
Tanker Demand
Global Ton-Mile Demand | Refined Products | 2000-2013
►
Significant growth in refined
products transport has
been observed since 2000
►
A compound annual growth
of 9% occurred in the
period 2000 through 2010
►
Since 2010 overall growth
has slowed, registering
2.3% total through 2013
Slide 13
Tanker Demand
Global Ton-Mile Demand | Refined Products | 2013
►
Top 20 trades represented
about two-thirds 68% of
total refined products
transport demand
►
This result illustrates the
more distributed nature of
the refined products trade
matrix and transport
system
►
Middle East exports to the
Far East drive clean
transport demand
►
Africa is emerging as a
significant demand driver
Slide 14
Tanker Demand
CPP Ton-Mile Demand 2012 vs 2013
Total Ton-Mile
Demand
LR2
LR1
MR2
MR1
Total
2013
314
293
740
151
1,499
2012
294
273
716
165
1,449
2013
7%
7%
3%
-9%
3%
►
Overall growth of about 2%
year-on-year
►
MR2 continues to be the
workhorse of the CPP fleet but
losing share to LR classed
vessels
►
LR1 fixtures from USG doubled
year-on-year
Slide 15
Tonnage Demand
Regional Production | North America
►
►
US crude oil production volumes
declined steadily between 1990s
and 2008: 2008 production
volumes lowest level since 1946 ~
5 million b/d
►
Robust geological data, developed
transport infrastructure, slow &
steady investment into fracking
technology and the resulting lower
US $/barrel extraction cost
boosted production
►
Forecasted production in 2015
would make the highest level
since 1972
US exports? At some point, yes, but unlikely in 2014 and nominal in any
case ~ However, increase in re-exports requests could raise Canadian
volumes in 2014
Source: US Energy Information Administration
Slide 16
Tonnage Demand
US Hydrocarbons Production – Tight Oil
Slide 17
Tonnage Demand
US Hydrocarbons Production – Tight Oil
Slide 18
Tonnage Demand
US Hydrocarbons Production
Slide 19
Tonnage Demand
US Hydrocarbons Production – Tight Oil & Shale Gas
Slide 20
Tonnage Demand
US Transportation Logistics
►
Bakken Rail deliveries to the Northeast expected to average
315,000 b/d in 2014 at about US$ 12-14/bbl
►
Up to 500,000 b/d of rail delivery capacity could be online in 2015 to
the West Coast ~ Cost is roughly US $9/bbl to transport to
Washington state and US $10/bbl to the state of California
►
Expanded West Coast capacity will boost consumption of Canadian
and Bakken crudes
►
1Q2014 rail deliveries of crude to California averaged 15,700 b/d as
compared to 7,700 b/d during 3Q2013
►
Gulf Coast expansion project will eventually deliver 700,000 b/d
from Cushing, Oklahoma to USG – flows started January 2014
►
Another 450,000 b/d of delivery Seaway pipeline coming online in
1H 2014 ~ taking total capacity to 850,000 b/d
Source: US Energy Information Administration, News reports
Slide 21
Tonnage Demand
Effects of US Shale Play
►
US industrial production expected to increase by 3.5% by end of
decade and by almost 4% by 2025 on back of reduced energy costs
►
Manufacturing output will rise by US $258 billion in 2020 and US $328
billion in 2025
►
US consumers are also projected to benefit through reduced
household utility costs: 2012 disposable income rose by US $1,200
per home and could increase to US $2,700 by 2020
►
Estimates are that in 2012 shale extraction contributed to some 2.1
million jobs and US $75 billion in federal and state taxes: Revenue
provided to US Government could reach nearly US $140 billion by
2025
►
US GDP growth forecast at 2.8% in 2014 and 3.0% in 2015
US Economic Recovery
Source: IHS Fairplay – Version III A Manufacturing Renaissance – Sept 2013, IMF World Economic Outlook, April 1024
Slide 22
Tonnage Demand
►
Since about 2009 a clear trend of has emerged of a steadily
increasing proportion of heavy crudes being imported to the US –
driven by a growing abundance of domestic light sweet crudes
