MONTHLY SHIPPING REVIEW - ssyonline.com · MONTHLY SHIPPING REVIEW SSY Consultancy & Research Ltd...

MONTHLY SHIPPING REVIEW

15th APRIL 2016

FLEET DEVELOPMENTS

DRY BULK

TANKER

• Vessel earnings reach ytd highs, reflecting more positive demand-side developments and restrictions on fleet supply growth

• Steel price jumps in China encouraged greater crude steel output in March, which reached the highest monthly level for almost two years.

• Panamax and Supramax demand continues to be driven by strong South American grain exports, with a record 2q in prospect.

• Grain trade gains have offset the impact of lower Atlantic coal movements on Panamax demand for the time being at least.

Published by SSY Consultancy & Research Ltd, Lloyd Chambers, 1 Portsoken Street, London, E1 8PH T: 020 7977 7400 | F: 020 7265 1549 | E: [email protected] | www.ssyonline.com

April 2016 | 2

• After a firm March, VLCC earnings fell quickly in early April but have now started to pick up on solid West African enquiry and the requirements for modern ships.

• Caribbean dirty trades are being hampered by pipeline and production outages in Latin America and delays at Venezuela.

• UKC-USAC MR rates are rising amid strong West African demand and a thinner position list as ballasters from WAFR are opting to head to the busy cross-Med market instead.

• LR rates have softened in April as Asian naphtha buying falters and westbound arbitrage opportunities from Asia and the Middle East remain limited.

• In 1q16, 215 new vessels of 18.1mdwt were delivered to the global bulker fleet (excluding ships below 10,000dwt). These equated to 2.4% of end-2015 tonnage supply.

• 1q16 removals from the bulker fleet totalled 156 units of 12.3mdwt, or up by 3.2mdwt (+34.7%) from 1q15 volumes.

• New deliveries to the tanker fleet (including chemical carriers but excluding ships under 10,000dwt) totalled 65 units of 7.2mdwt, thus equating to 1.5% of the end-2015 fleet.

• 5 ships of 0.3mdwt were removed from the tanker fleet in 1q16, against 19 units of 1.7 mdwt in 1q15 - a year-on-year fall of 81.6%.

TANKERS: MIXED DRY BULK: FIRMER SHIP VALUES: WET: MIXED - DRY: MIXED


Registered : in England number 1971247 While care has been taken to ensure that the information in this publication is accurate SSY Consultancy & Research Limited can accept no responsibility for any errors or any consequences arising therefrom. Reproducing any material from this report without proper attribution to SSY s strictly forbidden.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan

-10

Jun

-10

Nov

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Apr

-11

Sep

-11

Feb

-12

Jul-

12

Dec

-12

May

-13

Oct

-13

Mar

-14

Aug

-14

Jan

-15

Jun

-15

Nov

-15

Apr

-16

Sep

-16

Source: Baltic Exchange

Baltic Exchange Dry Index

Crude Tanker Spot Earnings Weekly TCE Rates, US$’000/day

Existing No. MDwt No. MDwt No. MDwt No. MDwtTanker 5,715 494.4 5,752 501.8 5,825 518.4 6,070 530.0Bulk 9,323 674.2 9,567 709.8 10,046 747.6 10,322 771.7Combi 24 3.3 21 3.1 26 3.5 21 1.9

Tanker 430 19.7 402 19.9 372 17.7 458 27.6Bulk 1,568 77.8 1,193 66.7 1,092 66.1 1,074 63.7Combi 5 0.2 4 0.1 3 0.1 6 0.4

Tanker 514 55.0 674 58.7 784 69.6 924 83.9Bulk 1,537 122.6 1,656 133.3 1,846 156.5 1,225 106.8Combi 0 0.0 0 0.0 3 0.2 4 0.3

Fleet >= 20 years

FLEET DEVELOPMENTS

Orderbook

1.1.13 1.1.14 1.1.15 1.4.16

-20

0

20

40

60

80

100

120

Jan

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-14

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Sep

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260 MEG-Japan

130 W.Africa-USAC

80 N.Sea-UKC


SSY Consultancy & Research Ltd

SSY FLEET DATABASE

April 2016 | 3

Existing No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT Pre-1992 279 6.9 106 4.9 43 3.2 7 1.0 9 2.5 444 18.5

1992/96 208 5.3 198 9.1 119 8.6 57 9.0 48 13.3 630 45.21997/01 311 8.1 317 15.2 334 24.9 103 17.3 4 1.1 1,069 66.62002/06 294 8.3 427 22.5 356 27.7 191 34.2 4 0.9 1,272 93.72007/11 999 29.4 1,105 61.9 673 55.9 616 107.1 60 17.2 3,453 271.62012/16 874 29.5 1,126 64.7 913 74.5 459 82.0 82 25.5 3,454 276.2

Total 2,965 87.5 3,279 178.2 2,438 194.8 1,433 250.6 207 60.6 10,322 771.7Newbuildings

2016 139 5.0 293 17.8 161 13.0 117 22.2 13 3.5 723 61.52017 97 3.6 123 7.4 104 8.5 27 5.4 14 3.8 365 28.6

2018+ 38 1.4 38 2.3 29 2.4 8 1.6 24 9.0 137 16.7Total 274 9.9 454 27.5 294 23.9 152 29.3 51 16.3 1,225 106.8

Total220,000+Bulk Carrier Fleet, as at end March 2016

10-39,999 40-64,999 65-99,999 100-219,999

Existing No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT Pre-1992 3 0.1 0 0.0 0 0.0 0 0.0 0 0.0 3 0.1

1992/96 0 0.0 3 0.3 0 0.0 0 0.0 0 0.0 3 0.31997/01 3 0.2 7 0.8 0 0.0 0 0.0 0 0.0 10 1.02002/06 2 0.1 0 0.0 2 0.2 0 0.0 0 0.0 4 0.42007/11 1 0.1 0 0.0 0 0.0 0 0.0 0 0.0 1 0.12012/16 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0

Total 9 0.6 10 1.1 2 0.2 0 0.0 0 0.0 21 1.9Newbuildings

2016 0 0.0 3 0.2 0 0.0 0 0.0 0 0.0 3 0.22017 0 0.0 1 0.1 0 0.0 0 0.0 0 0.0 1 0.1

2018+ 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0Total 0 0.0 4 0.3 0 0.0 0 0.0 0 0.0 4 0.3

Combined Carrier Fleet, as at end March 201610-79,999 80-109,999 110-139,999 140-199,999 200,000+ Total

Existing No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT No. MDWT Pre-1992 73 1.2 58 2.0 24 1.1 5 0.4 5 0.5 6 0.8 0 0.0 171 6.0

1992/96 75 1.1 57 2.1 57 2.6 7 0.5 41 4.0 23 3.3 27 8.0 287 21.61997/01 163 2.6 109 3.8 120 5.5 29 2.1 127 13.4 85 12.8 105 31.5 738 71.62002/06 269 4.4 260 9.6 306 14.5 161 11.6 278 30.0 125 19.8 151 46.4 1,550 136.22007/11 667 10.5 206 7.7 538 26.2 180 13.3 348 38.3 166 26.3 245 75.8 2,350 198.12012/16 141 2.5 92 3.4 351 17.4 37 2.8 122 13.5 98 15.1 133 41.8 974 96.5

Total 1,388 22.3 782 28.6 1,396 67.4 419 30.5 921 99.7 503 78.2 661 203.4 6,070 530.0Newbuildings

2016 72 1.3 32 1.2 88 4.4 30 2.2 56 6.3 42 6.6 52 16.1 372 38.12017 54 1.1 28 1.0 62 3.1 30 2.2 61 6.9 62 9.7 41 12.6 338 36.6

2018+ 53 1.1 24 0.9 48 2.4 13 1.0 37 4.2 16 2.5 23 7.2 214 19.2Total 179 3.6 84 3.1 198 9.9 73 5.3 154 17.4 120 18.8 116 35.9 924 93.9

Tanker Fleet, including Chemical Tankers, as at end March 2016200,000+ Total85-119,999 120-199,99910-26,999 27-41,999 42-59,999 60-84,999

New buildings No. TEU No. TEU No. TEU No. TEU No. TEU No. TEU No. TEU2016 11 2,648 4 2,997 39 61,227 39 91,456 4 15,268 76 914,176 173 1,087,7722017 1 278 0 0 44 63,328 33 86,322 11 40,736 88 1,223,980 177 1,414,644

2018+ 0 0 0 0 17 28,996 25 66,808 6 22,736 70 1,071,530 118 1,190,070Total 12 2,926 4 2,997 100 153,551 97 244,586 21 78,740 234 3,209,686 468 3,692,486

100-499Container Ships on Order, as at end February 2016

Total4,000+3,000-3,9992,000-2,9991,000-1,999500-999



STEEL PRICES JUMP

T he sudden improvement in the Capesize market has lifted average earnings for 180k

dwt vessels from the all-time low of $1,985/day on 17 March to $7,076/day. This reflected a combination of more positive demand-side developments and restrictions on fleet supply growth.

Brazil’s official iron ore export data indicate a substantial gain in this year’s shipments despite the absence of Samarco from the market. The 1q16 total of 85.3 Mt is up 6.0 Mt on the 1q15. Australian iron ore exports also demonstrated growth in the first two months of the year, rising 2.1 Mt to 120.6 Mt, while record throughput last month from Port Hedland, the country’s largest terminal, suggests scope for further annual growth in Australian ore exports in March.

Chinese iron ore imports in the 1q16 rose 14.6 Mt annually to 241.6 Mt. This was partly due to restocking at the ports, but also displacement of domestic iron ore supply and, more latterly, increased demand from China’s steel mills.

Significantly, there have been sharp rises in steel prices, with the price of Chinese rebar, for example, jumping from $280/t in mid-March to $351/t by 14 April, a level last seen in January 2015. This has encouraged greater production with China’s crude steel output in March at its highest monthly level for almost two years.

Panamax average earnings have also risen to a year-to-date high, albeit in a less dramatic fashion than Capes, to $5,796/day, driven by gains in the Atlantic, where round voyage rates

DRY BULK MARKET

April 2016 | 4

0

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2,000

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Baltic Exchange Dry Index

SSY Capesize Indices

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06

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-07

Jul-

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Atlantic

Pacific

Representative Rates Last Day of Month Mar-14 Mar-15 Jan-16 Feb-16 Mar-16 16/15%Baltic Exchange Dry Index (4/1/85=1,000) 1,362 602 317 329 429 -28.7%Avg 6 T/C Handysize $9,542 $5,813 $3,227 $3,182 $4,033 -30.6%Avg 6 T/C Supramax $11,402 $6,797 $3,179 $3,542 $4,981 -26.7%Avg 4 T/C Panamax $7,600 $4,780 $2,299 $2,845 $4,008 -16.2%Avg 4 T/C Capesize $20,636 $4,415 $2,785 $2,356 $2,518 -43.0%Iron Ore W.Aus-China (Cape) $10.25 $4.50 $3.05 $2.95 $3.10 -31.1%Iron ore Brazil-China (Cape) $23.50 $10.25 $5.25 $5.60 $5.85 -42.9%Coal Richards Bay-Rotterdam (Cape) $10.85 $4.00 $2.75 $2.40 $2.50 -37.5%Coal Bolivar-Rotterdam (Panamax) $11.25 $8.10 $5.10 $5.30 $5.60 -30.9%Coal NSW-Qingdao (Panamax) $14.60 $8.40 $4.65 $5.55 $6.35 -24.4%12 month T/C Handysize - 30,000 $10,125 $6,375 $4,438 $4,250 $4,500 -29.4%12 month T/C Supramax - 52,000 $13,000 $8,188 $5,125 $4,813 $5,438 -33.6%12 month T/C Panamax - 74,000 $14,250 $7,750 $4,625 $4,875 $5,625 -27.4%12 month T/C Capesize - 180,000 $27,500 $10,000 $5,300 $5,500 $5,250 -47.5%SSY Atlantic Capesize Index (2/10/89=5,000) 9,306 3,869 2,505 2,531 2,593 -33.0%SSY Pacif ic Capesize Index (6/1/97=4,114) 6,748 2,538 1,617 1,633 1,786 -29.6%380 CST Rotterdam $579.50 $285.00 $153.00 $148.00 $157.00 -44.9%



climbed to a seven-month high of $7,450/day, as opposed to $4,173/day at the beginning of March.

