ThePlatouReport2015 Web FINAL

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R E A L 2 0 1 3 U S D P E R B B L , A N N U A L AVG .
THE PLATOU REPORT

2015
140
115.22
2011
120
104.12
1980
100
80
60
55
2015
(FEB)
40
20
10.79
1970
18.17
1998
THE PLATOU REPORT 2015
THE WORLD ACCORDING TO RS PLATOU
TABLE O F C O NTENTS
05
INTRODUCTION
34
MOBILE OFFSHORE DRILLING UNITS
07
THE SHIPPING MARKET ENVIRONMENT
38
THE OFFSHORE SUPPORT VESSEL

(OSV) MARKET
12
TONNAGE SURPLUS:
A COMPLICATED EXERCISE
42
RS PLATOU MARKETS
14
THE TANKER MARKET
44
RS PLATOU PROJECT FINANCE
19
THE DRY BULK MARKET
46
RS PLATOU REAL ESTATE
23
THE CONTAINER SHIP MARKET
49
STATISTICS
25
THE CAR CARRIER MARKET
56
CONTACTS
26
THE LNG SHIPPING MARKET
27
SMALL SCALE LNG MARKET
28
THE LPG SHIPPING MARKET
30
THE SHIPBUILDING MARKET
INTRO DUC TIO N
A NEW BEGINNING:
PLATOU JOINS FORCES
WITH CLARKSONS
Ragnar Stoud Platou was born in Hamar, next to Norways largest
freshwater lake, in 1897.
In 1915 he started as a shipbroker apprentice and in 1936 he
founded RS Platou. Over the next decades, RS Platou continued to
grow in global reach, number of employees and revenues.
RS Platou first engaged in a couple of joint ventures with
H. Clarksons in Canada and Australia, going on to work closely
together through the 60s and 70s.
Clarksons weathered the shipping crisis in the 70s and 80s
better than Platou, which saw its position in the world of shipping
significantly reduced by the mid 80s. However, the firms activity in
Offshore continued to thrive.
In 1987 the families that owned Platou encouraged a management buyout, whereby they transferred 75 percent of the company
to existing employees and guaranteed the operating cost for two
years. The timing for this new group of shareholders turned out to
be very good, as shipping had reached a fundamental turning point
in 1987, after 13 years of structurally weak shipping markets.
During the next 27 years, Platous revenue grew from about 6 mill
USD to approximately 200 mill USD as our Shipbroking activity
recovered, Offshore continued to thrive, and the company made a
profitable expansion into Project Finance & Investment Banking.
However, we in Platou realized we would not be able to grow
our Shipbroking activity to become a truly global player organically.
As such we are now very pleased to join forces with Clarksons, the
strongest player in the world of Shipbroking.
Clarksons and Platou will continue to work hard to develop
our services, and look forward to your continued support in the
years to come.
Yours Faithfully,
PETER M. ANKER
Managing Partner & CEO (19872015)

RS Platou ASA
THE SHIP P ING M ARK ET ENVIRO NM ENT
T H E S H IPPIN G MA R K ET EN VIRO N MEN T
WORLD SHIPPING 2014:

DEEPENING DIVERGENCES
A year ago we envisioned a scenario where 2014 would be The Recovery Year for global shipping markets, as an
improving world economy boosted tonnage demand, while fleet growth continued to slow to more sustainable
levels. We were only partially right, as once again the world economy failed to live up to its recovery billing.
World fleet capacity utilization was unchanged for the year, but in the absence of a strong world economy there
were bigger divergences between segments than in the recent past. The LPG and tanker markets were the years
clear winners, while the dry bulk market emerged as the clear loser.
A YEAR OF CRISES, BUT NO CRISIS
As in recent years, geopolitical crises again made the headlines.

However, this years crises had little direct impact on shipping.
Russias annexation of Crimea and hostilities towards Ukraine
did not interfere with any trade flows, and the Wests retaliation
measures, while broadly based, meticulously avoided Russias
on-going energy production and trade. The emergence of the ISIL
terror force was shocking in its suddenness and brutality, but it
made no impact on oil production and trade.
mances from other energy sources, caused the first decline in the
countrys coal use on record. Indonesian politicians, meanwhile,
decided that it was not in the countrys best interests to continue
exporting bauxite and nickel ore. In combination, these initiatives
caused trade growth in dry bulk to record its slowest growth since
the Financial Crisis.
MARKET VOLATILITY CONFIRMS TALES OF STRUCTURAL
OVERCAPACITY WERE EXAGGERATED
It was a year in which all segments experienced considerable intrayear volatility in freight rates, irrespective of the outcome for the
Instead, it was a year in which market volatility was driven more annual averages. As commented on last year, this very volatility
by endogenous, industry-specific factors. In the oil market, the war argues against the notion that freight markets have become structhat did break out was the one between Saudi Arabia and US shale turally over-tonnaged. Nevertheless, there is little doubt that the
oil producers, which caused the oil price to end the year in a vir- combination of the Financial Crisis and the largest orderbook in
tual free fall. The upshot for shipping was a surge in long-haul LPG thirty years did create a surplus of tonnage. However, the mechashipments, as soaring US energy production continues to look for nisms of absorbing this surplus slow steaming and waiting days,
new markets. The global oil trade had a very strong finish to the as opposed to lay-up have been different than in the past. With
year as crude oil producers kept pumping and refiners pounced on bunker prices crashing down and freight rates for many, but not all,
the sharp drop in input costs to step up production. Both events segments going up, the industry is about to find out just how much
resulted in more cargo volume looking for tonnage to move it. (over-) capacity there is. For a detailed discussion of this issue and
On the dry bulk side, Chinese authorities accelerated their shifts its complex dynamics, please see page 12.
in energy policy away from coal, and, helped by stronger perfor-
LEAVING THE WARS TO THE MARKET
TANKERS IN 2014: STRONG START, STRONGER FINISH
The tanker market very closely mirrored 2013s performance, with

sinking trade volumes pressuring freight rates for much of the year
before a spectacular year-end turnaround. The difference this time
was that the upswing was much broader as it also included the clean
market. All of these factors reflect stronger underlying fundamentals. While trade trends showed similar declines in the first half of
the year, 2014s turnaround was more pronounced, spurred by the
sharp drop in oil prices. We estimate that trade volume declined by
less than 1 percent for the year, again recovering strongly late in the
year. A marked lengthening of trading distances caused ton-miles to
increase by more than 2 percent, compared to zero growth for this
metric in 2013. Total tonnage demand, including estimated changes
in productivity, rose by more than 4 percent.
With fleet growth slowing sharply to 2 percent, the slowest rate
in more than a decade, capacity utilization increased by nearly two
percentage points to 85 percent, the highest level since 2010.
DRY BULK: BELOW EXPECTATIONS
DUE TO WEAKER TONNAGE DEMAND GROWTH
total shipping demand remained unchanged. The LNG carrier fleet

grew by 5 percent, resulting in a weakening in the fleets utilization
rate of equal magnitude and a lowering of the short-term charter
rates by 4045 percent. On average, a modern steam turbine ship
earned $54,500 per day, while a ship equipped with dual-fuelled
propulsion received $10,000 more per day.
LPG: BEATING HIGH EXPECTATIONS
Record high rates for the larger LPG carriers were seen during 2014.
Driven by a massive expansion of exports from the USA and healthy
Middle East exports and despite a contraction in the ammonia
seaborne trade we have estimated that total shipping demand for
LPG and ammonia climbed by 16 percent during 2014. Combined
with 6 percent fleet growth, the utilization rate ascended by 10 percentage points and reached an all-time-high of 99 percent. This
resulted in a two-fold increase in average spot earnings for VLGCs,
at $68,000 per day. The hike in spot rates were less pronounced for
the smaller ships; a Midsize LPG carrier earned on average 17 percent more in 2014, at $32,000 per day.
Earnings for dry bulk ships were on average lower in 2014 than
the year before. Preliminary assessments suggest tonnage demand
increased slightly above 4 percent. This was lower than anticipated
and largely caused by a strong drop in Chinese coal, bauxite and
nickel ore imports. The size of the fleet increased 5 percent. The fleet
utilization rate thereby decreased by around 1 percentage point.
For the full year, our weighted dry bulk index fell from $12,800
per day in 2013, to $11,500 per day, a drop of 10 percent. The largest
decrease came in the Panamax sector, where average earnings
decreased from $9,500 per day in 2013 to $7,700 in 2014, a slide of
19 percent. Capesizes obtained $14,800 per day against $16,600 the
year before. For Supramax tonnage, freight rates decreased from
$10,300 per day to $9,800, while the Handy sector daily earnings
eroded from $8,700 to $7,700.
2014 was a disappointing year for the car carrier industry. Despite
growing auto sales in the major markets, demand for tonnage has
been at a standstill, with most of the increased demand for cars
covered by local production instead of imports. Sales in emerging
markets are in decline and this impacts negatively on seaborne
volumes, as local vehicle production is scarce. As the fleet is
constantly growing, it means that oversupply of tonnage increased
to 67 percent during the year. Consequently, rate levels also
declined from the year before. Expectations for 2015 are that
demand will return to growth, but only to a level on par with forecasted fleet growth, meaning that rate levels will remain well below
breakeven for most vessels.
LNG MARKET
WORLD ECONOMY AND WORLD SHIPPING
CAR CARRIERS: LOCAL PRODUCTION

CUTS INTO SEABORNE TRADE
The LNG shipping market finally witnessed growth in seaborne To the surprise of many analysts, including ourselves, the world
trade, following two years of decline. However, due to a continued economy in 2014 stuck to its established disappointing pattern.
fall in transport distance and improved productivity in the fleet, 2013 had ended on a strong note, with US growth accelerating and
TONNAGE DEMAND GROWTH
VS WORLD ECONOMIC GROWTH 20022014
WORLD MERCHANT FLEET 20052014

