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SHIPPING MARKET OUTLOOK

1. SHIPPING MARKET OUTLOOK

The shipping markets have been subject to


significant stress over the past six months, with
a number of markets close to rock bottom.
Although the Clarksea Index averaged $14,410/
day in 2015, up 23% on the previous year, this
was supported by an excellent tanker market
and continued strength in the VLGC market. The
bulkcarrier market remained very depressed,
with idling and lay-up now an increasing feature,
whilst the containership charter market also fell
back towards historical lows in the second half
of 2015. The downturn in the offshore market
deepened. However, there was some positivity
in niche sectors including ferries, Ro-Ro and
cruise.

The world economy has remained fairly


subdued, and global GDP growth projections
have been revised downwards; world GDP is
currently projected to expand by 3.4% in 2016,
compared to 3.1% in 2015. However, risks
appear to be building and are now more
focussed on the developing economies. There
remain concerns over Chinese growth
(projected at 6.3% in 2016) as the economy
matures and diversifies away from a focus on
heavy industry. Low commodity prices, which
have placed significant financial pressure on
developing world exporting countries, also
present some downside risks.

Global seaborne trade expanded 2.0% in


2015 to 10.7bt, compared to 3.2% in 2014.
Global dry bulk trade contracted by 0.1% in
2015, with limited iron ore trade growth and
declining coal volumes as the Chinese economy
slowed. Meanwhile, container trade growth
slowed significantly to 2.3%. Conversely total oil
trade expanded strongly at 4.7%. In 2016, global
seaborne trade is projected to see fairly muted
growth of 2.2% to 11.0bt, with dry bulk trade
expanding 0.3%, container trade growing by
4.0% and oil trade by 3.5% in 2016.

Newbuild contracting across 2015 was


limited, totalling 1,348 ships of 99.0m dwt, down
38% on 2014, and the lowest level since 2009.
This was largely due to a fall of 68% in the
number of bulkers ordered (250 units). However,
tanker ordering rose by 22% to 414 vessels.
There was a rush to order before the Tier III
NoX deadline and in early 2016 newbuild activity
has been very subdued, with the outlook quiet.

Clarksons Research
Spring 2016

On the back of reduced contracting, the


orderbook has declined, standing at 283.2m dwt
at the start of March 2016, compared to 326.8m
dwt at the start of 2015. Newbuilding prices
have continued to fall, but re-sale opportunities
look highly competitive in comparison, placing
further pressure on shipyards. Deliveries
increased in 2015 to 96.6m dwt, and are
expected to increase this year before falling in
2017. Further removals of shipyard capacity are
expected in an increasingly tough environment
for yards.

Recycling volumes have been significant


during the first two months of 2016, at 11.7m
dwt, following 38.9m dwt in 2015. Bulker
recycling reached 30.6m dwt last year and is
expected to remain robust in 2016, with a further
9.2m dwt sold for recycling in 2016 so far.
Containership recycling is also expected to
increase. Overall, the world fleet is projected to
grow by 3.1% in 2016 and by 2.7% next year,
compared to levels of 8-9% five years ago.

The sale and purchase market remained


relatively active in 2015, with 1,365 units sold.
There has been strong activity so far in 2016,
with 165 vessels reported sold in the first two
months. Pricing trends have been mixed with
bulkcarrier and containership prices falling and
tanker asset prices relatively steady, before
sliding in the year to date. The ship finance
landscape continues to undergo significant
changes, with an increasing focus on
restructuring in current market conditions.

Overall sentiment in the shipping markets


feels just as bearish as in the immediate
aftermath of the financial crisis in late 2008.
Fundamentals across the sectors are mixed,
with a few markets performing well, but in
general the freight market environment remains
depressed, particularly in the bulkcarrier sector,
with surplus capacity combining with lacklustre
demand growth in many cases. Meanwhile,
downside risks to global seaborne trade growth
remain, including further turbulence in the
Chinese economy. Overall, if vessel demand
growth remains relatively sluggish, it may take
longer than previously expected to achieve a
more balanced supply-demand environment,
which would be needed to support a sustained
recovery in a number of markets.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

EXECUTIVE SUMMARY

SHIPPING MARKET OUTLOOK

The major volume shipping markets have


experienced very different fortunes over the last
six months. Earnings levels in the tanker market
have remained healthy, but bulker earnings are
under severe pressure and containership rates
have fallen back to historical lows.
In the tanker market, earnings have remained
firm in the last six months, averaging $30,090/
day across the sector as a whole. VLCC
earnings topped $100,000/day in December for
the first time since mid-2008, and averaged
$73,063/day in the six months from September
2015 to February 2016, up 30% compared to
the previous six months. While performance in
the other crude tanker markets has been mixed
over the last six months, this has still been
another positive period. The tighter market
conditions since late 2014 have been supported
by low oil prices, which boosted seaborne crude
oil trade in 2015 after several years of decline.
Additionally, fleet growth has been subdued,
with crude tanker fleet capacity increasing by
just 2% in 2015. In the product tanker market,
earnings improved in 1H 2015, but have since
softened slightly. While seaborne products
trade also grew strongly by 6% in 2015, partly
reflecting the lower oil price, an acceleration in
fleet growth has kept a partial lid on earnings.

Bulkcarrier Earnings
Avg. $/day

Mar '15-

Sep '15-

Aug '15

Feb '16

Change

Capesize

8,995

7,889

-12%

Panamax (spot)

7,910

6,227

-21%

Panamax (trip)

6,076

4,085

-33%

Handymax (52k)

7,125

5,053

-29%

Handysize (t/c)
Weighted Avg.

6,490
7,414

5,615
5,947

-13%
-20%

The containership market has also weakened


considerably in the last six months. Despite
rapid growth in the large containership fleet, the
tightening of supply in the charter market fleet
in recent years, combined with a slowdown of a
key part of the cascade trend from late 2014
had seen significantly improved earnings levels
in 1H 2015. However, seaborne container trade
growth slowed to 2.4% last year, and the
cumulative impact of this led to weaker ship
demand in the second half of the year. Rates
for all charter market sizes have decreased in
the last six months back to historically low
levels, and overall containership earnings have
dropped 33% to $6,663/day.
Containership Earnings

Tanker Earnings
Avg. $/day

1999. However, the problem has now shifted to


the demand side, with the dramatic slowdown in
Chinese dry bulk imports in 2015 contributing to
a 0.1% decline in seaborne dry bulk trade last
year, causing a further build up of oversupply.

Mar '15-

Sep '15-

Avg. $/day

Mar '15Aug '15

Sep '15Feb '16

%
Change

Aug '15

Feb '16

Change

6,800 teu gls (3yr t/c)

25,667

16,167

-37%

VLCC (c. 2010-built)

56,281

73,063

30%

4,400 teu gls (1yr t/c)

14,767

6,742

-54%

Suezmax (c. 2010-built)

44,688

45,599

2%

3,500 teu gls (1yr t/c)

12,500

7,150

-43%

Aframax (c. 2010-built)

37,876

34,219

-10%

2,500 teu gls (1yr t/c)

11,417

6,983

-39%

Products (dirty)

25,485

24,916

-2%

2,000 teu gls (1yr t/c)

9,483

7,258

-23%

Products (clean)

23,536

17,682

-25%

1,700 teu grd (1yr t/c)

10,050

7,492

-25%

-3%

1,000 teu grd (1yr t/c)


Weighted Avg.

7,883
9,907

6,633
6,663

-16%
-33%

Weighted Avg.

31,050

30,090

Meanwhile, the last six months have been


exceptionally difficult for the dry bulk market.
Average bulker earnings dropped 20% in the
six months to February 2016 to less than
$6,000/day, close to typical operating costs. All
sectors of the market have seen significantly
weaker earnings, with Capesize earnings falling
12%, and Supramax trip rates down 29%. While
rapid supply growth in 2010-13 had led to a
build up of surplus capacity, deliveries have
since slowed, allowing bulker fleet growth to
ease to 2.4% last year, the slowest pace since

In summary, the last six months have seen


sentiment deteriorate further across the major
shipping sectors, to levels comparable to the
onset of the global economic downturn. The
tanker market has performed well, but there are
concerns over its sustainability. After years of
pressure from supply growth, the focus in the
volume shipping markets has clearly shifted to
the demand side, with muted growth in
seaborne trade presenting continued problems
for the market balance in many sectors.

Clarksons Research
Spring 2016

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

1.1 Freight Market Overview

Figure 1.1.3

Source: Clarksons Research


70

10

Jan-16

30

Jan-15

80

Jan-14

40

Jan-13

60

Jan-12

Bulker Average Spot Earnings

Jan-11

$ ,000/d

Jan-10

Figure 1.1.1

Jan-09

Source: Clarksons Research


Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-08

70

Jan-07

ClarkSea Index

Jan-07

10

Jan-06

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

50

Jan-06

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

$ ,000/d
$ ,000/d

60

40
50

30
40

30

20
20

10

Source: Clarksons Research

Figure 1.1.2

120 '93 = 100

Containership Earnings Index

110

50
100

90

20
60

50

40

30

Source: Clarksons Research

Figure 1.1.4

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Clarksons Research
Spring 2016

Jan-11

Jan-10

Jan-09

Jan-08

70
Jan-07

Jan-06

60

Jan-07

Jan-06

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

SHIPPING MARKET OUTLOOK

Tanker Average Spot Earnings

SHIPPING MARKET OUTLOOK

The last six months have seen continued


pressures on global economic growth, with
several forecasters strongly highlighting the
emergence of increased downside risks facing
the world economy. In the aftermath of the
global financial crisis, it was principally
problems in the developed world that posed the
greatest difficulties, but as the US and
European economies have continued to
gradually improve, the focus has increasingly
shifted to the strength of growth in emerging
markets, particularly China. During the last
year, trends in the Chinese economy and in
commodity prices have had a significant global
impact, and in early 2016, the IMF stressed that
global growth could be derailed if key
transitions are not successfully managed.
The picture in developed economies has been
one of continued gradual recovery. US
economic activity has been fairly resilient,
sufficient to allow the US Federal Reserve to
raise interest rates slightly in late 2015.
Economic difficulties in Europe remain, but
overall growth in the region has improved in
recent years. The low oil price environment has
supported this to some extent. The price of
Brent crude averaged $52.5/bbl last year, down
47% y-o-y, and prices fell further in the first two
months of 2016 to closer to $30/bbl, although
they have subsequently increased slightly.
While lower oil prices helped to support oil
demand and consumption in Europe and Japan
in particular in 2015, this is expected in part to
be a one-time boost, and the decline in prices
has also caused a number of negative impacts
elsewhere. Growth prospects in a number of oilexporting countries have been significantly
reduced as a result of the decline, including
Russia, and exporters in South America, Africa
and the Middle East, whilst declines in other
commodity prices are also having an impact. In
Russia, GDP declined by nearly 4% in 2015,
whilst the rouble continued to weaken and
inflation surged. Saudi Arabia had appeared
relatively resilient to low prices, but revenue has
dropped sharply and growth is expected to
slow. Other producers within OPEC have
struggled significantly, and growth has declined
in Nigeria, whilst economic conditions in
Venezuela have deteriorated further. The

10

recession in Brazil has deepened, with GDP


declining by 3.8% in 2015. Oversupply in the oil
market is expected to persist in the short-term,
despite projections for US oil production to
decline this year. This is likely to maintain
pressure on oil exporting countries, and recent
downward revisions to global growth forecasts
have been focussed on commodity-exporting
developing nations.
There has also been a continued focus on the
Chinese economy in recent months, as the
pace of growth has slowed and the country
continues to transition away from a focus on
heavy industry towards a more mature,
diversified economy. Chinese GDP growth
reportedly slowed to 6.9% in 2015, the slowest
pace in 25 years. The slowdown largely
reflected a slowdown in the pace of export
growth and reduced fixed-asset investment, as
well as weakness in the domestic property
sector. While the service sector in China is
growing rapidly, there remain concerns over the
slower pace of expansion in industrial
production, and Chinas efforts to address
structural overcapacity in a number of industrial
sectors and improve air quality in major cities is
having a significant impact. Volatility in the
Chinese stock market has also contributed to
wider negative trends in global financial
markets.
However, there have been some areas of
positivity. The Indian economy has continued to
grow at a strong pace, and other emerging
Asian economies have recorded a positive
performance. The lifting of nuclear-related
sanctions on Iran in January 2016 could also
provide some positive impetus from the
countrys increased re-integration in the world
economy. Nevertheless, the outlook for a
number of emerging nations remains clouded
by trends in China and the weak commodity
price environment.
Overall, despite pockets of improved economic
performance, growth in most regions came
under pressure in 2015, with global economic
growth slowing to 3.1%, from 3.4% in 2014.
Global GDP expansion is currently expected to
pick up slightly in the short-term, to reach 3.4%
in 2016, but it seems clear that risks remain
tilted to the downside, with significant
implications for trends in seaborne trade.

