Latsco Shipping Limited The VLGC Market Prepared for the IMSF, ALBA, Athens, May 2016 Presented by Dr. Mariniki Psifia, Market Analyst Latsco Shipping Limited IMSF Forum (9 th – 11 th May 2016) Prepared by Dr. Mariniki PSIFIA, 2016
Disclaimer This presentation (including any oral presentation) (the “presentation”) is intended solely for the purposes of the IMS Forum 2016 and its participants. This presentation is confidential and must not be copied, reproduced, published, distributed, disclosed or passed to any other person at any time without the prior written consent of Dr. Mariniki Psifia. Without prejudice to the generality of the foregoing, this presentation may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States. This presentation is for information purposes only. The information and opinions provided in this presentation are, unless otherwise stated herein, provided as of the date of this presentation and are subject to change. Certain statements are forward- looking statements. The forward-looking statements include statements typically containing the words “intends”, “expects”, “anticipates”, “targets”, “plans”, “estimates” and words of similar import. These forward-looking statements speak only as at the date of this presentation or as otherwise specifically provided herein. The forward-looking statements are based on numerous assumptions and such assumptions may or may not prove to be correct. No one undertakes to update or revise such forward-looking statements. This presentation does not constitute legal, valuation, tax, or financial consulting advice, nor is it a statement on the performance, management capability or future potential (good or bad) of the company(ies), industry(ies), product(s), region(s) or country(ies) discussed. Those interested in specific guidance for shipping, legal, strategic, and/or financial or accounting matters should seek competent professional assistance from their own advisors. Any commentary, observation or discussion contained in this presentation about a country, industry or company does not constitute a recommendation to buy or sell company shares or make investment decisions. Although the statements in this presentation are derived from or based upon various and credible information sources and/or economic models that the author believes to be reliable, the author does not guarantee their accuracy, reliability, or quality, and any such information, or resulting analyses, may be incomplete, rounded, inaccurate or condensed. All estimates included in this presentation are subject to change without notice. This presentation is for informational purposes only and may or may not be intended as a recommendation to invest or an offer or solicitation with respect to the purchase or sale of a security, stock, limited partnership instrument, or financial vehicle. This presentation reflects the views of its author and not of any one else (including of any former or current employer). Prepared by Dr. Mariniki PSIFIA, 2016
LPG Shipping Prepared by Dr. Mariniki PSIFIA, 2016
Liquefied Petroleum Gas (LPG) is a global industry Sources Processing industries Transport User Natural Natural Gas Gas Plant Pipeline Power Generation Gas well LNG liquefaction Residential / LNG Commercial LPG Petrochemical gases Industrial Ammonia Auto Condensates (CPP) LPG Oil well Refinery Further refining Clean Products Chemicals Dirty Products Agricultural LPG consists of propane and butane, petroleum gases that originate either from crude oil and/or natural gas Despite being gaseous at ambient pressure and temperature, propane and butane both liquefy relatively easily under pressure, refrigeration or combination of the two LPG is a clean energy source compared to many other fossil fuels and it has numerous applications LPG is substitutable in many of its applications, and its pricing is influenced by its competition with other fuels or feedstocks Source: Various Prepared by Dr. Mariniki PSIFIA, 2016
