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The Deep Sea Chemical Carrier Market Richardson Lawrie Associates - - PowerPoint PPT Presentation

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Private and Confidential The Deep Sea Chemical Carrier Market Richardson Lawrie Associates Ltd Maritime Economists & Business Consultants Website: www.richardsonlawrie.com Annual Meeting - "Disruption-Decarbonisation- Data Athens,

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

The Deep Sea Chemical Carrier Market Richardson Lawrie Associates Ltd

Maritime Economists & Business Consultants

Website: www.richardsonlawrie.com

Annual Meeting - "Disruption-Decarbonisation-Data“ Athens, May 2019

This paper is specifically for the use of delegates attending this course and shall be used for no other purpose without the written permission of Richardson Lawrie Associates Ltd. No part of this paper may be reproduced, transmitted, transcribed or stored in a retrieval system without the prior written permission of Richardson Lawrie Associates Ltd.

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Established in 1987, Richardson Lawrie Associates Ltd (RLA) is an independent firm of international maritime economists and business consultants It has a close association with Wade Maritime in Singapore/India; maritime consultants offering a range of services including operational risk management; specialist training; audits and inspections; claims and dispute advisory services

Private and Confidential

Richardson Lawrie Associates Ltd

Sectors ▪ Crude Oil ▪ Petroleum Products ▪ LPG ▪ LNG ▪ Petrochemicals ▪ Dry Bulk ▪ Containers ▪ Ports and Terminals Services ▪ Regular market analyses and forecasts ▪ Shipping pool revenue distribution systems ▪ Commercial and contract advice ▪ Project development and implementation ▪ Feasibility, due diligence and logistics studies ▪ Financial appraisals ▪ Management training ▪ Expert witness advice

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Private and Confidential

Wade Maritime Network

Wade Maritime’s network of associates supports RLA’s global reach

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

The Chemical Carrier Sector

  • Deep Sea Chemical Trade
  • Major Players in the Market
  • Capacity Developments
  • Vessel Demand
  • The Fleet
  • Rates and Earnings
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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Composition of Chemical Carrier Trade: 5 main Groups But Hundreds of Products

1991

34% Commodity Chemicals 15% Inorganic Acids 19% Speciality Chemicals 23% Natural Products 9% Caustic Soda Solution

Total = 36 mln tonnes Total = 124 mln tonnes

50% Commodity Chemicals 19% Speciality Chemicals 9% Inorganic Acids 7% Caustic Soda Solution 16% Natural Products

2018

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Organic Chemicals, Caustic and Acid Trade

After a recovery in trade in 2010 of 12.5%, growth has been limited

Trade moved between 94 to 96 million tonnes between 2011 and 2015. In 2016 it reached 97 million tonnes and steadily grew to 104 million tonnes in 2018.

Imports Exports

  • 3
  • 2
  • 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 110000 1995 2000 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % Change p.a. 000 Tonnes

USA South America Europe North East Asia China Other Asia Others Rate of change

  • 3.0
  • 2.0
  • 1.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 110000 1995 2000 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % Change p.a. 000 tonnes Canada W.C USA South America EC Europe Middle East Others Asia Caribs/Central America South America WC

  • N. Africa

Rate of change

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Trade is Impacted by Growth But with Time Shifts and Large Variations in Scale Ch Chemica cals ls trade ade increa eases ses from m

  • 1% to 13% year

ear

  • n year
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% 10% 12% 14%

All Bulk Liquid Chemicals OECD GDP Asia GDP

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Comparison of US Deep Sea Commodity Chemicals Exports and Imports

  • Deep sea exports of commodity chemicals marginally

increased in 2017 after increasing significantly in 2016. 2018 was comparatively a better year rising by 13% year on year

  • Main drivers of change were ethanol and methanol
  • Proportions of US chemicals exported deep sea to total

exports have been on average 65% since 2015

  • There has recently been a slowdown in deep sea import

volumes for commodity chemicals. 2018 imports were down 4% year on year

  • Fall in methanol volumes has lead to lower deep sea

imports.

