Many Faces, Many Futures The New Dynamic Face of Greek Shipping 4th Hydra Shipping Conference 15th September 2012 Dr Martin Stopford, President, Clarkson Research, London 1. 2. 3. 4. 5. The 7 Faces of Shipping Dynamics of Globalization Greek Shipping Evolution Six Challenges Conclusions How do you play this hand? 3. PUBLIC COMPANY 2. PRIVATE COMPANY 1. Shipowner 7. LEASING COMPANY 4. PRIVATE PARTNERSHIP KG etc 5. SHIP OPERATOR 6. MANAGEMENT COMPANY We must build a dynamic world economy • Before the 2nd World War the world the world (and shipping) was dominated by European Empires • In 1944 at the Bretton Woods conference in USA set the scene to change the system • The aim was to “globalize” of the world economy US Treasury Secretary Henry Morgenthau at Bretton Woods in 1944 1944 Global Free Trade Policy MEETING AT BRETTON WOODS IN USA • At Bretton Woods in 1944 US Treasury Secretary Henry Morgenthau outlined the objective of creating "a dynamic world economy ". • The method was to establish a new, liberalized trade regime • To assist in achieving this aim the World Bank, the IMF and GATT were founded. 13/04/2015 2nd April 2008 “The objective, gentlemen, is to create a dynamic world economy” Delegates at the Bretton Woods Conference in 1944 5 The Result – A “Flood” of Trade 1950-2011 Index 1950=100 1,600 Sea Trade World GDP 2012 Sea trade 16 times as big as in 1950 1,400 1,200 1,000 800 Sea trade grew at 4.3% per annum 600 400 200 World GDP Grew at average of 3.6% per annum 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 0 2012 World GDP 8 times as big as in 1950 The Shipbuilding Cycle Shipyards expand to replace the ships built in the 1970s boom Million Dwt 160 140 120 100 80 60 Deliveries 61 m dwt in 1976 Deliveries Scrapping Deliveries 162.5 m dwt in 2012 FORECAST Last phase of 1970s scrapping! 40 20 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 0 Globalization Part 1 7.50 Japan 6.30 Europe 3.80 N. America China S America Africa 1950-2000 OECD’s 1.3 billion population 0.8 0.6 0.20 2000-2050 6 billion Non-OECD population want to consume at OECD levels 0 1 2 3 4 5 6 7 8 9 10 11 12 Tonnes of sea imports per person a year Sea Transport was mechanized:A new Shipping Model developed in the 1950s Bulk Bulk Shipping Homogeneous cargoes Bulk carrier, tanker Liquids Unit Load Refrigerated Manufactures Specialised Shipping Container Shipping Specialized cargoes Unitized cargoes Air Freight Urgent cargo Container ship Air freighter Specialised ship The mechanization of sea transport lies at the heart of globalisation – adding value takes place by inter-segment competition Business Model Maturing • Low returns, chasing size • High investment requirement • Finance problems • Increased energy costs • Complexities of globalization Figure 3 The Potential Cargo Matrix (PCM) 2. Air Freight A B C 4. Bulk Transport Low High Volume tonnes per year • Globalization provided a massive opportunity for independents • Control of the fleet moved from imperial owners to independents • Greece led the way Greek Owned Fleet & Globalization Shows Gross tonnage and growth rate Million GRT 160 Greek owners used charter back $ loans to build the fleet in the 1960 140 2000s 5% pa 120 100 1990s 7% pa 80 1970s 7% pa 60 40 1960s 6% pa 1950s 18% pa 20 1980s -1.4% pa 2010 2000 1990 1980 1970 1960 1950 0 Greek Finance1949 to 2012 Greece’s share of the fleet grew from 3% in 1949 to 18% in 2008 % World Fleet 1996-2012 1974-1990 20% Steady at 15-17% 5% cut back 1949-1973 18% during Rapid growth based 1970s/80s 16% on time charters & recession Euro$ loans 14% 12% 10% 8% 6% 4% 2% 0% Equity Markets Bond Markets Euro$ market starts 1958 2012 2008 2004 2000 1996 1990 1986 1982 1978 1974 1970 1966 1962 1957 1953 1949 Charter backed finance Greek Owned Fleet - Top 10 Owners in 1969 No 1 2 3 4 5 6 7 8 9 10 Niarchos (London) Ltd Onassis Triton (Costas Lemos) S. Livanos Shipbrokers Ltd Capeside