ANNUAL CHANGES
Tonnage demand growth, world merchant fleet, annual change in percent
Percent
9
14
10
12
10
11
03
08 12
13
6
4
02
2
0
04 07
06
7
6
05
14
4
3
2
09
-2
1
0
-4
-1
World output growth, percent
05
06
07
08
09
10
11
12
13
14
signs of encouragement in China, as well as Europe. Neverthe- BUT U.S. UPSWING SHEDS SOME LIGHT
less, renewed headwinds emerged quickly in the New Year from ON THE SECOND HALF
familiar as well as new fronts and an all-too familiar pattern of As soon as the weather related headwinds receded, the US
growth markdowns began. An equally familiar development, how- economys stronger underlying momentum resurfaced. The Amerever, was the continued supportive policies of central banks, with ican economy is reaping the tailwinds of having tackled the Finanboth Chinese and European authorities moving to ease policy. The cial Crisis more aggressively, which has improved balance sheets all
price of oil also was in focus, as usual. Contrary to previous years, in around. In addition, the fiscal drag that held the economy back in
which spiking prices have been a threat to growth, plunging prices 2012 and 2013 is now fading. As a result, the economy rebounded
were seen as a tax cut to consuming countries. Consequently, there forcefully with growth averaging 4.5 percent during the second and
were once again some signs of encouragement as the year ended, third quarters.
led by surging growth in the US.
A hard landing in China was the big fear for markets going into
2014. However, authorities continued the investment-led downturn
GROWTH MOMENTUM BROKEN, AGAIN,
in the property sector by pro-actively deploying growth support
measures such as fiscal stimulus, although at a much smaller scale
DURING THE FIRST HALF
The first half slowdown was most acute in the US, where growth than in the past, alongside tax breaks and interest rate cuts. As a
went from being seemingly robust in the second half of 2013 and result, the growth remained near the governments 7.5 percent target
straight into contraction during the first quarter. However, it soon through the year, with an improvement in exports lending support
became apparent that the slowdown was weather related. Ameri- during the second half of 2014. However, growth remained lackluster
cans endured one of their harshest winters in years, causing severe in the rest of the world. Emerging markets have been suffering from
disruptions in economic activity throughout the country. Chinese weaker external demand conditions for some time. The downturn in
growth remained uneven, with ongoing weakness in domestic commodity prices, which began during the summer, further added
investment and infrastructure, a mixed performance on trade, but to these problems, particularly for countries in Latin America and
still relatively strong private consumption, continuing the pattern for Russia. The latter was obviously at the epicenter of rising geosince 2013. Europes economies, while technically not in recession, political tensions resulting from its aggression against Ukraine, and
still failed to maintain what little momentum they had due to on- economic sanctions began to bite during the second half of the year.
going tight public sector budgets and fragmented balance sheets. For Europe and Japan, the second half was as weak as the first even
The region was also the hardest hit by the rise in geopolitical weaker in Japans case,as private consumption failed to recover from
tensions resulting from the RussiaUkraine conflict. In Japan, the spring tax hike. The slowdown in China, combined with a downAbenomics stumbled in the wake of the increase in the consump- turn and financial instability in Russia, hit the European manufacturtion tax in the spring. With growth weakening in the big economies ing sector and once again cast doubts on its banking system.
it was no surprise that many emerging markets suffered; as their
exports took a hit, while financing remained tighter than earlier 2015: FROM DIVERGENCE TO CONVERGENCE?
following the reversal of capital flows that had begun in 2013.
The outlook for 2015 is eerily familiar to that of 2014, 2013 etc., with
These developments resulted in the IMF marking down its 2014 the opinion being that growth has been held back by legacies of the
world GDP growth projection by a hefty 0.4 percentage points to 3.3 Financial Crisis but should pick up next year. Indeed, no sooner
percent, in line with the weak pace of 2013.
had the year started before there was another markdown of growth
9
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / ///////////////////////////////////////////////////////
expectations by the IMF, this time by 0.3 percentage points. The start moving towards its 4 percent trend rate for the first time since
difference from recent years is the emergence of the US as a clear 2010 a development that would be good news for tonnage demand
growth leader. The American economy has gained momentum as in all segments.
growth has begun to impact upon the labor market, with consistent job gains and a decline in the unemployment rate during the SHIPPING MARKET PROSPECTS: A NEW WAVE,
year. 2015 will also reap the full benefits of the plunge in oil prices, BUT UNLIKELY TO LIFT ALL VESSELS
although the substantial increase in energy investment and produc- Commodity shipping markets have been affected to roughly the
tion seen in recent years is expected to take a significant hit in the same extent by two macro trends since the Financial Crisis; a weak
wake of the oil price plunge and will offset some of the income gains world economy and above-trend fleet growth. The effects of the
from lower oil prices.
late 2000s newbuilding spike are now fading, while some of the
The strength of the US economy means improved external seeds sown by the commodity price bubble in the same period are
conditions for its main trading partners, including China, which blossoming and transforming production and trade patterns. These
will also benefit from sharply lower energy prices. We expect the changes are likely to mean that we are entering a period of less syngovernment to continue to provide growth supportive measures, chronized shipping market cycles than in the recent past.
while the long-term trend toward urbanization and the transition
The tanker market is a case in point. The freight market collapse
away from agriculture and towards manufacturing and services will in recent years was almost exclusively attributed to the US shale oil
continue. The Chinese labor market appears to be on solid footing, revolution and the subsequent decline in oil imports. Sharply lower
with wage gains supporting strong growth in consumer spending. rates, combined with a pervasively negative market sentiment, hit
As a result we expect growth in China to remain above 7 percent.
ordering of new vessels. The result is that the market is now facing a
With the worlds two biggest economies seeing a stronger new upswing in the oil trades on the back of the lowest orderbook
advance in 2015, the external environment for other econo- in more than a decade. A further improvement in fleet utilization
mies should improve. Emerging economies, which are the main thus looks highly likely. Unfortunately the dry bulk market is at
drivers of tonnage demand, should benefit from these trends. the other end of the spectrum. Ordering of new vessels rebounded
Growth support is needed as the sharp downturn in commodity quickly after the Financial Crisis, driven by market optimism on
prices is hurting energy producers in the Middle East, Latin China, and fleet growth has thus remained stubbornly high. MeanAmerica and Russia, although the strength of the US dollar is off- while, the forces shaping the commodity appetite of the markets
setting some of that headwind.
biggest customer, China, are changing. The countrys growth rate
Europe and Japan may still be the biggest downside risks. The has slowed and composition shifted, while the pressure for more
former continues to struggle with its banking system and shrink- environmentally friendly energy use has intensified. The result is
ing credit growth, while the troubles of Russia have added another a downshift in the growth rate of dry bulk trade amid persistently
layer of complexity. A more competitive Euro and a likely more high fleet growth.
The outlook for 2015 thus remains one of cautious optimism for
radical stance on monetary policy should be positive contributors
to growth. The situation remains fragile, however, as evidenced by shipping overall, but with a much broader range of expected outcomes than usual for the individual segments. We expect tankers
the market reactions to changes in Greek politics.
Overall, we still remain cautiously optimistic that global growth and LPG to continue to outperform. Both market segments are
will emerge from the sluggish levels of recent years, aided by the sharp beneficiaries of strong growth in world oil production which in turn
drop in commodity prices, in addition to continued stimulative eco- is supporting strong trade growth. The challenge now is for growth
nomic policies. Propelled by these forces, the world economy should to pick up in order to absorb surging production.
Dry bulk will likely remain a laggard. Fleet growth will remain selective. It is thus no longer possible to talk about the outlook.
high for the foreseeable future, while lower Chinese coal consump- 2015 has all the signs of being a mixed year for the markets overall,
tion and ongoing support for its domestic coal and iron ore mining but with a much clearer distinction between winners and losers
industries means lower-than-normal trade growth.
than in the past.
The LNG market is expected to begin a cyclical upturn in
response to increased production capacity, which will generate
more trade. The car carrier market is expected to remain static.
OLE-RIKARD HAMMER
Global shipping is entering a new period of fragmentation
Head of Research
in which new trends in commodity demand and production are
RS Platou Economic Research
reshaping trade lanes. Orderbook levels have also become much
more differentiated, as access to financing has become increasingly
WORLD SEABORNE TRADE AND ECONOMIC GROWTH

19702014
GLOBAL ECONOMIC GROWTH 20052015

FORECASTS AND ACTUAL GROWTH RATES
ANNUAL GROWTH IN REAL GDP

PERCENTAGE CHANGE FROM PREVIOUS YEAR
Index 1970=100
500
USA
450
400
Source: IMF
2014 F O RECA ST
2014 ACT U A L
2015 F OR ECA ST
2.8
2.4
3.6
Japan
1.7
0.1
0.6
Euro area
1.0
0.8
1.2
350
C. and E. Europe
2.8
2.7
2.9
300
Russia
2.0
0.6
-3.0
250
China
7.5
7.4
6.8
200
150
100
50
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Seaborne oil trade
10
Seaborne dry trade
World output
India
5.4
5.8
6.3
ASEAN-5
5.1
4.5
5.2
M. East and N. Africa
3.3
2.8
3.3
Sub-Saharan Africa
6.1
4.8
4.9
L. America
3.0
1.2
1.3
World
3.7
3.3
3.5
SUPPLY, DEMAND AND UTILIZATION RATE 19902014

WORLD MERCHANT FLEET
Percent change
Mill cgt
600
500
400
300
200
100
0
0
05
Forecast
06
07
Actual
08
09
10
11
12
13
14
15
Source: IMF (forecast per Oct. the year before)
Utilization rate (%)
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Supply
Demand
190
180
170
160
150
140
130
120
110
100
90
80
70
Utilization rate
11
TO NNAGE SURP LUS: A C O M P LIC ATED EXERC ISE
TONNAGE SURPLUS:
A COMPLICATED EXERCISE
AN ENIGMA: The tanker fleet has increased by 50 percent since 2005 (a year with balanced market conditions);
seaborne oil trade has increased by 5 percent. How big is the tonnage surplus?
life, operating cost etc. At the end of 2014 this leads us to roughly
Our estimate for 2014 is 5 percent. How could that be possible?
This simple comparison between the fleet growth and the $40,000 per day, with an optimum speed of 13 knots at a bunker
growth in trade volumes does not tell the whole story. There price of $400 ton per ton in our VLCC example. This points to an
are a number of additional factors. Measuring overcapacity in annual transport capacity of 2.23 mill tons or 12 percent less than at
shipping markets is a complicated exercise that could be done in maximum speed.
many different ways. In the good old days, with very low bunker
Normal productivity for the fleet can be defined as the number
prices, estimating overcapacity was simple; just count the number of ton-miles produced per deadweight ton per year at a 90 percent
of laid up vessels. Either the vessels were sailing at full speed or they utilization rate. Since our goal is to measure tonnage surplus we
were laid up. Today most of the overcapacity is in the form of slow have to differentiate between market-dependent changes in producsteaming, definitely a much more complicated element to handle. tivity and structural changes. To illustrate: In a weakening market
Let us start by establishing some basic principles.
operators want to reduce the speed because optimum speed is
First of all we must distinguish between technical overcapacity falling. This results in a market-dependent decline in productivity,
and economical overcapacity. For the sake of simplicity we will con- which is a part of the overcapacity to be measured. An increase in
strain ourselves to VLCCs. An example: Lets say that the current bunker prices is normally also lead to lower speed, but we regard
speed is 11 knots and that the technical maximum speed is 15 knots. this as a structural drop in productivity. In other words, an increase
Based on an AG/Korea trade the annual transport capacity for in bunker prices at a constant rate level will lead to slower speed and
a VLCC is 1.91 mill tons at 11 knots and 2.54 mill tons at 15 knots, the need for more tankers to carry out the same transportation work.
implying a technical overcapacity of 25 percent.
Let us take a look at the other productivity factors in addition
However, we regard economical overcapacity to be a much more to speed:
Transport distances have played an important role in the years
relevant concept. RS Platou Economic Research has defined 90
percent (quite arbitrarily) as full capacity utilization, correspond- since 2005. According to our estimates average tanker distances
ing with a freight rate giving 8 percent return on total capital based have increased by 12 percent, resulting in a rise of 17 percent in tonon reasonable assumptions on the price of the vessel, its economic mile numbers over the last nine years. We regard this as a structural
12
trend, not a function of market cycles.

Floating storage. Over the period from 2005 to 2014 there were
several years with a significant use of tankers for storage purposes,
in addition to their traditional trading employment. A peak was
reached in November 2009, when roughly 7 percent of the tanker
fleet was utilized for oil storage. The current crude oil oversupply
may again lead to a new floating storage surge in 2015.
Another structural element is the load factor, defined as the cargo
size divided by the deadweight tonnage of the vessel. There has
been a consistent trend over many years towards larger Aframaxes,
Suezmaxes and VLCCs, while cargo sizes have remained more or
less unchanged. This means that we need more deadweight tons to
take the same cargo as before, reducing the productivity by some
56 percent since 2005.
Port days. The number of port days per year could fluctuate
significantly over time, partly due to market cycles (market-dependent congestion), partly due to structural factors, such as changes in
global trading pattern and vessel size distribution.
The ballast factor describes the share of days in ballast compared
with the total days at sea. Significant and rapid changes in the worldwide trade pattern normally lead to more repositioning of the fleet,
more ballast days and consequently lower structural productivity.
Then back to speed again. The sharp drop in bunker prices after
September 2014 should have led to a strong rise in structural speed
in addition to higher speed driven by improved market conditions.
We have actually observed an increased speed, but considerably
lower than the optimum level in mid-January 2015. There are several
possible explanations behind this, such as charterers requirements,
different speed optimization for oil company tonnage and not least
that the net-income curve per day as a function of speed is very flat
between 11 and 15 knots at $300 bunker prices. Nothing wrong with
this, tonnage surplus calculations have to be theoretical.
To sum up: From 2005 to 2014 the structural productivity of
the tanker fleet has fallen by 16 percent, contributing to a 43 percent growth in tonnage demand. The consequence has been a fall
in the utilization rate from 90 percent in 2005 to 85 percent in 2014,
despite the 50 percent fleet growth.
ERIK M. ANDERSEN
Special Adviser
13
THE TANK ER M ARK ET
FREIGHT RATES: ACROSS-THE-BOARD GAINS

FOR CRUDE, MIXED FOR CLEAN
THE TANK ER MA RKET
A WELL-OILED RECOVERY
2014 turned out to be quite a good year for tanker owners with capacity utilization and freight rates improving,
very much in line with our forecast. While this improvement was partly due to a sharp slowdown in fleet growth,
this was the easy part of the prognosis given the low orderbook. It was the demand side of the market that again
offered surprises, and the combination of drivers was somewhat different than expected.
We had foreseen that this would be the year the world economy
and oil demand finally began to recover after several false starts.
On the contrary, however, it turned out to be yet another year of
sluggishness. While such a development is normally not good news
for tanker demand, the big surprise was that OPEC (Saudi Arabia)
decided along the way to change its strategy in favor of maintaining market share rather than supporting prices by reducing volume.
The unrestrained increase in world oil production was very beneficial to tanker demand, which improved significantly during the
second half of the year, as rapidly rising output of crude oil, as well
as refined products, needed more tonnage to move it. Cheaper oil
also meant longer trading distances, as the US shale revolution pressured more Atlantic basin cargoes towards Asia. With fleet growth
virtually stagnant, fleet utilization was boosted above the 85 percent
FREIGHT RATES SINGLE VOYAGE 20052014

CRUDE CARRIERS
$1,000 per day
mark, tipping pricing power back to owners and resulting in significant rate gains during the last four months of the year. Importantly,
the increases were much more broadly based than in 2013, indicating a stronger base.
THE CLEAN MARKET: LIFE, AT LAST
The clean market took part in that strong finish, unlike last year.
This obviously represented a highly welcome trend shift, as this
segment had been underperforming the rest of the market, not to
mention its own lofty expectations, for the past year. The drivers
of the upturn were much the same as for crude. The worlds refining sector is in a period of rapid capacity growth and the plunge in
crude prices had an immediate positive effect on refiners margins
via lower input costs, encouraging them to increase utilization. All
of the worlds refinery export hubs were thus humming in synchronized fashion during the second half of the year, driving up tonnage
demand. While fleet growth remains significantly higher for clean
tankers, so does tonnage demand intensity i.e. how much tonnage
is needed when factoring in such productivity factors as longer
waiting times in port, and multi-porting.
200
180
AVERAGE FREIGHT RATES $1,000 PER DAY

