MISC Annual Report 2019

Bulk Carriers ( Grain, timber, fruit juices) 42.60% Oil Tankers (Crude oil, clean petroleum products) 28.70% Container Ships ( Containers, Roll on/Roll off) 13.40% Gas Carriers (LNG, LPG) 3.50% Others 11.80% Deadweight tonnage (dwt) refers to maximum weight that the ship can carry including all the cargo, fuel, fresh water, crew and other supplies. (Percentage of Deadweight Tonnage) World Fleet by Vessel Types, 2018 - 2019 the shipping industry & business #whatyoudontknow The Global Shipping Industry Shipping is the backbone of the world economy, transporting the biggest share of world trade. Shipping plays an important role in the intercontinental trade of raw materials, products and commodities. It is said that “without shipping, half the world would starve, and the other half would freeze”. More than 80% 1.5 of world trade carried by sea million Around seafarers employed globally KEY PLAYERS MAIN VESSEL TYPES Maritime regulations are developed at the global level. Key regulators are: P&I insurance is a form of mutual maritime insurance provided by a P&I Club that provides cover for open-ended risks including damage to cargo, war risks and risks to environmental damage. Responsible for measures to improve the safety and security of international shipping and to prevent pollution from ships. More than 170 member states of IMO implement and enforce these international rules into their legislations. Aligned with the Maritime Labour Convention 2006 and responsible for implementing internationally recognised labour standards to protect the rights of seafarers. Some examples of P&I Clubs Regulators special focus: Demand Factor: Demand and supply for oil and gas • Chartering is an activity in which a customer agrees to hire the use of a vessel from a shipowner • Customer is often referred to as the ‘charterer’ of the vessel • Charterparty is the agreement between the shipowner and the charterer • Preliminary/Concept Design • Basic Design • Detail Design Depending on the vessel type, the average construction period from the time the vessel is ordered until its delivery is approximately two years. Average economic lifespan is between 20 – 25 years. • Steel Cutting • Keel Laying • Launching • Commissioning • Delivery • Operational Control • Ship Maintenance • Upgrading and Repairs • Dismantling • Recycle Design Scrapping Operation Construction • Charterer hires a vessel and crew for cargo transportation from a load port to a discharge port, at an agreed freight rate (usually on a per-tonne basis). • Chartering of a vessel for a designated period e.g. 12 months, at a set daily charter rate. • The charterer selects the ports and directs the vessel where to go, but the operation and general management of the vessel still lies with the owner. • An arrangement where the charterer has possession and control of the vessel, including the right to appoint its own crew to manage the vessel. Capital Cost + Operating Cost + Voyage Expenses Bears the cost Vessel Owner Bears the cost Voyage Expenses Capital Cost Operating Cost + Voyage Expenses Bears the cost Charterer Vessel Owner Among the first industries to adopt widely implemented international safety standards Protection and Indemnity Insurance (P&I) Club Company engaged by shipowners to maintain and operate the vessels. Shipmanager Company involved in the construction of ships and other floating vessels. Shipbuilder Owner of merchant vessels which are equipped for trade and delivery. Shipowner Once a vessel has reached its economic lifespan, it will be disposed under specific rules and regulations. Disposal/recycling process must be done in an environmentally friendly manner. Some vessels that are still within its economic lifespan can be converted for other use in the energy industry, such as FPSO, FSO, FSU and others. Did you know? A non-governmental organisation that establishes and maintains technical standards for the construction and operation of ships and offshore structures. Some examples of Classification Societies Classification Society DNV-GL (Germany) ClassNK (Japan) In early 2019, there were 95,402 vessels in the total world fleet accounting for 1.97 billion in deadweight tonnage (dwt). MISC operates in these shipping categories, particularly in LNG and Petroleum shipping ENERGY SHIPPING CARGOES & VESSELS Petroleum LNG Clean Petroleum Products Produced from the processing of crude oil and other liquids at petroleum refineries. Smaller tankers : MR2 (Below 45,000dwt) Commonly used to transport clean petroleum products over shorter distances Large tankers : VLCC (200,000 – 320,000dwt) Carries crude oil. Offers economies of scale because it carries large amounts over long distances. Mid-sized tankers : Aframax (45,000 - 160,000dwt) Carries crude oil and clean petroleum products. Used for short-haul voyages such as between the ports in the Caribbean, Europe, and the United States. Crude Oil Unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Liquefaction Cooled down Approx. -160°C 600x smaller More than 0°C Heated up Regasification LNG carriers vary in cargo capacity, from 1,000 cbm to 267,000 cbm. Majority of modern vessels are between 125,000 cbm and 175,000 cbm capacity. Sea Transportation Transported in double-hulled ships with cryogenic tanks Conversion of liquid to natural gas Conversion of natural gas to liquid KEY DRIVERS IN ENERGY SHIPPING Demand Supply Demand for oil & gas around the world Oil production caps by OPEC+ coalition Development of new oil and gas fields opens new trade routes and diversify the supply sources Natural disasters, war and geopolitical developments Seasonality: Demand is higher in the first and fourth quarter of the calendar year 1. DEMAND AND SUPPLY OF OIL & GAS 2. TRANSPORTATION DISTANCE The longer the distance between the source of crude oil (exporter) and the refinery (importer), the greater the demand for shipping services DEMAND FOR ENERGY SHIPPING Oversupply of vessels in the market Older vessels are removed from the market Market rebalances New vessels are ordered Tonnage growth Freight rates stabilises, leading to increased earnings and profitability for the shipowners Investment by shipowners in building new vessels with lead time to delivery of about two years Number of vessels in the market increases over time Causes lower freight rates and reduces earnings and profitability for shipowners Over time, older, less efficient vessels are disposed as they become too uneconomical to run Oversupply of vessels is gradually reduced CYCLICALITY OF THE SHIPPING BUSINESS LPG LPG Cyclical nature of the shipping market driven by the supply and demand of vessels which affects the charter rates and capital flows in the market SUPPLY OF SHIPPING CAPACITY SUPPLY OF VESSELS MAIN CHARTER TYPES Capital Cost • Cost of the ship including financing cost Operating Cost • Crew cost • Administration & management • Repair & maintenance • Dry docking • Insurance Voyage Expenses • Fuel (Bunker) • Port charges • Canal dues Pays Charter Hire Pays Charter Hire Pays Charter Hire Spot Charter Charterer Time Charter Vessel Owner Capital Cost + Operating Cost Bears the cost Charterer Bareboat Charter Bears the cost LIFE CYCLE OF A VESSEL American Bureau of Shipping (ABS) (USA) Lloyd’s Register (UK) Britannia P&I London P&I Club GARD P&I Club UK P&I Club (Source : UNCTAD Review of Maritime Transport 2019) Learn more about MISC’s LNG Asset Solutions and Petroleum & Product Shipping segments on pages 42 to 43 and 88 to 101.