24 february 2014 1st mare forum dubai 2014 1 - … mare forum dubai, 2014.… · (bbc) • private...

24 February 2014 1st Mare Forum Dubai 2014 1

Agenda

1. Industry Facts

2. Ship recycling Boom and Corrections

3. Ship Recycling: Source of Recovery?

4. Ship Finance Facts and Trends

5. Private Equity – Filling the Gap

6. Alternative Financing: PE Markets & Role of GMS

7. Closing Thoughts


1.1. Industry Facts


Cash Buying has evolved into a huge industry with large economic, environmental and social impacts. In 2012 alone, roughly $5.1 billion worth of scrap vessels were purchased for recycling, where as, in 2013, the total worth of scrap ships was approximately $4.1 billion

Throughout 2013 about 46.8 million DWT was recycled vs. total of 56.5 million DWT in 2012

Dry Bulk: 32.4 mill DWT vs. 35.7 mill in 2012 Wet: 14.4 mill DWT vs. 13.7 mill in 2012

Average age: 2011 - 37 years old 2012 - 31 years old 2013 - 30 years old

INDUSTRY BREAKDOWN (2013)

INDIAN SUB CONTINENT CHINA TURKEY

No. of Vessels 610 286 240

Lightweight (lt) 6,952,118 1,977,000 920,000

Amount (US$) 2.83 bill 697 mill 290 mill

Note: all figures are approximates

74%

18%

8%

Estimated 2013 Totals ($) INDIAN SUN CONTINENT CHINA TURKEY

1.2. Where it is done (Capacity)

Number of active yards in each Country: Indian subcontinent

India (160-162 of 170-172) Bangladesh (70-80 of 100-110) Pakistan (110 of 129)

China (16 of 20) Turkey (20) ________ Note: all figures are approximates

These 5 countries (with 80% Asian) recycle more than 95% of the world’s fleet.


1.3.1. India


1.3.2. India


1.3.3. India


1.3.4. China


1.3.5. China


2.1. Historical Highs – Ship Recycling BOOM…and 2014!

•1985 42.6 Million Dwt 9 Million LDT •2012

56.5 Million Dwt 11.7 Million LDT •2013 45.2 Million Dwt 9.55 Million LDT •2014 4.06 Million Dwt 0.86 Million LDT Note: All figures are approximate



2.2. Demometer

Bulk Carrier 1.6m – DWT (31 VSLS)

Ship Type

Sales Recorded over last 30 days

Total Scrapped in 2014 YTD

Total Scrapped for Same Period in 2013

Total Scrapped in 2013

Total of New buildings Delivered in 2014

4,5m – DWT (84 VSLS)

21.8m – DWT (480 VSLS)

9.4m – DWT (119 VSLS)

2.9m – DWT (51 VSLS)

Tanker 0.8m – DWT (12 VSLS)


10.1m – DWT (136 VSLS)



Containership 135,500 – TEU (37 VSLS)

65,500 – DWT (32 VSLS)

402,500 - TEU (176 VSLS)

182,000 – TEU (20 VSLS)

190,500 – TEU (55 VSLS)

Source: Braemar Seascope February 2014

2.2. Bulk Carriers Sold for Recycling 2011

(No./DWT) 2012

(No./DWT) 2013

(No./DWT) 2014 YTD (No./DWT)

Capesize 74 11,533,655 87 13,885,067 50 8,717,760 3 492,358

Panamax 66 4,481,196 118 7,945,415 56 3,770,967 7 474,187

Handymax 48 2,239,479 102 4,630,781 71 3,177,777 2 91,263

Handysize 291 6,536,167 322 8,459,421 280 7,438,865 15 391,853

Minibulk 86 511,316 69 456,105 85 523,446 9 60,312

Total 565 25,301,813 698 35,376,789 542 23,628,815 36 1,509,973

Source: Allied Shipbroking Inc. February 2014


Sold For Recycling 2011 (No./DWT)

2012 (No./ DWT)

2013 (No./ DWT)

2014 YTD (No./ DWT)

ULCC 2 618,576 3 918,638 8 2,476,181 0 0

VLCC 12 3,239,246 12 3,209,269 17 4,727,514 2 599,910

Suezmax 7 1,002,063 22 3,239,167 12 1,762,116 1 149,544

Aframax 28 2,656,659 39 3,714,797 28 2,739,776 2 193,323

Panamax 6 411,956 7 473,380 9 634,084 1 72,511

Product 68 2,207,837 62 2,033,749 54 1,749,084 11 320,137

Minitank 44 225,574 26 152,370 25 119,992 3 20,355

Total 167 10,361,911 171 13,741,370 153 13,208,737 20 1,315,780

2.3 Tankers


Source: Allied Shipbroking Inc. February 2914

2.4. Baltic Demolition Assessment 2014


300

320

340

360

380

400

420

440

460

480

500

1/7/2014 1/14/2014 1/21/2014 1/28/2014 2/4/2014 2/11/2014 2/18/2014

D/TKR CHINAD/TKR SUBCONC/TKR CHINAC/TKR SUBCONB/C CHINAB/C SUBCON

2.5. Factors that Affect Pricing 1. Supply 2. Demand 3. Steel Prices 4. Currency exchange rates 5. Government Regulations


