Oil and Gas Energy in China: Liquid Bulk Shipping: The Start Of A Brutal Down Cycle

• Publication date: August 2011

Ongoing Overcapacity The global crude-oil shipping segment continues to be affected by the overcapacity that is plaguing the container and dry bulk shipping segments also. Vessels ordered during the boom years continue to come online, and although the ordering appears to have slowed, there is much extra tonnage still scheduled to be floated. Despite reported increased demand from Japan in the wake of the country’s nuclear scare in Mar...

Ongoing Overcapacity
The global crude-oil shipping segment continues to be affected by the overcapacity that is plaguing the container and dry bulk shipping segments also. Vessels ordered during the boom years continue to come online, and although the ordering appears to have slowed, there is much extra tonnage still scheduled to be floated. Despite reported increased demand from Japan in the wake of the country’s nuclear scare in March, and the ever-growing needs of China and other emerging industries, BMI does not believe that demand growth will be sufficient to absorb the tonnage, especially given the flat growth we project in the OECD countries this year. As such we agree with leading tanker operators in projecting a continued period of pain for the segment, especially for the larger vessels.

Drivers Key Views
• Global oil supply and demand to grow, though not sufficiently to absorb tonnage.
• Increased Saudi production potential lifeline for tanker market .
• US oil imports to fall, China to take up some of the slack.
• Non-OECD countries will drive demand growth.
• Short-term risk to oil import demand from the IEA stockpile release.

Capacity Key Views
• Liquid-bulk segment to continue to suffer from overcapacity in the industry .
• Very few vessels remain to be scrapped.
• Slow-steaming on ballast legs is becoming market practice.
• New orders slowing, but tonnage still coming online.

Rates Key Views
• Rates on key index and benchmark tanker routes will continue to fall.
• Tanker operators will struggle to maintain their bottom lines.
• Larger industry players already looking forwards to after the slump; smaller operators to suffer.

Logistics And Freight Industry in South America

Executive Summary ............. 7
Overview . 7
Ongoing Overcapacity ............... 7
Drivers ..... 7
Key Views ............. 7
Capacity ... 7
Key Views ............. 7
Rates ........ 7
Key Views ............. 7
Liquid Bulk Shipping: The Start Of A Brutal Down Cycle ................... 8
A Gloomy Outlook.......... 8
Overview............... 8
Drivers...... 8
Key Views.............. 8
Exports To Grow.... 8
Demand Driven By Non-OECD Countries........ 9
CHART: OPEC Leading The Way..9
BMI Oil Supply Projection To 2015
CHART: Chinese Imports Solace For Tanker Operators........... 10
US & China Oil Imports
IEA Stockpile Release To Hit Market ............ 10
Capacity.. 10
Key Views............ 10
All Scrapped Out?11
Overcapacity Still An Issue As Deliveries Keep Coming......11
Methods To Combat Overcapacity................ 12
CHART: Idling Up...12
Idled Vessels (mn dwt)
Rates....... 12
Key Views............ 12
CHART: Far From 2008 Highs.13
Baltic Dirty Tanker Index, USD
Opportunities For Some........... 13
Company Profiles ............ 14
Frontline. 14
Overview............. 14
Strategy............... 14
SWOT: Frontline industry player profile swot....................14
Financials 2011.... 14
Excess Supply And Falling Rates.................. 15
Outlook Gloomy... 15
2010.................... 15
Latest Activity .............. 16
Share Price Hit By IEA Announcement.......... 16
Early Terminations.................... 16
Teekay........... 17
Overview............. 17
Strategy............... 17
Financials 2011.... 17
2010.................... 17
SWOT: Teekay industry player profile swot..... 17
Latest Activity ............. 18
Share Price Hit By IEA Announcement.......... 18
Mitsui OSK Lines (MOL ) Tankers............. 19
Overview............. 19
Strategy .............. 19
Financials 2010 .. 19
SWOT: MOL industry player profile swot..........19
Lastest Acticity.............. 20
MOL To Pay USD 1.2mn Fine To Settle Allegations............. 20
MOL And Hafnia To Participate In New LR1 Pool............... 20
Nippon Yusen Kaisha (NYK Line) ........... 21
Overview............. 21
Strategy............... 21
SWOT: NYK industry player profile swot........... 21
More LNG Carrier Orders Placed As Demand Soars.......... 21
Financials.................... 22
NYK Lowers Profit Projection Following Earthquake And Tsunami - 2011. 22
2010.................... 22
Latest Activity.............. 23
Rewarded For Green Steel...... 23
Overseas Shipholding Group (OSG)....... 24
Overview............. 24
Strategy............... 24
SWOT: OSG industry player profile swot........... 24
Financials 2011.... 24
2010.................... 24
Lastest Activity ............. 25
Share Price Hit By IEA Announcement.......... 25
World Assumptions .......... 26
World Outlook............. 26
Second Half Risks ................... 26
TABLE: GLOBAL ASSUMPTIONS ..26
Indicators: Real Gross Domestic Product Growth (%) - US, Eurozone, Japan, China, World
Consumer Inflation (ave) - US, Eurozone, Japan, China, World
Interest Rates (eop) - Fed Funds Rate, ECB Refinancing Rate, Japan Overnight Call Rate
Exchange Rates (ave) - USD /EUR, JPY/US$, CNY /US$
Oil Prices (ave) - OPEC Basket (US$/bbl ), Brent Crude (US$/bbl )
Developed States .................... 27
Data : EMERGING MARKETS AGGREGATE GR OWTH ........ 27
indicators: Emerging Industries Aggregate Growth, Latin America - Argentina, Brazil,
Mexico Middle East - Saudi Arab ia, UAE, Egypt Africa - South Africa, Nigeria
Emerging Asia - China, Hong Kong, India*, Indonesia, Malaysia, Singapore, South Korea,
Taiwan, Thailand Emerging Europe - Russia, Turkey, Czech Republic, Hungary, Poland
Emerging Industries ................... 28
Data : DEVELOPED STATES REAL Gross Domestic Product GROWTH FORECAST ............... 28
indicators: Developed States Aggregate Growth - G7, Eurozone, EU -27
Selected Developed States - Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, United Kingdom
Data : REAL Gross Domestic Product GROWTH CONSENSUS FORECASTS .....28
indicators: 2011 - Bloomberg Consensus, BMI 2012 - Bloomberg Consensus, BMI