SINGLE VOYAGE
160
140
2012
120
100
VLCC
80
60
40
20
05
06
Aframax
14
07
08
Suezmax
09
10
VLCC
11
12
13
14
20.9
2013
17.6
Freight rose across-the-board and despite a steep second quarter

slump still improved significantly for all segments for the year. Our
tonnage-weighted rate index came in at close to $24,000 per day.
This was the highest level in four years and represented a solid 44
percent gain on 2013.
Crude tankers were led by a hefty 84 percent increase for Suezmaxes, averaging $26,000 per day. VLCCs, as usual, saw the highest
average, coming close to breaking the $30,000 per day barriers for
the first time since 2010, but finished at $29,000 per day. The clean
segment was much more mixed. MRs struggled for the first nine
months and ended the year 30 percent lower on theoretical voyage
returns at $12,000 per day. Actual trading results will vary, however,
depending on the number of paid trading days accomplished. LR 1s
were little changed at $16,000 per day, while LR 2s had an excellent
year with an average increase of more than 30 percent to $19,000
per day.
ASSET VALUES: HESITANTLY HIGHER FOR SECONDHAND,
MOSTLY FLAT FOR NEWBUILDINGS
While 2013 had been the year of the newbuilding, 2014 was the
year of secondhand prices. Secondhand prices for modern crude
carriers increased by a respectable 30 percent on average, relative
to year end 2013 levels, while gains for older vessels in general were
more muted. The majority of the price increases were seen during
the first quarter, as asset markets caught up with the unexpected
rate spike in 2013. However, for the rest of the year it was mostly an
uphill battle. The middle part of the year was uninspiring and somewhat disappointing earnings wise, and buyers showed a distinct lack
of conviction during the freight market upswing in Q4. MR values
retreated as selling pressure built up in response to the disappointing freight market in the first part of the year. Transaction volume
doubled from 2013, however, as improved earnings tempted buyers
as well as sellers.
Newbuilding prices also increased, but in a much more muted
way. The recovery in freight rates shifted buyers attention towards
vessels on the water. Slow activity in conventional segments, some
LNG cancellations, and the downturn in offshore all made for a
weak demand situation overall. Capacity availability, falling commodity prices and a higher USD all contributed to keeping a lid
on price increases during the second half of the year. For the year,
newbuilding prices increased by about 5 percent relative to yearend 2013 levels.
2014
29.2
Suezmax
14.7
14.1
26.1
Aframax
15.4
16.3
23.2
LR2 product
14.3
13.5
18.7
MR product
13.0
16.3
11.5
THE OIL MARKET: ONE MANS CURSE

IS ANOTHER MANS BLESSING
Following three years of remarkable stability, the oil market

returned to its volatile ways in 2014. Prices remained near their yearlong $110 average for the first half of the year, but began sinking from
mid-year. At first the gains were linked to disappointing demand
figures, which carried greater weight as the aforementioned downgrades to economic growth forecasts began. However, as oil production figures continued to beat even elevated forecasts, led by
the US and the return of Libyan output, it became clear that rising
supply was a more pressing issue. During the last four months of the
year global oil supplies were growing by nearly 3 percent year-onyear, while demand growth was struggling to reach 1 percent. Commercial oil inventories rose and exceeded their normal levels for the
TANKER MARKET INDEX 20052014
ANNUAL AVERAGES (WEIGHTED BY DWT)
$1,000 per day
70
60
50
40
30
20
10
0
05
06
07
08
09
10
11
12
13
14
08
09
10
11
12
13
14
TANKER FLEET 20052014

AVERAGE ANNUAL CHANGES
Percent
9
8
7
6
5
4
3
2
1
0
05
06
07
FREIGHT RATES SINGLE VOYAGE 20052014

CLEAN CARRIERS
$1,000 per day
80
70
60
50
40
30
20
10
0
05
06
45,000 dwt
07
08
09
70/85,000 dwt
10
11
12
13
14
85/110,000 dwt
15
THE TANK ER M ARK ET
first time in several years, while spot oil prices fell below those of
forward contracts; a clear market signal of excess supply. However,
price weakness only turned into a rout during the last two months
of the year, as it became clear that Saudi Arabia had no intention
of relinquishing market share to support prices. Without an anchor,
prices immediately plunged, searching for a new floor somewhere
below $50 per barrel.
AS THERE WAS PLENTY OF CARGO TO MOVE
OVER LONGER DISTANCES, BOOSTING TONNAGE DEMAND
entire seaborne oil trade increased by 3 percent, handily offsetting

the decrease in volume and leading to an increase in ton-miles of
more than 2 percent. This represented a significant improvement
from 2013, when ton-mile demand was flat.
MORE TON-MILES AND LOWER PRODUCTIVITY
DROVE A SOLID INCREASE IN TONNAGE DEMAND
The final component of our tonnage demand equation, fleet productivity, played a smaller, but still important, role. We estimate
productivity decreased by 12 percent, about half of the typical rate
of decrease in recent years, as sharply lower bunker prices during
the second half of the year increased optimum speed. Rates were
comparatively low and bunker prices comparatively high for most
of the year however, which meant that changes were gradual.
Overall, we estimate that tonnage demand increased by more
than 4 percent, about half a percentage point higher than 2013.
This is a level that should be considered quite strong, given the
fairly soft macro-climate, and gives reason to be optimistic as one
looks into the near future, and, hopefully, better prospects for the
world economy.
For the tanker market, the turn in the oil market turned out to be
excellent news. More cargoes were searching for a home, boosting
demand for transportation capacity. This caused market activity to
pick up sharply as China moved to increase strategic storage and
Middle East exports rose in response. Trade volume, which had
been declining during the first half of the year, began recovering
during the third quarter and accelerated during the fourth, as lower
oil prices encouraged refiners to raise runs and build inventories.
With the strong fourth quarter trade upswing, we estimate that the
crude trade declined by 1 percent for the year, having been down by
more than 3 percent at mid-year.
Product trades also grew strongly during the second half of the FLEET TRENDS: GROWTH SLOWS SHARPLY
year, with all key export hubs in the US, Russia, Middle East and AS DELIVERIES ARE EVEN LOWER THAN EXPECTED
India humming. Trade volume expanded by nearly 2 percent, mod- Very high fleet growth has been the tanker markets nemesis for
erating the downturn in the total oil trade to less than 1 percent.
many years. Since 2009, net fleet growth has averaged more than 5
While it was a disappointing year volume wise, this was more percent per year, reflecting the spike in new orders that brought the
than compensated for via longer distances. On the crude side, the orderbook to nearly 50 percent of the sailing fleet by 2008. The tide
first half of the year was dominated by continued high Middle East began to turn in the second half of 2013, however, as the rate of newvolume to the US and increasing long-haul imports to China and building deliveries slowed. The trend continued in 2014. Deliveries
India from West Africa and Latin America. The oversupply of oil were supposed to be in line with the previous year, but instead fell
caused the premium of forward prices relative to spot to increase, a further 25 percent to 16 mill dwt, the lowest level in more than a
thus facilitating more long-haul trade and causing tonnage demand decade. The decline encompassed all segments, but was particularly
to increase.
sharp for Suezmaxes, which delivered only one-third of the schedClean trading distances also grew. The reasons for this include ule, mainly due to well-known problems at some Chinese shipyards.
the increase of long-haul US exports to Asia, while European gasoIt was an unexciting year for demolition, which remained in line
line exports took market share from Latin America in the North with previous years at around 9 mill dwt, or 2 percent of the total
American market.
fleet. The number of third and fourth special survey candidates is on
For the year, we estimate that average trading distances for the the rise, but that has had little impact on demolition figures, so far.
Total fleet growth was thus a meager 2 percent, a sharp slow- the US and China. In addition to growing oil consumption in Asia,
down from nearly 5 percent the year before. The decline was most the region is expected to continue building inventories for longpronounced for the crude fleet, which barely registered any growth term strategic reasons as well as for shorter-term commercial ones.
at all, with the Aframax fleet actually decreasing. Product tankers,
on the other hand, continued their steady expansion, increasing WHILE OIL SUPPLY ADJUSTMENTS ARE MORE LIKELY
by 4 percent. Slow growth in the LR fleet moderated an 8 percent OUTSIDE THE MIDDLE EAST
expansion of MRs.
With OPEC expected to continue to follow its new policy of letting
New orders declined by one third from the previous year to the market decide oil prices adjustments to world oil production
24 mill dwt, a relatively depressed level. Surprisingly, the pace of volume should be less painful for the tanker market than in recent
ordering slowed sharply during the year, as private equity capital years. We see likely production growth rates slow from very high
got more interested in vessels on the water. The sharp freight market levels in North America, while high cost countries which for various
upswing in the second half of the year had very little effect on order- reasons are deprived of investment, such as Russia, Venezuela,
ing activity, as investors and owners remained cautious regarding Nigeria and Libya, may see an outright drop in output. On the
the sustainability of the upswing.
clean side, refineries in the mature markets in Europe and Asia are
thought to be most vulnerable. They are net importers in the first
MARKET OUTLOOK:
place, however, which should moderate the impact on trade.
GATHERING MOMENTUM, BUT BEWARE OF OIL SLICKS
In sum, we see a much better balanced oil market during
2015 came off to a very strong start, as the demand and supply trends the second half of the year and do not foresee a sharp slump in
that shaped the second half of 2014 continued. In addition to con- tonnage demand. Improving oil demand is expected to smooth the
ventional inventory building boosting imports, the use of floating inevitable end of oil inventory building.
storage became a factor, adding to demand for tonnage. Fleet growth,
meanwhile, looks unlikely to top 2 percent, which is very low. These REVIVAL OF FLOATING STORAGE WILL HELP,
trends all point to further increases in fleet utilization and freight BUT IS NOT EXPECTED TO LAST FOR LONG
rates. However, the plunge in oil prices has created another layer of The present supply imbalance in the oil market also stands to
uncertainty: Unless oil demand picks up sufficiently, oil supply will benefit tanker demand, however, as forward oil price spreads have
have to adjust down, eventually.
increased to levels making it profitable to hire vessels to store crude
for the first time since 2010. Several VLCCs were picked up early
A STRONG YEAR FOR TONNAGE DEMAND AS
in the year, but we do not foresee a repeat of the 200910 boom in
VOLUME AND DISTANCES INCREASE...
which more than 50 VLCCs were taken out of active trading. This
The world oil trade looks set for a year of robust expansion, hav- is because we believe oil market imbalances are significantly smaller
ing turned the corner in the second half of last year. World oil pro- this time.
duction is growing briskly which creates a positive backdrop for
tonnage demand, while the rising USD is encouraging exporters FLEET GROWTH WILL REMAIN LIMITED,
to maximize volume. Importantly, we expect world oil demand to AS NEWBUILDING DELIVERIES STAY LOW
respond meaningfully to the price drop and snap out of its four-year
Tanker fleet growth is set to remain very slow, although the
long growth slump. While currency swings and changes in energy difference between the crude and clean segments will be wider
taxes cloud the picture, we believe these factors are unlikely to have than in 2013. Crude tanker deliveries are scheduled at 13 mill dwt,
much impact on the worlds two biggest oil consuming countries, the lowest level since the late 1990s. While last years actual figure
DELIVERIES AND REMOVALS OF TANKERS 20052014

EXCLUDING CHEMICAL CARRIERS
WORLD OIL PRODUCTION AND TRADE 20052014
WORLD OIL CONSUMPTION GROWTH 20052014

TANKER FLEET
Mill dwt
50
45
40
35
30
25
20
15
10
5
0
05
MBD
60
Percent
Mill dwt
550
50
2
40
1
0
30
-1
20
06
Removals
16
07
Deliveries
08
09
10
11
12
13
14
05
06
07
OPEC crude production
08
09
10
Non-OPEC production
11
12
World oil trade
13
14

160
500
150
450
140
400
130
350
120
300
110
250
100
200
90
150
80
100
-2
05
06
07
08
09
10
11
12
13
14
Source: IEA
70
05
06
Supply
07
08
Demand
09
10
11
12
13
14
Utilization rate
17
THE DRY BULK M ARK ET
T H E D RY BU L K MA R K ET
WEAK TONNAGE DEMAND

DEFINES DISAPPOINTING YEAR
Copyright: Aleksey Stemmer
came in at just 11 mill dwt, we anticipate that this years schedule is

unlikely to be on target, as has been the case in recent years.
The situation is different in the clean market, which should see
deliveries accelerate from 8 to 12 mill dwt. Demolition is expected
to remain moderate. Higher freight rates will discourage owners
from scrapping, but there will be an increase in the number of candidates facing expensive third or fourth special surveys, and not
every vessel will pass that survey.
In total, tanker fleet growth is set for another year of very moderate fleet expansion of less than 2 percent. That would mean that
tonnage demand growth will have an unusually low threshold to
cross before there is upward pressure on fleet capacity utilization
and rates.
MARKET VALUES OF TANKERS 20052014

