Confessions of a Shipping Cyclist. Wrong againsuckers!

Transcription

1 Confessions of a Shipping Cyclist Wheeee Wrong againsuckers! Martin Stopford, President Clarkson Research Marine Money, 26 th February 215

2 Surviving the Shipping Cycle 1. Secrets of our rich cycle forecasting heritage 2. Why shipping cycles are sexy 3. Predicting the shipbuilding super-cycle 4. How to predict the oil price 5. Predicting the shipping super-cycle OK, I confess. Everything I told you last year was completely wrong Forecasting Expert

3 1. Secrets of our Ancient Cycle Forecasting Methods The old ways are still the best

4 Was it it good? It No, was fantastic!! Useless 6 3 Mirror Lights Should I buy a Panamax? Honey cakes 1 4 Absolutely & we have some very nice ones for sale 2 Smoke 5 Antonius Van dale 17

5 Method 2: Aristotle The Rational Approach Aristotle's logic revolves around deduction (sullogismos). A deduction leads to our notion of logical consequence: If X and Y are true, then Z must be true For example If you buy our shares AND you re a sucker, we ll buy them back for 3% at the bottom of the cycle Aristotle Onassis Early Greek Shipowner

6 Method 2: The Computer Model The computer model is the direct descendent of the Aristotelian approach of deduction It uses data to summarise the relationships in the world economy We type things into a plastic box and it tells us the market s about to recover All I did was scrap 3 more ships and now we have a boom DATA

7 Method 4: Blame the Banks. "The rates today are lower than ever before. This was brought about by the over-production of ships fostered by reckless credit given by banks and builders, and over-speculation by irresponsible and inexperienced owners. J.C.Gould, Angier & Co, 31 December 1894 Shipping s success over a century Wales to Singapore 1871 $11.4/ton (coal) Tubarao to Japan 22 $8.7/ton (ore)

8 2. Why Shipping Cycles are Sexy

9 Three types of shipping market cycles 2.Short Cycle (5-1 years) 1. Shipping cycles fall into three categories 1. Seasonal Cycles 2. Short Cycles 3. Long Cycles 3. Long cycle 5 years? 1. Seasonal cycle (12 months) 6 Years 6 Years 6 Years Figure 3.1 Compiled by Martin Stopford from various sources

10 Seasonal shipping cycles 5% 4% 3% 2% 1% % -1% -2% -3% -4% -5% Deviation of VLCC monthly earnings from trend -1% June -23% July -38% Aug -16% -25% Sept Oct 37% 37% Nov Dec 17% Jan 8% Feb 13% March -16% April -8% May

11 Index 1741= Dry Cargo Cycles Stopford Era 5 Sailing Ship Era Steam Ship Era Bulk Era Source: Maritime Economics 3 rd Edition

12 Cycle length in years The length of 24 short shipping cycles For example this cycle lasted 14 years peak to peak

13 3. Predicting the Shipbuilding Super-Cycle One free with every ship

14 The shipbuilding super-cycle Million Dwt 3 Shipyards expand in the 197s boom & again in the 2s 25 Orders Placed Deliveries Step i: take orders for a lot of ships Step 2: predict the market will get worse next year, then recover

15 Figure 22 How Shipbuilders Saw the Market Million CGT How will output develop? 4 1 June 1978 forecast 3 June 198 forecast 2 April 1982 forecast June 1984 forecast Actual world shipbuilding completions 3 Note: This graph tracks how between 1978 and 1984 a group of international shipbuilding experts revised their forecast of future shipbuilding completions as the 198s recession developed Fig 17.1 Comparison of forecasts of world shipbuilding completions

16 4. How to predict oil prices If he d paid more attention to the IEA he d be up here with me

17 $ per barrel at market prices The Oil Price Hard to Predict Winner of the Shipping cycle yellow jersey $ money of the day

18 IEA s Price Forecast Leads the Way Oil Price $/barrel When it comes to forecasting oil prices the IEA has all the information just follow them In 1993 the oil price was $17 a barrel. What was the forecast for 21? Source: BP energy review Marttin Stopford 7 Junel 211

