3. YEAR 2019
FLOODING OF VALE
MINES ; OZ
CYCLONE
TRADE WAR
BETWEEN CHINA
AND USA
SANCTIONS ON VENENZULA AND IRAN
4. Ballast water managementSulphur Emission 2020
Singapore Will Seek Prison for Captains and Owners
Breaking 2020 Low Sulphur Fuel Rules
What’s next?
5. SCRUBBER –- Have or Have not?
Its two year story
• Its refinery job.
• Investment of USD 1.5 to 4 Million
& 30 days downtime.
• Payback on large vessels
• Uneconomical for smaller vessel
• Ban on open loop scrubbers
• Present scrap prices at high
• Differential in LSFO & HSFO price
• IOC, Port of Fujairah and others
confirm supply of LSFO
How it benefits Freight Market?
Vessels are heading for D/D
Vessel on LSFO due to price
differential will run at low speed.
Scrapping of vessel.
6. IMO 2020 Sulphur Cap: Dry Bulk Scrubber Uptake
Scrubber uptake for dry bulkmainly by the larger bulk sizes, particularly VLOC’s and Capesizes
14
18
58
185 143
10 15
38 18
72 6
14
167
1,027
108
459
868
1,089
2,788
697
3,381
0% 20% 40% 60% 80% 100%
VLOC
Capesize
Mini-Cape
Post Panamax
Kamsarmax
Panamax 7
118
Supramax
Handymax 1
Handysize 11 21
Confirmed Indicated No Indication
Current Fleet (No of Vessels) On Order (No of Vessels)
45
32
23
100
12
14 9
14 9
36
185
3
187
12
115
0% 20% 40% 60% 80% 100%
VLOC
Capesize
Mini-Cape
Post Panamax
Kamsarmax
Panamax
Supramax
Handymax
Handysize 22
Confirmed Indicated No Indication
7. • Seasonal
– Dry bulk trade usually drops in the Q1
– Chinese winter curtailment measures
• Exceptional
– Clampdown on coal imports into China
– Trade war continues to distort grain trade patterns
– Disruptions to Australian dry bulkexports
– Brazilian iron ore tailings dam disaster
• Cyclical
– Economic slowdown the most fundamental risk of all
1Q2019
WHY SUCH
CRASH IN
FREIGHT RATES?
8. Australian and Brazil Iron Ore Exports
First quarter volumes down year-on-year
Australia Weekly Capes (100k+ dwt) Ore Shipments Brazil Total Weekly Ore Shipments
Source: Clarksons Platou AIS tracking
9
8
7
6
5
20
19
18
17
16
15
14
13
12
11
10
Week1
Week5
Week9
Week13
Week17
Week21
Week25
Week29
Week33
Week37
Week41
Week45
Week49
MillionTonnes
2017 2018 2019
-9.2%
Ytd 19 vs ytd 18
Cyclone
Veronica
2
3
4
5
6
7
8
9
10
Week1
Week5
Week9
Week13
Week17
Week21
Week25
Week29
Week33
Week37
Week41
Week45
Week49
MillionTonnes
2017 2018 2019
-5%
Ytd19 vs Ytd 18
Vale Dam
Incident
17. Seaborne Trade: Summary
Seaborne trade growth recovers from a supply disrupted year
2017 Volumes 2017 2018 2019f
Iron Ore 1.53bnt 3.4% 1.2% 0.7%
Coal 1.21bnt 4.8% 4.3% 4.8%
Grains and Agricultural related 0.73bnt 6.6% -0.1% 4.9%
Construction and related 0.85bnt 0.8% 5.8% 4.6%
Other 0.09bnt 8.9% 9.3% 6.5%
Total 3.9% 2.9% 3.3%
Seaborne Trade Growth Demand Growth and Required Dwt Growth
• Iron ore – seaborne trade to increase with the restart of ‘lost’ volumes during Jan 19 in Brazil and Australia. Bructu mine to restart.
• Coal – increasing demand from emerging economies, although uncertainty and volatility with China’s imports.
• Grains – trade war will continue to drive uncertainty, the restocking of ‘lost’ volumes and continuation of changing trade patterns.
• Construction related commodities – Emerging economies infrastructure and energy expansion through initiatives such as China’s Belt-
Road-Initiative.
The total demand growth is forecast to increase by 3.3% in 2019.
Order book of vessels is forecasted to increase by 2~2.9%.
The required dwt demand is forecast to increase by 3.9% in 2019, led by the incremental grain and ore
volumes from Brazil, bauxite from Guinea and increased soybean volumes from ECSA.