5 YEARS OLD
For the full year of 2014, our weighted dry bulk index fell from
$12,800 per day in 2013 to $11,500 per day, a drop of 10 percent. The
largest decrease came in the Panamax sector, where average earnings decreased from $9,500 per day in 2013 to $7,700 in 2014, a slide
of 19 percent. Capesizes obtained $14,800 per day against $16,600
the year before. For Supramax tonnage, freight rates decreased from
$10,300 per day to $9,800, while the Handy sector daily earnings
eroded from $8,200 to $7,700 per day.
Mill $
180
160
140
120
100
80
SIGNIFICANT DECREASE IN ASSET VALUES
60
Ship values generally followed earnings trends, with the number

of transactions dropping by around 20 percent compared to 2013.
While newbuilding prices fell only marginally, secondhand values
decreased between 15 and 25 percent for the Handy, Supramax
and Panamax categories, depending on age. For Capesize tonnage,
values dropped somewhat less, especially for modern tonnage.
40
20
TIGHTER MARKET WILL BRING MORE VOLATILITY

BUT THE REAL RISK IS ANOTHER OPEC U-TURN
It follows that the expected increase in fleet capacity utilization will

lead to increased volatility in freight rates. The extraordinary situation in which oil imports rise faster than consumption because of
stockbuilding, while floating storage further restrains even low fleet
growth, will not last forever. At some point the tanker market may
find itself in the paradoxical situation of weakening as the world
economy begins to improve, because these two factors will begin
to reverse. Likewise, the combination of higher gross freight rates
in USD/ton and falling bunker prices is very likely to tempt owners
into raising speed in order to capture super-profits. This increase in
hidden capacity will contribute to bringing freight rates down from
peak levels. For more on this important dynamic, see page 12.
Still, that is not the situation we fear most, as this would merely
be a normal correction in an overheated market. The real problems
for the tanker market, both crude and clean, will be if the world
economy remains mired in sub-par growth, despite lower energy
costs. Inventory building has its limits and eventually there will have
to be supply adjustment in the market. Although Saudi Arabia has
remained adamant that only the most efficient producers shall survive one cannot rule out the possibility that acute financial pressure
on some of OPECs members (Venezuela, Nigeria, Iran) will result
18
Average earnings for dry bulk ships were lower in 2014 than 2013. Preliminary assessments suggest tonnage
demand increased by slightly more than 4 percent, which was lower than anticipated. The shortfall was largely
caused by a strong drop in Chinese coal, bauxite and nickel ore imports. Meanwhile, the size of the fleet increased
by 5 percent, giving a fleet utilization rate decrease of around 1 percent.
0
05
06
VLCC
07
08
Suezmax
09
10
Aframax
11
12
13
14
MR Product
in this decision being reconsidered, possibly in cooperation with

large non-OPEC producers, as has happened in the past.
That would be a direct blow to tonnage demand, as cargo
volume would decrease. The loss of volume would impact both
the crude and the clean segment, but we believe crude would be
more exposed, as the least cost-efficient refineries are situated in
net importing regions.
In summary, we believe 2015 is shaping up as something of a
perfect storm for the tanker market. The oil trade is expected to grow
at its fastest rate in several years, while fleet capacity growth will be
near its lowest. Against that backdrop, we look forward to another
exciting cyclical chapter in the history of the tanker market.
OLE-RIKARD HAMMER
Head of Research
DRY BULK IMPORTS BY COUNTRY/REGION 20052014
SEABORNE TRADE
Seaborne transportation of dry bulk commodities measured in tonmiles increased by around 4 percent from 2013 to 2014. Iron ore
transportation climbed by 11 percent and grain/soybean transportation combined grew 9 percent. On the contrary, shipsments of coal
fell by 1 percent and other commodities dropped by 1.5 percent.
In China, total dry bulk imports grew by a meagre 2 percent.
By commodity, iron ore imports escalated by 13 percent, grain
by 52 percent and soybean by 13 percent. On the minus side, coal
AVERAGE FREIGHT RATES, TRIP CHARTER
$1,000 PER DAY
2012
2013
2014
Capesize
Panamax
9.8
8.1
16.6
9.5
14.8
7.7
Supramax
9.4
10.3
9.8
Handysize
7.6
8.2
7.7
T/C RATES BULK CARRIERS 20052014

12 MONTHS
Mill tons/year
1,000 $/day
1,600
180
1,400
160
1,200
140
120
1,000
100
800
80
600
60
400
40
200
20
0
0
05
06
China
07
08
Other Asia
09
W. Europe
10
11
Japan
12
13
India
14
05
06
Capesize
07
08
Panamax
09
10
Supramax
11
12
13
14
Handysize
19
THE DRY BULK M ARK ET
imports fell 11 percent, bauxite 49 percent and nickel ore 33 percent. only marginally compared with the year before. Port congestion
The dramatic decline in bauxite and nickel ore was caused by the decreased on a global average basis, but with some divergence on a
Indonesian export ban introduced in January. Market participants regional basis. Australia and China faced higher congestion, while
had expected the ban to be repealed during the year, but instead South American and Indonesian ports were less congested due to
it became law. The drop in coal imports was caused by a substan- improved logistics and slow export growth.
tial increase in hydro power generation in the electricity sector, low
growth in coal demand from steel and other industrial sectors, high FLEET GROWTH
coal inventories at the start of the year, and stable domestic coal pro- Deliveries of new ships reached 47 mill dwt. This was 13 mill dwt
less than the program at the start of the year. Removals amounted to
duction.
In the rest of the world, dry bulk imports climbed in total 4 per- 15 mill dwt. Calculated as an average for the year, the dry bulk fleet
cent from the year before. India increased imports by 16 percent, increased in size by slightly above 5 percent.
By segment, the Panamax/post Panamax fleet was enlarged by 8
mainly driven by coal. Japan and other Asian countries elevated
their imports by 5 percent and the Middle East by 3 percent. Africa percent, while the Supramax and Capesize fleet expanded by 5 perand the US also imported higher volumes than last year. The US cent. The Handysize fleet increased by 1 percent.
Ordering of new ships remained brisk during the first half of the
imported more steel products and fertilizer, while African imports
were driven by a wider specter of industrial commodities. European year, but slowed substantially in the second half in response to the
weaker freight market. Nevertheless, 67 mill dwt of new orders were
countries reduced dry bulk imports by around 1 percent.
Among major exporting countries, Australia continued its rapid placed for the whole year, giving an orderbook increase, from year
expansion of iron ore exports with a 24 percent hike from the year end 2013 to year end 2014, of 16.5 to 20 percent of the existing fleet.
before. Coal exports climbed 9 percent, other minerals 10 percent,
and grain exports by 5 percent. Brazil lifted its iron ore export 4 per- MARKET PROSPECTS
cent and other minerals by 3 percent. Grain and soybean shipments Tonnage demand
fell 3 percent. Argentina experienced a 12 percent drop in grain The prognosis for the world economy is for world steel demand to
exports, while US and Canadian grain exports jumped 40 and 20 increase by 23 percent from 2014 to 2015. Chinas steel demand is
percent, respectively. Indonesia exported about 10 percent less coal forecasted to climb by only 1 percent.
One critical factor for tonnage demand, especially for Capesize
and only minor volumes of bauxite and nickel ore.
tonnage, will be Chinas import requirement for iron ore. Last years
SAILING DISTANCES
substantial increase in iron ore imports, combined with increased
The average sailing distance in iron ore was 3 percent lower than domestic production, raised Chinese iron ore inventories to an all
the year before, caused by a relatively strong increase in Australian time high at year end. Based on the prevailing forecasts for steel
exports compared to longer-haul trades. In coal, the average sailing demand growth, we doubt there is room for another year with a simdistance was longer, mainly due to higher Australian volumes rela- ilar increase in iron ore supply to the Chinese market without prices
tive to Indonesian transports to Asian countries. In other commod- eroding further. With lower production costs in Australia and Brazil,
ities, sailing distances lengthened in steel products, alumina and falling production in China and other high cost producer countries
seems likely. However, if Chinese mines receive support from the
wood pulp, with only small changes otherwise.
Government, the closedown of high cost Chinese production could
take longer than expected, thereby forcing overseas mines to cut
FLEET PRODUCTIVITY
The worsening imbalance in cross trade between the Atlantic and production and exports in order to stabilize prices.
the Pacific Basins resulted in higher ballasting. Average speed fell
Another vital element will be Chinas coal import requirement.
Copyright: Ultrabulk Shipping A/S

DRY BULK FLEET
MARKET VALUES OF BULK CARRIERS 20052014

5 YEARS OLD
Mill dwt
800
140
700
130
600
120
500
110
400
100
300
90
200
80
05
06
Supply
20
07
08
Demand
09
10
11
Utilization rate
12
13
14
BULK CARRIER FLEET 20052014

AVERAGE ANNUAL CHANGES
NEW ORDERS OF BULK CARRIERS 20052014
Mill $
Percent
Mill dwt
180
16
180
160
14
160
140
12
140
120
120
10
100
100
80
80
60
60
40
40
20
20
0
05
06
Capesize
07
08
Panamax
09
10
Supramax
11
12
13
14
0
05
06
07
08
09
10
11
12
13
14
05
06
07
08
09
10
11
12
13
14
Handysize
21
THE C O NTAINTER SHIP M ARK ET
Stronger focus on environmental issues will most likely reduce the

growth in coal consumption over the coming years at the expense of
other energy sources. Utilization of growing hydro power capacity
will greatly depend on rainfall. Other key elements for future coal
import to China will be the underlying growth in energy demand,
how quickly the energy mix changes, and not least Chinese policy
related to support of domestic coal mining.
The strongest upside potential in coal trade is in higher Indian
imports. Expanding steel production and coal burning power plant
capacities are expected to generate stronger growth in coal demand
than domestic production can satisfy in the short- to medium-term.
There are also a couple of new coal fired power plants under construction in other Asian countries, driving coal imports.
World coal trade is therefore likely to increase going forward,
but the underlying growth rate may be lower than in recent years.
The transportation of bulk commodities, especially in the
minerals sector, should, in general, expand in tandem with
economic growth. The strong growth in Chinese steel products
export is likely to moderate this year due to the withdrawal of
export rebates on boron steel, making Chinese steel less competitive on the export market.
New supplies of bauxite will gradually become available in
Australia, Malaysia and West Africa, but a full replacement of the
Indonesian shortfall will come in 2016 at the earliest. Nickel ore
exports from the Philippines have only partly replaced the Indonesian volumes, and any further escalation of production capacity
is not in the pipeline in the medium-term.
It is premature to conclude regarding the grain and soybean
trade; nevertheless, the bumper crops of 2014 should bode well for
continued high trade volumes, at least in the first half of 2015.
A continued expansion of arable land in South America is
expected to raise demand for fertilizers at a quicker rate than the
expansion of local production can meet. Fertilizer import is therefore the most likely growth segment in the coming years.
In forest products, wood pellet transportation is anticipated to
escalate further, especially from North America to Europe, but also
from Vietnam, China and Canada to South Korea. We also foresee a
further increase in woodchip and log transportation to China.
In our base scenario, we predict seaborne dry bulk trade to

increase in the region of 4 percent from 2014 to 2015. In this scenario,
we anticipate Chinese iron ore imports to grow by 50 mill tons and
coal imports to remain more or less stagnant. Growth in real tonnage demand is not expected to deviate significantly from volume
growth. Sailing distances in grain, soybeans and forestry products
are expected to rise, while we foresee relatively small changes in iron
ore and coal. Even though bunker oil prices have dropped dramatically of late, we do not expect the sailing speed to increase much
unless freight rates rise to unexpectedly high levels.
Fleet trend
The fleet is anticipated to expand by between 4 and 5 percent in 2015.

