Scrubbing up nicely for IMO 2020
Fra DNB engelske raporter
SHIPPING SECTOR Scrubbing up nicely for IMO 2020 With the deadline for compliance with the IMO’s sulphur cap less than 16 months away, we have taken another look at the likely outcome for shipping. Following up on our December 2016 note, we conclude that current forward fuel prices imply a less significant impact on the shipping balance than previously. Scrubber uptake is accelerating towards 2,300 units by 2020 on our estimates (covering 15% of pre-2020 heavy fuel oil (HFO) demand) and largely offsetting potential positive effects of higher fuel costs on vessel speed and supply.
On course for 2,300 scrubbers by early 2020... We forecast scrubber uptake to reach 2,300 by early-2020, a sharp increase from the latest data indicating 1,316 due to: 1) our belief the current figures do not reveal the full picture; 2) attractive paybacks and 3) stillavailable capacity. We expect major shipping segments to account for more than 90% of scrubber installations from 2018 to 2020, reaching 973 in dry bulk, 530 in tankers and 383 in containers by 2020.
… covering 15% of pre-2020 HFO bunker demand. The larger and more fuel-hungry vessels are likely to be overrepresented at the scrubber shop. On our calculations, 2,300 scrubbers would represent just 2.5% of the 2020e fleet, but c13% of total shipping fuel consumption, or c15% of shipping’s HFO demand. This reflects the average scrubberfitted vessel consuming 46tpd.
5% of shipping fleet consuming 38% of total fuel. Based on our assumption of the entire shipping fleet by 2020e numbering around 95k vessels, we calculate the most fuel-hungry 5% consume about 38% of all marine fuels, and the top 2.5% account for 24%. Container vessels make up only 6% of the fleet, but 30% of total marine fuel consumption, dry bulk represents 12% of the fleet and consumes 24%, and tankers are 10% of the fleet with 21% of consumption in our outlook for 2020.
Put simply, scrubbers look a good investment. Assuming a USD250/tonne fuel price spread between HFO and a compliant alternative, we estimate a scrubber investment payback period of nine months for a VLCC, 12 months for a VLGC, 14 months for a Capesize, 17 months for an MR and 18 months for a Supramax.
Thanks to scrubbers, we calculate a Capesize slowsteaming impact of just 0.5%. The intuitive conclusion from higher compliant bunker costs post-2020e would be 4% slower average Capesize speeds at current compliant fuel prices (USD550/tonne, above the current HFO price of USD450/tonne). However, based on a 2020e HFO price of USD350/tonne, we believe scrubber-fitted vessels would be incentivised to speed up, partly offsetting slower speeds from expected higher fuel costs for non-fitted vessels. This implies a net slowsteaming effect (based on 35% scrubber uptake – currently 15%), of 0.8% slower speeds (not 4%), reducing effective supply by just 0.5% (not 2.9%).
Investment choices are out there. For scrubberphiles, we cover Safe Bulkers (BUY, TP USD3.80) in dry bulk and DHT Holdings (BUY, TP USD6.30) in tankers, both with scrubbers on 48% of their vessels. The sceptics can choose between Genco Shipping (BUY, TP USD19.7) and Euronav (BUY, TP USD12.8) – neither have any scrubbers. Outside our coverage, Star Bulk and Hunter Group have 100% of their vessels fitted.
SHIPPING SECTOR Scrubbing up nicely for IMO 2020 With the deadline for compliance with the IMO’s sulphur cap less than 16 months away, we have taken another look at the likely outcome for shipping. Following up on our December 2016 note, we conclude that current forward fuel prices imply a less significant impact on the shipping balance than previously. Scrubber uptake is accelerating towards 2,300 units by 2020 on our estimates (covering 15% of pre-2020 heavy fuel oil (HFO) demand) and largely offsetting potential positive effects of higher fuel costs on vessel speed and supply.
On course for 2,300 scrubbers by early 2020... We forecast scrubber uptake to reach 2,300 by early-2020, a sharp increase from the latest data indicating 1,316 due to: 1) our belief the current figures do not reveal the full picture; 2) attractive paybacks and 3) stillavailable capacity. We expect major shipping segments to account for more than 90% of scrubber installations from 2018 to 2020, reaching 973 in dry bulk, 530 in tankers and 383 in containers by 2020.
… covering 15% of pre-2020 HFO bunker demand. The larger and more fuel-hungry vessels are likely to be overrepresented at the scrubber shop. On our calculations, 2,300 scrubbers would represent just 2.5% of the 2020e fleet, but c13% of total shipping fuel consumption, or c15% of shipping’s HFO demand. This reflects the average scrubberfitted vessel consuming 46tpd.
5% of shipping fleet consuming 38% of total fuel. Based on our assumption of the entire shipping fleet by 2020e numbering around 95k vessels, we calculate the most fuel-hungry 5% consume about 38% of all marine fuels, and the top 2.5% account for 24%. Container vessels make up only 6% of the fleet, but 30% of total marine fuel consumption, dry bulk represents 12% of the fleet and consumes 24%, and tankers are 10% of the fleet with 21% of consumption in our outlook for 2020.