Clarksons Research
Spring 2016

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

1.2 World Economy

GDP (% yoy)
OECD
USA
Japan
European Union
Germany
France
UK
Italy
Russia
China
Developing Asia
South Korea
Taiwan
Hong Kong SAR
Singapore
Thailand
Malaysia
India
Africa
S & C America
WORLD

2013
1.1
1.5
1.6
1.7
0.4
0.7
1.7
-1.7
1.3
7.7
7.0
2.9
2.2
3.1
4.4
2.8
4.7
6.9
5.2
2.9
3.3

2014
1.8
2.4
0.0
3.4
1.6
0.2
2.9
-0.4
0.6
7.3
6.8
3.3
3.8
2.5
2.9
0.9
6.0
7.3
5.0
1.3
3.4

2015
1.9
2.5
0.6
3.5
1.5
1.1
2.2
0.8
-3.8
6.9
6.6
2.7
2.2
2.5
2.2
2.5
4.7
7.3
3.5
-0.3
3.1

2016* 2017*
2.1
2.1
2.6
2.6
1.0
0.3
3.5
3.6
1.7
1.7
1.3
1.5
2.2
2.2
1.3
1.2
-0.6
1.0
6.3
6.0
6.3
6.2
3.2
3.6
2.6
2.9
2.7
2.8
2.9
3.2
3.2
3.6
4.5
5.0
7.5
7.5
4.0
4.7
-0.3
1.6
3.4
3.6

World GDP Trends


% y-o-y

8%

2014
2015(e)

7%

2016(f)

6%
5%
4%
3%
2%
1%
0%
World

Advanced Emerging
Economies Economies

* Fo recast, So urce: IM F (Jan 2016)

Table 1.1 Economic Growth

Source: IMF

Figure 1.2.1

Brent Crude Oil Price

Industrial Production
30
25

% p.a.

160

Pacific - Asia & India

China

$/bbl

140

20

120
15

100

10
5

80

60

-5

40

Source: Clarksons Research

Figure 1.2.2

Clarksons Research
Spring 2016

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-05

-20

Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15

20

Jan-07

Atlantic - US & Europe

-15

Jan-06

-10

Source: Clarksons Research

Figure 1.2.3

11

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

SHIPPING MARKET OUTLOOK

SHIPPING MARKET OUTLOOK

Around 85% of the volume of total world trade


is transported by sea. In 2015, world seaborne
trade is estimated to have expanded 2.0%
y-o-y, to total 10.7bn tonnes (equivalent to 1.46
tonnes per capita). Trade growth last year was
notably slower than the average 4.9% p.a.
expansion recorded between 2010 and 2014,
when trade was supported by strong Chinese
import demand, particularly for raw materials,
as well as continued containerisation of goods
and a shift of production globally away from
demand centres. In 2010-14, the rate of
increase in world seaborne trade either
exceeded or was close to the rate of global
economic growth. However, last year, seaborne
trade (2.0%) is estimated to have grown at a
slower pace than global GDP (3.1%).
In 2015, the slowdown in trade growth was
particularly notable in the dry bulk sector. Dry
bulk trade, which accounted for 44% of global
seaborne trade, fell marginally y-o-y last year,
totalling 4.7bn tonnes. This was the first year of
decline since 2009, and significantly slower
than the average 7.0% p.a. expansion seen in
the preceding 5 years, when strong Chinese
economic growth boosted import demand for
raw materials for use in steel production and
power generation. The maturing of Chinas
economy partly led to lacklustre dry bulk import
demand, with imports to the country falling 3%
y-o-y. Overall, global seaborne coal trade fell
for the first time in almost 30 years, to total
1.1bn tonnes, on the back of slower GDP
growth and strict coal restrictions in China, as
well as sluggish Indian import demand.
Seaborne iron ore trade grew 2.0% y-o-y to
1.4bn tonnes, following a 12.5% rise in 2015,
partly due to a fall in Chinese steel output. In
2016, seaborne dry bulk trade is expected to
remain fairly steady y-o-y.
The pace of expansion in container trade also
eased in 2015, to 2.3% (the slowest pace since
2009), with volumes totalling 175.2m TEU due
to negative trends in the world economy. Box
trade volumes on the peak leg Far East-Europe
route fell by an estimated 3.7% y-o-y on the
back of weaker European import demand, a
slump in Russian box imports, and inventory
adjustments. Elsewhere, growth on North-South
routes was limited by the impact of low

12

commodity prices on emerging economies


heavily reliant on commodity exports.
Meanwhile, growth in intra-Asian trade came
under pressure from the slowdown in China. In
2016, container trade growth is expected to
accelerate slightly. However, this is subject to
major risks in the global economy.
In contrast, seaborne oil trade (crude and
products combined) grew in 2015, following two
consecutive years of decline and very slow
growth prior to this. Crude trade rose 3.6% to
37.6m bpd, with OPEC members ramping up oil
output to attempt to retain market share. Oil
prices decreased significantly, leading to
improved refinery margins and increased crude
imports in Europe. Meanwhile, Chinese crude
imports grew 9% in 2015 to 6.1m bpd, on the
back of stockbuilding activity and greater
refinery throughput. The oil price collapse also
supported products import demand, particularly
for transportation fuels. Seaborne products
trade grew 6.2% in 2015 to 22.0m bpd. The
positive impact of low oil prices on trade seen in
2015 is expected to moderate in 2016. China is
expected to remain a key driver of crude trade
this year, as domestic refiners shift from
processing fuel oil to crude, and global
seaborne crude oil trade is expected to expand
3.5% in 2016. Meanwhile, products trade is
expected to rise 3.6%, supported by refinery
capacity expansions in the Middle East and the
approval of products export quotas in China.
Elsewhere, global seaborne LPG trade grew by
around 9% in 2015 to 78mt, reflecting a firm
rise in US exports, as well as robust growth in
Chinese and Indian imports. Expansion in
seaborne LNG trade was limited by a decline in
imports to some Far Eastern countries.
Meanwhile, seaborne chemicals trade rose
firmly, by an estimated 3%, partly supported by
an improvement in downstream demand in
some regions due to the low oil price.
Looking forward to 2016, world seaborne trade
is projected to continue to grow at a relatively
muted pace. Current projections indicate a
2.2% expansion in seaborne trade volumes,
slower than projected global GDP growth and
below the historical average. Overall, seaborne
trade is projected to total 11.0bn tonnes this
year, although we will need to monitor closely
for deviation from this trend.

Clarksons Research
Spring 2016

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

1.3 Seaborne Trade

SHIPPING MARKET OUTLOOK

Seaborne Trade Growth/GDP


Growth 'Multiplier'

y-o-y % growth
Crude Oil
Container
Gas & Chems

16%
1.6

14%
12%

Seaborne trade
growth

10%

1.4

Note: The average multiplier


in 2005-10 excludes 2009.

1.2

8%

6%
4%

1.0
0.8

2%
0%

-2%
-4%

0.6
0.4
0.2

-6%
2011-14

2005-10

2000-04

2016(f)

mt

y-o-y % growth 40%


Growth in total
Chinese
35%
seaborne imports

Oil
Dry Bulk
Other
2,000

30%
25%

1,500

20%
1,000

15%
10%

500
5%
0

Source: Clarksons Research

Figure 1.3.3

Clarksons Research
Spring 2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

0%
2006

2016(f)
1,344
-1.5%
1,130
-0.4%
2,228
1.9%
4,702
0.3%
1,938
3.5%
1,063
3.6%
3,001
3.5%
623
3.7%
1,762
4.5%
869
2.8%
10,958
2.2%

Figure 1.3.2

Chinese Seaborne Imports

2005

2015(e)
1,365
2.0%
1,135
-6.4%
2,188
2.1%
4,687
-0.1%
1,872
3.8%
1,026
6.3%
2,899
4.7%
601
2.7%
1,686
2.9%
845
2.5%
10,718
2.0%

Source: Clarksons Research

Figure 1.3.1

2,500

2015(e)

Source: Clarksons Research

1995-99

2016(f)

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

0.0

1990-94

-8%

Seaborne Trades
(mt)

2012
1,110
5.5%
Coal
1,123
12.3%
Other Dry Bulk
1,999
3.4%
Total Dry Bulk
4,232
Trades (mt)
6.2%
Crude
1,906
2.9%
Products
915
0.5%
Total Oil Trades
2,822
(mt)
2.2%
Total Gas &
556
Chems Trade (mt) 1.1%
Total Container
1,463
Trade (mt)
3.6%
Total Other Dry
768
Trade (mt)
5.4%
Total Seaborne
9,841
Trade (mt)
4.3%
Iron Ore

2013
1,190
7.2%
1,179
5.0%
2,112
5.7%
4,481
5.9%
1,836
-3.7%
957
4.5%
2,793
-1.0%
571
2.7%
1,543
5.4%
796
3.7%
10,184
3.5%

2014
1,338
12.5%
1,213
2.8%
2,143
1.5%
4,694
4.8%
1,805
-1.7%
965
0.9%
2,770
-0.8%
585
2.5%
1,638
6.2%
825
3.6%
10,512
3.2%

Table 1.2 Seaborne Trade

13

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Seaborne Trade 1996-2016


bn tonnes
12
Dry Bulk
Oil Products
Other Dry
10

SHIPPING MARKET OUTLOOK

In 2015, there was a marked improvement in


conditions in the tanker market, largely supported by strong crude oil and oil products trade
growth. OPEC members continued to ramp-up
or maintain high levels of oil production in order
to retain market share, which contributed to
lower oil prices. The price of Brent crude fell
47% y-o-y in 2015 to average $52.5/bbl in
2015. This sharp drop supported firm oil demand growth and boosted crude oil trade. The
crude tanker sector also benefitted from slow
fleet growth. Overall, average tanker earnings
increased 73% y-o-y in full year 2015, to reach
$31,036/day, the highest level since 2008.

