Latin American Panel
November 1, 2011
TANKER MARKET
OVERVIEW
JOSEPH ANGELO
MANAGING DIRECTOR
The state of the Tanker Industry
• Weak market, uncertain/weak
fundamentals
• Oversupply of tankers
– slow steaming (ballast)
– Lowering of C/P speed
– Suez Canal less used
– Piracy effect – longer routes/inefficiency
– Waiting
• Increased Middle East export has not
helped freight rates
Tanker Market
World GDP and oil demand change
15
%
Oil demand
Tonne miles
10
GDP
?
5
0
-5
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
-10
Oil/tanker demand correlates with Economic growth
IMF forecast positive growth projected – but there is great uncertainty
Because the extra barrel is taken from the Middle east, tonne-miles growth is stronger
Source. IMF/BP/IEA/Fearnleys
Recent Tanker Rates
$/day
100,000
VLCC AG-Japan, 250,000 ts
90,000
Suezmax Wafr-US 130,000 ts
80,000
Aframax N Sea-UKCont, 80,000 ts
Product Caribs-US, 38,000 ts
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Rates improved by slow steaming/backhauls
Source: Baltic: Exchange/BITR
Tanker Market
Oil price and freight rates 1970-2011
$ per barrel
100
Nominal price Arab Light
Real price Arab Light
Nominal freight rate AG-West
80
Real freight rate AG-West
Deflated by the Consumer Price Index (USD)
CPI* index 1982-84=100
60
40
2011
2010
2008
2009
2006
2007
2005
2003
2004
2001
2002
2000
1998
1999
1996
1997
1995
1993
1994
1991
1992
1990
1988
1989
1986
1987
1985
1983
1984
1982
1980
1981
1978
1979
1977
1975
1976
1973
1974
1972
1970
0
1971
20
Tanker Market
VLCC newbuilding prices and break even rates
m$
$/day
41
160
45,000
29
Break even rate
140
41,000
Newbuilding prices
18
Source: Clarkson Shipyard Monitor
31
120
37,000
Number aboved bars = deliveris of VLCCs
29
54
55
60?
100
33,000
215 VLCCs
68,000
dwtdwt
47,000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
25,000
1998
60
1997
29,000
1996
80
Tanker Demand
Middle East oil production
mbd
23
22
21
20
19
18
17
16
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Year
Tanker Demand
Increase in world oil demand
mbd
3.0
2.6
2.2
1.8
1.4
1.0
0.6
0.2
-0.2
-0.6
-1.0
-1.4
Rest of world
Middle East
USA
China
World
Biofuels demand
-1.8
-2.2
Based on data from IEA
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-2.6
Tanker Demand
Seaborne Oil Trade and Middle East Oil production
mbd
000 bn tonne-miles
24
13,000
21
11,200
Middle East
Oil Prod mbd
18
9,400
Tonne miles
15
7,600
•Asia 80% dependent on Middle East,
Europe 18% and US 17%
Some 15 mbd crude oil through
Hormuz 2010
12
Based on Fearnleys/IEA
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
4,000
1970
9
5,800
Tanker Demand
Crude oil seaborne trade
38 mbd in 2010
Others
48%
Saudi Arabia
15%
North Africa
12%
Other Persian
Gulf
25%
3057 bn tonne miles in 2010
Saudi Arabia
18%
Others
50%
Other Persian
Gulf
27%
North Africa
5%
Tanker Demand
Oil balance: production - consumption
mbd
20
Middle East
15
Oil
surplus
areas i.e.
exporting
areas
10
FSU
Africa
5
S America
0
China
-5
Oil
deficit
areas i.e.