The orderbook program suggests around 73 mill dwt to enter operation this year. We assume actual deliveries to total some 55 mill
dwt due to expected slippage. Removals are assumed to land in the
region of 2224 mill dwt.
CONCLUSION
On this basis, supply and demand growth is not expected to deviate dramatically, and market fundamentals are therefore likely to
remain more or less unchanged, with average earnings remaining at
relatively low levels. However, we should expect volatility through
2015 for seasonal and other reasons.
The major downside risks for dry bulk demand in a short- to
medium-term perspective are the Chinese import requirements
for iron ore and coal. Should demand deviate significantly from
assumptions, it will have a major impact on market fundamentals.
The upside potential lies in a more expansive fiscal policy in
China, which could result in higher growth in, for example, steel-intensive investments, potentially stimulating raw material imports.
BJRN BODDING
T H E CO N TA IN ER S H IP MA R K ET
STATUS QUO
The Container Ship Market in 2014 was characterized by small changes in freight rates compared with the year
before. The decline in box rates in the last two months of the year was driven by slowing volumes on major trade
lanes after the peak season in the third quarter. In general, average charter rates showed only moderate changes
from the previous year, but with some deviations among individual segments.
FREIGHT RATES AND CHARTER RATES
were up nearly 5 percent year-on-year. The volume of laden boxes
Freight rates per TEU increased about 2 percent from the previous from Asia was up 4 percent, while container traffic from South
year, calculated on a yearly average basis. However, strong volatility America rose by only 1 percent. On the EuropeUS route, an
was registered, especially on the Asia to Europe string, with slack increase of nearly 10 percent was recorded.
Container traffic into Europe climbed 6 percent. Activity grew
freight rates during the first half followed by a stronger third quarter,
before faltering again towards the end of the year. In other trades, steadily over the first three quarters, but slowed in the last as a result
there was less volatility, probably as a result of the relatively higher of softer economic activity. Far East Asian volume to Europe was
up 8 percent year-on-year, while traffic from the USA and South
coverage of term freight contracts.
Charter rates also showed relatively small changes. The year America increased only marginally. The strongest rise in European
was as dull as the year before, with low charter rates affecting most imports came from India, with an 11 percent escalation.
Intra Asian container traffic increased by a moderate 4 percent.
vessel sizes, except for larger over Panamax tonnage, particularly
ships above 9,000 TEU. Compared to 2013, smaller tonnage of 5,500 China registered only a slim increase in containerized imports,
TEU did not do as well, whilst Panamax tonnage enjoyed a slight while Korea recorded a 5 percent climb. Thailand and Indonesia
recovery. The small upswing in this segment was fuelled by several elevated their container volumes by 4 and 6 percent, respectively.
service upgrades and extra demand for ships to the US, caused by Asian exporters raised containerized exports to the Middle East by
heavy congestion on the US west coast.
8 percent and to Africa by 13 percent, while box shipments to East
Coast South America rose 5 percent.
CONTAINER MOVEMENTS AND TONNAGE DEMAND
Preliminary data suggests global container ship demand jumped by

over 6 percent from 2013 to 2014. Trade statistics suggest global container movements climbed by between 5 and 6 percent.
Assessing trends by region, in the US containerized imports
Some 1.5 mill TEU of new container ship capacity entered operation in 2014. This was about 300,000 TEU less than the order book
program. Scrapping totaled 400,000 TEU of capacity, which was
CONTAINER IMPORTS SELECTED REGIONS 20052014
FLEET GROWTH
DELIVERIES AND REMOVALS OF BULK CARRIERS* 20052014
WORLD STEEL OUTPUT 20052014
DELIVERIES OF CELLULAR CONTAINER SHIPS 20052014
Mill dwt
Mill tons
1,000 TEU
Mill TEU
120
160
1,750
70
140
1,500
60
120
1,250
50
1,000
40
750
30
500
20
250
10
100
80
100
60
80
60
40
40
20
20
0
05
Removals
22
06
07
Deliveries
08
09
10
11
12
13
14
* Incl. conversions
05
06
Total world
07
08
China
09
10
11
Rest of the world
12
13
14
0
05
06
07
08
09
10
11
12
13
14
05
06
EU
07
USA
08
09
10
11
12
13
14
Asia
23
THE C AR C ARRIER M ARK ET
60,000 TEU lower than last years record. The average age of ships
sold for breaking was 22 years, about the same as in the previous
year. Net fleet expansion was 6.2 percent across the year.
The idle fleet decreased to 118 units at the end of 2014, equivalent
to 230,000 TEU of capacity. This represents only 1.2 percent of the
total fleet. Only three ships above 7500 TEU and two ships between
5000 and 7500 TEU were reported idle.
The total fleet capacity utilization rate was more or less
unchanged, while the operating fleet utilization dropped somewhat
due to the re-activation of idle tonnage.
MARKET PROSPECTS
Historically, container traffic has increased at a rate that is around

double the world GDP growth. In 2014, the ratio was 1.7, which is
the same as in 2013. Despite stronger growth in European and US
container imports compared with the previous year, intra regional
trade within Asia and a couple of other emerging market services
increased less than the year before.
The prevailing prognosis for world GDP in 2015 suggests an
increase in world container traffic of some 67 percent. This is based
on the same factor to GDP as last year assuming there is a relatively
limited need to replenish global inventories in the short-term.
On a regional basis, the most important trade lane in the container market, measured in TEU-miles, is Asia to Europe. GDP
growth in Europe is forecast to be moderate, which suggests an
associated increase in container imports. US container imports
seem likely to increase somewhat more than last year, driven by
expected higher economic growth.
Trade growth within Asian is likely to accelerate at a faster pace
than last year. Chinese import growth is expected to remain subdued due to predicted low economic growth. However, within
other Asian countries such as Korea, Thailand and Indonesia, there
is an assumption that brisker economic activity should support
containerized imports. The Indian economy is also anticipated to
recover and this should lead to higher imports of consumer goods
etc. Latin America and Africa are also likely to contribute more
significantly to world container trade growth going forward.
FLEET TREND
New ships with a capacity of around 1.9 mill TEU are scheduled for
operation in 2015. Continued weak market conditions could cause
some slippage. We assume that 1.6 mill TEU will hit the water. A
very large proportion of the new ships entering service this year are
within the largest size categories. This will continue to generate a
cascading effect on other trades. We assume that scrapping will be
slightly lower than last year. On this basis, the net fleet expansion
will be slightly below 7 percent from 2014 to 2015.
Congestion and bottlenecking have caused concern during 2014.
Industry commentators blame these issues on bigger ships and the
larger volumes of cargo being passed to docks in one portion. With
vessel upsizing set to continue not only on major trades, but also
on smaller trades as a result of cascading this issue will not be
resolved in the near future.
The recent sharp drop in bunker oil prices raises the question of
what will happen with ship speeds. Industry leaders are divided, but
if fuel cost savings are less than charter ship costs etc. there might be
incentives for operators to increase speed on some services in order
to reduce the share of chartered tonnage. Higher fleet efficiency
will, on the contrary, affect the fleet utilization rate and contribute
to weaker freight rates.
In conclusion, the anticipated tonnage demand growth is more
or less in line with the likely growth in fleet capacity. The fleet
utilization rate is therefore expected to show small changes from
2014 to 2015. The main downside risk is a weaker than predicted performance from the world economy. Container carriers attempts to
improve profitability may, in addition to reducing operating costs,
also include an adjustment to the size of the operating fleet. This
can be done with idling or withdrawals of capacity in low volume
seasons. The newly established vessel sharing agreement among
the largest liner companies will lead to stronger competition for
increased market shares and may therefore affect freight rates
negatively. The main upside potential in this sector is a quicker than
expected economic recovery, especially in the Euro area, which will
boost tonnage demand significantly, especially in the large sizes.
T H E C A R C A R R IER MA R K ET
ANOTHER DISAPPOINTING YEAR
2014 turned into a disappointing year for the car carrier industry. Despite growing auto sales in the major markets,
demand for tonnage has been at a standstill, with most of the increased demand for cars covered by local
production. Emerging market sales are in decline, directly impacting on seaborne volumes as local production is
scarce. In addition, constant fleet growth means that the oversupply of tonnage has been exacerbated.
Seaborne volumes from all of the largest export markets developed
negatively over 2014. Japanese exports came down as expected, but
the reduction was larger than we had anticipated, ending down 4
percent. This was mainly due to new assembly capacity commencing operation in overseas markets, covering most of the added
demand for Japanese brands. While we had expected Korean
exports to rebound from a disappointing 2013, the downward trend
continued and volumes were reduced by 1 percent. Exports from
the EU were also significantly reduced, mainly into African and
Latin American markets.
However, emerging export markets such as China, Thailand
and India continued their positive development. Combined, these
three countries boosted exports by an estimated 3 percent, despite
a troublesome first half of the year in Thailand.
Auto sales, the ultimate driver for seaborne transportation of
cars, developed positively in all of the largest markets, namely USA,
Western Europe and China. However, as vehicle assembly is being
expanded rapidly in these markets, most of the added demand was
covered by local production. Emerging market sales, which depend
more on imports due to limited local production, are down. Russia,
Latin America, Africa and the Middle East have all seen reduced
BJRN BODDING
T/C RATES FOR CONTAINER SHIPS 20052014

12 MONTHS
AUTOMOBILE EXPORT 20052014
60
Mill vehicles
7
50
$1,000 per day
40
4
30
20
10
demand in 2014, which to a larger extent impacts negatively on seaborne volumes.

Relocation of production is a trend likely to continue in the
short- to medium-term. Japanese and European automakers have
already shifted some of their production to North America, China,
Thailand and India, and Korean makers are expected to follow suit.
This also opens the possibility for new trade lanes at sea, as some
models will be produced at new locations for export to global
markets. That may, over time, generate added tonnage demand, but
we expect that these new volumes will mostly fill available capacity
onboard the fleet in the next few years, until they reach such levels
that further tonnage is required.
We estimate that tonnage demand in 2014 did not grow, but
remained at the same level as the year before. Despite an anticipated
reduction in export volumes from Japan and Korea, demand is forecasted to grow by around 3 percent in 2015, backed by increased
volumes from emerging exporters, as well as from the EU and
North America.
The car carrier fleet expanded by a modest 2 percent in 2014, as
22 new vessels entered into operation and 13 were removed. The
orderbook at year-end comprised 55 vessels due for delivery into
2017, corresponding to 10 percent of the fleet. Fleet growth in 2015 is
estimated at 2.8 percent.
As a consequence of fleet growth being higher than demand
growth, the fleet capacity utilization was reduced to 83 percent in
2014, down from 85 percent in 2013. The increase in oversupply of
tonnage impacted negatively on rates too; the average 12-month
T/C rate for a 6,500 cap. car carrier ended at $23,200 per day, down
$1,400 per day from a year before. The outlook for 2015 does not
bode for much change, as both demand and supply are expected
to grow at the same rate. Overcapacity is therefore likely to remain
at the same level. The balance is rather fragile though any unexpected events, and they tend to be negative, would unfortunately
only increase the oversupply of tonnage.
1
0
0
05
06
5,600 TEU
24
07
08
4,500 TEU
09
10
3,000 TEU
11
12
1,700 TEU
13
14
1,000 TEU
05
Japan
06
Korea
07
08
09
China, Thailand and India
10
11
12
13
14
OLE GUSTAV ERIKSEN

25
THE LNG SHIPPING M A RKET
SM ALL SC ALE LNG M ARK ET
LNG MARKET APPROACHING

THE BOTTOM OF THE CYCLE
The LNG shipping market finally witnessed growth in seaborne trade after a declining pattern over the previous
two years. However, due to a continued fall in transport distance and the improved productivity of the fleet, total
shipping demand remained unchanged. The LNG carrier fleet grew by 5 percent, resulting in a corresponding
5 percent weakening of the fleets utilization rate, and a fall in short-term charter rates of 4045 percent. On
average a modern, steam turbine ship earned $54,500 per day, while a ship equipped with dual-fuelled propulsion
commanded $10,000 more per day.
Preliminary figures suggest a LNG seaborne trade of 241 mill mt in speeds and a small increase in the capacity used as FSRUs, we have
2014, up 2.5 percent from 2013. One facility, the Arun plant in Indo- estimated total shipping demand for 2014 to be at the same level as
nesia, finally closed down after 36 years in service. Three facilities the year before.
The LNG fleet saw an uptick in its growth rate during 2014, as
were inaugurated: PNG LNG in Papua New Guinea, Arzew GL3A
in Algeria and Queensland Curtis Island LNG in Australia. These 30 new ships left the shipyards. Four vessels were removed from the
market, resulting in a capacity expansion of 5 percent across the year.
projects have a nameplate capacity of 20 mill mt per year.
The second part of the ton-miles equation, transport distance, Order activity in 2014 was high, particularly towards the end of the
continued to decline during 2014. In spite of a small increase in the year, and in total we recorded 70 new contracts. By the end of 2014,
inter-basin trade between the Atlantic basin and Asia, the average an orderbook of 20 mill cbm represented 34 percent of the existing
recorded transport distance was almost 2 percent lower this year fleet.
Demand was at a standstill and, seen against a 5 percent fleet
than last.
Coupled with a small improvement in the fleets productivity, expansion, this resulted in a drop in the fleets utilization rate of 5
mainly resulting from lower bunker prices, and thus higher optimal percent, lowering short-term rates by the aforementioned 40 to 45
percent during 2014.
In 2015, we expect seaborne trade to pick up even further. Five
new LNG projects are due to come online, four in Australia and a
SHORT TERM RATE FOR LNG CARRIERS 20052014
small one in Indonesia, with a combined nameplate capacity of 20
$1,000 per day
mill mt. Pooled with the additional capacity of last years expansion,
200
we foresee a 16 mill mt growth in trade, equal to 7 percent growth
180
year-on-year. Average transport distance is expected to continue to
decline, albeit marginally, as lower oil price and thereby also the
160
LNG price in Asia will negatively affect inter-basin trade. In sum we
140
forecast a 7 percent growth in shipping demand this year.
120
Deliveries of new tonnage should be at the same level as in
100
2014, 4.8 mill cbm, which, combined with an anticipated removal
of 1.2 mill cbm, should yield a fleet growth of 9 percent in 2015. In
80
total, this should result in a 2 percent drop in the fleets utilization
60
rate to 84 percent.
SM A L L S C A L E L NG M A RK E T
ANOTHER HECTIC YEAR
Our predictions from the Platou report last year on the LNG marine fuel market came true. As predicted, we have
seen several small-scale LNG companies announce new marine LNG bunkering capacity. Notable projects were
GDF-Suez and Shells orders for one LNG bunkering vessel each in Asia and, at the beginning of 2015, Skangass
order of Europes first custom-built LNG bunkering vessel.
What now remains to be seen is if the North American LNG
bunker market will also develop with a similar, or maybe even
stronger, pace than the European market. The spread between gas
prices and liquid fuel prices here are even more pronounced than in
Europe, which should facilitate strong growth.
In parallel with the availability of new marine bunkering capacity,
shipowners have followed up by ordering even more vessels capable
of running on LNG. At our newbuilding desk in RS Platou, we have
seen a steady increase in owners interested in LNG fuel capabilities
for their newbuildings. This is also connected with the new rules
for the northern European Sulphur Emission Control Area (SECA),
which entered into force on 1 January 2015.
2014 will also go down in history as a year of dramatic fluctuations in energy costs. Whilst the oil price at the start of the year
was around USD 110 per barrel, 2014 ended with a steep decline and
prices that fell to below USD 50 per barrel by the beginning of 2015.
The small-scale LNG market is also an energy market. The
end users of the product can often choose between several energy
sources, including liquid fuels. Although a large part of the volumes
in this trade are normally sold on longer-term contracts, a sustained