Oil Trade Summary


Oil Demand
(MBpd)
OECD Europe
North America
Non-OECD Asia
Others
TOTAL
Crude Oil Supply
(MBpd)
Saudi Arabia
Other Middle East
Latin America
Africa
FSU
Others

Tanker Demand
Following average growth of 1.0% p.a. in 200514, seaborne oil trade (crude and products
combined) grew by an encouraging 4.7% in
2015, supporting tanker demand. Seaborne
crude trade grew 3.8% to 37.6m bpd in 2015,
as the low oil price boosted refinery throughput
and spurred stockbuilding. The surge in trade
also led to greater waiting time, whilst demand
for tankers for oil storage also increased. Crude
tanker deadweight demand is estimated to have
risen 3.6% in 2015, with long-haul trade from
the Middle East to Asia rising firmly. Seaborne
products trade rose 6.3% to 23.0m bpd, partly
underpinned by firmer demand for transportation fuels. Expansion in refinery capacity in the
Middle East bolstered products trade from the
region, particularly to Asia, and intra-European
trade also increased. Overall, product tanker
demand grew by an estimated 5.9% in 2015.
Tanker Supply

Total

14

2012
13.8
-3.2%
23.0
-1.8%
21.2
3.9%
32.2
3.4%
90.1
1.1%

2013
13.6
-1.1%
23.4
2.1%
21.9
3.4%
32.4
0.6%
91.4
1.4%

2014
13.5
-0.9%
23.5
0.2%
22.5
2.6%
32.6
0.6%
92.1
0.7%

2015
13.7
1.5%
23.7
0.8%
23.5
4.5%
32.8
0.7%
93.7
1.8%

2016(f)
13.7
0.0%
23.8
0.4%
24.1
2.8%
33.2
1.2%
94.8
1.2%

2011
9.5
6.3%
16.8
5.5%
7.1
4.4%
10.5
2.1%
13.5
2.4%
31.6
-4.3%
88.9
1.0%

2012
9.8
4.0%
18.0
6.8%
7.4
4.2%
9.7
-7.3%
13.7
1.5%
32.0
1.2%
90.6
1.9%

2013
9.7
-1.4%
18.4
2.5%
7.4
0.4%
9.1
-6.4%
13.9
1.1%
32.6
1.9%
91.1
0.5%

2014
9.7
0.4%
18.3
-0.5%
7.5
1.6%
8.5
-7.0%
13.9
0.2%
35.2
7.9%
93.1
2.2%

2015
10.4
6.8%
18.9
3.0%
7.7
1.5%
8.5
0.6%
14.0
0.6%
36.4
3.4%
95.8
2.9%

2016(f)
10.4
-0.1%
19.2
2.0%
7.8
1.4%
8.7
1.8%
14.0
0.3%
36.0
-1.1%
96.1
0.3%

To tal includes NGLs and pro cessing gains

Crude Exports
(MBpd)
Middle East
Africa
Caribs & L .Am
FSU
Others
WORLD TOTAL
Crude Imports
(MBpd)
United States
EU Europe
China
Other Asia
Others
WORLD TOTAL
Products Exports
(MBpd)
Asia
Europe

Crude tanker fleet growth has been fairly slow


in recent years. The fleet grew 2.4% in dwt
terms in 2015 and at the start of March 2016
numbered 3,451 ships of 386.9m dwt. In 2014
and 2015, 9.3m dwt and 8.4m dwt of crude
tanker capacity respectively was delivered,
below the annual average of 25.6m dwt of deliveries in the preceding 5 years. Strong market
conditions led to very limited demolition and
strong ordering. During 2015, the crude tanker
orderbook grew 60% y-o-y to 71.2m dwt, the
highest level since October 2011. Elsewhere,
the product tanker fleet grew relatively rapidly,

2011
14.3
-3.0%
23.4
-2.0%
20.4
2.9%
31.1
2.5%
89.1
0.5%

Latin America
Others
WORLD TOTAL
Products Imports
(MBpd)
Europe
Total Asia
Others
WORLD TOTAL

2011
17.9
8.9%
6.3
-13.8%
4.5
1.2%
4.8
-8.0%
3.6
-12.1%
37.2
-1.1%

2012
17.4
-2.8%
7.4
16.9%
4.6
1.4%
4.9
1.9%
4.0
10.3%
38.3
2.9%

2013
17.6
0.8%
6.6
-10.6%
4.4
-5.0%
4.8
-1.8%
3.5
-11.1%
36.9
-3.7%

2014
17.1
-2.8%
6.3
-4.8%
4.5
3.6%
4.7
-2.3%
3.7
4.0%
36.2
-1.7%

2015
17.4
1.9%
6.1
-2.6%
4.7
3.6%
5.1
8.4%
4.3
17.5%
37.6
3.8%

2016(f)
18.1
3.9%
6.2
1.8%
4.7
0.5%
5.2
2.7%
4.7
8.7%
38.9
3.5%

2011
6.7
-7.4%
9.0
-3.9%
4.6
4.2%
12.8
2.4%
4.1
0.3%
37.2
-1.1%

2012
6.1
-9.0%
9.6
6.9%
4.9
7.4%
13.5
5.3%
4.2
1.4%
38.3
2.9%

2013
2014
5.1
4.5
-15.7% -13.3%
9.0
8.9
-5.6% -1.7%
5.1
5.6
3.6% 10.1%
13.4
13.3
-0.8% -1.0%
4.2
4.0
0.3%
-4.1%
36.9
36.2
-3.7% -1.7%

2015
4.2
-6.5%
9.4
6.2%
6.1
9.3%
13.8
4.5%
4.0
-0.5%
37.6
3.8%

2016(f)
4.4
4.4%
6.2
-34.1%
4.7
-23.2%
5.2
-62.3%
18.4
359.4%
38.9
3.5%

2011
5.5
4.4%
5.1
4.2%
0.7
-14.0%
8.4
3.6%
19.7
3.2%

2012
5.5
-1.2%
5.4
6.1%
0.7
-1.9%
8.2
-1.5%
19.8
0.5%

2013
5.8
6.1%
5.5
1.2%
0.7
-2.0%
8.7
6.2%
20.7
4.5%

2014
5.8
1.0%
5.4
-2.5%
0.6
-9.8%
9.1
3.7%
20.9
0.9%

2015
6.1
3.7%
5.6
4.4%
0.6
-5.7%
10.0
10.0%
22.2
6.3%

2016(f)
6.4
5.0%
5.7
1.6%
0.6
4.5%
10.4
3.7%
23.0
3.6%

2011
6.5
2.3%
7.2
5.8%
6.0
1.1%
19.7
3.2%

2012
6.5
-0.1%
7.3
2.7%
6.0
-1.3%
19.8
0.5%

2013
6.8
5.3%
7.7
5.0%
6.1
3.1%
20.7
4.5%

2014
6.7
-2.3%
7.8
1.1%
6.4
4.1%
20.9
0.9%

2015
6.9
2.8%
8.4
7.0%
7.0
9.2%
22.2
6.3%

2016(f)
7.1
3.0%
8.6
2.6%
7.4
5.3%
23.0
3.6%

So urce: Oil and Tanker Trades Outlo o k: Clarkso ns Research. (f)=fo recasts.
Crude demand derived fro m crude and DP P trade. P ro ducts demand derived fro m DP P ,
CP P and veg o il trade.

Table 1.3 Oil Trade Summary

Clarksons Research
Spring 2016

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1.4 Tanker Market Overview

SHIPPING MARKET OUTLOOK

Average Values,
2006-2015

The tanker market perFirm

Softer

Firmer

-30%

+30%
+60%

-60%
-90%

Weak!

+90%

7%

-120%

Strong!

+120%

Average VLCC spot earn-

Where are we in the Tanker Cycle ?


Market
Rate
Indicator
Spot ($/day)
1 year t/c ($/day)
5 year old ($m)

2006-15
Average
Value
43,583
40,821
90.8

Market
Rate
64,846
48,433
80.0

Spot ($/day)
1 year t/c ($/day)
5 year old ($m)

35,031
30,529
63.3

46,713
35,875
60.0

Spot ($/day)
1 year t/c ($/day)
5 year old ($m)

35,031
22,744
47.4

37,954
26,712
46.0

Spot ($/day)
1 year t/c ($/day)
5 year old ($m)
Clean Products Average
Tanker Average

16,813
17,862
33.6

21,536
17,769
29.0

Ship by Type

VLCC
VLCC Average
Suezmax
Suezmax Average
Aframax
Aframax Average
Clean Products
(30k dwt)

2015
% diff. from
Average
49%
19%
-12%
19%
33%
18%
-5%
15%
8%
17%
-3%
8%
28%
-1%
-14%
5%
13%

2016 YTD
Market % diff. from
Rate
Average
59,417
36%
52,667
29%
76.0
-16%
16%
41,067
17%
37,444
23%
57.0
-10%
10%
30,302
-14%
29,778
31%
40.0
-16%
1%
16,676
-1%
18,194
2%
27.5
-18%
-6%
7%

formed very well in 2015.


Althugh the market has
come off slightly in 2016 so
far, it is still 7% above the
long-term trend. In the first
two months of 2016, spot
earnings in the VLCC and
Suezmax sectors have remained notably above the
long-term trend.

This Year
-12%
10%
-4%
-2%
-16%
5%
-5%
-5%
-22%
13%
-13%
-7%
-29%
2%
-4%
-10%
-6%

Worse
Better
Bit Worse
Bit Worse
Worse
Bit Better
Bit Worse
Bit Worse
Worse!
Better
Worse
Bit Worse
Worse!
Bit Better
Bit Worse
Worse
Bit Worse

ings in the six months up to


March 2016 rose 56%
y-o-y to $73,063/day, with
earnings reaching more
than
$100,000/day
in
December 2015.

Benchmark

secondhand
prices in the majority of
tanker sectors have generally declined in the year to
date. The price for a 5 year
old
uncoated
Aframax
stood at $40m at the end of
February 2016.

Figure 1.4.1 The Tanker Market

Crude Tanker Market Cycles


100

$,000/d

m dwt
Tanker Lay-Up
VLCC 1 Year T/C
Aframax 1 Year T/C

90
80

80
70
60

70
50

60
50

40

40

30

30
20
20
10

10

1972
1973
1974
1975
1976
1977
1978
1979
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
2011
2012
2013
2014
2015
2016

Source: Clarksons Research

Figure 1.4.2

Clarksons Research
Spring 2016

15

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Soft

by 5.8% in dwt terms, partly as demolition almost halved y-o-y to 0.8m dwt and deliveries
(8.7m dwt) reached the highest level since
2008. The MR and LR2 fleets expanded particularly rapidly in 2015, by 9% and 10% respectively. Meanwhile, product tanker ordering has
been fairly subdued since 2014. This, as well as
strong delivery levels, led to a decline in the
size of the product tanker orderbook in 2015.
The VLCC Market
Conditions in the VLCC market were very positive in 2015, supported by a tight supplydemand balance. Average VLCC earnings
more than doubled y-o-y to $64,846/day in
2015 and exceeded $100,000/day in December
for the first time since mid-2008. VLCC demand
rose firmly, as the low oil price boosted oil demand and stockbuilding, while fleet growth was
sluggish. Reflecting the strong market conditions, demolition activity was very subdued, with
just two units reported scrapped, while contracting doubled y-o-y to 20.4m dwt.
The Suezmax Market
In 2015, the Suezmax fleet grew 1.9% in dwt
terms, while deadweight demand expanded by
5.0%. Improved refinery margins in Europe, on
the back of the low oil price, boosted intraregional crude trade and shipments to the region from WAF and the Middle East. Suezmax
market fundamentals improved notably, with
average earnings rising 68% y-o-y to $46,713/
day. Ordering remained firm, while demolition
activity has stalled.
The Aframax Market
Average Aframax earnings increased 54% y-o-y
in 2015 to $37,954/day. Following two consecutive years of decline, crude Aframax demand
expanded last year (by 2.2%) on the back of
firm growth in intra-regional trade. Meanwhile,
crude Aframax fleet growth remained very limited. Crude Aframax contracting increased in
2015, with 59 vessels ordered, compared to just
8 and 11 in 2013 and 2014 respectively.
The Products Market
The products market performed strongly in
2015, with earnings firming across all size sec-