The Baltic Liquefied Petroleum Index (BLPGI) through the years Source: The Baltic Exchange Prepared by Dr. Mariniki PSIFIA, 2016
The U.S. poised to become the top LPG exporter within a few years U.S. Exports of Propane and Propylene are expected to hit unprecedented levels by 2017 due to additional export projects …to the fastest growing LPG exporter in the world over a 6 year time span! ??? From the LPG sector’s importer of last resort… Source: U.S. E.I.A, 2016 Prepared by Dr. Mariniki PSIFIA, 2016
The US confirmed its place as the world’s leading exporter of LPG in 2015 with over 19.7 mio mt of exports – a 40.1% y/y growth Data Source: GTIS, IHS Prepared by Dr. Mariniki PSIFIA, 2016
2015 – What happened last year Data Source: Clarksons SIN, Platts LPGaswire, Factsset, GTIS, IHS Prepared by Dr. Mariniki PSIFIA, 2016
2016 – Where are we this year? Prepared by Dr. Mariniki PSIFIA, 2016
Crude oil prices, Naphtha vs Propane Prepared by Dr. Mariniki PSIFIA, 2016
Correlations between WTI, Henry Hub Natural Gas and Propane Mont Belvieu WTI vs Henry Hub Natural Gas Propane Mont Belvieu vs WTI Propane Mont Belvieu vs Henry Hub Natural Gas Propane prices are highly correlated to Crude oil prices by Prepared by Dr. Mariniki PSIFIA, 2016
The West – East Arb is firmly closed FOB Propane Houston vs Arab Gulf The West- East Arb ARB OPEN ARB CLOSED $/mt FOB Houston FOB Arab Gulf $125 1 000,0 $100 950,0 $75 900,0 $50 $25 850,0 $0 800,0 ($25) 750,0 ($50) ($75) 700,0 ($100) 650,0 ($125) Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 600,0 Percentage of the Freight element to Japan CFR Price 550,0 Houston to Japan AG to Japan 70,0% 500,0 60,0% 450,0 50,0% 400,0 40,0% 350,0 30,0% 300,0 20,0% 250,0 10,0% 200,0 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 0,0% Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Prepared by Dr. Mariniki PSIFIA, 2016 Data Source: FactSet, Platts
Weaker crude prices and ample supply pulled down the LPG prices in Asia Prepared by Dr. Mariniki PSIFIA, 2016 Data Source: FactSet, Platts, GTIS
The VLGC Freight Market Prepared by Dr. Mariniki PSIFIA, 2016
Today, VLGC Net Time Charter rate are below $20,000/day (-79% y/y) Freight : AG-Chiba / Houston - Chiba VLGC Net Timecharter Rates Source: The Baltic Exchange Prepared by Dr. Mariniki PSIFIA, 2016
VLGC Timecharter Rates (TC) fell below long-term historical averages 1 Year VLGC TC Rates decreased by 63.2% since Jul. 15 84,000 cbm LPG TC Equivalent decreased by 84% since Jul15 ,000 per Month ,000 per Month 2 250 4 500 2015-jul; $2 219,0 82/84K CBM LPG TCE $4 038,8 4 000 2 000 5 years average 8 years average 3 500 1 750 1 Yr Time-Charter 5 years average 3 000 10 years average 1 500 2 500 $1 257,9 1 250 2 000 $1 646,9 $938,9 1 000 1 500 $1 174,8 750 2016-apr; 1 000 $816,0 $704,0 500 500 2002-des; $400,0 250 0 Oct-95 Oct-96 Oct-97 Oct-98 Oct-99 Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Jan-15 Aug-15 Mar-16 Oct-16 May-17 Dec-17 Jul-18 Source: Clarksons SIN Prepared by Dr. Mariniki PSIFIA, 2016
Massive cost savings for the owners because of the dramatic decline in bunker costs in 2015….do not apply anymore Bunkers Cost to Gross TCE ~ Ratio 100,0% 90,0% 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Prepared by Dr. Mariniki PSIFIA, 2016
The LPG Trade during 2015 and 1Q-2016 Prepared by Dr. Mariniki PSIFIA, 2016
World LPG Trade Development For 2016 LPG exports are expected to increase by 12% to 82 mio mt Major LPG Exporters Major LPG Importers Data Source: GTIS. ^forecasting as per various sources Prepared by Dr. Mariniki PSIFIA, 2016
In Q1-2016, propane and butane trade fell by 1.7% y-o-y to 16.53 mio mt* Data Source: GTIS. * Preliminary data as per data collection on 4 th May 2016 Prepared by Dr. Mariniki PSIFIA, 2016
All of US 2015 LPG exports found homes with Asian countries (China, Japan, S. Korea) absorbing the main increment of those cargoes Prepared by Dr. Mariniki PSIFIA, 2016 Data Source: GTIS - IHS, May 2016
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