25%
20%
15%
10%
5%
0%
-5%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018f
2019f
%YearonYearGrowth
Total Trade Growth Required DWT
Source : Various research papers
18. Guinea Bauxite: Expanding
Supporting Capesize tonne-mile demand
Guinea Monthly Capesize BauxiteShipments Guinea Total Bauxite SeaborneExports
Sources: Clarksons Platou, IHS Markit
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Milliontonnes
2016 2017 2018 2019
0
10
20
30
40
50
60
70
2012
2013
2014
2015
2016
2017
2018(f)
2019(f)
2020(f)
Milliontonnes
19. India and Emerging Economies coal demand continue to grow
Coal demand from emerging economies in search of affordable energy to support economic growth
-
20
40
60
80
100
120
140
2016
MillionTonnes
Vietnam
Thailand
2017 2018 2019(f) 2020(f)
Cambodia Malaysia Phillippines
Pakistan Egypt
• India coal imports reached about
223mt in 2018, and are expected to
continue to grow in 2019.
• Although the Indian Government's
intention is to ensure domestic
production is kept abreast to robust
economic growth.
• Economic development in Vietnam &
Cambodia has been driving the surge
in coal imports.
• New generation low emission power
plants are installed in many emerging
economies to ensure affordable energy.
Source: IHS Markit, Clarksons Platou
190
200
210
220
230
240
250
Emerging EconomiesCoal Imports India Coal Imports
160 260
2016 2017 2018 2019(f) 2020(f)
MillionTonnes
21. China’s Soybean Imports Set to Rebound in 2019?
Underlying demand for soybeans is good; disputes over origin
• China has resumed buying US soybeans after a near
cessation since April 2018 Trader expectations suggest
an interim purchase of c.3-5mt to bridge the gap until
Brazil’s new crop.
• Whilst the ‘truce’ is by no means the end of the entire
trade war, for the dry bulk market it means that the all
important soybean cargoes will return to the Panamaxes.
• ECSA will likely dominate shipments in Q2 but in Q3
markets may find that the US will need to clear their still-
substantial stocks before their new harvest in Q4. In total it
will be no surprise to see China’s imports rebound strongly
in the year.
• Regardless of what has been disputed thus far, one point is
clear: the demand for soybeans continues to grow. The
only question that remains is where buyers source it from,
which for dry bulk means more short term volatility.
Chinese Soybean Imports byYear
100
90
80
70
60
50
40
30
20
10
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019f
MillionTonnes
Brazil USA Argentina Uruguay Canada Other Forecast
22. Iron Ore Seaborne Supply
Limited replacement capacity, but to ramp-up over time.
881
902
917
384 394 383 399
275 254 256 262
200
300
400
500
600
700
800
900 873
2017 2018 2019(f) 2020(f)
MillionTonnes
Iron Ore Volumes Per Year per Country Incremental Iron Ore Exports in 2018 Incremental Iron Ore Export Forecast for 2019
-1.8
-7.0
-10.5
-4.6
1.4
-3.1
5
8.4
10.3
-2.0
-20 20
Total Seaborne
Brazil
Australia
Canada
South Africa
Chile/Peru
Iran
India
Sierra Leone
Others
0
Y-O-Y Million Tonnes
-7
41.0
23.0
20.6
20.0
4.8
4.2
1.6
1.4
0.7
0.3
-3.4
-8.9
1.2
1.0
-20 40 60
Total Seaborne
Brazil
Australia
Canada
South Africa
Chile/Peru
Iran
Finland
Sweden/Norway/
18.1
0 20
Y-O-Y Million Tonnes
Iron Ore Exports Forecast Pre-Vale Incident
Iron Ore Exports Forecast Post-Vale Incident
Australia Brazil Other
Source: GTIS, Customs, Port Agents, ClarksonsPlatou Seanet
23. Supply & Demand Balance
Demand for fleet tonnemiles is outpacing fleet growth and continues to rebalance the freightmarket
Total Dry Bulk Supply & Demand Balance Seaborne Demand:
• 2017 =3.9%
• 2018 = 2.6%
• 2019f =3.3%
• 2020f = 2.7%
Required dwt:
• 2017 =5.2%
• 2018 = 2.3%
• 2019f = 3.9%
• 2020f = 3.0%
Fleet growth:
• 2017 = 3.0%
• 2018 =2.9%
• 2019f = 3.7% or 2.9% /-1%*
• 2020f = 3.3%
* Provision made for off hire to comply
with IMO 2020
-1%
1%
3%
5%
7%
9%
11%
13%
15%
17%
19%
21%
23%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019f
2020f
%YearonYearGrowth
Trade growth Required dwt Net fleetgrowth
Slow steaming
started
24. All is not lost
1Q2019 impacted due to seasonal,
exceptional & cyclical factors.
Vessels Supply and demand are
well matched.
Vale has been given permission to
resume Brucutu mine on 16th April.
USA elections due in 2020, expect
softening stand on China and
speedy resolution on Venezuela.