16

Tanker Fleet (m.dwt)


VLCC
Suezmax
Aframax
Panamax
Handy
Total Fleet >10k dwt
% Change

2013
190.2
1.6%
76.2
4.9%
96.9
-0.7%
29.9
0.4%
107.7
2.6%
500.8
1.8%

Year End
2014
194.2
2.1%
76.0
-0.3%
96.0
-0.9%
29.8
-0.3%
111.7
3.8%
507.8
1.4%

2015
200.3
3.1%
77.4
1.9%
99.0
3.1%
29.4
-1.3%
118.3
5.9%
524.3
3.3%

Forecast
2016
2017
213.4 224.1
6.6%
5.0%
80.8
86.7
4.5%
7.2%
103.0 108.0
6.6%
4.9%
30.2
31.2
2.5%
3.4%
123.7 127.0
4.6%
2.7%
551.0 576.8
5.1%
4.7%

Table 1.4 Tanker Fleet


tors, despite robust fleet expansion. Seaborne
oil products trade expanded significantly in
2015, largely supported by the low oil price,
which drove improved refinery margins and increased oil demand in a number of countries.
An expansion in refinery capacity and products
exports from the Middle East, as well as firm
naphtha import demand in Asia supported the
LR market east of Suez. LR2 earnings on the
Gulf-Japan route increased 67% y-o-y to
$30,497/day, while LR1 earnings on the same
route rose 63% y-o-y to $24,847/day. Meanwhile, clean MR earnings rose 71% y-o-y to
average $21,444/day, as refinery throughput in
the US and Europe increased, boosting Atlantic
trade. Dirty Panamax earnings firmed to average $26,548/day in 2015, the highest level
since 2008.
Tanker Market Outlook
In 2016, seaborne crude and products trade
growth is projected to grow 3.5% and 3.6% respectively, as the boost from the slump in the
oil price is expected to ease. Although this is
slower growth than in 2015, it is still historically
relatively firm. Crude tanker fleet capacity is
projected to expand 5.0% in dwt terms in 2016,
reflecting an expected influx of deliveries of the
latter half of this year, which may exert some
pressure. Meanwhile, the outlook for product
tanker demand in 2016 appears fairly positive,
supported by refinery capacity expansions in
the Middle East, and firm Chinese products exports. However, the product tanker fleet is expected to expand 4.9% in dwt terms. Overall,
the outlook for the tanker sector is reasonable,
but there is potential for supply to increase later
in the year.

Clarksons Research
Spring 2016

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SHIPPING MARKET OUTLOOK

SHIPPING MARKET OUTLOOK

Seaborne Oil Trade

$'000/d

300

50

Aframax One Yr
T/C Rate

45

250

10%

y-o-y change
Crude Oil
Oil Products

8%

40
6%
35

MR One Yr
T/C Rate

200

30

150

25
20

100

4%
2%
0%

15
-2%
10

Figure 1.4.3

70%

Product Tanker Fleet 2016/17 = Forecasts


Crude Tanker Fleet

100

2016(f)

2015

2014

2013

m dwt
year to date

90

60%

500

Contracting

80

Product
tanker
orderbook as
% of the fleet

400

2012

Oil Tanker Fleet Trends

Tanker Fleet by Type

450

2011

Figure 1.4.4

m. dwt, end year.

550

2010

Source: Clarksons Research

Source: Clarksons Research

600

2009

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

-6%

2008

-4%

2007

5 year Old Tanker Price Index (LHS)

2006

50

50%

70
Deliveries

60

350

40%
50

300
30%

250
200

20%

150

Scrapping

40
30
20

Source: Clarksons Research

Figure 1.4.5

Clarksons Research
Spring 2016

2016

2014

2012

2010

2008

2006

2004

0
2002

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

0%
1995

10

2000

50

10%

1998

Crude tanker
orderbook as
% of the fleet

1996

100

Source: Clarksons Research

Figure 1.4.6

17

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Tanker Prices and T/C Rates

SHIPPING MARKET OUTLOOK

Bulkcarrier market conditions came under renewed severe pressure in 2015, reflecting the
impact of a considerable slowdown in seaborne
dry bulk trade and existing oversupply pressures. Average bulkcarrier earnings declined
28% y-o-y to $7,123/day in 2015, the lowest
level since 1999, and have slumped even further in 2016 so far. Asset prices have decreased significantly, and pressure on bulkcarrier owners has been severe. Against this backdrop of extremely challenging market conditions, bulker demolition surged last year, helping to limit overall fleet growth to the slowest
pace in fifteen years. Meanwhile, newbuild contracting activity was very subdued in 2015 and
fell to the lowest level since 2001, and the orderbook declined by almost 30% in terms of
tonnage over the course of the year. Idling and
lay-up of bulkcarrier tonnage has also increased significantly in recent months.
Bulkcarrier Demand
2015 saw a significant shift in bulkcarrier demand, with seaborne dry bulk trade estimated
to have declined marginally to total 4.7bn
tonnes, following average growth of around 7%
p.a. in the preceding five year period. Chinese
dry bulk imports have been a key driver of the
overall expansion in dry bulk trade in recent
years. In 2010-14, growth in dry bulk imports
into China accounted for more than 50% of the
expansion in global seaborne dry bulk trade.
However, Chinese dry bulk imports fell by 3% in
2015, partly reflecting the maturing of the Chinese economy. Weakness in Chinas construction industry and property sector contributed to
a 2% decline in the countrys steel output, limiting growth in seaborne iron ore imports to 2% in
2015, following expansion of 15% in 2014.
Meanwhile, global seaborne coal trade declined
for the first time in almost three decades to total
1.1bn tonnes in 2015, reflecting the impact of
weak coal demand and coal quality restrictions
in China, as well as expanding domestic coal
production in India. Meanwhile, growth in minor
bulk trade softened to 0.7%, following average
annual growth of 5.3% in 2010-14.
Bulkcarrier Supply
The bulkcarrier fleet expanded 2.4% in dwt
terms in 2015, which was the slowest pace of

18

Summary of Dry Bulk Trade


Iron Ore Imports
(mt)
China

2015(e)
939.7
2.8%
249.8
0.1%
112.1
-3.2%
63.0
6.4%
1,364.6
2.0%

2016(f)
921.6
-1.9%
249.4
-0.2%
106.3
-5.2%
67.0
6.2%
1,344.2
-1.5%

2011
2012
2013
2014
2015(e)
437.8
493.7
579.0
717.0
766.9
9.0%
12.8%
17.3% 23.8%
7.0%
Brazil
326.3
322.4
320.4
337.7
362.0
6.5%
-1.2%
-0.6%
5.4%
7.2%
Other
288.5
294.1
290.2
283.7
235.8
1.9%
1.9%
-1.3%
-2.2%
-16.9%
TOTAL
1,052.7 1,110.2 1,189.6 1,338.3 1,364.6
6.2%
5.5%
7.2%
12.5%
2.0%
Coking Coal Imports
(mt)
2011
2012
2013
2014
2015(e)
India
32.6
35.2
35.0
43.8
49.2
-6.1%
8.0%
-0.4%
25.1%
12.2%
China
24.6
34.6
60.0
47.7
35.5
-23.6%
40.4%
73.6% -20.5% -25.4%
EU 27
46.3
44.9
44.2
45.0
44.0
2.2%
-3.2%
-1.4%
1.7%
-2.3%
Others
4.8
4.9
4.8
4.7
5.1
-8.0%
1.9%
-1.8%
-2.3%
8.4%
TOTAL
224.4
233.7
264.4
262.1
252.0
-5.0%
4.2%
13.2%
-0.9%
-3.9%
Coking Coal Exports
(mt)
2011
2012
2013
2014
2015(e)
Australia
117.1
124.2
145.7
150.9
153.7
-17.9%
6.1%
17.3%
3.6%
1.9%
USA
59.3
59.0
56.4
53.2
39.7
24.1%
-0.5%
-4.5%
-5.5%
-25.4%
Other
48.0
50.5
62.4
58.0
58.6
4.8%
5.2%
23.5%
-7.1%
1.0%
TOTAL
224.4
233.7
264.4
262.1
252.0
-5.0%
4.2%
13.2%
-0.9%
-3.9%
Steam Coal Imports
(mt)
2011
2012
2013
2014
2015(e)
India
94.6
122.9
140.3
172.1
162.1
26.8%
29.8%
14.2% 22.7%
-5.8%
China
141.0
194.1
204.9
191.4
128.3
29.2%
37.6%
5.6%
-6.6%
-33.0%
Other Asia
337.6
347.5
354.4
363.7
373.0
2.9%
2.0%
2.6%
2.6%
4.2%
EU 27
128.9
147.6
138.9
136.7
127.7
19.0%
14.5%
-5.9%
-1.6%
-6.6%
Other
73.6
77.4
76.3
86.5
91.6
1.5%
5.3%
-1.5%
13.3%
6.0%
TOTAL
775.8
889.5
914.9
950.4
882.7
11.8%
14.7%
2.9%
3.9%
-7.1%
Steam Coal Exports
(mt)
2011
2012
2013
2014
2015(e)
Indonesia
350.6
381.8
415.5
408.2
355.6
18.4%
8.9%
8.8%
-1.8%
-12.9%
Australia
154.8
184.2
199.2
224.2
224.5
3.4%
19.0%
8.1%
12.6%
0.1%
Others
270.3
323.5
300.2
318.0
302.6
8.9%
19.7%
-7.2%
5.9%
-4.8%
TOTAL
775.8
889.5
914.9
950.4
882.7
11.8%
14.7%
2.9%
3.9%
-7.1%
Grain and Minor Bulk Trade
(mt)
2011
2012
2013
2014
2015(e)
Wheat&Coarse Grain
254.5
279.0
286.8
315.1
319.1
3.5%
9.6%
2.8%
9.9%
1.3%
Soybean
90.7
95.9
104.8
116.6
127.7
-6.8%
5.7%
9.2%
11.3%
9.4%
Minor Bulk*
1588.6 1624.1 1720.7 1711.4 1740.8
7.9%
2.2%
5.9%
-0.5%
1.7%
TOTAL DRY BULK 3,986.6 4,232.4 4,481.1 4,694.0 4,687.0
6.7%
6.2%
5.9%
4.8%
-0.1%
*Minor bulk total includes phosphate rock and bauxite/alumina
(f)=forecasts
Source: Dry Bulk Trade Outlook: Clarksons Research

2016(f)
803.4
4.8%
358.5
-1.0%
182.3
-22.7%
1,344.2
-1.5%

Other Asia
EU 27
Others
TOTAL

2011
665.4
10.4%
222.4
1.9%
112.6
-3.2%
52.3
-3.9%
1,052.7
6.2%

2012
723.5
8.7%
225.9
1.6%
107.2
-4.8%
53.6
2.5%
1,110.2
5.5%

2013
2014
794.9
913.8
9.9%
15.0%
229.2
249.5
1.5%
8.9%
112.2
115.8
4.7%
3.2%
53.2
59.2
-0.8%
11.4%
1,189.6 1,338.3
7.2%
12.5%

Iron Ore Exports


(mt)
Australia

2016(f)
51.9
5.4%
32.7
-8.0%
42.1
-4.2%
5.2
2.7%
250.2
-0.7%
2016(f)
155.6
1.2%
36.9
-7.0%
57.7
-1.6%
250.2
-0.7%
2016(f)
157.1
-3.1%
118.0
-8.0%
388.7
4.2%
120.9
-5.3%
94.8
3.5%
879.6
-0.4%
2016(f)
346.7
-2.5%
231.2
3.0%
301.7
-0.3%
879.6
-0.4%
2016(f)
325.9
2.1%
134.0
4.9%
1768.2
1.6%
4,702.0
0.3%

Table 1.5 Dry Bulk Trade Summary

Clarksons Research
Spring 2016

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1.5 Dry Bulk Market Overview

SHIPPING MARKET OUTLOOK

Average Values,
2006-2015

The dry bulk market has


Firm

Softer

Firmer

-30%

+30%

-60%

+60%

-90%

Weak!