19 World Oil Price - The 1993 Forecast Oil Price $/barrel Oil Price forecast Source: BP energy review Marttin Stopford 7 Junel 211

20 World Oil Price & 1994 Forecast Energy Use Mill Tonnes Oil Equiv Oil Price 1993 forecast 1994 forecast Source: BP energy review Marttin Stopford 7 Junel 211

21 World Oil Price & 1995 Forecast Energy Use Mill Tonnes Oil Equiv Oil Price 1993 forecast 1994 forecast 1995 forecast Source: BP energy review Marttin Stopford 7 Junel 211

22 World Oil Price & 1996 Forecast Oil price $/barrel Source: BP energy review Future price 1994 forecast 1995 forecast 1996 forecast 1998 forecast Marttin Stopford 7 Junel

23 World Oil Price & 2 Forecast Energy Use Mill Tonnes Oil Equiv Oil Price Source: BP energy review Marttin Stopford 7 Junel 211

24 World Oil Price & 24 Forecast Oil price $/barrel Oil Price 1993 forecast 1994 forecast 1995 forecast 1998 forecast 2 forecast 24 forecast Source: BP energy review Marttin Stopford 7 Junel 211

25 World Oil Price & 26 Forecast Oil price $/barrel Oil Price 1993 forecast 1994 forecast 1995 forecast 1998 forecast 2 forecast 24 forecast 26 forecast Source: BP energy review Marttin Stopford 7 Junel 211

26 World Oil Price & 27 Forecast Oil Price $/barrel Oil Price 1993 forecast 1994 forecast 1995 forecast 1998 forecast 2 forecast 24 forecast 26 forecast 27 forecast Source: BP energy review Marttin Stopford 7 Junel 211

27 World Oil Price & 28 Forecast Oil Price/barrel Oil Price 1993 forecast 1994 forecast 1995 forecast 1998 forecast 2 forecast 24 forecast 26 forecast 27 forecast 28 forecast Source: BP energy review Marttin Stopford 7 Junel

28 World Oil Price & 21 Scenarios Oil Price/barrel Oil Price 1993 forecast Future actual 1994 forecast 1995 forecast 1998 forecast 2 forecast 24 forecast 26 forecast 28 forecast 27 forecast 21 "Current Policies" 21 Carbon Scenarios Source: BP energy review Marttin Stopford 7 Junel 211

29 5. Predicting Today s Cycles

30 Seems like we re still under water, folks

31 Oil tanker market each decade different W/S Gulf Europe Tight Supply shortage of ship yards 2. Shipper driven market Run by oil majors 13% trade growth pa with 2% standard deviation 3. Investment bubble 11% trade growth pa with 1.5% standard deviation 4. Distressed market & no demand growth % trade growth pa with 7% standard deviation 5. Long trough working surplus out of system 3.5% trade growth pa with 3.4 % standard deviation 6. Superboom 3.5% pa growth with 2% st. dev. 7. Kicking can down road.7% pa trade growth with 2.4% st. dev

32 VLCC Net Earnings VLCCS made good money in 16 out of 44 years (36%) Net earnings after OPEX interest & depreciation Free cash flow in $ million Free cash $ m VLCC The average ship value was $75 m and the average return was $.6m, a 1% return

33 Dry bulk market cycles $ 1 year TC Peak "An exciting market" Very poor" Unprofitable" Peak "Rates boomed" "Worst ever" Note: based on the US Gulf-Japan grain freight Peak "Firm" Stronger" 1999 Sentiment rock bottom" 2 22 Peak fortunes made Source: compiled by Martin Stopford from various sources Peak Peak recovery next year

34 1. Play the players, not the cards. 2. Watch them from the minute you sit down. 3. Play fast in a slow game, slow in a fast game. 4. Never get out when you are winning. 5. Look for the sucker and, if you don t see one, get up and leave because the sucker is you Amarillo Slim s Advice (and mine too!)