2.6. Steel Prices – Currency 2014: India

• IR on 1st January 2013: 54.80 per USD / Steel prices: IR 26,000 per 12 mm scrap metal

• IR on 1st January 2014: 61.88!!! / Steel prices: IR 28,000 • IR on 1st February: 62.50 / Steel prices: IR 29,100 • IR on 24th February: 61.87 / Steel Prices: IR 30,000


430.00

440.00

450.00

460.00

470.00

480.00

490.00

INDIA (USD)

INDIA (USD)

27,800.00

28,300.00

28,800.00

29,300.00

29,800.00

30,300.00

1/1/20

14

1/8/20

14

1/15/2

014

1/22/2

014

1/29/2

014

2/5/20

14

2/12/2

014

2/19/2

014

STEEL INDIA (RS)

STEEL INDIA (RS)

2.7. Steel Prices – Currency 2014: Pakistan • PKR on 1st January 2013 : 97.27 per USD / Steel prices: PKR 52,000 per

12 mm scrap metal • PKR on 1st January 2014: 105.30 / Steel prices: PKR 56,000 • PKR on 1st February: 105.45 / Steel prices: PKR 56,000 • PKR on 24th February: 104.94 / Steel prices: PKR 58,000


55,500.00 56,000.00 56,500.00 57,000.00 57,500.00 58,000.00 58,500.00 59,000.00 59,500.00

1/1/20

14

1/8/20

14

1/15/2

014

1/22/2

014

1/29/2

014

2/5/20

14

2/12/2

014

2/19/2

014

STEEL PAKISTAN (PKR)

STEEL PAKISTAN(PKR)

525.00530.00535.00540.00545.00550.00555.00560.00565.00

PAKISTAN USD

PAKISTAN USD

2.8. Steel Prices – Currency 2014: Bangladesh

• BDT on 1st January 2013 : 79.67 per USD / Steel prices: BDT 42,500 per 12 mm scrap metal

• BDT on 1st January 2014: 77.59 / Steel prices: BDT 37,300 • BDT on 1st February: 77.66 / Steel prices: BDT 38,800 • BDT on 24th February : 77.57 /Steel prices: BDT 38,800


36,000.00 36,500.00 37,000.00 37,500.00 38,000.00 38,500.00 39,000.00 39,500.00 40,000.00

1/1/20

14

1/8/20

14

1/15/2

014

1/22/2

014

1/29/2

014

2/5/20

14

2/12/2

014

2/19/2

014

STEEL BANGLADESH (BDT)

STEELBANGLADESH(BDT)

465.00470.00475.00480.00485.00490.00495.00500.00505.00510.00

BANGLADESH (USD)

BANGLADESH (USD)

Chartering earnings: from region USD 4.9k/day during beginning of January 2013 to region USD 40k /day during end of September. Improvement of more than 700%!!!

On 4th November abt USD 19k /day

3.1 Recovery(?): Capesize

1000

1500

2000

2500

3000

3500

4000

4500

1/2/13 2/2/13 3/2/13 4/2/13 5/2/13 6/2/13 7/2/13 8/2/13 9/2/13

BCI – 2013 / September 2013

BCI -2013


2000

2500

3000

3500

4000

4500

BCI – October 2013

BCI

Chartering earnings: from region USD 5.3k/day during beginning of January 2013 to region USD 14.3k /day during end of September. Improvement of about 169.8%!!!