Strong!

+90%

-75%

-120%

+120%

Secondhand

Where are we in the Bulkcarrier Cycle?


Ship by Type
Capesize
(170k dwt)

Market
Rate
Indicator
Spot ($/day)
1 year t/c ($/day)
5 year old ($m.)

Capesize Average
Panamax
Spot ($/day)
(75k dwt)
1 year t/c ($/day)
5 year old ($m.)
Panamax Average
Supramax
Trip ($/day)
1 year t/c ($/day)
(52k dwt)
5 year old ($m.)
Supramax Average
Dry Bulk Average

2006-15
Average
Value
40,623
40,797
60.3

Market
Rate
9,060
10,049
25.0

19,340
22,685
36.2

7,335
7,492
14.0

19,835
20,191
32.0

6,578
7,620
13.5

2015
% diff. from
Average
-78%
-75%
-59%
-71%
-62%
-67%
-61%
-63%
-67%
-62%
-58%
-62%
-65%

2016 YTD
Market % diff. from
Rate
Average
3,262
-92%
5,331
-87%
23.8
-61%
-80%
4,916
-75%
5,108
-77%
13.0
-64%
-72%
3,356
-83%
4,667
-77%
12.0
-62%
-74%
-75%

remained under pressure,


with average earnings in all
sectors in the year to date
down y-o-y. Capesize spot
earnings in the first two
months of 2016 fell 52%
y-o-y to average $3,262/
day, and the Capesize
market is 80% below the
historical average.

This Year
-14%
-12%
-2%
-9%
-13%
-11%
-3%
-9%
-16%
-15%
-5%
-12%
-10%

Worse
Worse
Bit Worse
Bit Worse
Worse
Worse
Bit Worse
Bit Worse
Worse
Worse
Bit Worse
Worse
Bit Worse

prices fell
declined in all sectors during 2015 and have continued to fall in the year to
date, reflecting weak market
sentiment.
The
secondhand price for a 5
year old Capesize stood at
$23.8m at the end of February 2016, down 39%
y-o-y.

Overall, the dry bulk market is 75% below the longterm historical trend.

Figure 1.5.1 The Bulkcarrier Market

Bulkcarrier Market Cycles


180

$,000/d

m dwt

70

Bulkcarrier Lay-Up

160

60

Panamax 1 Year T/C


Capesize 1 Year T/C

140

50
120
100

40

80

30

60
20
40
10

20
0

1972
1973
1974
1975
1976
1977
1978
1979
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
2011
2012
2013
2014
2015
2016

Source: Clarksons Research

Figure 1.5.2

Clarksons Research
Spring 2016

19

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Soft

growth since 1999. Weak market conditions led


to a surge in demolition last year, with 30.6m
dwt reported scrapped, almost double the 2014
level. Deliveries continued at a relatively steady
pace, with 49.3m dwt entering the fleet. Bulker
ordering was very subdued in 2015, with just
250 units of a total 17.7m dwt reported ordered,
compared to an average of 74.2m dwt p.a. in
the previous ten years. Some owners also
chose to convert existing orders to other vessel
types including tankers and boxships. In 2015,
the bulker orderbook declined by 28% in terms
of tonnage, and at the start of March 2016
stood at 1,391 vessels of 112.5m dwt, the
smallest it has been since early 2007.
The Capesize Market
A notable slowdown in the pace of seaborne
iron ore trade growth in 2015, largely due to
sluggish Chinese import demand, placed significant pressure on the Capesize market in 2015.
Capesize spot earnings declined 44% y-o-y to
average $9,060/day and the market has weakened even further in 2016 so far, with earnings
reaching a record low of $2,690/day in February. Capesize fleet growth slowed to just 0.4%
in dwt terms in 2015, on the back of firm demolition (totalling 15.4m dwt). Meanwhile, newbuilding interest has collapsed contributing to a
decline in the size of the orderbook, which was
equivalent to 14% of the fleet at the start of
March 2016, compared to 21% a year earlier.
The Panamax Market
Following average growth of 10% p.a. in 201014, Panamax fleet growth slowed to 1.5% in
2015. Despite this, conditions in the Panamax
market remained challenging last year, as seaborne coal trade declined on the back of weak
demand in Asia and Europe. Overall, average
Panamax spot earnings softened 6% y-o-y to
$7,335/day in 2015, and fell even further to
$4,831/day in February 2016.
The Handymax Market
The Handymax fleet, which includes Ultramaxes and Supramaxes, expanded rapidly by 7.7%
in dwt terms in 2015. This firm pace of growth,
coupled with a decline in seaborne coal trade
and only limited growth in minor bulk trade volumes, placed considerable pressure on the

20

Year End

Forecast

Dry Bulk Fleet


(m.dwt)

2012

2013

2014

2015

2016

Capesize

280.0

293.9

308.2

309.4

309.7

308.3

12.0%

5.0%

4.9%

0.4%

0.1%

-0.4%

Panamax
Handymax
Handysize
Total Fleet

2017

169.2

184.2

192.3

195.2

196.6

198.5

12.0%

8.9%

4.4%

1.5%

0.7%

1.0%

147.4

158.3

166.6

179.4

189.7

195.8

12.2%

7.4%

5.2%

7.7%

5.7%

3.2%

90.1

89.5

90.6

91.9

91.8

90.9

1.6%

-0.7%

1.3%

1.5%

-0.1% -1.0%

686.7

726.0

757.7

775.8

787.8

793.5

10.6%

5.7%

4.4%

2.4%

1.5%

0.7%

Table 1.6 Bulkcarrier Fleet


Handymax market in 2015. Average Supramax
trip rates fell 28% y-o-y to $6,578/day in 2015.
Weak sentiment contributed to a fall in contracted in 2015, with just 4.9m dwt of Handymax
tonnage reported ordered, compared to 31.2m
dwt in 2013 and 17.9m dwt in 2014.
The Handysize Market
The build-up of surplus capacity in the
Handysize market in recent years, as well as
limited growth in seaborne minor bulk trade last
year (the slowest pace since 2009), continued
to place pressure on fundamentals in 2015. Average Handysize trip rates decreased 28%
y-o-y to $5,485/day during the year.
Bulkcarrier Market Outlook
The extremely difficult operating environment
has seen owners take significant supply side
action, and demolition is expected to remain
very firm this year. This is projected to help
bulkcarrier fleet growth slow to just 1.5% in
2016, and 0.7% in 2017, whilst newbuilding interest is expected to be subdued. Despite this
notable supply-side adjustment, the outlook for
seaborne dry bulk trade growth remains difficult. Chinas continued economic transition and
a focus on reducing overcapacity in some
heavy industries is likely to impact trade.
Growth in global iron ore trade is expected to
be limited as a result, and coal trade is also
likely to come under further pressure from
weaker Chinese and Indian demand. With dry
bulk trade growth expected to remain subdued
in coming years, with expansion of just 0.3%
projected for 2016, the market is likely to remain under pressure for some time yet.

Clarksons Research
Spring 2016

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SHIPPING MARKET OUTLOOK

SHIPPING MARKET OUTLOOK

100

$ million

Seaborne Dry Bulk Trade

$ ,000/d

80
72

90
80

64

5 Year Old
Panamax

70

56

60

48

50

40

15 Year Old
Panamax

5,500

mt

y-o-y growth

18%

Iron Ore
Coal
Grain
Minor Bulk
Dry Bulk Trade Growth

5,000
4,500

16%
14%

4,000

12%

3,500

10%

3,000

8%

2,500

6%

16

1,000

0%

10

500

-2%

-4%

Jan-16

Jan-14

Jan-12

Jan-10

Jan-08

Jan-06

Jan-02

Jan-00

Jan-98

Jan-96

Jan-94

Jan-92

Jan-04

Panamax 1 Year T/C

Source: Clarksons Research

Source: Clarksons Research

Figure 1.5.4

Figure 1.5.3

Bulkcarrier Fleet by Type

Bulkcarrier Fleet Trends

m. dwt, end yr.

90%

180

80%

160

70%

140

60%

120

500

50%

100

400

40%

80

300

30%

60

200

20%

40

100

10%

20

0%

900

700
600

m dwt
year to date

2016/17 = Forecasts.

Handysize
Handymax
Panamax
Capesize

800

2016(f)

20

2014

2%

2012

1,500

2010

24

2008

30

2006

4%

2004

2,000

2002

32

2000

40

Orderbook as
% of Fleet

Contracting

Deliveries

Source: Clarksons Research

Figure 1.5.5

Clarksons Research
Spring 2016

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

Scrapping

Source: Clarksons Research

Figure 1.5.6

21

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Bulkcarrier Prices & T/C Rates

SHIPPING MARKET OUTLOOK

Container Fleet
('000 TEU)

2013
4,083
-2.5%
7,443
1.1%
3,555
13.8%
2,058
30.5%
2,219
-0.4%
19,357
4.8%

Year End
Forecast
2014
2015
2016
2017
4,009 4,015 4,009 3,992
-1.8% 0.1% -0.1% -0.4%
7,453 7,468 7,254 7,008
0.1%
0.2% -2.9% -3.4%
4,096 4,797 5,284 5,570
15.2% 17.1% 10.2% 5.4%
2,695 3,457 3,965 4,724
30.9% 28.3% 14.7% 19.2%
2,189 2,184 2,159 2,117
-1.3% -0.2% -1.2% -1.9%
20,443 21,921 22,671 23,411
5.6%
7.2%
3.4% 3.3%

Over the last six months, the containership market has come under renewed pressure, partly
as a result of slower growth in seaborne box
trade. Boxship charter earnings were volatile in
2015, and improved in the first half of the year,
having remained at historically weak levels for
some time. However, these gains were relinquished in the second half of the year. Earnings
have remained at historically low levels into early 2016, with the Panamax one year charter
rate standing at $5,800/day in February 2016,
down from over $15,000/day in mid-2015. While
the slowdown in a key part of the cascade
trend, and limited supply growth in the small
and medium sized boxship fleets had supported
improved earnings in early 2015, the cumulative
impact of slower growth in seaborne container
trade took its toll on the market as the year
went on. Reduced vessel demand also contributed to an increase in the level of idle capacity,
to more than 8% of the fleet by early March
2016, the highest level in six years. Meanwhile,
the box freight market remained highly volatile
and subject to severe downward pressure in
2015 and into early 2016, significantly impacting liner company performance. Freight rates
have declined to near-record lows on several
occasions since mid-2015, as liner companies
continue to struggle to manage the impact of
robust deliveries of very large containerships.