Panamax and Supramax demand continues to be driven by strong South American grain exports, with a record 2q in prospect. March data from Brazil show that combined exports of soya and corn combined surged to a record 11.9 Mt in March, up 56% year-on-year, as soya shipments rose to an eight-month high just short of 10 Mt.

For the time being at least, these gains have offset the impact of lower Atlantic coal movements on Panamax demand. US coal exports (excluding Canadian cargoes) declined by a third to 3.9 Mt in February, as steam coal exports slumped to a six-year low. On the importer side, the sharpest slowdown in Europe has been in the UK, where coal imports fell 2.2 Mt year-on-year to 1.0 Mt in February, the second lowest month in the last 16 years.

One positive development for tonne-mile demand has been Colombian steam coal exports to India, which reached a combined 0.8 Mt in February/March, the first such shipments since 2013. That said, March exports to all destinations slipped to a two-year low of 5.6 Mt.

Average spot earnings for both Supramax and Handysize have also established respective year-to-date highs of $5,494/day and $4,639/day.

The bauxite mining ban in Malaysia, initially running for three months from January, has been extended for another three months. China imported 24 Mt of bauxite in 2015, so the reduction in shipping (purely from stocks) from Malaysia has been detrimental to Supramax demand in the Pacific. Chinese customs data for the first two months of the year revealed a shift in bauxite sourcing, with 1.4 Mt imported from suppliers in the Atlantic in the first two months of 2016, compared with a mere 0.1 Mt in the same period last year.

Fleet supply growth across the whole of the dry bulk carrier fleet slowed to just +0.1 Mdwt in March from +4.8 Mdwt in January, as demolition activity remained robust, particularly in the Capesize and Panamax sectors. Cape deletions totalled 2.7 Mdwt in March, excluding 19 sales for demolition of 3.1 Mdwt, which have yet to exit the fleet. This ensured a net decline of almost 1 Mdwt in Cape supply last month (before any allowance for ships entering lay-up).

DRY BULK MARKET

April 2016 | 5

Average of the Timecharter Routes $/day

Capesize Voyage Rates $/t

12 Month Time-Charter Rates $/day

0

10,000

20,000

30,000

40,000

50,000

60,000

Jan

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Jan

-11

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-13

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Jan

-15

Jan

-16

Supramax (52,000 dwt)

Panamax (74,000 dwt)

Capesize (172/180,000 dwt)

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Coal RB/Rotterdam

Iron Ore W. Aus/China

Iron Ore Brazil/China

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-14

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-16

25/32,000

50/55,000

70/75,000

170/180,000



J apan’s combined steam coal and anthracite imports surged to a record 120.1 Mt last year,

marking a sizeable gain on the 114.2 Mt shipped into the country during the previous year and, significantly, comparing favourably with the 107.9 Mt imported during 2010, prior to the post-Fukushima nuclear shutdown starting in 2011 (see chart, right). Of last year’s imports, almost 75% were shipped from Australia, with Russia supplying more steam coal/anthracite (13.5 Mt) than Indonesia (12.6 Mt) for the first time since 1993. However, at 19.9 Mt, imports of steam coal/anthracite in the first two months of 2016 were 4% lower than in the same period last year.

The past year has seen a number of statements on the long-term role of coal in the energy sector.

In July last year, the ministry of economy, trade and industry approved Japan’s Intended Nationally Determined Contribution (INDC) in advance of December’s Paris Agreement on Climate Change (COP21). By 2030 coal was targeted to form 26% of the national energy mix from around 30% at present. This would be a similar share to the gas 2030 target of 27%, with renewables, such as solar and hydropower, comprising as much as 24%. The INDC aimed for a 36% cut in CO2 emissions from 2013 levels by 2030.

Perhaps most contentiously, however, was the planned contribution of nuclear power of 22% by 2030, which would approach the 2010 share of around a quarter, if the energy mix were to evolve as planned. This would also mark a dramatic return of the sector from current minimal generating levels. Data from the Federation of Electric Power

COAL

JAPAN’S LONG-TERM STEAM COAL PROSPECTS

Companies of Japan show the sporadic and limited return of nuclear power since 2011, (see chart below).

As we commented in the December MSR, although coal was not explicitly mentioned in the text of last year’s COP21 agreement, success in reaching the temperature-focused targets in the agreement would require lower coal consumption, without the widespread adoption of new technologies.

In February this year, Japan’s environment ministry permitted the construction of new coal-fired power plants on the proviso that utilities disclose CO2 emissions from this month (April) onwards, when full liberalisation of Japan’s energy sector takes place. More importantly, each utility supplying in excess of 500 GWh will be committed to raising the share of non-fossil fuels in their energy output to a minimum of 44% by 2030. Additional thermal efficiency improvements will be also be required at each plant.

Between now and the end of 2019, Reuters estimates some 15 coal-fired units are planned to enter operation with an aggregate capacity of 1,622 MW, but, crucially, a further 16 units are planned to enter service during 2020-23, which would have a far higher combined capacity of 11,200 MW. Given the targets detailed above, it can be assumed that a number of these new facilities will simply replace outdated coal-fired power plants.

The legacy of Fukushima does pose a threat to the realisation of nuclear securing 22% of Japan’s energy mix 14 years from now. According to Japanese media, an emergency shutdown in February of the No.4 unit at the Takahama plant 380 km from Tokyo took place just three days after its restart. This incident prompted the nuclear regulator to refer to the “large impact on society” with trust in nuclear energy diminished and underlines the delicate balance to be struck between following public opinion and promoting non-fossil fuel

Japan’s Steam Coal/Anthracite Imports Mt

Nuclear Power Generation in Japan bln kWh

April 2016 | 6

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6

Source: Federation of Electric Power Companies

generation at zero

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105

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125

2008 2009 2010 2011 2012 2013 2014 2015



COAL

April 2016 | 7

Coal Exports Mt 1990 1995 2000 2005 2010 2012 2013 2014 2015 AnnlsdUSA: Coking 53.6 43.2 26.3 22.0 47.8 59.0 56.2 53.2 37.9(ex. Canada) Thermal 28.3 28.2 9.6 5.4 15.6 48.1 43.5 28.9 23.7

Total 81.9 71.4 35.9 27.4 63.4 107.1 99.7 82.1 61.6 [Dec]Canada: Coking 25.9 26.6 26.3 25.1 25.7 29.8 34.4 30.4 26.9(ex. USA) Thermal 3.9 5.4 3.5 1.1 5.5 3.9 3.2 3.1 2.2

Total 29.8 32.0 29.8 26.2 31.2 33.7 37.6 33.5 29.1 [Dec]Australia: Coking 57.1 74.6 99.6 122.0 158.9 144.9 169.6 186.0 185.7

Thermal 49.5 62.1 87.1 111.7 142.1 171.2 188.3 200.7 201.6Total 106.6 136.7 186.8 233.7 301.0 316.1 357.9 386.7 387.3 [Dec]

South Africa: Coking 3.6 6.2 2.1 1.0 0.6 0.8 0.6 2.0 1.7Thermal 46.0 55.6 68.1 70.0 68.2 76.6 73.4 76.0 76.1Total 49.6 61.7 70.2 71.0 68.8 77.4 74.0 78.0 77.8 [Dec]

Poland: Coking 8.9 4.9 3.0 1.4 0.1 0.2 0.3 0.0 0.0Thermal 6.5 13.1 15.3 13.6 7.1 3.9 7.2 4.7 4.6Total 15.4 18.0 18.3 15.0 7.2 4.1 7.5 4.7 4.6 [SSY]

Colombia Thermal 13.7 18.7 34.0 54.6 69.2 79.7 73.7 74.9 80.5 [Dec]Indonesia Thermal 4.4 31.3 57.1 128.7 290.6 347.1 381.2 356.1 326.5 [SSY]PR China Coking 4.0 4.6 6.5 5.3 1.1 1.3 1.1 0.9 1.0

Thermal 13.7 24.1 48.6 66.4 17.8 7.8 6.2 4.9 4.0Total 17.7 28.6 55.1 71.7 18.9 9.1 7.3 5.8 5.0 [Dec]

Other Exporters Coking 11.1 10.4 16.0 24.9 32.8 36.9 45.7 42.8 40.9Thermal 12.9 12.2 20.5 61.1 75.2 105.3 111.8 113.4 108.9Total 23.9 22.6 36.5 86.0 108.0 142.2 157.5 156.2 149.8

Total Seaborne Coking 164.1 170.5 179.8 201.7 267.0 272.9 307.9 315.3 294.1Thermal 178.8 250.6 343.8 512.6 691.3 843.6 888.5 862.7 828.1Total 342.9 421.1 523.6 714.3 958.3 1116.5 1196.4 1178.0 1122.2 [SSY]

Coal Imports Mt 1990 1995 2000 2005 2010 2012 2013 2014 2015 AnnlsdJapan Coking 74.1 73.4 75.2 78.7 76.6 70.5 77.0 74.1 70.6 Jan to:

Thermal 31.4 49.6 66.4 96.1 101.7 107.7 109.0 109.0 114.4Anthracite 2.0 2.8 3.7 5.9 6.2 6.0 5.5 5.2 5.7Total 107.5 125.8 145.3 180.7 184.5 184.2 191.5 188.3 190.7 [Dec]

Europe Coking 56.6 49.8 51.4 52.2 55.1 53.9 53.5 60.0 54.2Thermal 83.3 99.6 121.4 162.0 120.4 163.7 157.2 146.7 138.5Total 139.9 149.4 172.8 214.2 175.5 217.6 210.7 206.7 192.7 [SSY]

South Korea Coking 11.3 17.2 19.6 16.2 23.4 25.7 26.4 29.9 32.5Thermal 11.6 26.0 42.3 56.1 87.8 91.1 91.8 92.7 93.7Anthracite 1.1 0.7 2.0 4.5 7.4 7.8 8.3 8.1 8.9Total 23.9 43.8 63.9 76.8 118.6 124.6 126.5 130.7 135.1 [Dec]

Taiwan Coking 4.6 5.3 7.3 9.8 10.2 10.5 10.9 10.9 10.8Thermal 14.8 23.9 38.1 51.3 53.2 55.2 57.1 57.0 56.3Total 19.4 29.2 45.3 61.1 63.4 65.7 68.0 67.9 67.1 [Dec]

China Coking 0.9 0.4 0.5 7.2 47.3 53.6 75.4 62.3 48.0Thermal 1.1 1.3 1.6 18.9 119.0 181.5 192.0 165.5 107.9Total 2.0 1.7 2.1 26.1 166.3 235.1 267.4 227.8 155.9 [Dec]

India* Coking 5.4 9.9 11.2 19.7 35.3 35.5 39.0 47.9 50.2Thermal 0.1 2.1 12.5 24.5 74.5 123.4 144.1 176.0 171.0Total 5.5 12.0 23.7 44.2 109.8 158.9 183.1 223.9 221.2 [SSY]

USA Thermal 2.4 6.5 11.2 27.6 17.7 8.3 8.1 10.3 10.3 [Dec]Other Importers Coking 11.3 14.5 14.6 17.9 19.1 23.2 25.7 30.2 27.8

Thermal 31.0 38.1 44.6 65.7 103.4 98.9 115.4 92.2 121.4Total 42.3 52.7 59.2 83.6 122.5 122.1 141.1 122.4 149.2

Total Seaborne Coking 164.1 170.5 179.8 201.7 267.0 272.9 307.9 315.3 294.1Thermal 178.8 250.6 343.8 512.6 691.3 843.6 888.5 862.7 828.1Total 342.9 421.1 523.6 714.3 958.3 1116.5 1196.4 1178.0 1122.2 [SSY]

* Based on exporter data to India

Seaborne Coal Trade



A fter a strong 2015 in which growth in the global steel trade was driven by surging exports from

China, the start of 2016 saw a slowing in the global steel trade with combined shipments from China, Japan, South Korea, the EU and Brazil in the 1q16 estimated to be the lowest quarterly total since the 1q15. This retreat can be largely attributed to weak global steel demand impacting trade, but also to a rise in protectionism. China has been the primary target of steel-related trade cases but most other major steel producers, including South Korea, Japan, Brazil, and some European countries, have also seen their products subject to tariffs and restrictions.