importing
areas
N America
Europe
-10
Asia - Pacific ex China
Source: INTERTANKO / IEA
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
-15
Tanker Demand
Middle East Oil production Jan-2000 to Aug-2011
Primo Oct. 2011
negative VLCC
Rates
mbd
24
23
Mid Jan
2003
$91,000/
day
24 Nov
2001
$92,000/
day
22
Primo July 2008
$181,600/day
20 July 2006
$87,000/day
End April
2004
$61,600/day
Primo Jan
2007
$27,000/day
21
20
Primo
Sept
2009
$5,000/
day
Yearly
average
ME oil
Production
ME oil
Production
8 July 2003
VLCC AGJapan
$14,000/day
Primo
Sept
2009
$5,000/
day
19
Based on Fearnleys/IEA
01/07/11
01/01/11
01/07/10
01/07/09
01/01/09
01/07/08
01/01/08
01/07/07
01/01/07
01/07/06
01/01/06
01/07/05
01/01/05
01/07/04
01/01/04
01/07/03
01/01/03
01/07/02
01/01/02
01/07/01
01/01/01
01/07/00
01/01/00
18
01/01/10
Source: IEA
Primo July 2003 VLCC AG-Japan
$7,000/day
Tanker Demand
Trade movements
mbd
60,000
Rest of world 47%
US
Europe
Japan
Rest of World
50,000
40,000
Rest of world 26%
30,000
20,000
10,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
Based on BP
Tanker Supply
Tanker Supply
Tanker fleet development
m dwt
number
545
6,400
dwt
Number
491
5,780
Assumed orderbook August 2011,
include chemical tankers
Tanker fleet increase 2003-2013 some 72%
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
3,300
1998
275
1997
3,920
1996
329
1995
4,540
1994
383
1993
5,160
1992
437
Tanker Supply
Tanker phase out, deliveries, scrapping tankers 10,000 dwt
+ balance assuming various demand increases
m dwt
95
Last phase out
Deletions
75
Delveries
Assumed market balance end 2008
55
Surplus 6% trade
growth
Surplus 4% trade
growth
35
Surplus 2.5%
trade growth
Surplus zero
trade growth
15
Minus 2% growth in
2009 and the above
scenarios later
-5
Assumed removal
of double hull
-25
-02
03
04
05
06
07
08
09
10
11
12
13
14
15
year
Under above assumptions, 6% growth necessary to regain
market balance by 2014 or more removal of DH tankers
Tanker Supply
Newbuilding Orders (Clarkson)
2002
2003
2004
2005
2006
2007
2007
2009
2010
Oct11
VLCCs
4.6
15.0
12.3
10.1
34.7
11.4
34.0
6.1
15.8
1.6
Suezmaxes
2.3
7.9
4.5
1.1
12.2
9.4
8.0
4.4
9.5
2.4
Aframaxes
5.2
10.6
7.2
6.0
18.4
8.8
3.7
2.0
4.0
0.8
Panamaxes
3.0
5.7
4.1
2.3
4.1
3.8
1.3
1.0
1.3
0.2
Handy
3.3
6.6
4.7
6.1
11.2
4.9
3.5
1.4
1.6
1.7
Chemicals/s
peci.
2.1
3.0
4.5
4.3
8.0
9.3
2.4
0.2
0.1
0.2
Total
20.5
48.8
37.3
29.2
88.6
47.6
52.9
15.1
32.3
6.9
Based on LRFairplay
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
Average age tanker fleet above 10,000 dwt
Years
16
14
12
10
8
6
Tanker Values
VLCC value - 15 years old and scrap value
m$
60
50
40
30
20
10
Source: Clarkson/SIW
Oct-11
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
Conclusion
Conclusions
Oil demand, tonne-mile, and tanker fleet indices
155
150
145
140
Oil demand index
Tonne miles crude tanker index
135
Tanker fleet index
130
125
120
115
110
105
Tanker fleet increase
2002-2010: 46%
100
Source: IEA, Fearnleys, INTERTANKO
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
95
Conclusions
Slowing Growth, Rising Risks
• Fundamentals uncertain or weak
• Recovery in the US and Europe and debt
problems are aggravating situation
• Chinese growth is threatened partly by
weakening world economy but also by a
domestic debt burdened industry
• Oil demand growth still positive, but weakening
• Surplus of tankers will continue to increase
Conclusions
Strategic tanker consideration
• China and Asia expected to drive demand and the
Middle East has the reserves
• Successful Green House Gas reduction will mean
reduced oil consumption
• High oil prices dampen growth in world economy
and a stimuli to fuel saving
• Substantial opportunities for both owners and
charterers with regard to vessel speed
• Costs reduction needs carful risk management
Thank You
For more information, please visit
www.intertanko.com