Market news An asset value upside is still present during our projection period for both newbuild and second hand tanker vessels On the supply side, scrapping activity has come down from its second quarter 2018 high, but we still recorded the busiest fourth quarter since 2013. Ordering activity came down in the fourth quarter at 3 MDWT compared to 7 MDWT in the third. Implementation of IMO 2020 is expected, through reduced speed and inefficiencies, to shave off supply capacity going forward.
FORECAST TANKER ASSET VALUES 20% 18%
Containers
LPGs After a firm fourth quarter of 2018, earnings for the VLGCs declined in 1Q 2019. Cold weather in the US contributed to higher domestic consumption and inventory levels, resulting in reduced export volumes. We expect earnings for VLGCs to improve over the next few years, as LPG trade demand is likely to outpace fleet growth. Growth in US exports of LPG, ethylene and propylene is expected to be a main contributor to the growth in trade, unless hindered by geopolitical tensions. The outlook for continued improved earnings is likely to moderately stimulate values for the small sized vessels of pressurised and semi refrigerated types. The MGCs are expected to see a firm appreciation in asset values, after a prolonged period of decline from 2015-2018. The improved earnings for VLGCs will also be reflected by a moderate appreciation in values for these ships.
90 NAFS | May 2019
16%
% Change
14% 12% 10% 8% 6% 4% 2% 0%
Q1
Q2 Q3 Q4
Q1
2019 VLCC
Q2 Q3 Q4
Q1
2020 Suezmax
Q2 Q3 Q4
Q1
2021 Aframax
Q2 Q3
2022 LR1
MR
Source: VesselsValue as of April 2019
FORECAST BULKER ASSET VALUES 25% 20% 15% % Change
Container trade volumes on the main trade lanes, Asia to North America and Asia to Europe, have shown diverging trends this winter. The main reason for the stronger growth rates to North America has been the ongoing trade war, where shippers were fast forwarding goods ahead of expected US tariff increases scheduled for the 1st March 2019. However, while negotiations are progressing, the US administration has delayed additional tariffs. Six to 12 month time charter rates reached a peak during the summer months last year before starting a long decline through the third and fourth quarters. Recently, the larger Post Panamax vessels have gained some ground but for the most part rates are currently hovering below rates of the first quarter last year. Fourth quarter scrapping activity increased, and we expect removals of 50-60k TEU per quarter in 2019. That is an improvement from 2018, but not enough to make a considerable difference. More importantly, declining speed, as realised in the fourth quarter, will dampen supply growth in our projected period. The second quarter of 2018 marked the recent peak in Container vessel values, which have since been in decline.
10% 5% 0% -5% -10% -15%
Q1
Q2 Q3 Q4
2019 Capesize Source: VesselsValue as of April 2019
Q1
Q2 Q3 Q4
2020 Panamax
Q1
Q2 Q3 Q4
2021 Supramax
Q1
Q2 Q3
2022 Handy