Small
(<3,000 TEU)
Intermediate
(3-8,000 TEU)
Deep Sea
(8-12,000 TEU)
Large
(12,000 TEU +)
Other Container Capable vessels

Containership Demand

Containership Outlook

Box trade growth is estimated to have slowed to


2.3% in 2015, less than half the pace of growth
achieved in 2014. While volume growth on the
Transpacific remained fairly robust, volumes on
the key Far East-Europe trade declined by 4%,
on the back of weak European import demand,
reduced Russian imports and cutbacks in inventory restocking. Growth in intra-Asian volumes slowed to around 3% in 2015, as a result
of slowing Chinese economic growth and weaker performance elsewhere in Asia. Meanwhile,
container imports into commodity exporting developing economies also slowed in the second
half of 2015, with total North-South trade increasing by just 1.1% in the full year.

Supply growth in the fully cellular containership


fleet is expected to slow in 2016 to 3.9%, as the
pace of mega boxship deliveries eases slightly. However, large containership deliveries are
still expected to remain firm (and are projected
to accelerate again in 2017), and this is likely to
continue to exert pressure on freight rates in the
short-term. Supply side fundamentals in the
charter market remain positive as a result of
greater demolition, limited deliveries in the
smaller segments, and the likely continued
slowdown of the cascade of surplus capacity.
However, charter rates are not expected to increase until growth in container trade improves.
The build up of surplus capacity, especially in
the Post-Panamax sector, is also likely to require time to absorb. Global box trade expansion is currently expected to increase to around
4% in 2016, although this projection remains
subject to a number of downside risks.

Containership Supply
At the start of March 2016, the containership
fleet numbered 5,230 ships of 19.8m TEU. Con-

22

Total Container
Fleet ('000 TEU)

Table 1.7 Containership Fleet


tainership fleet growth accelerated further in
2015, with expansion of 8.1% recorded during
the year in terms of capacity. Deliveries totalled
1.7m TEU last year, with 87% of this volume in
the 8,000+ TEU sector. Meanwhile, containership demolition slowed in 2015 to 0.19m TEU,
from 0.37m TEU in 2014. Contracting activity
doubled last year compared to 2014 levels, with
231 ships of 2.1m TEU ordered last year, the
majority of which was in the mega boxship
sector, although there was some activity in the
feeder segment. By the start of March 2016,
the orderbook totalled 439 ships of 3.7m TEU,
equal to 19% of fleet capacity. Slow steaming
continues to absorb capacity and despite the
lower bunker prices, there has been no indication of a significant increase in service speeds.

Clarksons Research
Spring 2016

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1.6 Containership Market Overview

SHIPPING MARKET OUTLOOK

Following improvements in
Firm

Soft

Softer

Firmer

-30%

+30%

-60%

In the first two months of


2016, charter rates were
on average 49% below the
long-term historical trend,
reflecting slower growth in
boxship demand and the
build up of surplus fleet
capacity. Charter rates
have declined particularly
significantly in the PostPanamax sizes.

+60%

-90%

Weak!

early 2015, containership


charter earnings have returned to historically low
levels and remain under
pressure.

+90%

-48%

-120%

Strong!

+120%

Where are we in the Containership Cycle ?

1,000 teu geared

Market
Rate
Indicator
1 year t/c ($/day)
10 year old ($m.)

2006-15
Average
Value
7,846
10.2

Market
Rate
8,220
6.0

1,700 teu geared

1 year t/c ($/day)


10 year old ($m.)

9,904
14.8

10,825
8.5

1 year t/c ($/day)


2,000 teu gearless 10 year old ($m.)

10,592
16.7

11,339
8.5

1 year t/c ($/day)


2,750 teu gearless 10 year old ($m.)

13,042
22.1

13,544
11.0

1 year t/c ($/day)


4,400 teu gearless 10 year old ($m.)

18,222
21.2

15,660
12.0

Ship by Type

Container Charter Market Average

2015
% diff. from
Average
5%
-41%
-18%
9%
-43%
-17%
7%
-49%
-21%
4%
-50%
-23%
-14%
-43%
-29%
-22%

2016 YTD
Market % diff. from
Rate
Average
6,475
-17%
4.8
-53%
-35%
7,000
-29%
7.0
-53%
-41%
6,650
-37%
7.0
-58%
-48%
6,000
-54%
9.0
-59%
-57%
5,875
-68%
9.5
-55%
-61%
-48%

This Year
-22%
-12%
-17%
-39%
-10%
-24%
-44%
-9%
-27%
-58%
-9%
-33%
-54%
-12%
-33%
-27%

Worse!
Worse
Worse
Worse!!
Worse
Worse!
Worse!!
Bit Worse
Worse!
Worse!!
Bit Worse
Worse!!
Worse!!
Worse
Worse!!
Worse!

Asset prices have come


under renewed pressure
on the back of weaker market sentiment. The guideline price for a 10 year old
gearless 2,750 TEU containership reached $9.0m
in February 2016, 59% below the long-term average.

Figure 1.6.1 The Containership Market

Containership Fleet Trends

Containership Charter Rates


$ ,000/d

60

3,500

'000 TEU
year to date

55

4400 TEU gls


3,000

50

Contracting

45
2,500

40

Deliveries

2750 TEU gls

35

2,000

30
25

1,500

20
Scrapping

15

1,000

10
5

500

1700 TEU grd

Source: Clarksons Research

Figure 1.6.2

Clarksons Research
Spring 2016

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

Jan-16

Jan-14

Jan-12

Jan-10

Jan-08

Jan-06

Jan-04

Jan-02

Jan-00

Jan-98

Jan-96

Source: Clarksons Research

Figure 1.6.3

23

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Average Values,
2006-2015

1.7 Overview Of Other Sectors

Reefer Sector

Outside of the three major volume sectors, market performance has also been mixed over the
last six months. For more details on each of the
following markets, see Section 2.

Reefer market conditions improved slightly in


2015, with the decline in the fleet in recent
years helping to balance the market to an extent. However, spot rates have decreased so
far in 2016, and the outlook remains challenging. The sector is expected to continue to lose
market share to boxships into the long-term.

Gas Carrier Sector


Market conditions in the LNG and LPG sectors
diverged considerably in 2015. In the LPG sector, VLGC earnings rose further from very firm
levels in 2014, to average $88,508/day in 2015,
up 15% y-o-y. The market was supported by
rapid LPG trade growth, driven by strong expansion in US exports. However, conditions in
the smaller LPG carrier sectors were mixed.
Meanwhile, short term rates in the LNG carrier
market weakened in 2015. Subdued Asian LNG
demand undermined expansion in seaborne
LNG trade, whilst the fleet has continued to
grow fairly quickly. The guideline spot rate for a
160,000 cbm carrier fell in 1H 2015, and averaged $36,038/day in the full year, down 50%
y-o-y, and by February 2016 had dropped to
$27,750/day. The drop in LNG spot prices has
also led to increased delay in LNG project development, although increased volumes are
expected and there were newbuild orders
placed for long-term projects.
Chemical Tanker Sector
The chemical tanker market continued to gradually improve in 2015. The average one year
timecharter rate for a 19,999 stainless steel
tanker rose by 8% y-o-y in 2015 to
$15,233/day, and reached $16,250/day by February 2016. Growth in seaborne chemical trade
accelerated in 2015, partly reflecting the positive impact of low energy prices on downstream
demand in some regions.

Car Carrier Sector


2015 was a difficult year for the car carrier sector. Charter rates and asset prices have declined, whilst idling of tonnage has increased.
The one year charter rate for a 6,500 ceu carrier fell to $22,500/day in February 2016, down
14% from mid-2014. Having recorded gradual
improvement in 2009-14, the sector has since
come under pressure from the impact of lower
demand growth in recent years, as seaborne
trade in cars has expanded at a slower pace.
Ro-Ro/Passenger Sectors
In the Ro-Ro and passenger ferry sectors, the
market has tightened significantly, and notable
improvements in charter rates and asset prices
have been seen. The one year charter rate for a
3,500lm Ro-Ro reached 21,000/day in February 2016, up from 14,500/day at the start of
2015. Following a period of depressed market
conditions, elevated levels of demolition and
limited contracting in recent years have led to a
decline in the Ro-Ro fleet, and limited expansion in the passenger ferry fleet, allowing gradual demand improvements to tighten the market. Major operators are now expected to undertake fleet renewal programmes in coming
years, in part to meet increasingly stringent
emissions regulations.
Cruise Sector

MPP Sector
The MPP market has come under considerable
pressure in recent years. The sector has continued to face competition from the containership
and bulkcarrier fleets, two sectors with sizeable
levels of surplus capacity. Shipments of project
cargoes have also reportedly weakened, owing
to reduced investment in energy and offshore
projects. The guideline one year charter rate for
a 21,000 dwt MPP stood at $9,500/day at the
end of February 2016, down 5% y-o-y.

24

The rate of expansion in the cruise industry has


continued unabated, and newbuilding interest
has been strong in recent years, leading to a
record orderbook of 48 units by start March
2016. The cruise lines are continuing to expand
operations in Asia, and optimism about prospects for growth in the region has led some
companies to order new ships and modify existing vessels for the growing Chinese market.
For detailed analysis of the offshore sector, see Section 2.1
and Offshore Review and Outlook.

Clarksons Research
Spring 2016

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SHIPPING MARKET OUTLOOK

SHIPPING MARKET OUTLOOK

Chemical Tanker One Yr T/C Rates

180

$,000/day

18

LNG Carrier
160,000 cbm
Spot Rate

160

16
VLGC Timecharter
Equivalent Earnings

140

14

20

0
Jan-16

Jul-11

19,999 dwt Stainless Steel Tanker


13,000 dwt IMO II Chemical Tanker

Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16

40

Jul-15

Jan-15

60

Jul-14

Jan-14

80

Jul-13

10

Jan-13

100

Jul-12

12

Jan-12

120

Jan-11

$000/day

Source: Clarksons Research

Source: Clarksons Research

Figure 1.7.1

PCTC Timecharter Rates


60

$000/day

Figure 1.7.2

Ro-Ro & Ro-Pax Timecharter Rates


30

000/day
3,500-4,000 lm Ro-Ro
2,000-2,500 lm Ro-Ro
2,000-2,500 lm Ro-Pax

50

25

40

20
30

15
20

10

10
6,500 ceu PCTC
4,500 ceu PCTC

Figure 1.7.3

Clarksons Research
Spring 2016

Feb-16

Nov-15

Aug-15

Feb-15

May-15

Nov-14

Aug-14

Feb-14

May-14

Nov-13

Aug-13

Feb-13

May-13

Nov-12

Aug-12

Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Source: Clarksons Research

May-12

Source: Clarksons Research

Figure 1.7.4

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LNG and LPG Carrier Markets

SHIPPING MARKET OUTLOOK

1.8 The Shipbuilding Market

The global orderbook now totals 283m dwt,


equivalent to 16% of the fleet, with nearly two
thirds of tonnage on order due for delivery in
2016. However newbuild ordering dropped 30%
in 2015 and in general yards struggled with increasingly challenging conditions as the year
developed. In the mid-2000s, builders benefitted from record newbuild demand and yard output peaked in 2010/11. After several years of
limited ordering after the economic downturn,
contracting rose to relatively healthy levels in
2013 and 2014, partly fuelled by eco ships
and investors judging a market cycle opportunity. Last year, NOx Tier III regulation provided a
one-off boost to yards as owners looked to secure slots to avoid the cost of compliance. Despite this, contracting in 2015 fell to its lowest
level since 2002, totalling 1,348 orders of 99m
dwt. Meanwhile the Clarksons Newbuild Price
Index has fallen by 5% since the start of 2015.
2016 has begun quietly, with some of the lowest monthly ordering volumes for 30 years.
Lower order potential is anticipated for 2016,
particularly in the volume bulker sector (buyers
have been relatively active in the re-sale market
however) and the value-added offshore sectors
(many largely finished units remain in shipyards
undelivered). The cruise market remains a
bright spot, with a record orderbook stretching
out beyond the end of the decade.
Shipbuilding Activity
In 2015, global shipyard output rose for the first
time in five years with a reported 36.9m CGT
delivered. This was largely driven by higher output in the tanker and gas sectors. Chinese and
South Korean yards each accounted for 35% of
global deliveries while yards in Japan delivered
18% of global output in terms of CGT. However,
the recent drop in bulker ordering has generally
hit Chinese yards the hardest and their share of
global orders fell to 30% in 2015, from 38% in
2014 in terms of CGT. Having lost market share
since 2003, South Korean and Japanese yards
took a greater share of global orders in terms of
CGT in 2015, 30% and 27% compared to 28%
and 22% in 2014 respectively. Korean yards
continue to take the largest share of large tank-