  • US imports for commodity chemicals have been heavily

reliant on deep sea sources

2000 4000 6000 8000 10000 12000 2000 2007 2012 2013 2014 2015 2016 2017 2018 ` Year

Acrylonitrile Benzene Ethanol Ethylene Dichloride Ethylene Glycol Methanol MTBE/ETBE Other Xylenes Paraxylene Styrene Toluene US Deep Sea Exports as a Percentage of Total US Exports 73% 65% 56% 56% 58% 64% 67% 65% 64%

2000 4000 6000 8000 10000 12000 2000 2007 2012 2013 2014 2015 2016 2017 2018 000 Tonnes Year

Acrylonitrile Benzene Ethanol Ethylene Dichloride Ethylene Glycol Methanol MTBE/ETBE Other Xylenes Paraxylene Styrene Toluene

US Deep Sea Imports as a Percentage of Total US Imports 86% 89% 87% 86% 84% 84%

82% 82% 80%

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Natural Gas Price Trends vs US Deep Sea Organic Chemical Exports & Natural Gas Production

Lower US gas prices leads to rising commodity chemicals exports and declining imports

1 2 3 4 5 6 7 8 9 10 50 100 150 200 250 300 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $/MMBTU Index Year 1997=100

US Natural Gas Production US Deep Sea Comm Chem Export US Deep Sea Speciality Chemicals Export US Deep Sea Comm Chem Import US Deep Sea Speciality Chemicals Import Natural Gas Price

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Natural Gas Price Trends vs US Deep Sea Commodity Chemicals (Excluding Ethanol) Trade & Natural Gas Production Underlying trends for commodity petrochemicals becomes clearer

1 2 3 4 5 6 7 8 9 10 50 100 150 200 250 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $/MMBTU Index Year 1997=100

US Natural Gas Production US Commodity Chemicals Deep Sea Export US Commodity Chemicals Deep Sea Import Natural Gas Price

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

USA Plants and Projects 2019-2023

USA Base Case Capacity between 2019 and 2023 is over 31 million tonnes Methanol accounts for 84% or 26 million tonnes

  • 2000

2000 4000 6000 8000 10000 12000 14000 2019 2020 2021 2022 2023 000 Tonnes Commissioning Year

Toluene Sulphuric Acid Styrene Paraxylene Phosphoric Acid Other Xylenes MTBE Methanol Ethanol Ethylene Glycol Ethylene Dichloride Benzene Acrylonitrile

There is a further 5.3 million tonnes of Upside Case capacity majority of which is methanol

500 1000 1500 2000 2500 3000 3500 2019 2020 2021 2022 2023 000 Tonnes Commissioning Year

Toluene Sulphuric Acid Styrene Paraxylene Phosphoric Acid Other Xylenes MTBE Methanol Ethanol Ethylene Glycol Ethylene Dichloride Benzene Acrylonitrile

Base Case Upside Case

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Middle East Deep Sea Organic Exports

  • Exports of organic chemicals

increased to 32 million tonnes in 2015 from 15 million tonnes in 2008.

  • Main drivers were methanol and

ethylene glycol

  • After a slowdown in 2016,

exports of organic chemicals have increased to 33 million tonnes in 2018

5000 10000 15000 20000 25000 30000 35000 40000

08 09 10 11 12 13 14 15 16 17 18

000 Tonne

Speciality Chemicals Commodity Chemicals

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Middle East Plants and Projects 2019-2023

Middle East Base Case capacity is nearly 13 million tonnes of which paraxylene is 5 million tonnes and methanol is 3.5 million tonnes Middle East Upside Case capacity is nearly 28 million tonnes; 23 million tonnes from Iran

1000 2000 3000 4000 5000 6000 Bahrain Iran Kuwait Oman Qatar Saudi Arabia UAE 000 tonnes

Acrylonitrile Benzene Ethylene Dichloride Ethylene Glycol Ethanol Methanol MTBE Other Xylenes Phosphoric Acid Paraxylene Styrene Sulphuric Acid Toluene