Chinese steel exports fell on an annual basis for only the second time in the last three years in January, dropping 0.6 Mt to 9.7 Mt. However, exports returned to positive year-on-year growth in both February and March, with shipments in the latter a three-month high of 10.0 Mt. This can be linked to the first annual rise in Chinese crude steel output since December 2014 in March, up almost 3% to 70.7 Mt. In aggregate, China’s 1q16 exports of 27.8 Mt were up 2.0 Mt on the 1q15, although they were still down on the preceding two quarters. The slowdown in export growth at the start of 2016 can be ascribed to both lower domestic steel output in the first two months of the year and a more competitive environment for exports amidst stagnant global steel demand. However, tariff barriers and import restrictions initiated by a range of countries against Chinese steel imports have also played a role. SteelFirst reported 39 active trade cases pending against Chinese steel products at the start of 2016 and a further 18 investigations citing Chinese steel products were initiated in the 1q16.

STEEL/IRON ORE

STEEL TRADE ROUND-UP

Brazil has also seen a sharp increase in its steel exports, up over 40% in 2015. This continued at the start of 2016 with shipments up 0.3 Mt year-on-year to 2.0 Mt in Jan-Feb. Rising steel exports have occurred alongside a drop in domestic steel output, showing the slump in steel consumption that has occurred as the country’s economy has slowed. Brazil has also seen its currency depreciate substantially against the dollar, providing an additional impetus for exports.

The US has been one of the most active countries in filing trade cases concerning steel imports. Falling domestic demand, particularly in the oil and gas sector, has increased the competition between domestic and imported steel and placed more attention on the impact of low cost imports on the domestic steel industry. The US has introduced anti-dumping measures against ten countries including, China, South Korea and Brazil, since the start of 2016, this is in addition to other measures already in place. US steel imports have fallen by 2.9 Mt year-on-year in the first two months of 2016 to 4.4 Mt, and this sharp decline is partially responsible for the drop in annualised 2016 Chinese steel exports to the Americas. Chinese exports to Latin America have also fallen over the same period.

Japanese steel exports dropped slightly on an annual basis in Jan-Feb to 6.6 Mt. However, shipments in the first two months of the year were only slightly below average monthly exports in 2015. Japanese steel exports appear not to have been significantly impacted by the surge in Chinese shipments to its key markets in SE and NE Asia, as annual volumes have remained steady at slightly over 40 Mt for the last three years.

Given the rising tide of steel protectionism, together with the World Steel Association’s current forecast for a 0.8% net decline in global steel demand this year, it will be difficult for world steel trade volumes to improve on, or even match, last year’s annual record.

Major Steel Exporters ‘000 tonnes

Chinese Steel Exports by Destination Mt

April 2016 | 8

0

5

10

15

20

25

30

35

40

SE

Asi

a

NE

Asi

a

Am

eric

as

ME

ast

Afr

ica

Eur

ope

Sou

th A

sia

2013 2014 2015 2016a

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

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

Japan China S.Korea Brazil EU



STEEL/IRON ORE

April 2016 | 9

Million Tonnes 1985 1990 1995 2000 2005 2010 2013 2014 2015 AnnlsdIron Ore ExportsAustralia 88.0 100.0 137.1 165.2 250.8 422.6 611.3 751.9 804.2 [Dec]Brazil 92.3 114.3 131.4 160.1 223.4 310.9 329.7 344.4 366.2 [Dec]Canada 32.3 27.0 28.7 26.5 27.9 32.6 38.0 40.3 36.9 [SSY]India 28.8 31.6 32.3 34.9 80.9 95.9 14.2 10.0 12.0 [SSY]S.Africa 10.2 17.0 21.8 21.4 26.6 48.0 58.2 62.0 64.2 [Dec]FSU 43.9 38.6 30.0 27.4 35.6 57.6 58.0 56.0 56.0 [SSY]Other 80.3 68.6 64.5 55.9 69.9 106.0 181.3 171.3 118.9 [Dif f]Total 375.8 397.1 445.8 491.4 715.1 1,073.6 1,290.7 1,435.9 1,458.4 [SSY]

Iron Ore Imports 1985 1990 1995 2000 2005 2010 2013 2014 2015 AnnlsdEU15 133.9 140.4 143.3 138.7 133.5 112.2 107.0 113.4 110.5 [SSY]Other W.Europe 1.7 2.0 3.4 4.1 4.6 6.8 8.2 8.8 10.0 [SSY]E.Europe 58.8 47.7 35.2 30.0 31.9 22.1 21.6 22.7 23.0 [SSY]Europe (E+W) 194.4 190.1 181.9 172.8 170.0 141.1 136.8 144.9 143.5 [SSY]Japan 124.5 125.3 120.4 131.7 132.3 134.3 135.2 136.4 131.0 [Dec]South Korea 13.2 22.6 35.1 39.0 43.5 56.3 63.4 73.5 73.3 [Dec]Taiw an 4.9 7.8 9.2 14.9 14.6 18.9 20.4 21.3 23.8 [Dec]China 10.0 14.3 41.2 70.0 275.2 618.6 820.3 932.9 953.3 [Dec]Other Asia 3.8 5.7 7.7 9.1 6.9 8.6 18.5 29.6 28.5 [SSY]Other 26.7 33.5 43.7 47.9 63.8 53.4 53.9 54.4 61.8 [SSY]Total 377.5 399.3 439.2 485.4 706.3 1,031.2 1,248.5 1,393.0 1,415.2 [SSY]

Steel Production 1985 1990 1995 2000 2005 2010 2013 2014 2015 AnnlsdAustria 4.7 4.3 5.0 5.7 7.0 7.2 8.0 7.9 7.7 -2.4%Belgium 10.7 11.5 11.6 11.6 10.4 8.0 7.1 7.4 7.3 -1.5%France 18.8 19.0 18.1 21.0 19.5 15.4 15.7 16.1 15.0 -7.2%Germany 40.5 38.4 42.1 46.4 44.5 43.8 42.6 42.9 42.7 -0.6%Italy 23.9 25.5 27.8 26.8 29.4 25.8 24.1 23.7 22.0 -7.2%Netherlands 5.5 5.4 6.4 5.7 6.9 6.7 6.7 7.0 7.0 0.4%Spain 14.2 12.9 13.8 15.9 17.9 16.3 14.3 14.3 14.8 4.2%Sw eden 4.8 4.5 5.0 5.2 5.7 4.8 4.4 4.5 4.4 -3.6%United Kingdom 15.7 17.8 17.6 15.2 13.3 9.8 12.0 12.2 10.8 -11.6%Other EU 8.8 9.1 8.5 10.0 9.2 8.4 6.6 7.0 7.0 0.0%EU15 Total 147.6 148.4 155.8 163.4 163.8 146.2 141.4 143.0 138.6 -3.1%Turkey 4.9 9.4 13.2 14.3 21.0 29.1 34.7 34.0 31.5 -7.4%Other Europe 6.4 5.1 1.9 3.2 9.7 6.9 8.3 8.9 9.8 10.3%TOTAL EUROPE 158.9 162.9 170.9 180.9 194.5 182.2 184.4 186.0 180.0 -3.2%Canada 14.6 12.3 14.4 16.6 15.3 13.0 12.4 12.7 12.5 -2.0%United States 80.1 89.7 95.2 101.8 93.2 80.5 86.9 88.2 78.8 -10.6%N. AMERICA 94.7 102.0 109.6 118.4 108.6 93.5 99.2 100.9 91.3 -9.5%Brazil 20.5 20.6 25.1 27.9 31.6 32.9 34.2 33.9 33.3 -1.9%Mexico 7.4 8.7 12.1 15.6 16.2 16.7 18.2 19.0 18.2 -4.0%Other L&S America 7.9 9.2 10.3 12.2 15.1 12.1 13.1 12.4 12.0 -2.9%L&S AMERICA 35.8 38.5 47.5 55.7 62.9 61.8 65.5 65.3 63.5 -2.7%Japan 105.3 110.3 101.6 106.4 112.5 109.6 110.6 110.7 105.2 -5.0%Australia 6.6 6.7 8.5 7.1 7.8 7.3 4.7 4.6 4.9 6.9%South Africa 8.5 8.6 8.7 8.5 9.5 7.6 7.3 6.6 6.4 -2.3%India 11.9 15.0 22.0 26.9 40.9 68.3 81.3 87.3 89.6 2.6%Rep of Korea 13.5 23.1 36.8 43.1 47.8 58.6 66.1 71.5 69.7 -2.6%Taiw an 5.2 9.7 11.6 16.9 18.6 19.8 22.3 23.1 21.4 -7.6%Czech+Slovakia 15.0 14.9 11.2 9.9 10.7 9.8 9.7 10.1 9.8 -2.4%Poland 16.1 13.6 11.9 10.5 8.4 8.0 8.0 8.6 9.2 7.5%Romania 13.8 9.8 6.6 4.7 6.2 3.7 3.5 3.5 3.5 0.0%CIS 154.7 154.4 79.1 98.5 113.3 108.3 108.3 106.1 101.5 -4.3%China 46.8 66.3 95.4 128.5 353.6 623.8 801.0 819.9 798.4 -2.6%N.Korea 6.5 7.0 0.6 0.3 1.4 1.3 1.3 1.3 1.3 0.0%Other 25.5 27.5 30.4 32.5 51.3 69.9 77.4 64.9 59.4 -8.5%WORLD 718.9 770.5 752.3 848.9 1,147.8 1,433.4 1,650.4 1,670.2 1,615.0 -3.3%



I n late March, China’s State Administration of Grain announced it would end the price support scheme

for domestic corn producers and move towards market based pricing. The scheme, introduced nine years ago, was intended to encourage corn planting and promote food security by setting a minimum price at which the government would guarantee to purchase domestically produced corn and store it in its reserves. A new scheme where subsidies would be paid directly to farmers has been announced, although the details have yet to be confirmed.

The minimum prices for corn set by Chinese authorities have been well above recent global prices (around 30-50% higher according to the US Department of Agriculture) and, as a result, the government has built up substantial corn stockpiles. According to the International Grains Council (IGC) corn stocks have risen from 44.4 Mt in 2006/07 (Jul-Jun) to an estimated 98.4 Mt in 2014/15 and are forecast to rise further to 108.0 Mt in 2015/16, accounting for 52% of stocks globally. Some sources put stocks significantly higher, for example Reuters are quoting “close to 250 Mt of corn”. In addition, high domestic corn prices have created the somewhat bizarre situation that, despite oversupplied domestic markets, China has raised its imports of corn and similar substitutes such as sorghum and barley. The end of minimum pricing is likely to see domestic prices fall towards the levels seen on global markets, with negative implications for trade and ship demand.