drop in oil price will surely impact the small-scale LNG sector as
well. In 2015 it remains to be seen if pressure on energy prices will
influence the ton-mile demand in the small-scale LNG sector. However, despite the fall in oil prices, LNG remains an attractive energy
source in the long run.
When looking into 2015, we believe there will be continued
healthy growth in the small-scale LNG segment both for vessels
transporting LNG, and for vessels using LNG as fuel. Based upon
our sensors in the market, we also believe that we may see more midsized LNG vessels being built in the years to come. This is due to further developments in the small-scale LNG infrastructure, with more
shore-based receiving terminals under construction. LNG may
therefore be transported greater distances to these new locations.
EGIL ROKSTAD
RS Platou Shipbrokers
Copyright: Anthony Veder
THE L NG SHIPPING MA RKET
40
20
JRN BAKKELUND
0
05
06
Steam
26
07
08
09
10
11
12
13
14
DFDE
27
THE LP G SHIP P ING M ARK ET
THE L P G SHIPPING M A RKET
LPG SHIPPING MARKET

REACHES NEW HEIGHTS
During 2014 record high rates for the larger LPG carriers were seen. Driven by a massive expansion of exports from the
USA and healthy Middle East exports and in spite of a contraction in the Ammonia seaborne trade we have estimated
that total shipping demand for LPG and Ammonia has grown by 16 percent during 2014. Combined with a 6 percent fleet
growth, the utilization rate climbed by 10 percent and reached an all-time-high of 99 percent. This resulted in a two-fold
increase in average spot earnings for VLGCs at $68,000 per day. The hike in spot rates was less pronounced for smaller
ships, with a Midsize LPG carrier earning on average 17 percent more in 2014 at $32,000 per day.
The seaborne trade for the two commodities LPG and Ammonia Americas slipped three percentage points to 60 percent, while the
developed in the opposite direction during 2014. Based on pre- amount of cargoes sold to Europe increased from 15 to 19 percent.
liminary figures we have estimated an upswing in LPG exports by The share to Asia also increased, from 13 to 15 percent.
18 percent. The USA continued to be the main driver, increasing
A 13 percent decline in the average transport distance in the
exports by almost 70 percent, while Middle East exporters appear Ammonia trade resulted in a 1 percent rise in transport distance for
LPG and Ammonia combined. We estimate a 16 percent growth in
to have increased exports by 10 percent.
The Ammonia trade is estimated to have eroded by 6 percent in demand for LPG carriers in 2014.
2014. Lower exports from Ukraine and Russia, due to geopolitical
tensions, and much lower US imports are the main reasons behind FLEET DEVELOPMENT
the fall. In total, seaborne trade is estimated to have increased by 15 During 2014 we registered 21 new LPG carriers delivered from the
percent in 2014.
shipyards, with a combined capacity of 1.05 million cbm. Meanwhile, six smaller vessels, equal to 0.09 million cbm, were removed.
LPG AND AMMONIA TRANSPORT DISTANCE
Record high ordering activity resulted in 91 new contracts placed
The average transport distance for LPG is estimated to have during 2014, as the orderbook ended the year at 9.9 million cbm,
increased by 2 percent during 2014. The LPG exported from the representing 52 percent of the existing fleet. The average fleet
USA was, on average, transported 10 percent further compared growth in 2014 for fully- and semi-ref ships larger than 10,000 cbm
to the previous year. The portion of the export shipped to the was 6 percent year-on-year.
Copyright: BW LPG
BALANCE IN 2014
A 6 percent fleet growth compared to a 16 percent growth in shipping demand lifted the utilization rate in 2014 by 10 percent to 99
percent. This impacted upon average spot earnings for VLGCs,
which saw a two-fold increase to an average of $68,000 per day.
YEARLY AVG. SPOT RATE FOR VLGC 20052014

LPG CARRIERS
$1,000 per day
Mill cbm
80
20
130
70
18
120
EXPECTATION FOR 2015
60
16
110
14
100
12
90
20
10
80
10
70
60
For the coming year, we expect seaborne trade to increase by 4

percent. LPG trade is projected to grow by 5 percent, again driven
by exports from the USA, while the Ammonia trade is expected to
weaken by 3 percent on the back of lower US imports.
We predict that the average transport distance for LPG will
increase by 5 percent, as more US exports are shipped to Europe and
Asia. We expect a small decline in transport distance for Ammonia.
50
40
30
05
06
07
08
09
10
11
12
13
14
05
06
Supply
28
07
08
Demand
09
10
11
12
13
14
The total transport distance should increase by 4 to 5 percent and

overall shipping demand is forecast to grow by 9 percent in 2015.
Newbuild deliveries will start to pick up this year, with 3.8 million cbm of shipping capacity set to be delivered. Combined with
an anticipated removal of 0.6 million cbm, the fleet should grow by
11 percent.
The utilization rate in 2015 is thereby anticipated to drop by 2 percent to 97 percent, which should ease some of the upward pressure
seen last year.
JRN BAKKELUND
Utilization rate
29
THE SHIP BUILDING M ARK ET
New orders amounted to 39 mill compensated gross tons (cgt), These players dominated the contracting arena in 2013, utilizing
which is a reduction of 15 percent from 2013. Orders for tankers, the opportunity of ordering ships of new design at low prices with
bulk carriers and container ships were markedly reduced, whereas relatively short time until delivery in what appeared, at the time, to
contract volumes for capital intensive vessels like gas carriers, chem- become improved markets.
As newbuilding prices increased on the back of increased
ical tankers and cruise ships increased by almost 50 percent.
Order volumes were on par with our estimated shipyard capacity, demand and delivery times were prolonged as orderbooks became
which is also reflected in our newbuilding price index which ended thicker, this window of opportunity vanished and the flow of
private equity into shipping did too. This tendency was clear
2014 at the same level as it started.
already during the first quarter when new orders dropped significantly from January until March.
DEMAND FOR NEW TONNAGE
Our freight rate index increased by 25 percent from 2013 to 2014
While demand for newbuildings exceeded expectations in 2013, the
level of contracting returned to more normalized levels in 2014, at and ended at $17,200 per day for the year. Historically, this index
least compared to prevailing market conditions in the various ship- is linked to the volume of new orders placed by conventional ship
ping markets. 39 mill cgt of new orders were registered at shipyards owners, i.e. those who are in this business with a long-term perduring the year, a 15 percent reduction from a year before. This is spective. A freight rate index at this level indicates that the annual
still somewhat higher than what we had expected a year ago; how- volume of new orders placed should be in the region of 33 mill cgt.
ever, this can be party explained by the continued presence of insti- While reported orders came in at 39 mill cgt, or close to 20 pertutional investors in the first quarter of 2014 when orders came in cent higher, the deviation may be explained partly by the very high
significantly above the average for the remaining three quarters. activity early in the year. January and February orders combined
represented more than 4 mill cgt of additional volumes compared the end of 2014 such ordering activity was not repeated, indicating
to what the 2014 monthly average indicates.
that many of the VLCC orders in December 2013 were backed by
Newbuilding prices increased as a consequence of the large aforementioned institutional investors who are no longer present
volumes of orders placed in 2013 and early 2014. However, as order- in this market.
ing activity started to drop again, prices reached a peak in the
16.4 mill dwt of tonnage was delivered during the year, leaving
second quarter of last year before starting to decrease again. Our the fleet at 478 mill dwt at year-end. The orderbook comprised 63
newbuilding price index rose by 12 percent during 2013 and added mill dwt, corresponding to 14 percent of the fleet.
another 2 percent until mid-2014, but has since then retracted and
we are now back at the level seen at the end of 2013.
Bulk carriers
While the annual volume of new orders last year, in absolute While bulk carrier orders gradually increased during 2013, the
terms, ranks 5th historically, it represents only around 7.5 percent tendency was the opposite last year. January started strongly with 17
of the global fleet which is only the 10th highest of the past 17 yearly mill dwt of new orders, but demand faded throughout the year as
records. Compared to 2007 when new orders represented 24 per- freight markets and prospects remained in the doldrums. Novemcent of the fleet, last years volume is therefore quite moderate.
ber orders were reported at a mere 1.4 mill dwt with December
Rough estimates indicate that around 75 bill USD was invested only marginally higher. Accumulated orders ended at 67 mill dwt
in new ships during 2014. That is an increase of around 10 bill USD which is a reduction of 20 percent from 2013, although still high in
from 2013, partly explained by the higher newbuilding prices early historical terms and ranking third among top contracting years for
in the year, but also due to the larger portion of capital intensive bulk carriers.
vessels such as gas carriers, chemical tankers and cruise ships
Expectedly, most orders went to Chinese yards, representordered in 2014.
ing 60 percent. Japanese yards claimed 23 percent; a distribution
In cgt terms, Chinese yards claimed 39 percent of all orders quite similar to the year before. 2014 deliveries reached 47 mill dwt,
in 2014 and 27 percent of these were for domestic accounts. This leaving the orderbook at 146 mill dwt which is close to 20 percent
is a higher portion than in 2013, which could be explained by the of the fleet at year-end.
favorable recycling scheme for Chinese ship owners and yards
introduced by the government in 2013. 30 percent of the new orders Container ships
went to Korean yards, of which 11 percent were for Korean accounts. Container ship ordering was markedly reduced in 2014, compared
Japanese yards received 22 percent of all new orders in 2014, up from to the year before. A total of 1.15 mill TEU was ordered, down
14 percent in 2013. This is largely a consequence of the improved 42 percent from 2013. Close to 90 percent of new orders were
competitiveness of Japanese yards as they have benefitted from a vessels larger than 8,000 TEU, with the remaining orders being for
weaker yen, in contrast to Korean yards that have been facing an vessels below 4,000 TEU. No new vessels between 4,000 and 8,000
appreciating won. 38 percent of the orders at Japanese yards were TEU were ordered last year. Japanese yards were able to secure a
backed by Japanese owners.
substantial portion of the new container contracts, corresponding
to 23 percent. Chinese and Korean yards claimed 35 and 37 percent,
Tankers
respectively.
New orders of tankers reached 25 mill dwt, of which 59 percent
Deliveries amounted to 1.5 mill TEU in the same period,
went to Korean yards and 22 percent to China. This represents a taking the orderbook down to 18 percent of the fleet, compared to 22
38 percent reduction in new orders from 2013, which recorded a percent a year earlier. A total of 3.2 mill TEU remains for delivery
particularly high number of VLCC orders at the end of the year in 2015 and onwards.
backed by strong earnings. Despite comparably high rate levels at
THE S HI PBUILDING M A RKET
WEAK FREIGHT MARKETS