Base Case Upside Case

5000 10000 15000 20000 25000 Bahrain Iran Kuwait Oman Qatar Saudi Arabia UAE 000 tonnes

Acrylonitrile Benzene Ethylene Dichloride Ethylene Glycol Ethanol Methanol MTBE Other Xylenes Phosphoric Acid Paraxylene Styrene Sulphuric Acid Toluene

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Chinese Deep Sea Imports

Growth 2010 - 2018 (%p.a) Commodity Chemicals 5.2% Speciality Chemicals

  • 4.4%

Inorganic Acids

  • 2.7%

Caustic Soda Solution 45.7% Total 3.8%

5000 10000 15000 20000 25000 30000 35000 2010 2011 2012 2013 2014 2015 2016 2017 2018 000 Tonne

China Deep Sea Imports

Commodity Chemicals Speciality Chemicals Inorganic Acids Caustic Soda Solution

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Short Sea Chemical Trade by Product Group

20000 40000 60000 80000 100000 120000 140000 2012 2013 2014 2015 2016 2017 2018 000 tonne Commodity Chemicals Speciality Chemicals Inorganic Acids Caustic Soda Solution

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Source: Richardson Lawrie Associates Ltd

Methanol: Future Capacity Developments

  • Boom in US methanol capacity
  • Iran has large potential in increasing its methanol capacity. Lack
  • f funding and sanctions have been main barriers for progression.

5000 10000 15000 20000 25000 30000 35000 China Middle East USA 000 Tonne pa

Upside Case Base Case

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Percentage of Vessel Demand by Export Area and Product Group 2018

Major share by exporting region: USA 32%, Middle East 29%

5 10 15 20 25 30 35 Mideast USA Europe/ Black Sea Central Am/ Caribs SAEC Canada WC Others Natural Products Caustic Soda Solution Inorganic Acids Speciality Chemicals Commodity Chemicals

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Percentage of Vessel Demand by Import Area and Product Group 2018

Major share by importing region in Asia 65%: NEA and China 40% , Other Asia 25% 5 10 15 20 25 30 35 40 45 NEA and China Other Asia Europe/ Black Sea USA South America Others Natural Products Caustic Soda Solution Inorganic Acids Speciality Chemicals Commodity Chemicals

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Source: Richardson Lawrie Associates Ltd

The Current Fleet is 22.7 M Dwt

1000 2000 3000 4000 5000 6000 7000 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2014 2015 +

To 15k 15 to 25k 25 to 40k 40k +

000 Dwt

Built

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Spot Chemicals Business – ‘Non Chemical’ Carriers

* Trade excludes Natural Products

In 2017 the proportion of spot chemicals business in CPP/Chemical tankers has eased and falling further in 2018.

0% 5% 10% 15% 20% 25% 30% 200 400 600 800 1000 1200 1400 1600 1800 2014 2015 2016 2017 2018 000 Tonne US Gulf - Asia Fixtures

Chemical Carriers CPP/Chemical Tankers % in CPP Tankers/Chemical

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 1000 2000 3000 4000 5000 6000 7000 8000 2014 2015 2016 2017 2018 000 Tonne World Fixtures

Chemical Carriers CPP/Chemical Tankers % in CPP Tankers/Chemical

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Fleet Containment Profile

Partial/Fully Stainless still dominate in all size ranges except vessels above 40,000 dwt

2000 4000 6000 8000 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2014 2015 + 000 Dwt

Built

Coated PS/SS <20k dwt PS/SS 20-30k dwt < 25 seg PS/SS 20-30k dwt > 25 seg PS/SS > 30k dwt < 25 seg PS/SS > 30k dwt >25 seg

2000 4000 6000 8000 10000 To 15k 15 to 25k 25 to 40k 40k + 000 Dwt

Size Range

Coated PS/SS <20k dwt PS/SS 20-30k dwt < 25 seg PS/SS 20-30k dwt > 25 seg PS/SS > 30k dwt < 25 seg PS/SS > 30k dwt >25 seg

Coated ships are 38%

  • f the fleet and 65% of

these are over 40,000 dwt

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Total Orders: 2.7 Million Dwt