Price liberalisation will provide strong short-term incentives for China to reduce its corn stockpiles. Stocks will be devalued as the price of corn reverts towards market levels and the quality of the inventory

GRAIN

CHINA ENDS MINIMUM PRICING FOR CORN

is likely to deteriorate over time. Given the current condition of oversupply in the domestic market, this can most easily be achieved by substituting for imports and increasing exports.

Chinese coarse grain imports are forecast by the IGC to drop to 17.3 Mt in 2015/16 (of which 2.5 Mt is expected to be corn), down from 23.6 Mt in 2014/15 (4.9 Mt of corn). A significant release in corn stocks could push this down further and, should imports revert to levels seen before the minimum pricing scheme was introduced, then volumes would be cut to under 2.0 Mtpa of coarse grain, with corn imports close to nil. However, if domestic output drops as a result of lower prices, China’s corn imports could recover over the longer term.

China’s corn exports have been negligible since the minimum pricing scheme was introduced, however in the three years preceding the implementation of the scheme the country exported over 16 Mt of corn. Any significant resumption in Chinese exports is likely to be focussed on destinations in SE Asia, potentially displacing longer haul cargoes from producers in Europe and the Americas.

According to a recent agriculture ministry statement, reported by Reuters, China is seeking to cut corn oversupply by reducing the area made over to planting the crop by a third (around 8.2 million acres) by 2020. The government plans to allocate 3.5 billion yuan to the task of encouraging farmers to switch to alternative crops. However, It may be difficult to cut corn production this harvest year, as farmers will have already made preparations for the planting season that begins in April. Nevertheless, should a substantial amount of land be switched to soyabeans then, subject to issues of price and quality, there could be negative implications for the country’s soyabean imports, which totalled 81.7 Mt in 2015 and are dominated by long haul supplies from Latin America and the US.

Chinese Corn Stocks Mt

Chinese Coarse Grain Imports Mt

April 2016 | 10

0

20

40

60

80

100

120

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16f

Source: IGC

0

5

10

15

20

25

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16f

Source: IGC



GRAIN

April 2016 | 11

08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 DiffExporters:Brazil: Wheat 0.4 1.2 2.6 1.7 1.7 0.0 1.7 1.4 -0.3Coarse Grain 6.8 6.4 11.4 8.5 26.5 23.6 20.6 34.6 +14.0Soya 42.9 41.4 44.0 51.0 55.1 60.7 64.9 71.8 +6.9Total 50.1 49.0 58.0 61.2 83.3 84.3 87.2 107.8 +20.6USA: Wheat 27.3 24.2 35.7 27.9 27.5 31.3 22.6 20.5 -2.1Coarse Grain 50.4 55.2 52.0 44.7 22.3 47.3 56.6 50.4 -6.2Soya 42.8 51.8 48.6 47.2 45.2 55.4 62.6 56.2 -6.4Total 120.5 131.2 136.3 119.8 95.0 134.0 141.8 127.1 -14.7Canada: Wheat 18.3 18.3 16.3 18.2 18.7 22.9 24.9 21.8 -3.1Coarse Grain 3.9 3.1 4.9 3.5 4.7 5.1 4.2 3.6 -0.6Total 22.2 21.4 21.2 21.7 23.4 28.0 29.1 25.4 -3.7Australia: Wheat 13.5 13.7 18.5 23.1 21.3 18.4 16.6 17.0 +0.4Coarse Grain 4.9 4.3 4.7 7.1 5.9 7.2 6.9 5.8 -1.1Total 18.4 18.0 23.2 30.2 27.2 25.6 23.5 22.8 -0.7Argentina: Wheat 8.5 5.1 7.6 11.3 7.1 1.5 4.1 6.6 +2.5Coarse Grain 13.8 14.9 18.5 20.9 28.1 15.9 22.7 21.7 -1.0Soya 27.9 36.5 35.0 31.4 29.5 30.8 36.9 41.3 +4.4Total 50.2 56.5 61.1 63.6 64.7 48.2 63.7 69.6 +5.9EU: Wheat 24.5 20.8 22.1 15.6 21.7 31.0 34.4 31.0 -3.4Coarse Grain 5.5 2.8 6.0 6.3 6.6 9.0 13.7 12.4 -1.3Total 30.0 23.6 28.1 21.9 28.3 40.0 48.1 43.4 -4.7Russia: Wheat 18.3 18.8 4.0 21.6 11.2 18.5 22.2 23.4 +1.2Coarse Grain 4.8 3.2 0.3 5.6 4.3 6.9 8.4 7.6 -0.8Total 23.1 22.0 4.3 27.2 15.5 25.4 30.6 31.0 +0.4Others: Wheat 26.0 26.0 18.9 25.9 32.7 32.7 26.9 32.2 +5.3Coarse Grain 22.6 22.4 19.2 29.1 30.5 38.8 35.6 30.8 -4.8Soya 14.8 16.9 19.5 20.5 24.7 24.1 22.7 22.9 +0.2Total 63.4 65.3 57.6 75.5 87.9 95.6 85.2 85.9 +0.7World: Wheat 136.8 128.1 125.7 145.3 141.9 156.3 153.4 153.9 +0.5Coarse Grain 112.7 112.3 117.0 125.7 128.9 153.8 168.7 166.9 -1.8Soya 128.4 146.6 147.1 150.1 154.5 171.0 187.1 192.2 +5.1Total 377.9 387.0 389.8 421.1 425.3 481.1 509.2 513.0 +3.8

Importers 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 DiffJapan: Wheat 4.9 5.5 6.0 5.8 6.3 5.9 5.6 5.7 +0.1Coarse Grain 18.9 19.9 18.7 17.2 18.0 17.5 16.3 16.9 +0.6Total 23.8 25.4 24.7 23.0 24.3 23.4 21.9 22.6 +0.7PR China: Wheat 0.5 1.4 1.0 3.0 3.3 6.7 2.1 2.5 +0.4Coarse Grain 1.5 2.6 3.8 7.1 6.1 11.6 23.6 17.3 -6.3Soya 40.6 54.1 52.8 57.5 61.3 70.8 79.0 82.0 +3.0Total 42.6 58.1 57.6 67.6 70.7 89.1 104.7 101.8 -2.9S.Korea: Wheat 3.3 4.4 4.9 5.1 5.2 4.1 4.0 4.6 +0.6Coarse Grain 6.9 7.8 7.6 7.2 8.3 9.3 10.2 9.6 -0.6Total 10.2 12.2 12.5 12.3 13.5 13.4 14.2 14.2 +0.0EU: Wheat 7.9 5.1 4.7 7.2 6.9 6.0 8.0 7.4 -0.6Coarse Grain 4.6 2.6 8.9 6.8 12.1 17.1 10.4 15.0 +4.6Soya 34.3 34.0 34.5 32.5 30.8 32.6 33.7 34.0 +0.3Total 46.8 41.7 48.1 46.5 49.8 55.7 52.1 56.4 +4.3Egypt: Wheat 9.8 10.2 10.4 11.6 8.2 10.1 11.1 10.9 -0.2Coarse Grain 5.2 5.4 5.9 6.8 5.8 7.8 7.8 8.3 +0.5Total 15.0 15.6 16.3 18.4 14.0 17.9 18.9 19.2 +0.3Iran: Wheat 8.9 3.0 0.1 2.5 5.4 6.5 5.0 3.7 -1.3Coarse Grain 5.8 4.6 4.1 4.9 5.6 5.7 8.7 6.8 -1.9Total 14.7 7.6 4.2 7.4 11.0 12.2 13.7 10.5 -3.2Others: Wheat 101.5 98.5 98.6 110.1 106.6 117.0 117.6 119.1 +1.5Coarse Grain 69.8 69.4 68.0 75.7 73.0 84.8 91.7 93.0 +1.3Soya 53.5 58.5 59.8 60.1 62.4 67.6 74.4 76.2 +1.8

World Grain Trade



D espite exceptionally high disposals of surplus ships in 2011-2015 inclusive, 1q16 has seen yet

further acceleration in scrap sales, with 253 vessels of 15.55mdwt (basis all ship types) reported sold. This constituted a rise in tonnage terms of 2.4mdwt (+18.6%) from 1q15. Furthermore, if sustained to the end of the year (which is unlikely given the influence of the monsoons on activity in the Indian sub-Continent), such selling would imply a final total for 2016 of 62.2mdwt - up by 4.8mdwt (+8.4%) from the all-time record of 57.4mdwt recorded in 2012. As is also clear from the top graph, sales have again been heavily centred on dry cargo vessels, with 237 such units of 14.6mdwt sold in 1q16. By contrast, just 16 oil carrier scrap sales of 0.9mdwt (or 5.9% of the total in dwt terms) ensued in the same period.

Greater demolition sales in 1q16 took place despite further steep falls in scrap prices in January and February, albeit that these have since rallied, as seen in the lower graph. From US$227/lwt at end-February prices of bulkers for scrapping on the sub-Continent reached US$287/lwt six weeks later - a 26.4% rise. (For a Capesize of around 22,000lwt, this meant an increase of some US$1.32m in revenue received by the seller of such a ship). Heightened selling also ensued despite very low oil and bunker prices that cut the incentive to dispose of older, less fuel-efficient vessels. Yet international oil prices have rebounded by almost 50% since mid-January, from barely US$30/bbl for Brent crude to around US$44/bbl at present. Hence, any negative effect that softer bunker prices may have had on owners’ willingness to scrap tonnage should similarly abate.

A major factor in surging scrap sales has been continued severely depressed dry cargo markets.

FLEET DEVELOPMENTS

1Q16 SCRAP SALES SURGE

This was illustrated by a record quarterly low for the Baltic Dry Index (BDI) in 1q16 of just 358 points - a decline of 41.7% from 1q15. As well as demand side weakness, vessel earnings have been pressured by a 3-year high in newbuilding deliveries. Together this has caused record numbers of Panamaxes (65-99,999dwt) and Capesizes (100,000+dwt) to be sold for scrap in the year to date. At mid-April, 59 such sales have taken place of the former, compared to 109 in the whole of 2015. For Capes, the comparable figures are 49 sales so far in 2016 against 2015’s final total of 93.

Not only have greater numbers of large bulkers been sold for scrap in 1q16: analysis of vessel ages shows a heightened incidence of sales for breaking of ships less than 20 years’ age. Whereas 26 such Panamaxes were sold for demolition in calendar 2015, so far in 2016 the comparable total has been 20 units. Similarly, for Capesizes, 39 ships less than 20 years old were sold for scrap last year against 16 already in 2016. In fact, whereas the average age of Panamaxes sold for breaking even as recently as in 2014 was 24.3 years, in 2016 to date it has fallen to just 21.1 years. In the Capesize sector, the equivalent averages were 23.4 years in 2014 and 21.0 years so far in 2016.

Unlike ongoing high sales for breaking of large bulkers (and older container ships) so far this year, tanker scrap sales (including purpose-built chemical carriers) have fallen again. After 105 such ships of 4.2mdwt were sold in 2015 (a third successive annual decline), sales of these vessels are on course to total only 64 units of 3.7mdwt in 2016 (based on first quarter sales). If correct, this would be the lowest annual total for this ship type since 1991. Furthermore, as noted in the “Fleet Developments” section of last month’s issue, the current tanker fleet has a very modern age profile: only 16.9% of existing vessels are over 15 years old. This implies limited scope for tanker scrapping in the near term, even if present firm freight markets ease.