Put simply, scrubbers look a good investment. Assuming a USD250/tonne fuel price spread between HFO and a compliant alternative, we estimate a scrubber investment payback period of nine months for a VLCC, 12 months for a VLGC, 14 months for a Capesize, 17 months for an MR and 18 months for a Supramax.
Thanks to scrubbers, we calculate a Capesize slowsteaming impact of just 0.5%. The intuitive conclusion from higher compliant bunker costs post-2020e would be 4% slower average Capesize speeds at current compliant fuel prices (USD550/tonne, above the current HFO price of USD450/tonne). However, based on a 2020e HFO price of USD350/tonne, we believe scrubber-fitted vessels would be incentivised to speed up, partly offsetting slower speeds from expected higher fuel costs for non-fitted vessels. This implies a net slowsteaming effect (based on 35% scrubber uptake – currently 15%), of 0.8% slower speeds (not 4%), reducing effective supply by just 0.5% (not 2.9%).
Investment choices are out there. For scrubberphiles, we cover Safe Bulkers (BUY, TP USD3.80) in dry bulk and DHT Holdings (BUY, TP USD6.30) in tankers, both with scrubbers on 48% of their vessels. The sceptics can choose between Genco Shipping (BUY, TP USD19.7) and Euronav (BUY, TP USD12.8) – neither have any scrubbers. Outside our coverage, Star Bulk and Hunter Group have 100% of their vessels fitted.
Volf
14.09.2018 kl 09:08
1481
DRY BULK SECTOR Scrubbers to cut 2020 speed impact We stay optimistic on the dry bulk outlook, but demand looks more fragile being highly coal-dependent as iron ore is facing slower growth. We believe large scrubber uptake combined with a young fleet would lessen the 2020 impact on dry bulk. The share price of our sector top pick, Golden Ocean, is unchanged YOY and is trading at 1.0x NAV, as the NAV is up by 60% YOY, making the potential risk/reward attractive, in our view.
Increased rate forecasts. We have marginally raised our freight rate forecasts from September 2017. We expect Capesize spot rates of USD19k/day for 2018 (previously USD17k/day), USD24k/day for 2019 (USD20k/day) and USD27k/day for 2020 (USD23k/day), and we introduce our USD28k/day forecast for 2021. We forecast 11% upside potential to dry bulk second-hand values (Capesize and Panamax) from resales to 15-year olds and we see 7% upside potential to newbuild prices, as we expect orders to pick up with a freight rate recovery. 2018–2021e average fleet growth of 2.6%. We expect the dry bulk fleet to grow by 3.1% in 2018, 2.4% in 2019, 2.8% in 2020 and 2.3% in 2021. Adjusting for congestion and speed, we expect fleet transport capacity to grow by 1.7%, 3.2%, 1.7% and 2.4%, respectively. We have modest scrapping assumptions, as 73% of the Capesize fleet was built in the past 10 years and another 11% remains on order. 2018–2021e average demand growth of 3.3%. We expect dry bulk tonne-mile demand to grow by 3.5% in 2018 (4.6% in 2017), 3.9% in 2019, 3.4% in 2020 and 2.5% in 2021. 2018–2021e coal trade to grow by 4.2%, or 3.0x iron ore trade growth of 1.4%. We forecast global coal trade to grow by 4.2% p.a. on average in 2018–2021, or 3.0x growth in iron ore trade of 1.4% in the same period. We forecast iron ore trade as a share of growth in dry bulk trade of 18% in 2018 (72% in 2016), while coal as a share of growth in trade rose from 7% in 2016 to 34% in 2017, and we forecast 42% for 2018. Thanks to scrubbers, Capesize slow-steaming impact reduced to 0.5% (not 2.9%). We believe the intuitive conclusion from high bunker costs (post 2020) would be average vessel speeds for a Capesize vessel decreasing by ~4% at the current compliant fuel price (USD550/tonne, up from current HFO of USD450/tonne). However, scrubber ships are incentivised to increase speeds on lower 2020 HFO prices (USD350/tonne), partially offsetting the effect of slower speeds from likely higher fuel costs. Hence, the net effect on slow-steaming, based on our forecast of 35% scrubber uptake (currently 15%), would be 0.8% lower speeds and not 4%, which would reduce effective supply by 0.5% and not 2.9% (see ‘Scrubbing up nicely for IMO 2020’ from 13 September). Our sector top pick is Golden Ocean (BUY TP NOK95 (NOK90)), trading at 1.0x its NAV and 0.80x our one-year forward NAV of NOK90/share. We keep our BUY for all companies in our dry bulk universe, but due to less potential upside on older vessels and reduced NAV premiums we have changed our target prices as follows: D/S Norden to DKK139 (DKK137), Eagle Bulk Shipping to USD6.3 (USD7.5), Genco Shipping & Trading to USD19.7 (USD19.6) and Safe Bulkers to USD3.8 (USD3.9).