200 400 600 800 1000 1200 1400 1600 1800

2019 2020 2021

Upside Case Base Case

000 DWT

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

The Order Book as a Percentage of the Fleet

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 2Q 95 2Q 98 End 01 2Q 04 Beg 06 End 07 Beg 11 Mid 13 Beg 15 3Q 16 2Q 18

000 Dwt Newbuildings 000 dwt Newbuilding % of Fleet

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Source: Richardson Lawrie Associates Ltd

Vessel Removals

100 200 300 400 500 600 700 800 000 Dwt

Chemical Tankers Removed Chemical Tankers Scrapped

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Source: Richardson Lawrie Associates Ltd

The Global Fleet in 1997

0% 5% 10% 15% 20% 25% 30%

Odfjell Stolt-Nielsen Seachem Tankers Jo Tankers Tokyo Marine Formosa Plastics Iver Ships MT Maritime Management MISC Aurora Tankers Others Fleet Proportion

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Independent Fleet Operator Profile

0% 5% 10% 15% 20% 25% 30%

Proportion of Fleet by Dwt

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Chinese Owned Chemical Carriers

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 200 400 600 800 1000 1200

Beg 11 End 11 Mid 12 End 12 Mid 13 Beg 14 Mid 14 Beg 15 2Q 15 Beg 16 3Q 16 Mid 17 End 17 2Q 18 3Q 18 1Q 2019

000 dwt

Chinese Owned Fleet % Chinese Owned Tonnage

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Development of the Chemical Carrier Market Surplus

0% 5% 10% 15% 20% 25% 30% 2 4 6 8 10 12 14 16 18 20 22 24 2010 2011 2012 2013 2014 2015 2016 2017 2018

  • M. Dwt

Supply %Surplus

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Commodity Chemicals Rates and Means

10 20 30 40 50 60 70 80 90 100 110

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$/Tonne

Trans-Pacific Quarterly Freight Rate Trans-Pacific Mean Trans-Atlantic Quarterly Freight Rate Trans-Atlantic Mean MEG to East Asia Quarterly Rate MEG to East Asia Mean

2Q 2019 are April averages

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

RLA Easichem Earnings Indices

50 100 150 200 250 300 350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Trans-Atlantic Trans-Pacific MEG to East Asia Trans-Atlantic Mean Trans-Pacific Mean MEG to East Asia Mean

T/C Equiv. Index T/A 2000 = 100

2Q 2019 are April averages

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Bunker Costs as a Proportion of Trans-Pacific Freight Rates

0% 10% 20% 30% 40% 50% 60% 20 40 60 80 100 120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$/Tonne

Quarterly Rate Bunker Costs Bunker/Quarterly Rate %

2Q 2019 are April averages

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Stainless Steel Rates and Means

35 45 55 65 75 85 95 105 115 125 135 145 155

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$/Tonne

Trans-Pacific Quarterly Freight Rate Trans-Pacific Mean Trans-Atlantic Quarterly Freight Rate Trans-Atlantic Mean Cont East Asia Quarterly Freight Rates Cont East Asia Mean

2Q 2019 are April averages

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

RLA Stainless Steel Earnings Indices

50 100 150 200 250 300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Trans-Atlantic Trans-Pacific Cont to East Asia Trans-Atlantic Mean Trans-Pacific Mean Cont to East Asia Mean

T/C Equiv. Index T/A 2000 = 100

2Q 2019 are April averages

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

  • US Chemicals Exports and Middle East Exports
  • China’s Import Requirements
  • Methanol as a Market Driver
  • Short Sea Trade Developments
  • The Impact of CPP/Chemical Carriers on the Market
  • Trade Wars

Private and Confidential

Opportunities and Challenges

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Private and Confidential

Source: Richardson Lawrie Associates Ltd

Contact Details Zubair Adam Richardson Lawrie Associates Ltd Thornton House Thornton Road Wimbledon London, UK SW19 4NG Tel: +44 (0) 20 8405 6325 zadam@richardsonlawrie.com www.richardsonlawrie.com