Ship Demolition Sales by Year (Mdwt)

Ship Demolition Prices: sub-Continent

April 2016 | 12

0

5

10

15

20

25

30

35

40

45

50

55

60

65

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Dry cargo / other Oil carriers

SOURCE: SSY

2016 totals annualised on basis of year-to-date sales

200

225

250

275

300

325

350

375

400425

450

475

500

525

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

Nov

-14

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

Nov

-15

Jan

-16

Mar

-16

US

$ pe

r lw

t

Dirty tanker, 15/25,000 lwt

Clean tanker, 6/10,000 lwt

Bulk carrier, 7/12,000 lwt



L ast month US Federal Reserve Chair Janet Yellen argued the Fed should “proceed

cautiously,” before raising interest rates again due to global economic uncertainty. Indeed, in this week’s World Economic Outlook, the International Monetary Fund (IMF) notes the world economy has been growing “too slow for too long”. The Federal Reserve made its first upward adjustment to US interest rates for seven years as recently as December 2015, lifting the federal funds rate by 0.25 percentage points to a range of 0.25-0.5%. Although further rate increases this year had been expected by some market participants, the US Federal Reserve has evidently tempered its approach.

Were the very low interest rate environment to persist for longer than expected, it would naturally benefit those repaying debt as well as fresh investors in shipping assets. The IMF notes another positive factor for economic activity in the form of boosting the attractiveness of infrastructure investment, which the Fund claims in its April Outlook is needed across a range of countries. Meanwhile, this year’s fall in the US Dollar (see chart of the Dollar Index below), has helped commodity prices to rise.

Noting the “ever-slowing and increasingly fragile pace” of the global recovery, the IMF has lowered its forecasts for global GDP growth in 2016 and 2017 from its previous projections released in January. This year’s projection has been lowered by 0.2 percentage points to 3.2% and the 2017 forecast has been trimmed by 0.1 percentage points to 3.5%. This compares with the IMF’s growth estimate of 3.1% for last year, which the IMF has opted to leave unchanged. Last year’s performance was the weakest since the contraction of -0.1% in 2009.

ECONOMY

WORLD GDP GROWTH “TOO SLOW FOR TOO LONG”

Managing Director Christine Lagarde highlighted that the global recovery remains, too slow, too fragile and is at risk of persistent low growth having damaging effects on the social and political fabric of many countries. In her words the risks of being trapped in a “new mediocre” have increased.

The introduction to the Outlook also refers to political discussion in the US and Europe turning more inward due to income inequality, resentment of global elites and fear of terrorism, which may eventually lead towards protectionist policies.

In advanced economies the recovery has been hampered by weak demand, partly restrained by unresolved crisis legacies, unfavourable demographics and low productivity growth. The US economy is forecast to expand by 2.4% this year and 2.5% next year (marking respective downward revisions of 0.2 percentage points and 0.1 percentage points), consistent from an expansion of 2.4% in 2015. The projection for the Eurozone was lowered by the same amount for both years, to 1.5% for 2016 and 1.6% for 2017, similarly consistent with estimated growth of 1.6% last year. Japan saw the most significant downward revision among this group, with estimates cut by 0.5 percentage points for this year to 0.5% and by 0.4 percentage points to a contraction of -0.1% next year.

For emerging markets and developing economies low commodity prices have contributed to further trimming of GDP growth estimates for Russia, Brazil, Sub Saharan Africa and West Africa over the next two years. In contrast, projections for China were lifted by 0.2 percentage points for both years to 6.5% and 6.2% respectively, but down from growth of 6.9% in 2015. The economy’s transition towards a service- and consumption-based model continues, but the IMF warns “bumps along the way” could have substantial spillover effects.

GDP Growth %

US Dollar Index

April 2016 | 13

75

80

85

90

95

100

105

Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16

Source: Thomson Reuters

-1

0

1

2

3

4

5

6

7

8

World US Eurozone Japan China India

2015 2016 2017

Source: IMF



A s Russia heads into an April meeting in Qatar along with other oil producers, the country is

considering a number of output and export scenarios which may help to strengthen its position in a challenging global oil environment. For crude oil, these considerations are focused around two areas, first a production freeze (or even decrease) and second, where this crude output will be sold to.

Russia is currently the world’s largest oil producer and in March had an average oil output of 11.25M b/d (including NGLs), according to the International Energy Agency (IEA). The country raised it’s output to post-Soviet highs at the beginning of 2016 but has also been one of the most prominent non-OPEC countries to both voice concerns over the current global oil market’s oversupply and express an interest in potential co-ordinated action to lift prices. The country was the only non-OPEC member of an output freeze agreement in February with Saudi Arabia, Qatar and Venezuela (but this required other countries to join before action was taken).

However, outside of a freeze agreement, Russia is traditionally thought to be limited in its ability to reduce output. Much of its oil is produced in Siberia where permafrost and potential rock deformation if pressure is reduced make lowering output difficult. However, new technology and potential mothballing of long-term non-profitable fields may indicate that some cuts are possible. Russia’s Deputy Energy Minister noted in the media in March that it was “technically possible” to reduce the country’s oil output by 5%, which at February levels would be around 561K b/d.

However despite discussions of output action, for the moment scheduled 1H16 Russian crude exports

OIL MARKETS

RUSSIA CONSIDERS ITS OPTIONS: PRODUCTION AND EXPORT STRATEGIES

from its Baltic, Black Sea and Far East port of Kozmino are set to rise by 228K b/d y-o-y to 2.78M b/d, Energy Intelligence reports. Factors cited for the rise include i) lower export duties, ii) reduced domestic demand (Russia’s economy is projected by the IMF to contract 1.8% in 2016) which could mean that exports still rise even if output is capped or declines, iii) accumulated stocks in the system and iv) that the export plans can be subject to change. The slump in the value of the Rouble has also reduced Russian oil producers output costs, increasing their international competitiveness.

Of the 2.78M b/d that is set to be exported in 1H16, higher Baltic exports (+219K b/d to 1.55M b/d) account for the majority of this. Since 3Q15 Baltic volumes have bucked the recent trend of declines. Russian producers are also aiming to protect their market share from growing Middle Eastern crude supply to Northwest Europe and the Baltic. But Black Sea exports (-11K b/d to 622K b/d), are set to come under pressure as Russia reduces shipments from the region (as more supplies are directed to the country’s Far East ports), while loadings at Novorossiysk have also been sporadically disrupted by poor weather conditions.

Growth in exports through Kozmino (+19K b/d to 604K b/d) has slowed but Russia is expected to continue to focus on Asia for growth. Chinese imports of Russian crude surged in 2015 and this trend shows little sign of abating in 2016, with China becoming the dominant buyer for Kozmino cargoes, while South Korea and Japan have also taken significant volumes. Russia’s Energy Minister Alexander Novak stated in late 2015 that the country expects up to 30% of its crude oil exports to head to Asia by as soon as 2020, with infrastructure improvements (rail and pipeline) and oil exploration in its largely unexplored East Siberia and Far East region lifting volumes. Russia has also been improving its energy ties with India, with Rosneft set to take a 49% stake in Indian refiner Essar Oil.

Russian Oil Production Monthly M b/d

Russian Crude Exports Quarterly M b/d, Y-o-Y

April 2016 | 14

10.90

10.95

11.00

11.05

11.10

11.15

11.20

11.25

11.30

Jan

-15

Feb

-15

Mar

-15

Apr

-15

May

-15

Jun

-15

Jul-

15

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Source: IEA

Source: IEA

-150

-100

-50

-

50

100

150

200

250

300

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

*

Baltic Black Sea Kozmino



OIL MARKETS

April 2016 | 15

Annual averages Year to Date: Percentage Latest2012 2013 2014 2015 2016 Data to: Change** Month

WORLD OIL PRODUCTION (incl Non-OPEC NGLs)Saudi Arabia 9.59 9.41 9.55 10.12 10.19 Mar 16 4.34% 10.17Iran 3.00 2.68 2.81 2.86 3.17 Mar 16 12.66% 3.30Other MEG OPEC 9.39 9.59 9.78 10.35 10.60 Mar 16 7.10% 10.44Non-MEG OPEC (*Incl Indo) 10.26 9.55 8.98 8.83 8.61 Mar 16 -2.27% 8.56FSU 13.71 13.86 13.88 14.00 14.18 Mar 16 1.02% 14.16US 8.81 10.02 11.48 12.62 12.45 Mar 16 0.23% 12.39Latin America (incl Mexico) 7.09 6.84 7.15 7.16 6.97 Mar 16 -3.68% 7.04Europe 3.47 3.29 3.31 3.47 3.54 Mar 16 2.51% 3.57Sources: IEAOIL PRODUCTS DEMANDUS 18.67 18.89 19.07 19.43 19.46 Feb 16 0.59% 19.52Japan 4.70 4.54 4.32 4.21 4.63 Feb 16 -4.39% 4.91EU (Main 4)* 7.08 6.94 6.87 6.89 6.81 Feb 16 0.14% 7.13South Korea 2.24 2.29 2.35 2.43 2.69 Feb 16 8.84% 2.72PRC 9.77 10.01 10.23 10.76 10.96 Feb 16 1.50% 11.01FSU 4.67 4.74 4.67 4.73 4.91 Feb 16 1.16% 4.53Latin America (excl Mexico) 6.53 6.44 6.65 6.54 5.88 Feb 16 -7.18% 6.04Sources: Energy Intelligence (Oil Market Intel)CRUDE OIL & NGL EXPORTSFSU (seaborne) 4.79 4.80 4.66 5.12 5.57 Feb 16 5.00% 5.64FSU (Druzhba pipeline) 1.08 1.03 1.01 1.07 1.05 Feb 16 1.45% 1.09Mexico 1.26 1.19 1.14 1.17 1.18 Feb 16 -7.99% 1.24UK 0.60 0.64 0.60 0.64 0.61 Jan 16 1.61% 0.61Sources: IEA, Pemex, PRC CustomsCRUDE OIL IMPORTSUS 8.49 7.71 7.34 6.80 7.34 Feb 16 2.92% 7.68Japan 3.65 3.63 3.44 3.38 3.43 Feb 16 -3.91% 3.46OECD Europe 9.34 8.93 8.63 9.49 9.02 Jan 16 0.71% 9.02South Korea 2.58 2.50 2.54 2.81 2.91 Mar 16 5.70% 2.71India 3.68 3.82 3.80 3.94 4.27 Feb 16 12.52% 4.27PRC 5.43 5.66 6.19 6.74 7.35 Mar 16 12.30% 7.71Sources: US DoE, PAJ, IEA, KNSO, PRC customsREFINED PRODUCTS IMPORTSUS 2.10 2.07 1.88 2.05 2.06 Jan 16 -8.16% 2.06Japan 0.65 0.62 0.61 0.61 0.63 Feb 16 -4.48% 0.56OECD Europe 3.40 3.71 3.79 3.80 3.70 Jan 16 -0.99% 3.70PRC 0.76 0.76 0.58 0.60 0.65 Feb 16 6.53% 0.69Sources: US DoE, PAJ, IEA, PRC customsREFINERY THROUGHPUTSUS 15.00 15.31 15.84 16.20 15.88 Feb 16 2.78% 15.77Japan 3.23 3.27 3.13 3.14 3.37 Feb 16 -2.74% 3.37OECD Europe 12.11 11.45 11.43 12.10 11.95 Feb 16 -0.67% 11.87South Korea 2.60 2.50 2.53 2.80 3.06 Feb 16 8.72% 3.14Sources: IEACRUDE SPOT OIL PRICES (US$ per barrel)Brent (dated) 111.58 108.68 98.99 52.45 33.90 Mar 16 -37.21% 38.49WTI (Cushing) 94.15 97.94 93.17 48.72 33.24 Mar 16 -31.55% 37.76Urals (delivery Mediterranean) 110.74 108.37 98.02 51.57 32.29 Mar 16 -39.04% 36.85Dubai Light 109.05 105.51 96.61 50.91 30.42 Mar 16 -41.34% 35.12Sources: IEA* EU (Main 4) = Germany, France, Italy and the UK.** % changes for 2016 figures (year to date) against same period of 2015, e.g. Jan-Nov '16 vs Jan-Nov '15

SUMMARY OIL STATISTICS (million b/d)



T anker markets have again demonstrated their volatile nature. Dirty markets spiked mid-March,

with VLCC rates driving the sector, on the back of i) increased Middle East exports (Iraq output hit a rec-ord high in March), ii) loading delays in the Far East and iii) storage interest for Aframaxes and Suezmax-es in Asia. But levels have since declined as Asian refinery maintenance weighs on crude demand. For the clean sector, LR rates rose through March as Asian naphtha demand remained strong and addi-tional support came from strong Aframax earnings. However, rates have fallen rapidly in April as naph-tha buying slowed and westbound arbitrage opportu-nities from East of Suez remained limited. MR rates in Asia increased steadily due to strong short-haul enquiry and robust Australian demand. But, Atlantic MR rates were under pressure as the transatlantic diesel and gasoline arbitrages remained closed.