Steamship/Global N.J.Goulandris London & Overseas Freighters Chandris J.M. Carras Rethymnis & Kulukundis Total Top 10 Fleets Total Greek owned fleet 74 77 55 47 55 36 41 44 44 29 502 GRT 1,398 1,300 886 860 851 659 532 455 360 332 7,633 26,932 % Fleet 5% 5% 3% 3% 3% 2% 2% 2% 1% 1% 28% 72% • In 1969 the ten biggest international Greek companies owned 502 ships, accounting for 28% of Greek owned GRT Greek Owned Fleet - Top 10 Owners in 2012 1 2 3 7 5 6 8 4 9 10 Major Group No. Angelicoussis Group 80 Dynacom Tankers Mngt 68 General Maritime 95 Enterprises Shpg. 94 Tsakos Group 75 Cardiff Marine Inc. 54 Navios Group 58 Danaos Shpg. 60 Minerva Marine Inc. 45 Marmaras Nav. Ltd. 43 Total top 10 Fleet 672 Total Fleet GT 8,144 5,219 5,185 4,464 4,179 4,089 3,878 3,310 2,910 2,819 44,197 151,011 % 5% 3% 3% 3% 3% 3% 3% 2% 2% 2% 29% 71% • In 2012 the ten biggest international Greek companies owned 672 (much bigger) ships, accounting for 29% of Greek owned GRT. Greek Owned Fleet 2012 546 Greek companies owning ships over 5000 dwt Number of companies Number of ships owned • Top 10 own 672 ships • The core are the medium sized companies with 3-15 ships 0 50 100 150 200 250 300 1-2 ships 246 3 to 5 149 6 to 10 11 to 15 16-20 21-25 26-35 Small 73 Medium 35 14 8 Big Owners 11 36-50 6 50-70 4 Top 10 Owners Greek Owned Fleet: Ship Value • Greek companies owned ships worth $70.6 billion • $14.8 billion owned by listed companies • Medium companies have assets worth $32 billion (funding requirement of, say, $20 billion??) Fleet value $ billion 0 1-2 ships 5 15 Small (5% value) 4 10 3 to 5 12 6 to 10 Medium (45% value) 10 11 to 15 6 16-20 21-25 10 Big Owners (27% value) 5 26-35 8 36-50 8 50-70 8 Top 10 Owners (23% value) Values at 1st May 2012 (over 5000 dwt) Greek Owned Fleet By Type Fleet value $ billion 0 4 8 10 Tankers 37% VLCC 5 Suezmax 6 Aframax 4 Panamax 1 Products 10 Capesize 8 Kamsar max 4 Panamax 6 Supermax 7 Handymax 3 Handy 2 Gas 4 MPP 0 Container 7 Cruise & Ferry 2 Reefer 0 6 Bulkers 42% Other 20% • Broad portfolio, 80% tankers and bulkers • Containers only 10% which is low for the third biggest world fleet segment (5,100 ships worth $100 billion). 2 1. 2. 3. 4. 5. 6. Over-capacity Energy costs Regulatory focus Globalization part 2 IT & Comms revolution Container model How do you play this hand? Challenge 1: Shipping Over-Capacity M. Dwt 1800 1600 World Cargo Fleet 1963-2013 Surplus shipping capacity (% right axis) % Surplus 47% From 2009 world fleet surges ahead of demand 37% 1400 1200 Demand for sea transport runs ahead of supply 27% 1000 17% 800 600 7% 400 -3% 200 -13% 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 0 Challenge 2: Energy Costs THE SHIP USED TO COST MUCH MORE THAN BUNKERS BUT. TODAY BUNKERS COST MORE THAN THE SHIP. 40,000 $/day cost 35,000 30,000 2005 Ship costs 3x fuel 2012 Ship costs half fuel 25,000 20,000 15,000 10,000 Bunker cost 1 Year TC Rate 5,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 Based on Aframax tanker, 1 year TC rate and Rotterdam bunker price Challenge 3: Regulation • Requirement that new ships must comply with the EEDI, a clear attempt to drive efficiency improvements • The focus on air emissions; ballast water; recycling; energy efficiency and the carbon footprint. • The dilemma of gas oil versus scrubbers and the uncertainty over of which ballast water system. • Many shipyards, after a decade when they were able to sell standard ships, are struggling to respond. Eco-Ship Design – Complex Fuel cost saving , charter cost increase $000 Shows the effect on fuel cost (green lines) & ship cost (yellow line) of changing speed in 1 knot increments on 5000 mile voyage 400 Shipping lanes 350 Back haul LNG 300 250 200 150 100 wind NUCLEAR scrubbers best speed at $1500/tonne bunkers Fuel Cells best speed at $200/tonne bunkers EEDI No ballast COATINGS logistics Hull form Engineering 50 0 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 