Key trends in shipping markets ESPO Conference, 2018 30 th May, 2018 - PowerPoint PPT Presentation

Key trends in shipping markets ESPO Conference, 2018 30 th May, 2018 www.drewry.co.uk

Content • Trade patterns ‒ How US shale is transforming oil and gas markets ‒ Iron ore shifts East ‒ Brakes on for Thermal Coal • Service patterns ‒ Alliances, ULCVs and liner network development 2 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

US transforms gas and oil markets www.drewry.co.uk

Overview of global LNG trade (2012) Qatar was the biggest LNG exporter, export volume stood at 78.0 million tonnes, 32% of total LNG trade. LNG trade also gained momentum on the Russia to Asia trade lane Russia-Asia 10.9 Mt Algeria - Europe 11.2 Mt Indonesia - Asia, 18.5 Mt Nigeria - Europe 8.6 Mt Qatar - Europe 23.0 Mt Qatar - Asia Trinidad & 48.9 Mt Tobago-S. and Australia - Asia central America 20.7 Mt 7.4 Mt Source: Drewry Research Database, BP Statistics 4 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Overview of global LNG trade (2017) Qatar remains the biggest LNG exporter , challenged by Australia. US emerging strongly and is expected to be the third biggest exporter of LNG US-Europe 1.8 Mt Algeria - Europe 10.5 Mt Indonesia - Asia, 18.5 Mt US-Asia Nigeria - Europe 4.8 Mt 8.8 Mt Qatar - Europe 17.7 Mt Qatar - Asia 52.1 Mt Australia - Asia 55.5 Mt Source: Drewry Research Database, GIGNL report 5 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

US is expected to have total capacity of 105mtpa by 2022 Kenai Cameron LNG T4-T5 1.6mtpa 10mtpa Dominion Cove Point Magnolia T1-T4 5.8mtpa Operational 8mtpa Liquefaction Plants Lousiana Lake LNG Planned Charles 2mtpa Liquefaction Plants Global Venture 15mtpa 10mtpa Under construction Elba Southern Liquefaction Plants LNG 2.5mtpa Texas LNG 2mtpa Cameron LNG (T1-T3) 10mtpa Golden Pass T1-T3 15.6mtpa Sabine Pass T1-T3 13.5mtpa (operational), Freeport LNG T4-T5 10 mtpa 13,2mtpa Corpus Christi T3 (under const.) Corpus Christi T1-T2 4.5mtpa 9mtpa Source: Drewry research database 6 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Overview of global LNG trade (2022) The US is expected to become the largest LNG exporter, followed by Australia. Meanwhile, China will rise as a major LNG importer in the Asian market importing about 60 million tonnes of gas Russia's liquefaction capacity USA liquefaction (Mt) capacity (Mt) 26 15 105 2017 2022(f) 25 Nigeria liquefaction 2017 2022 (f) capacity (Mt) 120 49 100 22 80 mtpa 60 2017 2022 (f) 40 Australia Liquifaction capacity (Mt ) 20 91 0 69 Current 2022 2017 2022 (f) Source: Drewry Research Database 7 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Overview of Global Trade – Crude Oil The Middle East has been largest exporter of crude. Cargo volumes based on 2016 trade data The Middle East is the largest exporter of crude oil; it and with West Africa have been main suppliers of crude oil to Asia. Cargo volumes based on 2016 trade data The US is however becoming a prominent supplier of crude to the world amidst supply cuts enforced by the OPEC. The US Gulf refineries, which account for most of the US’s refined products production, use heavy grade for their slate, which is imported from the Latin Americas and Canada, by pipeline. The lighter crude from the US is exported to Asia and Europe. Crude from Northern sea enters Europe via the Baltic Sea.

US crude production taking off 55.0% 14,000 US crude oil production (kbpd) 12,133 45.6% 12,000 45.0% 41.3% 10,000 9,243 35.0% 8,000 25.0% 6,000 15.0% 4,000 7.2% 2,000 5.0% 2.0% 0 2007 2009 2011 2013 2015 2017 2022 -5.0% 2007 2012 2017 2022 9 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Crude oil trade on major routes xxxx ME-Europe FSU-Europe 10% 6% 6% 5% FSU-Asia 5% 13% 12% 4% 12% 0% 12% 11% 1% 2% 2007 2012 2017 11% ME-USA 10% 10% 0% 5% 5% 4% 2007 2012 2017 2007 2012 2017 Africa-Europe 0% 10% 2007 2012 2017 7% 6% 5% 5% USA-Asia Pacific Latin America-USA ME-Asia 0% 40% 34% 4% 4% 33% 1% 5% 0.6% 2007 2012 2017 3% 29% 30% 0% 0% 20% 0% Africa-Asia Pacific 0% 2007 2012 2017 2007 2012 2017 2007 2012 2017 10% 7% 6% 5% 5% 0% Latin America-Asia 2007 2012 2017 4% 5% 3% *NE Asia: Japan, South Korea, China 1% 0% 2007 2012 2017 Source: Drewry Research Database, BP Statistics 10 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Iron ore shifts East www.drewry.co.uk