DIRTY - VLCC: MEG-Japan earnings surged mid-March to their highest since January at over $85,000/day amid i) a sharp jump in Middle East cargoes fix-ing for March, ii) ongoing delays in the Far East, and iii) heightened West African fixing, particularly to Asia (raising tonne miles and attracting eastern ballasters away from the MEG). Rates spiked at W100 (US$19.3/t) mid-month, double the level at the start of March, but quickly fell back to W62.5 (US$12.1/t). A flurry of options cargoes and some replacement fixtures caused levels to bounce to W90 (US$17.4/t) at the end of the month but rates fell to W60 in early April as Asian refinery maintenance gets underway. Vessel congestion at ports of Qingdao and Basrah as well as terminal issues in Thailand have provided some support, but not enough to clear prompt posi-tion lists that have also included several newbuilds.

TANKER MARKET

CLEAN TANKER MARKETS UNDER PRESSURE

At Basrah, although April loadings were expected to be relatively stable on the month at around 3.28M b/d, the May schedule has been cut to 3.09M b/d due to maintenance and the current backlog, reports Reuters.

Similarly, WAFR-China rates spiked mid-month at W85 (US$24.3/t) as the strong Middle East market provided support and Asian enquiry picked up, driven by China. China’s loadings of West African crude in April are ex-pected to be the highest in 19 months at 1.11M b/d as strong demand from independent refiners combines with the additional volumes now heading from Angola following a deal with Sinopec, reported Reuters. Total loadings to Asia are set to rise to over 2M b/d, the highest since July 2015. Rates fell once enquiry slowed, but not as severely as in the Middle East.

In the Caribbean, rates were briefly supported by strength across the VLCC sector mid-month, but Atlan-tic tonnage supply has remained elevated on i) supply

VLCC Spot Rates $’000/day

Suezmax Spot Rates $’000/day

April 2016 | 16

-40

-20

0

20

40

60

80

100

120

Jan

-14

Apr

-14

Jul-

14

Oct

-14

Jan

-15

Apr

-15

Jul-

15

Oct

-15

Jan

-16

Apr

-16

280K MEG-USG260K WAFR-China265K MEG-Japan

0

20

40

60

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100

120

140

Jan

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135K BS-Med

130K WAFR-USAC

AVERAGE MONTHLY TCE

Assessments ($/day) now inc allowances for ECA zones

Dirty March February 2016 YTD

265K MEG-Japan 57,951 46,409 57,015

280K MEG-USG 26,033 22,272 30,073

130K WAFR-USAC 27,588 31,784 32,894

135K Bsea-Med 30,512 36,448 39,628

70K Caribs-USG 23,187 27,552 24,202

80K Indo-Japan 38,068 26,210 31,191

80K UKC-UKC 25,741 25,073 29,518

Clean75K MEG-Japan 19,882 21,914 23,973

55K MEG-Japan 17,910 15,974 18,662

37K UKC-USAC 9,627 13,016 13,335

38K USG-UKC 10,681 11,096 10,886

30K SEAS-Japan 11,170 10,113 10,802



and infrastructure issues at a number of Latin Ameri-can ports in the region that have trimmed cargo vol-umes, ii) lower demand for Latin American crude and iii) an absence of eastbound Forties cargoes.

SUEZMAX: West African rates were under pressure at the start of March keeping WAFR-UKC rates at W67.5 (US$9.2/t) as European refinery maintenance got underway and US demand for W. African car-goes fell. Support came mid-month amid a tighter position list as more ships opened in the US (following the recent rise in W. African imports) and opted for regional or Asian bound voyages, rather than returning to WAFR position lists, helping push rates to W82.5 (US$11.3/t). But, rates ended March at W75 as the slow European demand persisted.

The strength in West Africa provided brief support to Black Sea-Med rates mid-month, with rates rising to W82.5 (US$6.3/t) despite slow enquiry. Turkish Straits delays and a strong Aframax market later in the month prevented rates from falling further to-wards the end of March.

Middle East markets gained support mid-month as i) the surge in VLCC rates prompted charterers to split stems and ii) ships were taken on timecharter and for short-term storage in Singapore.

AFRAMAX: Rates fell rapidly in the Caribbean and US Gulf from mid-March (despite ongoing delays caused by record US crude stocks). This was due to i) a force majeure on Colombian exports following pipeline attacks, ii) a number of oil company relets, iii) a week long Easter holiday in Venezuela and iv) ships returning to the position list that were previous-ly held up by delays. As such, Caribs-USG rates fell from W142.5 (US$13.3/t) to W90 (US$8.4/t) by end-month.

Rates in the North Sea and Baltic jumped mid-March as a tight tonnage list met the emergence of a num-

TANKER MARKET

ber of end-March/early April cargoes amid a longer Primorsk loading schedule for April (due to Russian refinery maintenance). Cross-UKC rates peaked at W125 (US$8.9/t) end month having been stable at W92.5 (US$6.6/t) through 1H March. Mediterranean rates were supported by i) delays caused by bad weather and port storage constraints, ii) a rise in cargo volumes and iii) the return of Iraqi Kurdistan flows to Ceyhan. Cross-Mediterranean rates rose from W80 (US$6.7/t) to W120 (US$10/t) but have since fallen to W82.5 (US$6.9/t) in early April as enquiry and Turkish Straits delays fell.

In Asia, Indo-Japan rates jumped almost 70 points mid-month to the highest since July 2015 at W187.5 (US$20.6/t) as i) a number of ships were taken on timecharter and for short-term fuel oil storage in Singa-pore and ii) long-haul enquiry increased. But, timechar-ter enquiry slowed and tonnage supply grew amid a dearth of short and long-haul cargoes, while demand for Suezmaxes on storage also alleviated some of the Aframax demand. Thus rates fell quickly to W115 (US$12.7/t) in early April.

PANAMAX: Caribs-USAC rates remained relatively stable around W125 (US$9.9/t) (despite the rapid de-cline in Aframax earnings and reported delays at Vene-zuela) but were under pressure by end month. In con-trast, UKC-USG rates continued to slide to W90 (US$16.6/t), taking earnings to the lowest since July 2014, as the high VGO stocks in the US limited arbi-trage opportunities. But, rates recovered towards end month (to W115 in April) in line with the rise in Europe-an Aframax markets and the return of US refineries from maintenance.

CLEAN - LR: MEG-Japan LR2 rates rose about 20 points in 2H March to W108 (US$20.6/t) as support came from i) the flurry of Aframax fuel oil storage inter-est, ii) firm Asian naphtha demand and iii) a closed West to Asia naphtha arbitrage that reduced the num-

Aframax Spot Rates $’000/day

Panamax Spot Rates $’000/day

April 2016 | 17

0

20

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100

120

Jan

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Jul-

14

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80K UKC-UKC

70K Caribs-USG

80K Indo-Japan

0

10

20

30

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60

70

Jan

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Jul-

14

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50 Caribs-USG

55 UKC-USG



ber of ships arriving East of Suez. But, levels have fallen quickly in April as i) ballasters arrive from the quiet European market, ii) Asian naphtha buying fal-ters amid cracker turnarounds and high Chinese gas-oline stocks and iii) the jet arbitrage from Asia to Eu-rope remains closed. Fleet growth in 1Q16 is starting to add further underlying pressure. For LR1s, tight ship supply and stronger demand amid healthy east and westbound volumes from the Middle East boost-ed rates, with MEG-Japan rising to W127 (US$24.2/t) from W100 (US$19.1/t) at the start of the month. But, a lack of enquiry and weak MR rates have weighed on the sector and levels have fallen in line with the LR2 market to W92.5.

MR: UKC-USAC rates fell mid-March from W117.5 (US$15.8/t) to W92.5 (US$12.4/t) by end-month as the selloff of winter gasoline limited import demand from the US, taking earnings to the lowest since Sep-tember 2014. USG-UKC rates were under pressure in 1H March as the diesel arbitrage to Europe re-mained closed, with levels falling to W82.5 (US$15.2/t) from W125 (US$23.1/t). But a brief opening caused a spike in rates to W122.5 end-month while Latin American demand continued to provide under-lying support, despite rising regional output.

In Asia, Singapore-Japan rates rose from W134 (US$13.5/t) to W152.5 (US$15.3/t) as trade was sup-ported by i) strong Australian demand, ii) robust cross-Singapore volumes and iii) high exports from China and Japan. Levels are now under pressure, falling to W136 in April, as enquiry has slowed and ship supply has been boosted by a number of oil company relets.

PERIOD: Timecharter activity remained low through-out March. Owners still seem to be interested in fix-ing for longer periods of 18-36 months while their hire ideas differ from charterers offers for the shorter

TANKER MARKET

6-12 months periods they are pushing for.

Notable VLCC fixtures included a 2009 build taken for 7 years to an Indian charterer for a reported $34,500/day. In addition two newbuilds from a Taiwanese com-pany fixed for 2 years at circa $38,500/day while an oil company chartered three VLCCs, with the younger 2009 build reportedly at circa $46,000/day for 1 year while details on the other two older ships (2002 and 2004) were not declared. Some short term activity was also reported with rates around $40,000/day for 3-5 months. For Suezmaxes, two 1 year extensions were reported to an oil major at $26,250/day plus profit share while short term storage activity for 1-3 months was paying around $35-40,000/day depending on the vessel and the delivery. Three Aframaxes fixed for 2 years at $23-23,500/day while another four were con-cluded for 1 year at circa $26-27,000/day, the majority were booked for lightering business in the US Gulf. Short term activity of 2-6 months paid from $25,000/day to low $30,000's/day depending on the ship and the prompt delivery. A Latin American oil company ex-tended five dirty Panamaxes for 22 months at a rate of about $20,500/day plus profit share for the larger two 74,000 dwt units and $19,000/day plus profit share for the smaller 68,000 dwt ships. In addition a 2005 built 70,000 dwt vessel was booked for 1 year at $21,500/day to an oil company.

In the clean sector, a newbuild LR2 fixed but details were unclear while only one LR1 was reportedly con-cluded at a new benchmark low of $19,750/day for 1 year while an oil company was trying to relet two ves-sels in the high $19,000's/day for 10 and 12 month pe-riods. On the MR's, due to the paper market picking up at the start of March, around 12 ships were booked for 1 year with rates ranging from $17-18,000/day depend-ing on the vessel and delivery. Three ice class Handies fixed for a pool operator for 3 years/option 1 year/1 year at a firm $15,600/$16,500/$17,500/day.