Slide 23
Tanker Demand
Imports
►
Exports
USG emerging as export hub providing robust volumes of gas oil &
gasoline to Atlantic Basin
Slide 24
Tonnage Demand
US Production
US crude oil production in three cases, 1960-2040
(million barrels per day)
US Imports
Net import share of US petroleum and other liquids
consumption in three cases, 1990-2040 (percent)
Slide 25
Tonnage Demand
US Shale Play Downside Risks
► July 2013 rail car tragedy in Lac-Megantic, Quebec; December 2013
explosion in North Dakota; and January 2014 derailment in
Philadelphia driving additional scrutiny on industry – 8 in the past year,
last one in Lynchburg, Virginia just last week
►
New legislation, equipment standards or operating restrictions have
the potential to slow crude-by-rail deliveries (DOT -111)
►
Transport capacity bottlenecks in pipeline and rail continue to throttle
deliveries below potential
►
“Flash” production profile of shale oil wells require sustained drilling of
new wells – production sustainability estimating not well developed
►
Lack of tie-backs for gas handling increasing flaring in North Dakota
►
Pushback from landowners, environmentalists, legislators could slow
the growth trajectory
►
Lack of skilled labor becoming a constraint
Slide 26
Tonnage Demand
Crude & DPP Demand Projection | 2014 – 2018 | Ton Mile Growth
VLCC
2012-2013: 2.1%
2013-2014: 3.8%
2014-2018: 1.0%
SUEZ
2012-2013: 5.9%
2013-2014: 0.6%
2014-2018: -0.1%
2012-2013: 1.5%
2013-2014: 1.5%
2014-2018: 0.6%
AFRA
2012-2013: -5.0%
2013-2014: -0.1%
2014-2018: -0.1%
PANA
2012-2013: -2.9%
2013-2014: 4.2%
2014-2018: 0.0%
Slide 27
Tonnage Demand
CPP Demand Projection | 2014 – 2018 | Ton Mile Growth
LR2
2012-2013: 6.8%
2013-2014: 3.3%
2014-2018: 0.6%
LR1
2012-2013: 7.4%
2013-2014: 2.6%
2014-2018: 0.7%
2012-2013: 3.5%
2013-2014: 2.1%
2014-2018: 0.6%
MR2
2012-2013: 3.4%
2013-2014: 2.2%
2014-2018: 0.7%
MR1
2012-2013: -8.6%
2013-2014: -1.9%
2014-2018: -0.4%
Slide 28
Agenda
Tanker Demand
Tanker Supply
Outlook
Slide 29
Tonnage Supply
Derivation
VLCC 2014
No. of Vessels
Starting Gross Inventory
Plus Additions
Less Deletions
Equals Net Inventory Change
Ending Gross Inventory
613
19
15
4
617
Average Inventory
615
Availability Reductions:
Lost Time (weather & speed 2.5%)
Maintenance & Repair (2.5%)
Waiting Time (4.5%)
Dislocation (10%)
Capacity Reduction (10%)
Availability Reduction
Vessels Applied to Demand
15
15
28
62
27
152
463
►
Third party data is
purchased, validated and
enhanced with proprietary
information
►
Accuracy is an issue,
especially newbuilding orders
►
Additions include coated
ships trading dirty; deletions
include exits to demolition
and conversion
►
Inventory reductions include
floating storage, port delays,
coated ships trading dirty
Slide 30
Tanker Supply
Contracting & Orderbook
Contracting
Orderbook*
* As of 31-Dec-14, not including approximately 100
MR2 IMO 2 vessel orders and another 100 vessels
ordered in 2014 ytd
Slide 31
Tanker Supply
Deletions | 2014-2018
►
Various exit profiles may apply
to the trading fleet, depending
on a number of factors
►
Minimal fleet growth
corresponds to a pre-15 year
exit profile (before the 3rd
special survey); maximum
growth to a pre-5th special
survey (25 years)
►
An average fleet growth
assumption uses pre-4th
special survey as the exit point,
or, in the case of VLCCs, a
conversion requirement of
about 15 vessels per year
Slide 32
Tanker Supply
VLCC Additions, Deletions, Trading Fleet | 2001-2018
►
Driven by lack of newbuilding
orders, VLCC fleet growth is
moderating since 2012
►
A widespread adoption of a 15year exit profile would have a
substantial effect on the
average fleet inventory in the
near future (87 less vessels
over 4 years as compared to
20-year exit profile)
►
Increased freight rates may
lead to a resumption of
ordering which would drive the