Note 1: Just difficult decisions Speed of ship (knots) 80% saving Challenge 4: Globalization Part 2 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Fleet Ownership Non OECD Non OECD 44% OECD 56% OECD 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 • Over the last 50 years the OECD countries dominated growth • Asia started to grow in 1970s & China in the 1990s. • Non OECD trade overtook OECD in 2006 • The next phase of globalization will see more countries; more pressure on resources; and more geo-political tension (piracy a sign) Billion tons of imports Regional imports 1950-2010 Challenge 5: IT & Comms Gordon Moore Invented “Moore’s Law” Fibre optic cable network Challenge 6: Container Business Model The container business will be at the heart of change Billion tons 1.8 1.6 1.4 1.2 1.0 0.8 In between there have been long periods of conservatism". 0.6 Ronnie Swayne, Chairman OCL 1973 0.2 0.4 This chart shows container cargo growing to 1.5 billion tonnes today. In 2009 the trade had its first serious “wobble”. y = 6.5684e0.0888x 0.0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 “Over the centuries technical developments in liner shipping has been not so much a continuous process as an occasional leap forward precipitated by a compelling call for change. Will the exponential trend of 8.8% trend continue? 1. 2. 3. 4. 5. 6. Lousy hand so aim 1 is to survive Major revolution in fuel costs, technology, software and systems Challenging regulatory focus which the industry is still struggling with Globalization “Part 2” will change the pattern of trade & it’s “fuel costs and environmental geopolitics regulations are the Wild IT Revolution will create “soft” Cards” opportunities The container business is due for a “great leap forward” 1. “Play the players, not the cards. 2. Watch them from the minute you sit down. 3. Play fast in a slow game , slow in a fast game. 4. Never get out when you are winning. 5. Look for the sucker and, if you don’t see one , get up and leave because the sucker is you” Amarillo Slim’s Advice Oceanic Steam Navigation Company Ltd • The company is better known as White Star Line which owned the Titanic • 100 years ago the Chairman was Thomas Bruce Ismay • In the film Titanic he is the arrogant man who ordered the Captain of the Titanic to go imprudently fast • He looks bad, but he had a problem the film did not tell you about, which you will understand. Chairman Bruce Ismay Chairman 1912 Oceanic Steam Navigation Company Ltd 5.5 7 year average earnings (in arrears) 4.5 Collapse of earnings 1900 to 2010 4 Titanic loss 2012 3.5 Cut throat competition between Cunard and White Star 3 2.5 2 1.5 Bruce Ismay, Chairman 1878 1880 1882 1884 1886 1888 1890 1892 1894 1896 1898 1900 1902 1904 1906 1908 1910 1912 1914 1916 1918 £ per Gross Ton earnings 5 Seaborne Trade – 9 billion Tonnes Other 15% 10 9 Container 15% Sea Trade in 2011 Gas 3% 7 6 Other bulk 18% 5 . Iron ore 11% Coal 10% 4 3 2 1 2010 2007 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1965 0 1962 Billion tonnes of cargo 8 Oil 28% Seaborne Imports – 9 billion Tonnes Other 15% 10 9 Sea Trade in 2011 Gas 3% 7 6 Other bulk 18% 5 . Iron ore 11% Rest of the world Coal 10% 4 3 2 1 2010 2007 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1965 0 1962 Billion tonnes of cargo 8 China Container 15% Oil 28% Greek Owned Fleet - Ship Type Prospects Ship Type Number of ships in fleet VLCC 108 Suezmax 142 Aframax 155 Panamax Tanker 40 Products 512 Capesize 240 Kamsar max 144 Panamax 359 Handymax 286 Handy 275 Gas 90 MPP 53 Container 275 Cruise & Ferry 115 Grand Total 3139 Sdource: CRSL estimates Prospects Orderbook Trade Growth % Fleet to 2023 % pa 20% 5% 24% 5% 8% 3% 10% 2% 12% 2% 29% 5% 38% 5% 38% 4% 25% 3% 21% -1% 18% 8% 16% 2% 21% 8% na 7% 20% 5% Ratio Orderbook /Trade - 4 7 3 5 6 6 8 9 8 21 2 8 3 4 The “Ratio” is “orderbook as a % fleet” ÷ trade growth trend