RESTRAIN ORDERING ACTIVITY
Shipyard activity in 2014 was characterized by a high volume of new orders early in the year, decreasing
steadily towards the end. While private equity boosted demand for new vessels in 2013, the window of
opportunity for this kind of players vanished as orderbooks were filled up and delivery times were prolonged.
BUILDING PRICES FOR BULK CARRIERS 20052014
BUILDING PRICES FOR TANKERS 20052014
BUILDING PRICES FOR CONTAINER SHIPS 20052014
Mill $
Mill $
Mill $
Mill cgt
100
180
120
80
160
80
100
140
60
80
120
60
100
60
40
20
40
20
20
20
0
0
05
06
Capesize
30
07
08
09
Panamax/Kamsarmax
10
11
12
Handymax/Supramax
13
14
40
60
80
40
NEW ORDERS 20052014
0
05
06
VLCC
07
08
Suezmax
09
Aframax
10
11
12
MR Clean
13
14
0
05
06
9,000 TEU
07
08
6,000 TEU
09
10
4,500 TEU
11
12
1,700 TEU
13
14
05
Tankers
06
07
Bulk carriers
08
09
10
Container ships
11
12
13
14
Others
31
THE SHIP BUILDING M ARK ET
BUILDING CAPACITY AND SLIPPAGE

would expect that orders that were not delivered according to plan
The steady decrease in deliveries from yards since the peak in 2012 one year would be delivered the following year, and thereby reduce
continued also during 2014. Average monthly deliveries were 2.3 slippage rates a year later. However, as slippage volumes remain
mill cgt, down from 2.6 mill cgt a year earlier and 3.4 mill cgt in 2012. quite high over many years this is an indication that there are many
This is clearly a consequence of a continuously reduced orderbook officially reported contracts that are actually never going to be delivwhich has forced yards to cut capacity through shutdown of facili- ered. This could be for various reasons; contracts may simply have
ties and reduced work force.
been cancelled, which the yard is not very interested in reporting, or
Shipyard capacity is flexible and is adjusted as a consequence of options may have been registered as firm orders but never declared.
profitability. The downturn in global shipping markets since 2008 A substantial number of orders also remain with distressed Chinese
has reduced demand for new tonnage, thereby forcing yards to cut yards which may not be able to perform. With the vast number of
prices. Consequently, profitability has fallen and yard capacity has orders at smaller, Chinese yards it is a challenging task to verify
been reduced. Newbuilding price development in the past year which are actually going to be delivered, and when.
has not resulted in surging profits; only, for many, changed results
from negative to slightly positive. Compared to a rising cost base BUILDING COST
and unfavorable currency fluctuations, Korean and Chinese yards During the past year the building cost for ships has been impacted
are some distance from increasing building capacity in a short- by fluctuations in currency exchange rates as well as a reduction in
term perspective, unless they decide to allocate available offshore steel prices. As discussed above, Japanese yards benefit from a weakcapacity to conventional shipbuilding. Japanese yards are in a ening of the yen, which has moved from around 100 JPY/USD in
different position, increasing competitiveness from the weak yen, early 2014 to close to 120 JPY/USD at year-end. With most of the
which is also reflected in the share of contracts claimed during 2014. cost in yen and export contracts in dollar this has made a significant
However, capacity growth in Japan is mainly possible through pro- impact on the cost for Japanese yards. Steel prices, however, have
ductivity gains and, as Japan is already on the high end of that scale, not moved much for the Japanese as they are obliged to purchase
there is not much potential for added capacity. We therefore expect steel domestically where prices have remained fairly stable in the
global yard capacity to remain at a steady level through 2015, around same period.
38 mill cgt annually.
Korean and Chinese yards, on the other hand, have not enjoyed
Evaluating yard capacity, order books and deliveries also draws weaker currencies, but may purchase steel at world market prices.
attention to the substantial number of vessels that are not being Reduced prices for iron ore and coking coal have impacted on the
delivered according to schedule; the so-called slippage. This is price for ship steel too; our steel plate price index fell by 8 percent
relevant in all main segments, and particularly for tankers. While in 2013 and another 20 percent in 2014. Our rough building cost estithe order book at the end of 2013 indicated that 22.2 mill dwt of mates indicate that the cost of building tankers has been reduced by
tankers were due for delivery in 2014, records show that only 16.4 around 7 percent in China and Korea during 2014, and the cost of bulk
mill dwt actually hit the water. This means that a noteworthy 26 carriers has been reduced by around 7 percent in China and Japan.
percent were never delivered according to plan.
Similarly, 58.4 mill dwt of dry bulk tonnage was scheduled for OUTLOOK
2014 delivery, but only 46.5 mill dwt, or 80 percent, were delivered. Demand growth for the global merchant fleet is estimated at 4 perThe situation was somewhat better for container ships, where 84 percent in 2014, which is below our forecasts a year ago. This is mainly
due to weaker than expected development of GDP and seaborne
cent, or 1.5 of the 1.8 mill TEU scheduled for delivery, left the yards.
This trend has been going on ever since 2010 although we see dry bulk trade; however, most segments have developed weaker
some improvement in performance during the past two years. One market conditions than we had forecasted. Our forecast for global
DELIVERIES, NEW ORDERS AND ORDERBOOKS BY VESSEL TYPE

Deliveries
2014
New orders
2014
WORLD MARKET PRICE FOR HEAVY STEEL PLATES 20052014

10 MM +
Order book
Percent of
end 2014 fleet end 2014
$/ton
Type
Capacity
Tankers
Mill dwt
16.4
24.1
63.4
13.8
1,400
Bulk carriers
Mill dwt
46.5
66.9
146.0
19.7
1,200
Container ships
Mill TEU
1.52
1.15
3.25
17.9
1,000
1,600
LNG
Mill cbm
4.8
11.6
21.7
35.4
800
LPG
Mill cbm
1.04
4.97
9.91
52.2
600
1,000 CEU
155
125
366
10.0
400
Mill dwt
0.2
1.0
3.9
4.9
200
1,000 berths
18.0
56.7
106.1
20.2
Car carriers
Chemical carriers
Cruise
32
05
06
07
08
09
10
11
12
13
14
Japan Marine United, Ariake Shipyard
tonnage demand growth in 2015 is 5 percent, based on our segment modestly. Based on the historical correlation between the rate index
and new orders, we forecast new order volumes at 4142 mill cgt in
analyses.
The global merchant fleet is expected to grow by 45 percent in 2015. This is close to our estimated yard capacity.
Given the above assumptions the average newbuilding price
2015, slightly less than last year and well below the average 7 percent annual growth during the past decade. Consequently, average index for 2015 should remain in the same range as in 2014, with the
fleet capacity utilization should improve from 84 percent last year to likelihood of minor variations throughout the year. Uncertainties
around 85 percent in 2015. Preliminary forecasts for 2016 indicate a are mainly linked to the potential for further weakening of freight
continuation of this positive development, albeit at a slightly slower markets. New environmental regulations impacting newbuildings,
such as Tier-III engines for vessels keel-laid after 1 January 2016 with
pace.
With capacity utilization remaining well below 90 percent, corresponding price premium, are not expected to generate much
which we define as full capacity utilization, and freight rates still added demand under the prevailing market conditions.
below break-even in most segments, we do not anticipate that
the volume of new shipyard orders will surpass the estimated
yard capacity. Slightly higher expectations to freight markets indiOLE GUSTAV ERIKSEN
cate that our freight rate index will continue to increase, although
33
M O BILE O FFSHO RE DRILLING UNITS
MOB I L E O FFSHORE DRILLING U N I TS
2014: THE DECLINE OF THE

OFFSHORE RIG MARKET
utilization declined four percentage points in 2014 and averaged
DAY RATES/UTILIZATION: REVIEW OF THE YEAR
The jack-up market remained tight in 2014, despite a decidedly 91 percent. A further breakdown of the floater fleet shows that the
weakening trend in fundamentals becoming more visible as the active utilizations of the floater sub-segments were all in decline.
year progressed. We observed that the active utilization of modern Ultra-deepwater (UDW) units dropped three percentage points to
Independent Cantilever units (built >1998, modern units) averaged 95 percent, while the active utilization of Deep-water (DW) units
94 percent in 2014, a drop of only two percentage points compared dropped seven percentage points to 85 percent. Finally, the Midto 2013. Meanwhile, the active utilization of older Independent water (MW) units dropped four percentage points to 89 percent
Cantilever units (built <1998, standard units) dropped on average in 2014. Global day rate averages reflected the active utilizations
four percentage points from 2013, averaging 90 percent in 2014. As and, on an annual basis, UDW units dropped 11 percent, DW units
the total active jack-up fleet started to weaken, day rates of both dropped 7 percent and MW units dropped 14 percent.
standard and modern units also began to tail off. Global average
day rates of standard units started the year at $141,000 per day and DEMAND
decreased 15 percent to $120,000 per day by the end of the year. Cor- The level of Mobile Offshore Drilling Unit (MODU) fixing activity
respondingly, global average day rates of modern units started 2014 weakened considerably in 2014 and even more so than the decline
at $164,000 per day and decreased by 13 percent to end the year at in oil and gas revenues predicted (oil and gas revenues have histori$143,000 per day. On an annual average basis day rates were largely cally been a solid predictor of fixing activity). It was clear that even
unchanged.
before the decline in oil prices, which started mid-2014, oil and gas
The floater markets weakening fundamentals were more pro- companies had to introduce large measures of capital discipline in
nounced and all major market indicators were flashing red through- order to ameliorate poor returns. Moreover, as many oil and gas
out 2014. Floater fixing activity declined by 25 percent in 2014 and companies have been unsustainably cash flow negative (mainly
totaled 130 rig years. This comes on the back of a steep decline in fix- financed by more debt and sales of assets) upstream investments
ing activity in 2013. As a result, the once huge contract backlog has were further impacted upon. Finally, the shift of E&P spending to
withered and both utilizations and day rates came under increasing onshore, mainly due to the emergence of shale oil plays and higher
downward pressure in 2014. Our records show that active floater risk of returns offshore, led to diminishing demand for MODUs
MARKET DEVELOPMENT 20052014
FLOATERS
MARKET DEVELOPMENT 20052014

JACK-UPS
and lower fixing activity. At the end of the year fixing activity of
MODUs fell to a recorded 452 rig years, a decrease of 30 percent
compared to 2013.
Jack-up fixing activity dropped significantly in 2014 and the
end of the year tally showed that contracts with a total duration
of 325 rig years were fixed, a year-on-year decrease of 32 percent.
The lower fixing activity in 2014 cut jack-up demand growth in
half compared to 2013. Nevertheless, the number of jack-ups on
contract still increased and averaged 423 units in 2014, a 5 percent
jump compared to the previous year. Demand increases for jack-ups
were mixed across the regional markets. Clearly, the Middle East
was driving demand (+12 percent), while demand in other previous growth markets, such as Asia-Pacific (+3 percent) and Gulf of
Mexico (+4 percent), slowed down to single digit growth and,
in some regions, such as West Africa (-20 percent), a decline in
demand was actually recorded. Jack-up demand growth was clearly
aligning itself with the weakening cyclical components of demand.
However, development drilling of older fields, such as in the Middle
East, was supporting jack-up demand. Time critical drilling of older
fields is necessary to support reservoir pressure and hence production, unless of course these fields are to be shut down. This type of
development drilling supports jack-up demand and has grown over
the last years at close to 4 percent p.a. without much volatility.
The number of floaters on contract also increased in 2014, but
growth slowed to a trickle, rising by only four units or 1.5 percent.
Floater demand grew unevenly across both the different types of
units and regions of operation. UDW units were clearly crowding
out older units. The number of UDW units on contract in 2014 rose
by 12 units, while the number of MW and DW units on contract
decreased by three and four units respectively. In terms of region
of operation, Brazilian demand continued to slide and decreased
by another 10 percent in 2014. On the other hand, the number of
floaters on contract grew in Gulf of Mexico (9 percent), Asia-Pacific
(11 percent) and West/East Africa (12 percent). Fixing activity of
floaters (as measured in rig years), which is a more forward-looking
indicator, decreased again in 2014 and was 25 percent lower than
in 2013. The accumulated length of contracts signed in 2014 was 130
rig years, significantly below the 256 floaters on contract at the end
Jack-up active fleet growth in 2014 was solid and increased 9 percent,
compared to the 8 percent rise of 2013. We recorded 38 deliveries in
2014, which is only slightly below what the orderbook indicated at
the start of the year. Three units were removed from the fleet and we
also recorded a number of units being reactivated from cold stacking. At the start of the year owners were still placing plenty of orders
at the yards, but as downside risk to the market increased through
the year new orders slowed down markedly. Only 10 new contracts
were placed in the second half of 2014. The final tally shows that
orders placed at yards were down almost 50 percent year-on-year,
from 74 units in 2013 to 38 units in 2014.
We estimate the average active floater fleet to have expanded by
17 units, or 6 percent, in 2014. As with 2013 some delays of newbuilds,
especially semi-submersibles, were noted, mainly as a consequence
of bottlenecks among key equipment manufacturers. However,
owners were also starting to ask for delays as a consequence of the
weakening floater market. In other words, supply dynamics began
to increase to compensate for a more challenging floater market.
The newbuilding market for floaters was also less active in 2014,
with six drillships and three semi-submersibles ordered, compared
to 15 drillships and seven semi-submersibles in 2013. Furthermore,
DAY RATE FOR RIGS 20052014
NEWBUILDING PRICES FOR RIGS 20052014
of 2014. Fixing activity in the different floater segments was negative across the board. We estimate fixing activity of UDW units
decreased 12 percent, while fixing activity of MW and DW units
declined 50 percent and 21 percent respectively.
Despite the long string of major deep-water discoveries in
numerous basins, deep-water developments are for the time being
out of favor with oil and gas companies and, as a consequence,
floater demand is negatively impacted. As with jack-up demand,
floaters were increasingly being hit by weakening cyclical factors in
2014, but the critical issue is that as deep-water developments have
become more complex to develop, the risk of cost overruns and
delays have also increased. At the same time other parts of the E&P
industry, such as shale oil, have managed to decrease costs through
improved productivity and thus made themselves relatively more
attractive for investment.
FLEET TREND
350
140
550
210
$1,000 per day

