The VLGC Market Prepared for the IMSF, ALBA, Athens, May 2016 - - PowerPoint PPT Presentation

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The VLGC Market Prepared for the IMSF, ALBA, Athens, May 2016 - - PowerPoint PPT Presentation

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


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Prepared by Dr. Mariniki PSIFIA, 2016

The VLGC Market

Latsco Shipping Limited

Prepared for the IMSF, ALBA, Athens, May 2016

Presented by Dr. Mariniki Psifia, Market Analyst Latsco Shipping Limited IMSF Forum (9th – 11th May 2016)

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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 Without prejudice to the generality of the foregoing, this presentation may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States.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).

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LPG Shipping

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Liquefied Petroleum Gas (LPG) is a global industry

Natural Gas well Gas Plant Pipeline Power Generation

LNG liquefaction

LNG Residential / Commercial

Petrochemical gases

Industrial Auto Oil well Refinery Further refining Chemicals Agricultural

User Sources Transport

LPG

Dirty Products

Processing industries

Natural Gas LPG Ammonia Condensates (CPP) Clean Products

Source: Various

 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

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The Baltic Liquefied Petroleum Index (BLPGI) through the years

Source: The Baltic Exchange

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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

Source: U.S. E.I.A, 2016

…to the fastest growing LPG exporter in the world over a 6 year time span! From the LPG sector’s importer of last resort… ???

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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

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2015 – What happened last year

Data Source: Clarksons SIN, Platts LPGaswire, Factsset, GTIS, IHS

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2016 – Where are we this year?

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Crude oil prices, Naphtha vs Propane

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Correlations between WTI, Henry Hub Natural Gas and Propane Mont Belvieu

Propane Mont Belvieu vs WTI WTI vs Henry Hub Natural Gas Propane Mont Belvieu vs Henry Hub Natural Gas

Propane prices are highly correlated to Crude oil prices by

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The West – East Arb is firmly closed

200,0 250,0 300,0 350,0 400,0 450,0 500,0 550,0 600,0 650,0 700,0 750,0 800,0 850,0 900,0 950,0 1 000,0

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

$/mt FOB Houston FOB Arab Gulf

($125) ($100) ($75) ($50) ($25) $0 $25 $50 $75 $100 $125 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 ARB OPEN ARB CLOSED

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Houston to Japan AG to Japan

The West- East Arb FOB Propane Houston vs Arab Gulf Percentage of the Freight element to Japan CFR Price

Data Source: FactSet, Platts

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Weaker crude prices and ample supply pulled down the LPG prices in Asia

Data Source: FactSet, Platts, GTIS

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The VLGC Freight Market

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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

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VLGC Timecharter Rates (TC) fell below long-term historical averages

2002-des; $400,0

2015-jul; $2 219,0 2016-apr; $816,0 $1 257,9 $938,9 250 500 750 1 000 1 250 1 500 1 750 2 000 2 250

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

,000 per Month

1 Yr Time-Charter 5 years average 10 years average

$4 038,8 $704,0 $1 646,9 $1 174,8 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 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 ,000 per Month 82/84K CBM LPG TCE 5 years average 8 years average

1 Year VLGC TC Rates decreased by 63.2% since Jul. 15 84,000 cbm LPG TC Equivalent decreased by 84% since Jul15

Source: Clarksons SIN

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Massive cost savings for the owners because of the dramatic decline in bunker costs in 2015….do not apply anymore

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0% 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

Bunkers Cost to Gross TCE ~ Ratio

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The LPG Trade during 2015 and 1Q-2016

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World LPG Trade Development

For 2016 LPG exports are expected to increase by 12% to 82 mio mt

Major LPG Importers Major LPG Exporters

Data Source: GTIS. ^forecasting as per various sources

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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 4th May 2016

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All of US 2015 LPG exports found homes with Asian countries (China, Japan, S. Korea) absorbing the main increment of those cargoes

Data Source: GTIS - IHS, May 2016

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US Terminal Export Capacity & VLGC liftings from Targa & Enterprise (2014 – Feb 2016)

6,81 7,37 11,69 16,00 1,88 5,1 6,70 6,70 3,40 6,20 6,20 6,20 6,20 6,20 4,25 5 10 15 20 25 30 35 40 45 50 2013 2014 2015 2016 2017 2018 2019 2020 Mio MT KinderMorgan Sage Phillips 66 Oxy Sunoco DCP Petredec/Martin Gas Trafigura Sunoco/MarkWest PetroGas Targa Enterprise

Estimated North America LPG Export Volume Capacities

US LPG Export Scenarios based on Terminal Capacity VLGC Estimated Liftings from Targa and Enterprise, TX (mio mt)

Data Source: GTIS / IHS. Lifting data are from AIS

26,16 19,69 37,14 26,00 27,95 29,71 15 20 25 30 35 40

Terminal Capacity Exports 70.0% 75.3% 80.0% 2015 Terminal Capacity 2016 2016 Export Scenarios (% of Terminal Capacity)