LR Spot Rates $’000/day

MR Spot Rates $’000/day

April 2016 | 18

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75K MEG-Japan

55K MEG-Japan

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37K UKC-USAC

30K Sing-Japan

38K USG-UKC



T he shortage of space in the US Gulf that began back in November 2015 continued more or less

solidly through March. The Easter holiday period did cause a period of reflection from charterers, some of whom opted to defer shipments into April instead.

Methanol, ethanol, styrene and EDC were the principal grades to Asia, with a showing of MX by month end. Rates were very strong for the entire month. USG/India-MEG continued in the same vein as February, with no new space opening up. Rates therefore continued on a firm track.

Transatlantic eastbound was on the whole pretty strong. Occasionally space would open up when a ship ran late, but generally charterers preferred to hold onto the vessels they had fixed due to a lack of alternatives. Rates were mostly firm. Interest in shipping styrene to Europe ebbed in favour of selling it to Asia, but there were plenty of parcels such as cumene, methanol, ethanol, biodiesel, acetic acid etc to fill any space.

Little new space opened up on the USG/Caribs service, with rates generally staying solid across the board. USG/EC. South America started to see more ethanol requirements, along with cargoes of styrene, lubes, PX and caustic. Rates were also unchanged.

European coastal business saw a few more peaks and troughs than in February. The North Sea and Baltic regions were quieter and prompt space easier to find and at more competitive numbers than in recent months. Southbound into the Mediterranean also had a slow spell, with a surplus of open tonnage at times in the 1H March. Some rates into the West Mediterranean fell into the high €20s/t from the low

CHEMICALS

ANOTHER STRONG MONTH IN THE AMERICAS

€30s/t of February.

Northbound out of the Mediterranean remained stable, keeping rates surprisingly steady. Inter-Med demand was pretty tight for much of the month, although there was a brief spell when supply in the West Mediterranean looked a little higher and some routine shipments managed to secure a minor rebate off the normal level. It was linked to a week or so when the biodiesel market faded, but as soon as it recovered, space tightened once more.

Westbound transatlantic lacked excitement, and rates declined. Fortunately for scheduled carriers, rates back out of the US Gulf were so strong that anyone who wished to participate in the bonanza could effectively ballast and therefore their presence had little impact on the parcels trade.

Europe/Asia found renewed interest, especially with parcels of styrene, methanol, PX, OX and base oils, and March space filled rather quickly, and at slightly firmer levels than in February. Europe/India-MEG was livened up by a large number of parcels competing for space and therefore pushing up freights.

Poor demand in the palm oil sector meant increased competition for chemical cargoes in some domestic Asia markets, such as intra-SE. Asia and northbound routes. Intra-Far East markets did better and tonnage was booked ahead for most of March, causing rates to recover to more usual levels. Asia export markets struggled with a non-existent benzene arbitrage to the US. Instead, owners fixed biodiesel, UAN and sulphuric acid to the US and only small parcels of solvents to Europe. Rates fell on both services.

The MEG-India region stabilised but demand was erratic both east and westbound, and rates remained soft throughout the month. Only regional business between India and the MEG performed satisfactorily.

5,000t Easy Chemicals Spot Rates $/t

5,000t Easy Chemical Spot Rates $/t

April 2016 | 19

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Rotterdam - Far East Ulsan - Houston

Houston - Far East Ulsan - Rotterdam

0

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Houston - Santos Houston - EC MexicoRotterdam - US Gulf Houston - Rotterdam



I n March, LNGC markets continued very much in the same vein as February, with a large surplus of

shipping in the East and the West being buoyant, but governed strongly by a lack of available volumes. The month was dominated by the ENARSA tender for up to 33 cargoes into Argentina, but this failed to raise sentiment, with the majority of the volumes contracted to portfolio players. With Easter at the end of the month, there was some relief that holidays broke up a market which does not currently know which way to go. Certainly, falling product prices that are eroding margins across the basins is not helping the cause.

After February’s start up of Louisiana’s Sabine Pass LNG plant, another new source of cargo supply has come on line. The LNGC “Asia Excellence” (159,600 cbm, blt 2015) sailed on 20 March from Western Australia’s Gorgon LNG plant, carrying the maiden cargo from its first 5.2mtpa train. Yet the plant has since developed technical problems that operator Chevron says may keep it out of service throughout April and possibly May.

The first cargo from the Sabine Pass LNG plant on the US Gulf arrived at Guanabara Bay in Brazil on 14 March on the LNGC “Asia Vision” (159,600cbm, blt 2014). This, plus the plant’s next 2 cargoes, were bought by Petrobras. By end-March, four shipments had taken place from Sabine Pass.

Cedigaz, the international association for natural gas estimated that world LNG trade grew by 5Mt to 241.2 Mt (+2.1%) in 2015. This was despite a decline of 5Mt (-2.8%) in Asia’s imports, to 172.8Mt - its first such fall since 2009, amid milder weather and slower economic growth in Japan, Korea and China.

It was also reported in March that seepage from the

LNG

GORGON SHIPS ITS FIRST CARGO

Panama Canal’s new locks had been rectified and that the enlarged waterway will be inaugurated on 26 June. A new 49m (106.8ft) beam limit will apply (up from 32.3m, or 106ft), with a draft restriction of 15.2m (50ft), instead of 12m (39.5ft) Tropical Fresh Water (TFW). All existing LNGCs except Q-flexes, Q-maxes and a few Moss ships should thus be able to transit.

The Maritime & Port Authority of Singapore (MPA) reported that it should be able to offer LNG bunkers from early 2017. Supply licences has been awarded to Pavilion Gas and to a partnership between BG and Keppel Offshore & Marine. MPA will work with these suppliers to devise bunkering infrastructure required for LNG-fuelled ships calling at Singapore.

Safety and environmental inspections of Dunkirk LNG terminal in northern France were undertaken in March. Subject to passing these inspections, approval should soon follow from the Oil Companies International Marine Forum (OCIMF), the international organisation for users of oil and LNG terminals. The facility is due on line in June with a regas capacity of 13 Bcm p.a..

Croatia’s government indicated that it would now prefer the country’s first LNG terminal to comprise a floating facility, rather than an onshore facility, due to the lower cost and shorter lead time this could offer. Reports claim that this could be in service in 2 years, rather than 5 years for a land-based terminal at Krk Island.

Italy’s Eni stated that it aims to make a final investment decision (FID) “before June” on the 3.4mtpa Coral floating LNG (“FLNG”) project off Mozambique in East Africa. If this proceeds as planned, LNG output might start in 2021 or 2022. Eni’s plans to develop Coral were approved by Mozambique in February.

In Far East Russia, the Sakhalin-2 LNG plant, which had experienced a power outage since 28 January that cut output by 50%, resumed normal operations on 28 February. Despite a nameplate capacity of 9.6mtpa, actual output has exceeded 10mtpa since 2012.

LNGC Supply at April 2016 No. of ships

Estimated LNGC Spot Earnings $/day

April 2016 | 20

0

10

20

30

40

50

60

70

< 1

980

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

> 2

018

year of build / scheduled delivery

Ships on order Existing fleet

Source: SSY

Excludes possible slippage from reported ship delivery dates

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Jan

-06

Jul-

06Ja

n-0

7Ju

l-07

Jan

-08

Jul-

08Ja

n-0

9Ju

l-09

Jan

-10

Jul-

10Ja

n-1

1Ju

l-11

Jan

-12

Jul-

12Ja

n-1

3Ju

l-13

Jan

-14

Jul-

14Ja

n-1

5Ju

l-15

Jan

-16

138-150,0000cbm steam

160,000+cbm DFDE

End-month figures



C ontinued weakness in the dry bulk freight market in March did not stem buying interest in existing

ships. Instead, SSY’s records show that, excluding vessels below 10,000dwt, 49 sales for further trading ensued - up slightly from February’s 44 transactions reported deals and also 5 sales above March 2015 volumes. Continued willingness to acquire tonnage in this sector reflects a perception among would-be buyers that prices are now at very competitive levels. It may also indicate a belief by some owners that, after this year, fleet additions are set to fall sharply. Along with ongoing scrapping of older units and further restraint in new ship ordering, this could provide the basis for an eventual charter market upturn before end-2017.

Handymax/Supramax (40-64,999dwt) and Panamax (65-99,999dwt) deals were very prevalent in March: 22 sales occurred of the former (up from 19 deals in February) and 15 of the latter. This was the highest number of Panamax sales since September 2012 and compared with just 8 reported deals in February.

In the Capesize sector, clients of Eastern Pacific acquired the “Aquacaro” (180,600dwt, bt 2016, Imabari) at region US$33m, while the 2006-built “Spring Hydrangea” (176,955dwt, blt Namura) was committed to Greeks at US$12.5-13.0m. The “Global Partnership” (177,000 dwt, blt 2006, Namura) tied up to clients of Winning Shipping at similar levels. This was up on levels last done: the “Shin Sho” (177,000 dwt, blt 2006, Mitsui) had sold in February to clients of Samos Steamship at US$12.2m.

Liberty sold four Daewoo-built Kamsarmaxes: the “Liberty Dawn” (81,800dwt, blt 2013, Daewoo), which had reportedly been in cold layup since February, was sold for US$13.4m and “Liberty Destiny” (81,800

SALE & PURCHASE

BULK CARRIERS

dwt, blt 2012, Daewoo) for US$12.4m - reportedly to clients of Thenamaris. We understand that clients of Embiricos purchased the “Liberty Desire” (81,800dwt, blt 2013, Daewoo) for US$13.4m and the “Liberty Dream” (81,800dwt, blt 2012, Daewoo) for US$12.4m. Clients of Kambara Kisen were busy, selling the 2008-built “Tenshin Maru” (82,687dwt, blt 2008, Tsuneishi Zhoushan) to clients of Erasmus for US$7.9m. They also sold for US$9.2m the “F. D. Isabella” (82,191dwt, blt 2009, Tsuneishi Zhoushan) to clients of Erasmus after some 14 would-be buyers had inspected her. UniCredit secured the auction sale of Kaptanolgu Shipping’s “Zeynep K” and “Sadan K” (both 81,000dwt, blt 2010, STX) to clients of Sea World Management & Trading for US$9.25m each “en bloc.”

Of Panamax sales, the “Lowlands Camellia” (76,600 dwt, blt 2006, Sasebo), having initially failed to clients of Sea Pioneer at US$6.4m, was reportedly sold to clients of Apollonia Lines for US$6.2m.

On the Ultramax front, it was widely reported that the “Red Daisy” (61,000dwt, blt 2016, Iwagi) had sold to an unnamed compatriot Japanese party at US$18.5m. A time-charter back to the sellers was also rumoured to have been attached to this deal. Clients of LA Maritime S.A. acquired the “Global Island” (53,566dwt, blt 2004, Iwagi) for US$4.3-US$4.5m. Elsewhere, the “Pacific Guardian” (52,525dwt, blt 2006, Tsuneishi Cebu) was sold to unnamed buyers for US$4.2m.

In the Handysize sector, Greek interests purchased the “CS Chara” (30,600dwt, blt 2006, Cochin) at US$3.6m.