Shipping
Increased rate forecasts. We have marginally raised our freight rate forecasts from September 2017. We expect Capesize spot rates of USD19k/day for 2018 (previously USD17k/day), USD24k/day for 2019 (USD20k/day) and USD27k/day for 2020 (USD23k/day), and we introduce our USD28k/day forecast for 2021. We forecast 11% upside potential to dry bulk second-hand values (Capesize and Panamax) from resales to 15-year olds and we see 7% upside potential to newbuild prices, as we expect orders to pick up with a freight rate recovery. 2018–2021e average fleet growth of 2.6%. We expect the dry bulk fleet to grow by 3.1% in 2018, 2.4% in 2019, 2.8% in 2020 and 2.3% in 2021. Adjusting for congestion and speed, we expect fleet transport capacity to grow by 1.7%, 3.2%, 1.7% and 2.4%, respectively. We have modest scrapping assumptions, as 73% of the Capesize fleet was built in the past 10 years and another 11% remains on order. 2018–2021e average demand growth of 3.3%. We expect dry bulk tonne-mile demand to grow by 3.5% in 2018 (4.6% in 2017), 3.9% in 2019, 3.4% in 2020 and 2.5% in 2021. 2018–2021e coal trade to grow by 4.2%, or 3.0x iron ore trade growth of 1.4%. We forecast global coal trade to grow by 4.2% p.a. on average in 2018–2021, or 3.0x growth in iron ore trade of 1.4% in the same period. We forecast iron ore trade as a share of growth in dry bulk trade of 18% in 2018 (72% in 2016), while coal as a share of growth in trade rose from 7% in 2016 to 34% in 2017, and we forecast 42% for 2018. Thanks to scrubbers, Capesize slow-steaming impact reduced to 0.5% (not 2.9%). We believe the intuitive conclusion from high bunker costs (post 2020) would be average vessel speeds for a Capesize vessel decreasing by ~4% at the current compliant fuel price (USD550/tonne, up from current HFO of USD450/tonne). However, scrubber ships are incentivised to increase speeds on lower 2020 HFO prices (USD350/tonne), partially offsetting the effect of slower speeds from likely higher fuel costs. Hence, the net effect on slow-steaming, based on our forecast of 35% scrubber uptake (currently 15%), would be 0.8% lower speeds and not 4%, which would reduce effective supply by 0.5% and not 2.9% (see ‘Scrubbing up nicely for IMO 2020’ from 13 September). Our sector top pick is Golden Ocean (BUY TP NOK95 (NOK90)), trading at 1.0x its NAV and 0.80x our one-year forward NAV of NOK90/share. We keep our BUY for all companies in our dry bulk universe, but due to less potential upside on older vessels and reduced NAV premiums we have changed our target prices as follows: D/S Norden to DKK139 (DKK137), Eagle Bulk Shipping to USD6.3 (USD7.5), Genco Shipping & Trading to USD19.7 (USD19.6) and Safe Bulkers to USD3.8 (USD3.9).
Shipping
Volf
14.09.2018 kl 09:22
1462
DNB MARKETS HØYNER KURSMÅL TIL 95 (90), FASTHOLDER KJØP
Oslo (TDN Direkt): DNB Markets oppjusterer kursmålet på Golden Ocean-aksjen til 95 kroner fra 90, og fastholder kjøpsanbefalingen.
Oppjusteringen skyldes blant annet at meglerhuset nå anslår at capesize-ratene vil ligge på 19.000 dollar pr dag i 2018, opp fra tidligere anslag på 17.000 dollar pr dag. Videre oppjusteres anslaget for 2019 til 24.000 dollar pr dag, fra 20.000, mens det for 2020 er oppjustert til 27.000 dollar pr dag, fra 23.000 dollar pr dag.
Videre estimerer meglerhuset et oppsidepotensial på annenhåndsverdien til tørrbulkskip til 11 prosent.
HH, finans@tdn.no
TDN Direkt, +47 21 95 60 70
Oslo (TDN Direkt): DNB Markets oppjusterer kursmålet på Golden Ocean-aksjen til 95 kroner fra 90, og fastholder kjøpsanbefalingen.
Oppjusteringen skyldes blant annet at meglerhuset nå anslår at capesize-ratene vil ligge på 19.000 dollar pr dag i 2018, opp fra tidligere anslag på 17.000 dollar pr dag. Videre oppjusteres anslaget for 2019 til 24.000 dollar pr dag, fra 20.000, mens det for 2020 er oppjustert til 27.000 dollar pr dag, fra 23.000 dollar pr dag.
Videre estimerer meglerhuset et oppsidepotensial på annenhåndsverdien til tørrbulkskip til 11 prosent.
HH, finans@tdn.no
TDN Direkt, +47 21 95 60 70