Terminal utilization 75.3%

  • 0,20

0,40 0,60 0,80 1,00 1,20 J-14 F-14 M-14 A-14 M-14 J-14 J-14 A-14 S-14 O-14 N-14 D-14 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15 J-16 F-16

Mio Mt

2015: On average 18.6 liftings per month

  • Est. total lifted quantity 9.8 mio mt

2014: On average 18.2 liftings per month

  • Est. total lifted quantity 9.64 mio mt
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Middle East LPG Exports during 2015 and 1Q-2016

Split between Long-Haul and Short-Haul Importers Who has exported the most during Q1-2015 & Q1-2016 Middle East LPG Exports y/y comparison in mio mt* AG to China: +15.6% y/y

0,02 1,18 0,95 2,43 1,39 3,23

0,01 0,73 0,77 1,95 0,86 2,71

0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50

Bahrain Iran Kuwait Qatar Saudi Arabia UAE Mio mt [Q1-2015] [Q1-2016]

70% 65% 60% 56% 51% 37% 31% 40% 22% 24% 30% 35% 40% 44% 49% 63% 69% 60%

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

2007 2008 2009 2010 2011 2012 2013 2014 2015 3M-2016

Long-Haul Short-Haul 2014 2015 y-o-y 3M-2015 3M-2016 y-o-y China 7.79 10.91 39.9% 2.24 2.59 15.6% India 7.51 8.28 10.3% 2.03 0.77

  • 62.0%

Japan 8.20 7.99

  • 2.6%

2.62 2.32

  • 11.5%

Indonesia 3.23 3.84 18.8% 0.84 0.63

  • 25.1%

Korea, South 3.77 3.08

  • 18.2%

0.88 0.47

  • 46.3%

Thailand 1.79 1.30

  • 27.6%

0.34 0.21

  • 39.7%

Other 0.917 1.04 13.7% 0.25 0.05

  • 81.7%

Total* 33.21 36.44 9.7% 9.20 7.03

  • 23.6%

Data Source: GTIS. * Preliminary data as per data collection on 4th May 2016

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Iran LPG Exports following the removal of International Sanctions and South Pars 24- phase development plans

0,23 0,52 0,40 0,63

1,58 2,52 2,89 3,74 2,31 0,71 2,81 3,74 0,71

1 2 3 4 5 6 7 8 9 10

2008 2009 2010 2011 2012 2013 2014 2015 2016 (f) 2017 (f) 2018 (f) 2019 (f) 2020 (f)

mio MT Other Middle East Asia & Oceania Africa

The South Pars fields Iran LPG Historical and Future Estimated Exports The South Pars Development Plans

Data Source: GTIS and Information from 10th LPG Trade Summit, Istanbul 2015, FGE. Prepared by Dr. Mariniki Psifia

Natural gas production from South Pars is critical to meet increasing domestic consumption and Iran’s current & future export obligations

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Data: GTIS / HIS. 2016^: 3M-2016

During Q1-2016, China’s seaborne LPG imports totalled 4.4 mio mt, up by 47.8% y-o-y

0,60 0,54 0,60 0,41 0,63 0,82 1,09 3,69 5,04 1,31 0,38 1,14 1,21 0,77 0,44 2,56 3,58 0,68 0,77 3,57 1,19 0,73 0,59 1,47 1,21 1,06 0,99 1,48 1,78 2,49 1,01 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016^ Mio mt UAE Iran Kuwait USA Saudi Arabia Other

Africa 8,66% Asia & Oceania 3,04% Eurasia 0,05% Europe 1,98% Middle East 50,11% North America 36,16%

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India LPG Imports keep increasing

2014-2015 Monthly Indian LPG Imports Yearly Indian LPG Imports Propane and Butane split

1,71 2,11 3,42 3,67 0,41 0,26 0,38 0,32 1,06 1,22 1,11 1,60 1,61 1,25 1,44 1,26 1,60 1,76 1,30 1,42 1,55 2,22 0,23 0,30 0,27 0,45 0,63 0,99 0,78 0,86 0,75

1 2 3 4 5 6 7 8 9

2007 2008 2009 2010 2011 2012 2013 2014 2015 Mio mt Qatar United Arab Emirates Saudi Arabia Kuwait Bahrain Iran Other 0,3 0,4 0,5 0,6 0,7 0,8 0,9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mio mt [Imp 2014] [Imp 2015]

Data Source: GTIS/IHS

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15 Butane Propane

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The VLGC Fleet

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LPG Fundamentals: Supply

  • VLGC units currently number 220 ships of a total 17.38m cu.m,
  • The y-o-y VLGC growth is today equal to 29.4% in number of vessels and

it is expected to exceed the 34.17% by June 2016.

  • The orderbook is quite heavy for the specific sector with 29.2% of the

fleet in cu.m terms currently on order (65 vessels).