sector towards oversupply
Slide 33
Tanker Supply
MR2 Additions, Deletions, Trading Fleet | 2001-2018
►
High net fleet growth during
the 200-2009 timeframe
added substantially to the
trading inventory: Another
building boom is scheduled
over the next few years
►
A widespread adoption of a
15-year exit profile would see
69 vessels less over the next
4 years
►
Additional ordering will create
substantial oversupply in this
sector
Slide 34
Tanker Supply
VLCC, MR2 Net Fleet Growth | 2011-2018
►
A comparison of annual
average trading fleet inventory
growth rates illustrates the
disparity in supply situation
between the VLCC and MR2
sectors
►
A heavy MR2 orderbook in
2014-2015-2016 follows
closely behind a period of
massive growth in this sector
►
The VLCC fleet net growth
peaked in 2012 and has been
moderating since
MR2
VLCC
Slide 35
Agenda
Tanker Demand
Tanker Supply
Outlook
Slide 36
Outlook
Past Forecast Performance
►
McQuilling 2013 was within 14%
of actual market performance
across the 12 trades monitored
in the 2013 Outlook
►
For the six dirty trades
monitored, we over-cast the
market by about 18% and
exceeded the five clean by 8%
►
Over the last 16 market
forecasting cycles, we produced
forecasts for the current year of
the Outlook that were within +/10% of actual levels observed 9
times or 55%. We were within
+/-25% of actual market levels in
14 cycles or 88%
Slide 37
Outlook
Current Market and Future Expectations
VLCC
2014 F’cast Ytd Ave
AG / East
45
48.3
AG / West
28
31.0
Wafr / China
45
49.8
SUEZ
AFRA
PANA
60
72.8
102
138.6
120
149.6
MR2
TC2
TC14
118
127.5
120
89.2
Slide 38
Outlook
Future Expectations
►
TCE Expectation, US$ 000/Day
+/- $60
Act. F’cast 20I5per mt
2013 2014 2018 Trend bkrs
►
VLCC* 13.5 17.6 31.3
4.4
SUEZ
12.2
8.9
10.4
2.9
AFRA
10.9
6.4
8.4
2.3
PANA
10.8
9.5
12.8
1.8
LR2
10.9
11.3
8.0
2.5
LR1
11.8
12.3
9.1
2.0
MR2*
15.3
14.7
10.0
1.5
►
Forecasted TCE’s based
on constant US$ 640/mt
bunker price with
sensitivities shown
Average worldwide bunker
price in April was US$
600/mt
Dirty sector’s tonnage
supply is moderate and
demand positive, leading
to upward freight
projection over forecast
period
* Triangulated
►
Clean sectors are burdened by heavy supply outlook against only
moderate demand growth, leading to declining freight projection over
forecast period
Slide 39
Summary
►
The tanker market is a classic operations research challenge ~ greater
quantitative analysis is not only possible but a necessary step in better
understanding the global marine transport system and its drivers
►
Tanker demand is driven by world trade which in turn is a function of
economic growth | Economic recovery is underway and is increasingly
driven by OECD nations | Global GDP revised up slightly (0.1) to 3.7%
►
Oil demand should rebound by approximately 1.1 million b/d throughout
forecast period and 1.3 million b/d in 2014
►
New US crude streams will continue to change the global oil trade
matrix & US crude oil exports will become a reality, but not in 2014
►
We expect tanker ton-mile demand to be modest over the next few
years: ~ 1.5% for crude/DPP and 2.1% for CPP in 2014
►
VLCC supply outlook can be characterized as improving
►
Clean tanker supply rising strongly in 2015 & 2016 and a massive
surge of MR2 orders will pressure market fundamentals
►
Gas may be the game-changer for tankers
Slide 40
Ocean House | 1035 Stewart Avenue | Garden City, New York 11530
Tel: +1.516.227.5700 | Fax: +1.516.745.6198 | Email: [email protected]
► Management consulting
► Business development
► Ship finance advisory
► Marine logistics analysis
www.mcquilling.com
► Market research
► Information technology applications
► Ship construction & repair advisory
► Personnel training
Thank You!
Slide 41

The Changing Calculus of the Tanker Market

Transcription

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