In contrast to activity involving bulkers seen in March, the tanker sale & purchase market remained relatively muted. Reported sales of existing tonnage for further trading fell for a second successive month, with just 19

Bulk Carrier Secondhand Prices $m

Bulk Carrier Sales by Month No. of ships

April 2016 | 21

$0

$20

$40

$60

$80

$100

$120

$140

$160

Jan

-05

Jul-

05Ja

n-0

6Ju

l-06

Jan

-07

Jul-

07Ja

n-0

8Ju

l-08

Jan

-09

Jul-

09Ja

n-1

0Ju

l-10

Jan

-11

Jul-

11Ja

n-1

2Ju

l-12

Jan

-13

Jul-

13Ja

n-1

4Ju

l-14

Jan

-15

Jul-

15Ja

n-1

6

Handysize

Supramax

Panamax

Capesize

Basis 5-year-old vessels

Source: SSY

0

10

20

30

40

50

60

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

Nov

-14

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

Nov

-15

Jan

-16

Mar

-16

100,000 & over

65-99,999

40-64,999

10-39,999

Source: SSY

TANKERS



deals concluded; this compared with 25 such sales a year earlier. Many of these March deals (12 sales) involved ships below 50,000dwt, but some activity also emerged in the Aframax (85-119,999dwt) fleet segment. Yet a dearth of competitively-priced sales candidates in the Suezmax (120-199,999dwt) and VLCC (200,000 dwt & above) sectors meant that no sales of these sizes completed.

The largest tanker sold in March was the “Pacific London” (113,000dwt, blt 1999, Samsung), with this being taken by unnamed buyers for US$15m; this was one of 7 Aframax sales in the month. Also in this size range, the “Trident Star” (105,500 dwt, blt 2005, Namura) was acquired by Nathalin early in March at a firm US$26.5m, her higher price partly due to the long (one month) subjects attached to her sale. The most modern sale in this sector was of the Chinese-built, coiled “Ratna Puja” (105,000dwt, blt 2006, SWS) - acquired for US$22.5m by Eurotankers from India Steamship.

No LR1 or LR2 sales ensued in March, following the failure of the prospective buyers of the 2006-built “Maritina” (74,993dwt, blt Onomichi) to lodge the deposit on an intended sale at slightly over US$26m.

Buying interest was seen again for MRs, with several sales completing. The IMO3 “Amalienborg” (40,058 dwt, blt 2004, ShinA) was sold by Dannenborg/Stena to Chinese buyers for US$16m, with a 5-year charter back at US$14,000/day. She had been committed on subjects in mid-February to unnamed buyers for a price close to US$16m, basis 3 year charter back at US$16,000/day, but that sale had failed to complete. Still in the same sector, the IMO2-3 “Simoa” (40,354 dwt, blt Hyundai Mipo, 2004) was purchased for US$13.9m by Sea World.

The dirty-trading Handy tanker “Searambler” (39,551 dwt, blt Hyundai Mipo, 2001) was purchased from Thenamaris by unnamed buyers for US$11m.

SALE & PURCHASE

In terms of smaller tonnage, Searights Maritime sold the stainless steel “Sunflower II” (14,298dwt, blt 2002, sakawa) to Korean buyers for US$11.25m. The sellers had purchased her in late December last year from Japan’s Iino Lines for US$11m. The slightly smaller “Dong-A Sirius” (11,959dwt, blt 2002, Asakawa) was sold by Korea’s Dong-A Tanker to unnamed buyers for almost US$12m.

The exceptionally busy start to 2016 seen in demolition sales continued in March: in all, 99 such deals ensued, these totalling 5.31mdwt (1.06mlwt). Activity was again dominated by disposals of non-tankers, these totalling 92 vessels of 5.04mdwt (1.01mlwt). By contrast, just 7 oil carriers of 0.27mdwt (0.06mlwt) were sold. Thus, although total 1q16 sales of 253 ships of 15.55mdwt (2.48mlwt) far exceeded year-earlier volumes, those of tankers fell well short of 1q15 levels: only 16 sales occurred, against 38 in the first 3 months of 2015.

Two factors may further boost forthcoming scrap sales from their already remarkable volumes. The first of these is a partial rally in prices paid by breakers: from just US$227/lwt at end-February, prices of bulkers for breaking on the sub-Continent rose to US$269/lwt 4 weeks later, with further subsequent gains in April. Future demolition sales may also be supported by the partial rally seen since mid-January in global oil prices. By leading to corresponding increases in the cost of marine bunker fuels, these have added to the incentive for vessel owners to dispose of older, less fuel-efficient tonnage.

Ship sales for breaking in 2016 to date are examined more fully in the “Fleet Developments” section of this report (page 12).

Oil Tanker Secondhand Prices $m

Tanker Sales by Month No. of ships

April 2016 | 22

DEMOLITION

$0

$25

$50

$75

$100

$125

$150

$175

Jan

-05

Jul-

05Ja

n-0

6Ju

l-06

Jan

-07

Jul-

07Ja

n-0

8Ju

l-08

Jan

-09

Jul-

09Ja

n-1

0Ju

l-10

Jan

-11

Jul-

11Ja

n-1

2Ju

l-12

Jan

-13

Jul-

13Ja

n-1

4Ju

l-14

Jan

-15

Jul-

15Ja

n-1

6

MR (clean)AframaxSuezmaxVLCC

Basis 5-year-old vessels

Source: SSY

0

5

10

15

20

25

30

35

40

45

50

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

Nov

-14

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

Nov

-15

Jan

-16

Mar

-16

200,000 & over120-199,99985-119,99910-84,999

Source: SSY



SALE & PURCHASE

April 2016 | 23

Name DWT Built Yard Gear RemarksCS Chara 30,600 2006 Cochin Crs 4x30 ts Region $3.6m to Tide LinePacific Guardian 52,525 2006 Tsuneishi Cebu Crs 4x30 ts Region $4.2m to undisclosed buyersGlobal Island 53,566 2004 Iwagi Crs 4x30 ts Region $4.3m to LA Maritime S.A.Red Daisy 61,000 2016 Iwagi Crs 4x30.7 ts Region $18.5m to Japanese buyersLowlands Camellia 76,600 2006 Sasebo Region $6.2m to Apollonia LinesZeynep K 81,000 2010 STX

Sadan K 81,000 2010 STX

Liberty Dawn 81,800 2013 Daewoo Region $13.5m to clients of ThenamarisLiberty Destiny 81,800 2012 Daewoo Region $12.4m to clients of ThenamarisLiberty Desire 81,800 2013 Daewoo Region $13.4m to clients of EmbiricosLiberty Dream 81,800 2012 Daewoo Region $12.4m to clients of EmbiricosF.D. Isabella 82,191 2009 Tsuneishi Zhoushan Region $9.2m to clients of ErasmusTenshin Maru 82,687 2008 Tsuneishi Zhoushan Region $7.9m to clients of ErasmusSpring Hydrangea 176,955 2006 Namura Region mid/high $12m's to Greek buyersGlobal Partnership 177,000 2006 Namura Region mid/high $12m's to Winning ShippingAquacaro 180,600 2016 Imabari Region $33m to Eastern Pacific

Name DWT Built Yard Features Sold for/Remarks

Nogogini 11,600 1996 Fukuoka STST Region $4m to Far Eastern buyersDong-A Sirius 11,959 2002 Asakawa STST Region $12m to undisclosed buyersOceanic Cerise 13,221 2008 Jinse Epoxy Region $11.8m to Team TankersSunflower II 14,298 2002 Asakawa STST Region $11.25m to Korean buyersSearambler 39,551 2001 Hyundai Mipo Region $11m to undisclosed buyersAmalienborg 40,058 2004 ShinA Region $16m to Chinese buyers with timecharter backSimoa 40,354 2004 Hyundai Mipo IMO 2-3 Region $13.9m to Sea WorldGolden Gulf 46,700 1995 Hyundai Region $7.5m to Middle Eastern buyersKassos 95,420 1995 Hyundai Coiled Region $8.5m to AryaGreat White 104,024 1999 Samsung Region $15m to SoechiRatna Puja 105,000 2006 SWS Coiled Region $22.5m to EurotankersTrident Star 105,500 2005 Namura Region $26.5m to NathalinSKS Tana 109,906 1996 Hyundai Region $7.5m to KardenizPacific London 113,000 1999 Samsung Region $15m to undisclosed buyers

Name Type DWT LWT Built Remarks

Haj Walid Bulk 23,418 5,358 1985 Region $222 for delivery India

New Emerald Bulk 45,554 8,696 1996 Region $290 with delivery options

The Creator Bulk 68,519 9,861 1995 Region $260 for delivery India

Kythnos Warrior Bulk 72,072 9,617 1996 Region $230 for delivery India

Trident Navigator Bulk 75,500 9,969 2000 Region $275 for delivery Pakistan

Huitai Bulk 149,155 18,232 1996 Region $237 for delivery options Subcontinent, 800 ts bunkers ROB

Martha Bulk 148,804 22,396 1994 Region $275 for delivery Pakistan

China Steel Developer Bulk 154,191 23,088 1998 Region $260 'as is' Singapore including 500 ts ROB

RZS Harmony Bulk 171,779 22,362 1999 Region $280 for delivery Pakistan

Cape Century Bulk 172,683 21,104 2001 Region $247 'as is' Singapore with 250 ts ROB

Arnold Schulte Cont 41,000 13,900 2002 Region $278 'as is' Singapore with unknown bunkers

MOL Advantage Cont 66,332 27,750 2001 Region $252 'as is' Hong Kong, for green recycling

Zambia Cont 82,171 24,606 1998 Region $290 for delivery Bangladesh with unknown bunkers

Kampos Tank 41,465 8,094 1991 Region $240 'as is' Singapore destined for Pakistan

Representative Bulk Carrier Sales March 2016

Representative Tanker Sales March 2016

Indicative Sales for Demolition March 2016

Region $10.25m each 'en bloc' to Sea World

Management & Trading

JAKARTA Menara Anugrah, Kantor Taman E3.3, 21st Floor, Jl. DR Ide Anak Agung Gde Agung Lot 8.6-8.7, Jakarta, 12950 T: +62 21 5794 2330

LONDON Lloyds Chambers, 1 Portsoken Street, London, E1 8PH T: +44 20 7977 7400

LONG ISLAND 900 Merchants Concourse, Suite 302, Westbury, Long Island, NY 11590 T: +1 631 724 6100

MIAMI 1700 E. Las Olas Blvd. 203, Fort Lauderdale, FL 33301 T: +1 754 216 0252

MUMBAI A-307,215 Atrim, Kanakia Spaces, Next to Marriot Courtyard, Andheri Kurla Road, Andheri (East), Mumbai, 400 069 T: +91 22 6113 1000

NEW YORK 46 Southfield Avenue, Three Stamford Landing, Suite 200, Stamford, CT 06902 T: +1 203 356 2000

OSLO Drammensveien130B, Oslo, N-0277 T: +47 67 518 800

SHANGHAI Room 703, Holiday Inn Pudong Shanghai, 899 Dong Fang Road, Pudong, Shanghai, 200122 T: +86 21 6876 3350

SINGAPORE 50 Raffles Place, #14-01/02 Singapore Land Tower, Singapore, 048623 T: +65 6854 7120

SYDNEY Level 15, 124 Walker Street, North Sydney, NSW 2060 T: +61 2 9252 1711

TOKYO Shin-Yurakucho Building 10 F, 12-1 Yurakucho 1-chome, Shiyoda-ku, Tokyo, 100-006 T: +81 3 6269 9515

VANCOUVER Suite 314, 800 West Pender Street, Vancouver, V6C 2V6 T: +1 604 688 6244

ZUG Industriestrasse 9, 6300 Zug T: +41 41 725 2940

BERGEN 5th Floor, Kalfarveien 76, Bergen, 5022 T: +47 55 540 500

HONG KONG Unit 1502, 15/F Chevalier Commercial Centre, 8 Wang Hoi Road, Kowloon Bay, Kowloon T: +852 2521 1141

HOUSTON 4900 Woodway Drive, Suite 830, Houston, Texas, 77056 T: +1 713 652 2700

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