26

Global Shipyard Capacity


Over the previous decade, the global shipbuilding industry underwent a dramatic, almost unparalleled, expansion, largely driven by rapid
growth in Chinese shipyard capacity. Commercially available shipyard capacity is estimated to
have fallen over 20% from its peak in 2011 to
around 50m CGT at the end of 2015, with the
number of active yards dropping significantly.
However, the current market situation is expected to put further pressure to reduce capacity and the major shipbuilding nations face a
range of issues. In South Korea, dealing with
problematic offshore orders is a particular issue, with large financial losses reported. China
is meanwhile facing very limited demand from
its core bulker market.
Looking Ahead
Despite being remarkably resilient in recent
years, it looks like shipyards will face another
testing period, with weak order volumes expected and pressure on pricing set to continue.
While shipyard output is projected to rise again
in 2016, global delivery volumes are expected
to fall back in 2017 as the backlog of orders is
worked through. A further downward adjustment to shipbuilding capacity appears to be
required to reduce the current surplus, with all
of the major shipbuilding nations facing difficulties. In the long-term, newbuilding demand
should recover to some extent due to the continued expansion of seaborne trade and the
replacement of older, more inefficient (and polluting) vessels. However, the shipbuilding sector will remain under significant pressure in the
short-term.

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Ordering Trends

er and mega boxship orders (although China


has begun to grow market share) and are dominant in tanker and large gas carrier construction. However, Chinese yards have had some
success in diversifying their product mix; they
account for 64% of the 8-12,000 TEU boxship
orderbook in TEU terms. Japan was the only
nation to increase orders in 2015, with currency
movements helpful. Japanese yards reputation
for a high quality of build , as well as a large
domestic owner base (Japan was the largest
newbuild investor in 2015), saw yards there
secure a 20% share of global contracts in 201215 in terms of CGT.

SHIPPING MARKET OUTLOOK

6,000

Other
Offshore
Gas Carriers
Containerships
Bulkers
Tankers

180

2016: year to date

120

5,000
Average no. of
annual contracts in
2007-15

4,000

Shipbuilding Deliveries by
Builder Country
m dwt
China
South Korea
Japan
Other Asia
Europe
Other

160
140

2016: year to date


100

3,000

80

2,000

60
40

1,000
20

Source: Clarksons Research

Figure 1.8.1

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

Source: Clarksons Research

Figure 1.8.2

Orderbook by Vessel Type


m dwt
700
Others
Gas Carriers
Containerships
600
Tankers
Bulkers

1996

1994

1992

1990

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Newbuilding Price Index


200

Index

175

500

150
400

125
300

Source: Clarksons Research

Figure 1.8.3

Clarksons Research
Spring 2016

Jan-16

Jan-14

Jan-12

Jan-10

Jan-08

Jan-06

50

Jan-04

Jan-00

75

Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16

100

Jan-02

100

200

Source: Clarksons Research

Figure 1.8.4

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Shipbuilding Contracts
No.

SHIPPING MARKET OUTLOOK

In 2015, global demolition volumes increased


15% year-on-year to a reported 38.9m dwt.
Weak market conditions in the dry bulk sector
put pressure on owners to scrap older, less efficient ships and bulker demolition rose 87% year
-on-year to 30.6m dwt in 2015. This was equivalent to 79% of total ship recycling last year and
activity in other vessel sectors was relatively
limited. A firm earnings environment in the tanker sector saw recycling fall to its lowest level
since the 1980s with just 2.3m dwt reported
scrapped in 2015 while boxship recycling volumes declined 48% year-on-year to 0.2m TEU.
Only two VLCCs were recycled in 2015 while
Panamax boxship scrapping fell 44% year-onyear to 23 ships. Demolition activity remained
firm in 2015 despite historically low scrap prices
as Chinese exports of cheap steel billets flooded domestic steel markets in the Indian SubContinent (ISC) and caused scrap prices to decrease by around 40% across 2015. Recycling
levels in the first two months of 2016 have been
strong, especially in the bulkcarrier and containership sectors, with bulkers accounting for 85%
of the 10.8m dwt reported sold for scrap.
Bulkcarrier earnings weakened further in 2015
to historically depressed levels. This supported
a record 15.4m dwt of demolition in the
Capesize sector in 2015, which accounted for
around half of total bulker recycling last year.
Activity in the Panamax and Handysize bulker
segments was also strong in 2015 with 6.7m
dwt and 5.2m dwt reported scrapped respectively. Overall, the average age of bulkers
scrapped fell to 21 years in 2015, from 24 years
in 2014, with Capesize units as young as 15
years demolished.

demolition subsidy, open to Chinese owned and


flagged ships, and there are around 50 state
approved recycling facilities. Elsewhere, scrap
volumes at Turkish recycling yards rose last
year, supported by increased activity in the offshore sector. The IMOs Hong Kong Convention, which aims to promote the safe and environmentally sound recycling of ships, has seen
limited uptake with only five signatories so far.
Whilst the EU has introduced its own environmental Ship Recycling Regulation for EU
flagged vessels, it is uncertain how effective the
legislation will be.
Outlook
Looking forward, global demolition volumes are
expected to remain at elevated levels. The
shape of the age profile of the world fleet suggests that the volume of scrapping candidates
will increase at or close to todays scrapping
ages. Increasing environmental regulation, such
as the IMOs Ballast Water Management Convention and MARPOL Annex VI emission limits,
and the costs of compliance are also likely to
support demolition volumes. In full year 2016,
approximately 50m dwt is projected to be demolished globally as bulkcarrier scrap volumes
are expected to remain strong, whilst recycling
activity in the containership sector is also projected to increase.

World Fleet Age Profile


200 m. dwt
year to date
180
160
140

Others (incl. small and non-cargo)


Gas Carriers
Containerships
Bulkcarriers
Tankers

120

28

100

Based on total world fleet


of 91,294 vessels.

80
60
40
20
0
<=1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015

The ISC continues to account for the majority of


global shipbreaking capacity and breakers in
the region accounted for 76% of demolition in
2015. Indian shipbreaking activity was relatively
limited last year, in part due to the low scrap
prices, and Bangladeshi breakers accounted for
the largest volume of tonnage recycled, 4.2m
dwt. The scrap price differential between the
ISC and the Far East remained significant in
2015, ranging between $130-180/ldt, and the
Chinese ship recycling industry continued to
focus on the domestic owner market. Chinese
breakers have benefitted from the governments

Source: Clarksons Research

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Spring 2016

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1.9 The Recycling Market

SHIPPING MARKET OUTLOOK

65

Tankers
Bulkcarriers
Gas Carriers
Containerships
Other

60
55
50

55
50

45

45

2016: year to date

40

Bangladesh
India
Pakistan
China
Other

60

2016: year to date

Figure 1.9.1

2016

Figure 1.9.2

Scrap Prices

m dwt
Tankers

4.0

2014

Source: Clarksons Research

Demolition Trends
4.5

2012

2016

Source: Clarksons Research

2010

2008

2006

2004

2002

10

1996

10

2014

15

2012

15

2010

20

2008

20

2006

25

2004

25

2002

30

2000

30

1998

35

1996

35

2000

40

1998

65

Demolition by Country
m dwt

Bulkers

3-month
moving
average

600

$/ldt

550

3.5

500

3.0

450
400

2.5

350
2.0

300
1.5

250
1.0

200

Source: Clarksons Research

Figure 1.9.3

Clarksons Research
Spring 2016

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

100

Jul-13

0.0

Handy Bulker - Indian Sub-Cont


c.2,000 TEU Containership - Bangladesh

Jan-13

150
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16

0.5

Source: Clarksons Research

Figure 1.9.4

29

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Demolition by Vessel Type


m dwt

SHIPPING MARKET OUTLOOK

1.10 Supporting Industries

The ship finance environment has changed


significantly since 2008. While European banks
and bilateral or syndicated debt-based finance
still remain the core component of the sector,
European banks have moderated their
approach to lending and some have withdrawn
from the ship finance space altogether.
Meanwhile, other sources of finance have
grown in important in recent years, including
export credit agencies and leasing institutions.
In the bank finance sector, lending volumes
have recovered in recent years following more
limited activity after the financial crisis. The
value of reported syndicated marine finance
loans totalled $107bn in 2015 and $110bn in
2014, close to the 2007 high, and around
double the volume loaned in 2012. However,
banks continue to take a more conservative
approach to lending, with most traditional
banks focused towards lending to top-tier
companies, and owners not seen to be top-tier
finding it increasingly difficult to raise debt
through traditional ship finance channels.
Meanwhile, capital markets activity has
declined to low levels following stronger activity
in 2013-14. Whilst 2015 started with some
issuances, activity fell as the year progressed,
and the IPO window has generally been
regarded as closed, with many plans for new
listings being delayed or cancelled. At a
broader level, the difficult market conditions in
many of the key shipping and offshore sectors
at present is leading to increased restructuring
activity. This is likely to require the attention of
banks, lawyers, accountants and regulatory
bodies. For further discussion of trends in the
financial markets, see Section 2.7.
Regulatory Environment
Environmental regulation continues to rise up
the shipping agenda and legislation is playing
an increasing role in across the industry. The
IMOs Ballast Water Convention is expected to
be ratified this year and while ballast water
management systems are standard for most
newbuilds, retrofit demand could be significant.
Stricter limits on ship emissions are coming into
force and all ships with a keel laid after 1st

30

Marine Equipment and Technology


The decrease in global contracting activity in
2015 and very weak newbuilding interest so far
in 2016 has created very challenging conditions
for marine equipment suppliers, and these
seem unlikely to be alleviated in the short-term
with ordering volumes expected to be very
weak this year. Meanwhile, in the long-term a
move towards the digitisation and integration of
ship operations could benefit innovative yards
and equipment manufacturers.
Flag States
Growth in the global fleet has slowed in recent
years, and is expected to remain at relatively
slower levels in the short-term. At the start of
March 2016, 74% of the global fleet in terms of
GT was flagged with the top ten flag states. The
Panama flag is the largest flag state,
accounting for 8,163 vessels of 221m GT, with
the Liberian flag in second position and the
quickly growing Marshall Islands in third. See
Table 89 in Section 3 for further detail on major
flag states.
Classification Societies
The twelve members of the International
Association of Class Societies (IACS) between
them classed 51,338 ships of a combined
1.15bn GT at the start of March 2016. This is
equivalent to 94% of the global fleet in terms of
tonnage. DNV GL classed 9,501 vessels of a
combined 260m GT, the largest fleet of any
IACS member in terms of both tonnage and
vessel numbers. The second and third ranked
class societies by tonnage terms were Nippon
Kaiji Kyokai, which classed a fleet of 241m GT,
and the American Bureau of Shipping, whose
classed fleet totalled 206m GT.