Iron ore trade overview Demand is growing fast and shifting East Global iron ore trade (Million Tonnes) Global iron ore imports (% share) CAGR- 7% 9% 6.6% 1,511 20% CAGR- 1,099 7.3% 85% 84% 771 71% 2007 2012 2017 2007 2012 2017 Asia EU Other Europe imports widespread China accounted more than four-fifths of Asian imports in 2017 Germany France 16% 15% UK Asia EU China imports by imports by Japan 84% 9% Netherlands Italy country, country, 25% 7% 2017 2017 South Spain Korea 6% 5% Others Taiwan 24% 2% 12 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk Source: GTIS, Drewry

Iron ore exports (million tonnes) Australia and Brazil are the top iron ore exporters and contribute 80% of global trade. Very rapid growth. South Brazil Africa 25% 4% Canada 1,000 Canada Share in 3% 2017 500 exports other 42 24 32 11% 0 Australia 2007 2012 2017 55% 1,000 India 500 74 30 33 0 Brazil 2007 2012 2017 1,000 1,000 373 500 327 269 1,000 Australia 828 500 0 South Africa 492 2007 2012 2017 66 54 500 30 267 0 2007 2012 2017 0 2007 2012 2017 13 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk Source: GTIS, Drewry

Brakes on for Thermal Coal www.drewry.co.uk

Thermal coal trade overview Sharp slowdown in coal volume growth Global coal trade (million tonnes) Global coal imports (% share) 66% 63% CAGR- 1.1% 52% CAGR- 829 6.9% 786 23% 16% 15% 15% 562 12% 10% 10% 10% 9% 2007 2012 2017 EU Major Asian importers Minor Asian importers Other 2007 2012 2017 Asia coal imports, 2017 (% share) Taiwan Vietnam 10% 10% India 27% Pakistan Malaysia Share of the EU in coal imports is declining steeply. China 12% 32% During 2007-12 the share was taken by the rising 18% Major Asian imports of major Asian importers, However, 2012 Minor Asian importers, onwards minor Asian importers and Turkey is taking importers, 2017 up the share 2017 Philippine s South 22% Japan Korea 25% 20% Thailand 24% 15 Source: GTIS, Drewry Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Thermal coal imports (million tonnes) Major importers decline or slow; minor players grow Coal imports (million tonnes), CAGR (in %) -1.4% -4.7% Major Asian importers 0.3% 131 122 12.0% 96 526 519 294 2007 2012 2017 Minor Asian importers Turkey EU 9.9% 8.3% 2007 2012 2017 7.3% 7.7% 32 91 21 57 15 40 2007 2012 2017 2007 2012 2017 __ : CAGR below world’s average __ : CAGR above world’s average Source: GTIS, Drewry 16 Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

EU thermal coal imports sources Colombia and Russia are the EU’s major sources of coal 27 26 9 25 7 7 24 Russia 13 8 2007 2012 2017 2007 2012 2017 Intra- EU 2007 2012 2017 US Others South 7% 38 36 Africa 31 7% EU Colombia Colombia 7% 38% Share in United EU imports, 2007 2012 2017 States 2017 13% 41 South Africa Russia 12 28% 7 2007 2012 2017 17 Source: GTIS, Drewry Drewry Maritime Advisors – ESPO 2018 www.drewry.co.uk

Alliances, ULCVs and liner networks www.drewry.co.uk

Containership sizes double on most trades Evolution of average ship sizes on major trade routes Trade Route (TEU) 1Q09 1Q12 1Q15 1Q18 • · · Far East/N Europe 7,779 9,552 12,235 15,291 Far East/Mediterranean (direct) 5,488 6,848 8,625 10,998 Transpacific headhaul 5,079 5,869 6,740 7,828 Transatlantic headhaul 3,609 3,872 4,458 4,703 ECSA/Far East 5,074 3,240 8,314 9,236 WCSA/F East 5,100 2,681 7,207 7,751 Eur/S Africa 3,301 3,116 7,657 8,096 Source : Drewry Maritime Research Far East/S Africa (direct) 5,255 3,651 7,061 5,068 Eur/W Africa (direct) 1,965 1,636 2,578 2,965 Far East/W Africa (Direct) 2,755 2,220 4,846 5,490 Asia/Mid-East and South Asia 2,926 3,692 5,594 5,409 (direct) Source : Drewry Maritime Research 19 Drewry Maritime Advisors – GIC www.drewry.co.uk

Consolidation and alliances Major industry consolidation among companies and alliances 2016 CMA-CGM acquires CMA-CGM APL 2M APL COSCO merges COSCO CSCL with CSCL Ocean OOCL 2017 2017 THE HL merges Hapag- UASC with UASC Lloyd Maersk acquires Hamburg- Maersk Hamburg Sud Sud 2018 (Container Operations Only) Ocean Network K-Line NYK MOL Express 20 Drewry Maritime Advisors – GIC www.drewry.co.uk

Vessel sizes and service frequency Vessel sizes rise and service frequency declines. Volume is being concentrated… 18,000 30 Average vessel size (TEU) Number of services (per week) 16,000 25 14,000 12,000 20 10,000 15 8,000 6,000 10 4,000 5 2,000 0 0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Asia-North Europe Asia-Med Asia-North Europe Asia-Med 21 Drewry Maritime Advisors – GIC www.drewry.co.uk