  • Since the beginning of 2016, 22 VLGC of a total 1.84 mio cu.m were

delivered and 3 new VLGC orders were placed to the shipyards VLGC Supply Growth* in number of vessels

Source: Clarksons. * Slippage and Cancellations are not included

Deliveries and Orderbook in number of vessels

6 2 11 3 1 2 1 1 1 1 2 3 4 5 6 7 8 9 10 11 12

J- 16 F - 16 M- 16 A - 16 M- 16 J- 16 J- 16 A - 16 S - 16 O- 16 N- 16 D- 16

VLGC LGC MGC HGC

25 24 11 3 2 11 24 2 8 24 1 10 20 30 40 50 60 70 80 MA I.16 2017 2018 2019 2020 VLGC LGC MGC HGC 106 110 130 137 140 140 142 155 163 198 220 245 269 280 25 24 11 3 2015; 21,5% 2016; 23,7%

  • 3%

0% 3% 5% 8% 10% 13% 15% 18% 20% 23% 25% 28% 50 75 100 125 150 175 200 225 250 275 300 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 y-o-y growth # of vessels

VLGC Estimated Deliveries y-o-y growth

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Data: Clarksons SIN

LPG Fleet – Size Ranges, Cargo Capability & Tank Type

The fleet (in number of vessels) Orderbook (in number of vessels) Orderbook - to - Fleet Ratio (in number of vessels)

38 MGC 33 HGC 65 VLGC 98 HGC 2 LGC

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Data: Clarksons SIN

Currently the VLGC fleet stands at 220 vessels of 17.93 mio cu.M

80 62 23 17 20 13 5 10 20 30 40 50 60 70 80 90 0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 + # of vessels

VLGC average age is 9.4 years old

VLGC Fleet Profile 38 vessels are older than 20 years old The Fleet

220 25 50 75 100 125 150 175 200 225 250 VLGC

The Orderbook

60 5

  • 20

40 60 80 100 120 140 160 180 200 VLGC

LPG Ethane Capable

In just 10 years, the average VLGC age fell by 47.7% to less than 9.4 years old

18,0 15,7 14,9 14,3 14,1 13,9 13,0 12,5 10,4 9,40 8,0 10,0 12,0 14,0 16,0 18,0 20,0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mar-16 Average Age

Fleet As of Start 2016 16.09 198 Deliveries 1.84 22 Demolitions

  • Fleet As of today

17.93 220

NET FLEET CHANGE 1.84 22 Orderbook [2016 - 2020] 5.24 65

Orderbook to Fleet 29.2% 29.5%

VLGC ≥ 61,000 cu.M. in million cu.m. in number of vessels

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VLGC Fleet Per Year of Built & Orderbook

  • 2
  • 1 1 1
  • 1

5 6 8 6 1 2 3 2

  • 3

5 7 3 8 2 3 7 11 27 12 9 3 2 13 8 35 22 25 3 20 11 3 1 2

  • 5

10 15 20 25 30 35 40 45 50 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 NUMBER OF VESSELS YEAR OF BUILT

VLGC Fleet [Contract Year 2014] [Contract Year 2015] [Contract Year 2016]

Source: Clarksons SIN

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The VLGC Orderbook per Yard

Hyundai; 27; 49,1% Jiangnan SY Group; 4; 7,3% Jiangnan Changxing; 12.5% Kawasaki HI Sakaide; 4.2% MHI Nagasaki; 8; 14,5% Shanghai Waigaoqiao; 2; 3,6% DSIC Offshore; 5; 9,1%

8 11 3 2 15 2 2 1 4 2 1 2 3 2 10 20 30 40

Daewoo (DSME) Hyundai DSIC Offshore Jiangnan SY Group Jiangsu New YZJ Kawasaki HI Sakaide MHI Nagasaki Shanghai Waigaoqiao

2016 2017 2018 2019 2020

The Orderbook per Yard

(in number of vessels)

Scheduled Deliveries per Year

(in number of vessels)

Source: Clarksons SIN

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VLGC y-o-y fleet growth and timecharter equivalent rates (TCE)

apr.16; 30,51% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0%

$0 $10 000 $20 000 $30 000 $40 000 $50 000 $60 000 $70 000 $80 000 $90 000 $100 000 $110 000 $120 000 $130 000 $140 000 des.11 feb.12 apr.12 jun.12 aug.12

  • kt.12

des.12 feb.13 apr.13 jun.13 aug.13

  • kt.13

des.13 feb.14 apr.14 jun.14 aug.14

  • kt.14

des.14 feb.15 apr.15 jun.15 aug.15

  • kt.15

des.15 feb.16 apr.16

Y-o-Y Growth $/Day

82K CBM LPG TCE Rates VLGC Growth*

Historical Data: Clarksons SIN. * VLGC Growth in cu.m

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As per current shipyard delivery schedule, it is estimated that the VLGC fleet y-o-y growth will peak in June 2016

Source: Historical Data Clarksons SIN

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Thank you!