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Financial Markets

January 2016 must now meet the IMOs NOx


emission limits in the designated ECAs.
Elsewhere, the Chinese government introduced
its own domestic SOx ECAs and areas such as
the Mediterranean have been identified as
potential future ECAs. In the short-term, fuel
price trends make the case for LNG as a fuel
and fuel saving technology generally less
persuasive. However, in the longer term stricter
emission limits are expected to drive investment
in emission reduction technology.

140

$bn

Syndicated Marine Finance


Loan Volumes

Global Shipping* Capital Market Activity


110

No
Follow On**
IPO
Bond (RHS)

100
90

120

$m
IPO
Follow On
Bond

No
2014 2015
1,637 825
8,466 4,130
9,483 6,982

80

100

100

80

70
60

80

60
Includes OTC.
2016* = year to date.

50
40

60

40

30

40

20

20

10

20

Source: Dealogic, Clarksons Research

Figure 1.10.1

2015

2014

2013

2012

2011

2010

Source: Clarksons Research


*Companies whose primary activity is shipping. **Follow On only
includes issuances of new shares. For more information see Capital
Market Monthly on Shipping Intelligence Network.

Figure 1.10.2

Top Class Society Fleets

Top 10 Flag State Fleets


250

2016*

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2009

2008

% y-o-y growth

m GT, start March 2016

Points show fleet growth


in GT in 2015 (RHS)

200

20%

300

m GT, start March 2016

% y-o-y growth

6%

250

5%

15%
200

150

10%

100

5%

4%
Points show fleet
growth in GT in
2015 (RHS)

150

3%
2%

100

1%
50

50

7%

0%

0%
0

Figure 1.10.3

Clarksons Research
Spring 2016

Korean Register

China Class Society

Bureau Veritas

Lloyd's Register

American Bureau

Nippon Kaiji Kyokai

Japan

Greece

China P.R.

Bahamas

Malta

Singapore

Hong Kong

Marshall Is.

Liberia

Panama

Source: Clarksons Research

DNV GL

-5%

-1%

Source: Clarksons Research

Figure 1.10.4

31

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SHIPPING MARKET OUTLOOK

SHIPPING REVIEW & OUTLOOK


TABLE OF CONTENTS
SECTION 1: SHIPPING MARKET OUTLOOK
Executive Summary
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10

Freight Market Overview


World Economy
Seaborne Trade
Tanker Market Overview
Dry Bulk Market Overview
Container Market Overview
Overview Of Other Sectors
The Shipbuilding Market
The Recycling Market
Supporting Industries

7
8
10
12
14
18
22
24
26
28
30

SECTION 2: SHIPPING SECTOR REPORTS


2.1
2.1.1
2.1.2
2.1.3
2.1.4
2.1.5
2.1.6
2.1.7
2.2
2.2.1
2.2.2
2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.4
2.4.1
2.4.2
2.4.3
2.4.4
2.4.5
2.4.6
2.4.7
2.4.8
2.4.9
2.5
2.6
2.6.1
2.6.2
2.6.3
2.7
2.7.1

OIL & TANKERS


VLCC Market
Suezmax Market
Aframax Market
Product Tanker Market
Chemical Tanker Market
Offshore Market
Bunker Market
GAS CARRIERS
LPG Carrier Market
LNG Carrier Market
DRY BULK
Capesize Market
Panamax Market
Handymax Market
Handysize Market
LINER VESSELS
Containership Market 12,000+ TEU
Containership Market 8-12,000 TEU
Containership Market 3-8,000 TEU
Containership Market <3,000 TEU
MPP / General Cargo Market
Ro-Ro Market
Car Carrier Market
Reefer Market
Passenger Ferry Market
CRUISE SHIPS
SALE & PURCHASE
Shipbuilding Market
Secondhand Sales
Recycling Market
FINANCIAL MARKETS
Capital Market Activity

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SECTION 3: SHIPPING REVIEW DATABASE


Global Overview / Historical Trade Series
Table 1
World Seaborne Trade
Table 2
World Seaborne Trade (Tonne Miles)

Clarksons Research
Spring 2016

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Table 3
Table 4
Table 5
Table 6
Table 7

Seaborne Oil Trade


Seaborne Dry Bulk Trade
Seaborne Container Trade
Worldwide Bunker Price Trends
World GDP Growth

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Historical Fleet Series


Table 8
Table 9
Table 10
Table 11
Table 12
Table 13
Table 14
Table 15
Table 16
Table 17
Table 18
Table 19
Table 20
Table 21
Table 22
Table 23
Table 24
Table 25
Table 26
Table 27
Table 28
Table 29
Table 30
Table 31
Table 32
Table 33
Table 34
Table 35
Table 36
Table 37
Table 38
Table 39
Table 40
Table 41

Total World Fleet (Dwt)


World Fleet by YOB (Dwt)
Total World Fleet (Numbers)
World Fleet by YOB (Numbers)
Total Orderbook (Dwt)
Total Contracting (Dwt)
Total Orderbook (Numbers)
Total Contracting (Numbers)
Total Deliveries (Dwt)
Total Demolition (Dwt)
Total Deliveries (Numbers)
Total Demolition (Numbers)
Tanker Fleet & Deliveries
Tanker Orderbook & Contracting
Tanker Demolition
Tanker Losses
Tanker Fleet Development
Combined Carrier Fleet Development
IMO-Graded Tanker Fleet
IMO 1 Graded Tanker Fleet
IMO 2 Graded Tanker Fleet
IMO 3 Graded Tanker Fleet
Bulkcarrier Fleet & Deliveries
Bulkcarrier Orderbook & Contracting
Bulkcarrier Demolition
Bulkcarrier Losses
LPG Carrier Fleet Development
LNG Carrier Fleet Development
Containership Fleet Development
Reefer Fleet Development
MPP Fleet Development
General Cargo Fleet Development
Ro-Ro Fleet Development
PCC Fleet Development

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Historical Rates & Prices


Table 42
The Clarksons Average Earnings Index
Table 43
Tanker Freight and TC Rates
Table 44
Dry Bulk Freight and TC Rates
Table 45
Tanker & Bulkcarrier N/B Prices
Table 46
Secondhand Tanker Prices
Table 47
Secondhand Bulkcarrier Prices
Table 48
Liner Vessel Charter Rates
Table 49
Liner Vessel Secondhand Prices
Table 50
Liner Vessel Newbuilding Prices
Table 51
Gas Carrier Rates & Prices
Table 52
Offshore Rates
Table 53
Mobile Offshore Fleet Development

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Fleets by Size & Age, 1st March 2016


Table 54
Tanker Fleet by Size & Age
Table 55
Tanker Fleet Development by Size
Table 56
Crude Tanker Fleet by Size & Age
Table 57
Product Tanker Fleet by Size & Age
Table 58
Chemical Tanker Fleet by Size & Age

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Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

CONTENTS

Table 59
Table 60
Table 61
Table 62
Table 63
Table 64
Table 65
Table 66
Table 67
Table 68
Table 69
Table 70

Specialised Tanker Fleet by Size & Age


Bulkcarrier Fleet by Size & Age
Bulkcarrier Fleet Development by Size
Containership Fleet by Size & Age
Containership Fleet Development by Size
LPG Carrier Fleet by Size & Age
LNG Carrier Fleet by Size & Age
LPG Carrier Fleet Development by Size
LNG Carrier Fleet Development by Size
Cruise Fleet by Size & Age (GT)
Cruise Fleet by Size & Age (Berths)
Cruise Fleet Development

Fleet by Year of Build, 1st March 2016


Table 71
Total Tanker Fleet
Table 72
Crude Tanker Fleet
Table 73
Product Tanker Fleet
Table 74
Chemical & Specialised Tanker Fleet
Table 75
Bulkcarrier Fleet
Table 76
Combined Carrier Fleet
Table 77
LPG Carrier Fleet
Table 78
LNG Carrier Fleet
Table 79
Containership Fleet
Table 80
Multi-Purpose Vessel Fleet
Table 81
General Cargo Liner Fleet
Table 82
General Cargo Tramp Fleet
Table 83
Ro-Ro Fleet
Table 84
PCC Fleet
Table 85
Reefer Fleet
Table 86
Passenger Ferry Fleet
Table 87
Cruise Fleet (GT)
Table 88
Cruise Fleet (berths)
Bulk Fleet Flag & Ownership, 1st March 2016
Table 89
Top Flags of Registration By Fleet
Table 90
Top Tanker Fleet Owners (by No. & Dwt)
Table 91
Top Bulkcarrier Fleet Owners
(by No. & Dwt)
Table 92
Top Operator-Owner Containership Fleets
(by TEU)
Table 93
Top Charter-Owner Containership Fleets
(by TEU)
Clarksons Research Ship Sales Database
Table 94
Secondhand Sales Volumes
Table 95
Recently Reported Tanker Sales
Table 96
Recently Reported Bulkcarrier Sales
Table 97
Recently Reported Liner Sales
Fleet Additions / Removals
Table 98
Recently Reported Tanker & Bulkcarrier
Contracts
Table 99
Recently Reported Non-Bulk
Contracts
Table 100 Recently Reported Tanker & Bulkcarrier
Scrap Sales
Table 101 Recently Reported Non-Bulk
Scrap Sales
Table 102 Capital Market Activity by Company Type
Table 103 Top Publicly Listed Shipping Fleets - Owner
Groups
Table 104 Top Publicly Listed Shipping Fleets - Stock
Exchanges
Table 105 Recently Placed Shipping Issues

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Cruise Industry
Once again, our cruise industry chapter was written by Bill
Ebersold, former Director of Statistics and Economic Analysis
for the U.S. Maritime Administration, and currently a consultant
and writer on the cruise industry.
Data Validity
Please note that the cut-off date for fleet and commercial data
in this report is 1st March 2016.
Disclaimer
The material and the information (including, without limitation,
any future rates) contained herein (together, the "Information")
are provided by Clarkson Research Services Limited
("Clarksons Research") for general information purposes. The
Information is drawn from Clarksons Research's database and
other sources. Clarksons Research advises that: (i) any Information extracted from Clarksons Research's database is derived from estimates or subjective judgments; (ii) any Information extracted from the databases of other maritime data
collection agencies may differ from the Information extracted
from Clarksons Researchs database; (iii ) whilst Clarksons
Research has taken reasonable care in the compilation of the
Information and believes it to be accurate and correct, data
compilation is subject to limited audit and validation procedures and may accordingly contain errors; (iv) the provision of
the Information does not obviate any need to make appropriate
further enquiries; (v) the provision of the Information is not an
endorsement of any commercial policies and/or any conclusions by Clarksons Research and its 'connected persons', and
is not intended to recommend any decision by the recipient;
(vi) shipping is a variable and cyclical business and any forecasting concerning it may not be accurate. The Information is
provided on "as is" and as available basis. Clarksons Research and its connected persons make no representations or
warranties of any kind, express or implied about the completeness, accuracy, reliability, suitability or availability with respect
to the Information. Any reliance placed on such Information is
therefore strictly at the recipient's own risk.
This Information is confidential and is solely for the internal use
of the recipient. Neither the whole nor any part of the Information may be disclosed to, or used or relied upon by, any
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These exclusions do not apply to (i) death or personal injury
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Clarksons Research
Spring 2016

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

Licenced to Mr. Panca Yudha Kurniawan of CNOOC SES Ltd.. Distribution is restricted; please remember to acknowledge the source. Shipping Review Outlook Spring 2016.

CONTENTS

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