3.2. Recovery(?): Panamax

600

800

1000

1200

1400

1600

1800

1/2/13 2/2/13 3/2/13 4/2/13 5/2/13 6/2/13 7/2/13 8/2/13 9/2/13

BPI – 2013 / September

BPI -2013


1500

1600

1700

1800

1900

2000

2100

BPI October 2013

BPI

On 4th November abt USD 13k /day

As of September 2013 drop of about: 40% comparing

to the total fleet recycled in 2012

Or 48% comparing to

the total DWT supplied in 2012

500

1000

1500

2000

2500

BDI 2013 BDI 2013

3.3. Bulk Carriers: The effect of chartering improvement

0500

100015002000

1/3/12

2/3/12

3/3/12

4/3/12

5/3/12

6/3/12

7/3/12

8/3/12

9/3/12

10/3/

1211

/3/12

12/3/

12

BDI 2012 BDI 2012


14001600180020002200

BDI October 2013

BDI

TANKERS

SCRAPPED 2011 NEWBUILDING ORDERBOOK JAN 2012 %


ULCC/VLCC 14 67 20.9 15 57 26.3

SUEZMAX 7 67 10.4 22 64 34.4

AFRAMAX 28 60 46.7 39 30 130

PANAMAX 6 22 27.3 7 23 30.4

MR TANKER 68 94 72.3 62 116 53.4

MINI TANK 44 95 46.3 26 61 42.6

BULKERS



CAPESIZE 74 291 25.4 89 179 49.7

PANAMAX 66 165 40 117 223 52.5

SUPRAMAX 48 389 12.3 102 324 31.5

HANDYSIZE 291 337 86.4 324 275 118

MINI BULK 86 330 26.1 69 267 25.8

3.4 Beaching vs. Newbuilding


Important Pillar of Shipping (facilitates market balance) • Newbuilding – record years (pre-2008) • Recycling – record years (2012-?)

Impact of Ship Recycling on:

• New Building Orders • Charter rates (new/old ships, availability, etc.) • Sale and Purchase (2nd values at par with scrap values) • Ship Finance (residual values and future acquisitions) • Developments in Ship Design and Fuel Efficiency

Cash Buyers as a source of vessel financing • High Deposits and Loans • Asset acquisitions (Companies, Vessels) • Sale/Leaseback (BBC) • Private Equity

4.1 Ship Recycling & Changing role of Cash Buyers


4.1 Ship Finance Facts and Trends

Top 40 Shipping Banks = $408 BILLION worth of exposure to the sector Accounts for about 78% of global ship finance Roughly 75% of this exposure comes from European banks As of June, 42% of these institutions claimed to be prepared to lend while it

was only 22% one year earlier (but these banks are focusing on conservative deals with Top Tier, existing owners/clients

Many banks with a “legacy book” are more reluctant to lend as they are overexposed to previous “bad deals” Increased pressure on European banks is making portfolio sales more likely – perhaps creating a more liquid market Still a large funding gap... ~Source: NORD LB


4.2 Ship Finance Facts and Trends


4.3 (cont.) Ship Finance Facts and Trends With traditional banks more reluctant to lend, we now witness a more eclectic financing mix (blurred lines in terms of PE) Capital Markets (ie Scorpio w/ $230+ mill.) Private Equity (Wilbur Ross – Navigator Gas Transport) Aircraft style leasing and/or sale leaseback transactions

The USA based capital markets have gone through a Renaissance of sorts as it applies to ship finance Slowly but surely, European banks will become more aggressive – For the moment, however, PE seems to be taking the stage although most of the deals are accompanied by some sort of bank financing as well


5. Private Equity – “THE GAP”

The “official” figures provided give a good view of the market, however, they are likely under estimating the true impact of private equity. Countless deals go undetected on a regular basis. GMS has a department that specializes in shipping equity and finance transactions, catered to the needs of small to medium sized owners who are not attractive enough for banks to finance while being too small for the larger PE firms to consider. From large corporate acquisitions, down to smaller single ship related deals, GMS is active in providing equity funding to the market.


6. GMS in PE Markets GMS Examples of Private Equity Transactions :

Example 1 – Acquisition of Existing Company (i.e. Konig & Cie)

Example 2 – Struggling Owner Needs Cash – GMS Buys 50% of vessel acts as JV

partner

Example 3 – Owner Needs to Sell Vessel but Wants to Continue Operations – GMS buys 100% of the vessel and structures a sale leaseback / BB back

Example 4 - Cash strapped owner wants to buy a new vessel but has no funds on hand – GMS buys the “new” asset and takes in one of the owner’s “older” assets as a down payment and holds a note for the balance

Example 4 – Owner does not want to handle recycling of the vessel – GMS buys vessel clean or with cash flows attached and maintains ownership for set period of time until current employment obligations expire and vessel is recycled


7. Closing Thoughts

1) Traditional debt is still the primary vehicle of ship finance, although it is very difficult to obtain debt financing today

2) The absolute impact of private equity is difficult to quantify, however, it is clear that PE has had an enormous impact on the market and is helping to fill the “finance gap”

3) Through alternative equity financing, GMS offers its own unique client oriented financing services

4) Cash Buyers and Ship Recycling has evolved; both are critical to overall maritime markets


Established in USA in 1992….LARGEST CASH BUYER IN THE WORLD! In last two years, principals of GMS have delivered more than a quarter of the world’s fleet sold for recycling.

World's FIRST ISO 9001:2000 certified Cash Buyer.

EXCLUSIVE sales offices in all FIVE of the major ship recycling markets in the world (Bangladesh, China, India, Pakistan and Turkey).

Offices in USA, UAE, SINGAPORE and CHINA to provide 24/7 service to clients worldwide.

Financial and Management capability to:

Buy fleets on simple CASH "as is where is“ terms. Take forward positions Structure deals

Leader in Green Recycling:

IMO’s Hong Kong Convention GMS-GL Program Development of Green Yards


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