700
Mill $
800
300
130
500
190
600
700
250
120
450
170
500
400
150
400
350
130
300
300
110
200
No. of rigs
No. of rigs
110
200
100
100
90
250
90
100
50
80
200
70
06
07
Total supply
34
08
09
Active supply
10
11
Demand
12
13
14
Active utilization
05
06
07
Total supply
08
09
Active supply
10
11
Demand
12
13
14
Active utilization
500
400
150
05
600
300
200
100
0
05
06
07
Jackup, high spec
08
Midwater
09
10
Deepwater
11
UDW
12
13
Jackup, 300 ft
14
05
06
07
08
09
10
Jackup (350 ft Premium)
Semi (harsh environment)
Drillship (10,000 ft WD)
Jackup (400 ft Premium)
11
12
13
14
35
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / ///////////////////////////////////////////////////////
M O BILE O FFSHO RE DRILLING UNITS
backlog, nearly 120 floaters, or 40 percent of the actively marketed

floater fleet, will come off contract from the fourth quarter of 2015
and the end of the second quarter of 2016. New fixing activity is
unlikely to absorb these units and therefore the number of floaters
MARKET PROSPECTS
on contract is likely to drop through 2016. Our estimates indicate
Fixing activity and rig demand
that we could see a 10 to 15 percent drop in floaters on contract in
The recent precipitous drop in oil prices, combined with cost issues 2016. Floater demand is inherently linked to the success of develwithin OGCs, is likely to put further downwards pressure on fixing oping deep-water reserves. As is well-known, cost issues, timing
activity and the resultant demand for MODUs. Given the contin- issues and other relatively more attractive investments have moved
ued close link between oil and gas companies incomes and the level deep-water projects down the OGCs pecking order of investments.
of rig fixing activity (R2=0.92), and assuming oil prices averaging Industry productivity and lower costs are needed to raise the attracUSD 75 in 2015, fixing activity could drop an additional 30 percent tiveness of offshore projects. Moreover, the current withdrawal of
in 2015, which leaves downside given todays oil prices.
OGCs oil service demand, resulting in lower oil service prices is,
Jack-up fixing activity and the resultant demand will face a high however, not entirely the same as industry productivity. Cost issues
degree of risk in 2015/16. In terms of drilling drivers, exploration could easily resurface if the underlying problems are not remedied,
drilling is likely to stay muted as a consequence of maturity of the thus holding back long-term floater demand.
shallow water basins and, to a greater extent, as a result of the dropping oil prices. Lower oil prices are also slowing down new fields Fleet trend
entering the development stage. Continued increases in jack-up The current jack-up orderbook indicates that 69 units will be delivdemand hinges therefore on increased focus on the redevelopment ered in 2015 and 68 units in 2016. In other words, at the same time as
of older fields. It should be noted that the number of new fields market fundamentals are weakening the jack-up fleet could potenbeing developed exceeds those being decommissioned. However, tially face an expansion of 26 percent within the space of two years. It
the breaking point of where redevelopment/maintenance dril- is clear that owners will need to adjust their fleets in order to accomling becomes unprofitable and OGCs decide to move towards the modate the influx of tonnage. As we have already observed, condecommissioning phase must be getting close in some cases. The tracts of new units will dwindle, while owners will adjust delivery
impact of lower oil prices on jack-up demand is likely to take effect schedules and attempt to cancel units. Many units have, of course,
from the start of the year (2015). History has shown it takes approx- tail-heavy installments and at the end of the day some yards could
imately six months for a change in oil prices to take effect on jack-up sit with the problem. Some jack-ups have also been contracted by
demand. Given the above, demand is expected to decrease 5 percent owners with limited operational capability and first deployment
in 2015, before recovering to a growth of 4 percent in 2016, contin- of the units could prove challenging. Finally, it seems unavoidable
gent on oil prices readjusting upwards.
that owners will have to adjust fleets through removals/scrapping.
It seems inevitable that floater demand will be challenged in 2015 This is, however, not likely to happen before owners feel the pain of
and especially 2016. Floater fixing activity is likely to stay subdued lower utilization and earnings. Accelerated removals/scrapping is
and significantly below the actively marketed fleet. Thus, the once therefore unlikely before the second half of 2015 and through 2016.
huge contract backlog will wither further in 2015 and 2016. As a At the end of the day, we estimate the total jack-up fleet to grow by
consequence, floater demand growth in 2015 is likely to be on the close to 8 percent in 2015, but as scrapping accelerates fleet growth
negative side and we are currently estimating demand could drop is expected to be lower in 2016 and average 4 percent.
by 2 to 3 percent. Furthermore, due to the structure of the floater
Despite the current floater orderbook indicating that 30 units
will be delivered in 2015 and 22 units in 2016, the fleet count is
unlikely to rise much in the same period. As owners are well aware,
increased supply dynamics are needed to rebalance the sharply
MARKET VALUE OF RIGS 20052014
dropping market. New orders have already disappeared, delivery
Mill $
schedules are being drawn out and several owners are announcing
900
the intention of removing tonnage permanently from the market.
800
The floater fleet is therefore expected to grow by a mere 2 percent in
700
both 2015 and 2016.
several floater owners began to remove/scrap surplus tonnage.
In total, owners announced that they intend to remove/scrap 18
floaters, or nearly 6 percent of the floater fleet.
600
500
will fall. We estimate day rates for modern jack-ups to move down
to $100110,000 per day, a drop of 30 percent. Day rates for older
standard jack-ups will experience a similar percentage drop, but net
earnings will be even lower due to lower utilization. This may be the
trigger for scrapping/removals of the many older jack-ups. Floater
day rates will also fall and contracts for UDW units are likely to
drop to $275350,000 per day. With increased availability contract
length and lead times will also become shorter, and it will not be
uncommon to sign both jack-up and floater contracts on a well-bywell basis.
SVEN MELSOM ZIEGLER
RS Platou Offshore Research
RIG MARKET KEY FIGURES

AV ER AG E Y EA R
1990
1995
2000
2005
2008
2009
2010
2011
2012
2013
2014
Oil price (Brent, $/barrel)
24.0
17.2
28.1
55.2
97.4
61.9
79.4
111.0
112.0
108.5
99.0
Gas price (Henry Hub, $/bcf)
1.6
1.8
4.6
9.0
8.8
3.9
4.4
4.0
2.8
3.7
4.4
Total rig demand
417
387
424
487
540
504
509
599
601
657
681
Total rig supply
546
517
553
565
605
642
681
743
742
770
823
76.4%
75.0%
76.7%
86.1%
89.5%
79.2%
75.3%
80.6%
81.1%
85.3%
82.8%
CONCLUSIONS
400
300
200
100
0
05
36
Copyright: Seadrill
06
07
08
09
300 ft JU 80s
350 ft JU 2000+
2nd Gen
4th Gen
10
11
12
13
14
It is inevitable that MODU utilizations will decline over the next

two years. With regards to jack-ups, active utilization is estimated to
approach 80 percent by 2016. The sharpest decline will take place in
2015, with active utilization likely to level off in 2016. Active floater
utilization will probably see the sharpest fall in 2016 and could
drop to 7075 percent that year (unless supply dynamics increase
sharply). Competition for employment will be fierce and day rates
Rig utilization (on total supply)
6th Gen
37
THE O FFSHO RE SUP P O RT VESSEL M ARK ET
medium-sized vessels have on average been around 15 percent

lower than in 2013, whereas rates for large PSVs have on average
been 20 percent lower.
INTERN ATION A L OS V DEM A ND (P S V>10 0 0DW T
+ A HT S 4 9,9 9 9 BHP)
THE OFFSHORE SUPPORT VES SE L ( O S V ) M A RK E T
COMING DOWN
The North Sea PSV-market remained decent throughout 2014 when considering average numbers, albeit with
somewhat mixed developments. However, towards the end of the year, we saw the market increasingly start to
come down, with both term rates and spot rates dropping off sharply.
In spite of an increasingly challenging market also globally during

the second half of 2014, there was a higher average number of
vessels working through the year compared to 2013. We estimate
global OSV demand to have increased by around 5 percent during
2014, largely driven by increased rig activity. On a global basis the
rig count increased by 4 percent, with jack-ups on contract rising REM A INING FLEE T GROW TH S TILL SIGNIFICA NT
5 percent and floaters climbing 1.5 percent. Increasing offshore OSV fleet growth further looks set to remain high, with the
activity clearly contributed to the absorption of significant OSV order book scheduled for delivery in 2015 and 2016 (and beyond)
fleet growth. The global OSV fleet is estimated to have grown by currently standing at 514 vessels, of which 373 are PSVs and 141
8 percent in 2014, thus significantly outpacing demand growth. A are small AHTS (4,0009,999 BHP). Compared to the existfurther breakdown shows that the PSV fleet grew by 13 percent and ing fleet of around 2,900 OSVs, this corresponds to a continued
the AHTS 49,999 bhp fleet (cargo work being the mainstay for fleet growth of roughly 18 percent. Of the 514 newbuilds, 399 are
this type of vessel) increased by 4 percent in 2014. Average day rates scheduled for delivery in 2015 and 115 in 2016, corresponding to 14
through the year were relatively unchanged in most regions, but percent and 3.5 percent fleet growth respectively.
with slight regional variations. Softening rate levels towards yearHistorically, we have seen a net slippage of around 30 percent,
end have, however, started to materialize in most regions, perhaps which should imply that a fair share of deliveries scheduled for
with the exception of PSV rates in Brazil, and both AHTS and PSV 2015 will be pushed out in time. Increased market uncertainty
rates in the US Gulf of Mexico.
across oil services, financing challenges, speculative orders and
orders placed at inexperienced yards, e.g. in Asia, should also
lead to some cancellations going forward, as well as deliveries
OS V DEM A ND GROW TH FA LLING
With the steep fall in oil prices and heightened capital disci- being further postponed. Improving productivity as the yards in
pline focus amongst the oil and gas companies, we expect future general gain more experience, combined with easing pressure
demand growth for OSVs to come down strongly. Demand for along the supply chain, should to some extent counter these
OSVs is driven by production support, rig support and, to some effects. In sum, we assume net slippage to be roughly in line with
extent, offshore and subsea construction support. Continuous previous years, i.e. around 30 percent.
Applying this to the current orderbook numbers, we are likely
production support is by far the most important driver for OSVs,
whereas rig support is the main driver for the AHTS segment to see around 280 OSVs delivered in 2015, corresponding to 10
(see separate comment on AHTS below). We currently estimate percent fleet growth. Furthermore, using the same assumptions,
demand growth to about 2 percent for OSVs, both for 2015 and around 200 vessels should be delivered in 2016, implying another
for 2016, mainly driven by increased production support as on- 6 percent fleet growth. Note that these estimates assume no vessel
We estimate PSV utilization to have risen 2 percent in 2014,

averaging 92 percent through the year. Large PSVs achieved a utilization rate of 96 percent, in line with 2013-levels, while medium-sized
vessels increased to 90 percent from 84 percent in 2013. Smaller
vessels also achieved higher utilization, averaging 87 percent for the
year, compared to 82 percent in 2013.
Despite higher utilization, the North Sea PSV fleet did not
grow in 2014, marking a stark contrast to the fleet development
seen every year since 2007. At the beginning of 2014, there were
240 PSVs in the North Sea, whereas the year closed with 239 PSVs
in the region. Fleet development has been flat through the year,
with no notable spikes or slumps in the number of vessels. The
market has also seen a very low contracting level through 2014,
with the number of PSV years fixed at its lowest level since the
aftermath of the financial crisis in 2009. This is clearly illustrative
of a softening market, where charterers face low risk of tightening

capacity, and rather prefer to fix vessels on shorter-term contracts
or utilize the spot market.
The rising utilization rates were further not reflected in day
rates, marking another contrast to typical market behavior. We
estimate the small PSVs to have seen a slight increase in average
term charter rates (up 5 percent on average for the year), whereas
rates for medium-sized PSVs declined on average 4 percent,
while large PSVs fell 6 percent. Rates remained decent at the
beginning of the year, but started dropping off significantly in
the second half. The latest rate indications and fixtures are also
further down from 2014 average levels, with about 15 percent, and
we expect rates to continue to drop in line with a softer market
balance forward.
Average spot market rates have also been lower for PSVs
through 2014, compared to 2013. Spot market rates for small- and
NORTH SEA TONNAGE 20052014

AHTS AVERAGE T/C RATES (REPORTED AND ESTIMATED)
NORTH SEA TONNAGE 20052014

PSV AVERAGE T/C RATES (REPORTED AND ESTIMATED)
AHTS/PSV NEW ORDERS 20052014
1,000 per day
1,000 per day
No. of vessels
45
30
250
THE NORTH SE A P S V M A RK E T
40
25
35
25
NO. OF V ESSE L S
150
10
5
0
05
06
07
8-10,000 BHP
08
09
10-16,000 BHP
10
11
12
16-20,000 BHP
13
14
20,000+ BHP
O R DE R BO O K
AHTS 47,999 BHP
1,213
130
AHTS 89,999 BHP
221
36
AHTS 1015,999 BHP
318
60
AHTS 1619,999 BHP
119
78
21
1,949
256
AHTS Total
100
10
15
I N S E RV I C E
AHTS 20,000+ BHP
15
20
50
05
06
07
08
09
10
11
12
13
1,5002,199 DWT
500749 m2 deck area
2,2003,099 DWT
750899 m deck area
3,100+ DWT
900+ m deck area
38
AHTS/PSV FLEET OVERVIEW, END 2014
200
20
30
going field developments come to completion and new production is brought on-stream. Rig support is anticipated to drop, thus
contributing negatively. Note that our estimates have steadily
been revised down during the second half of 2014, in line with
the rig market coming down. If this continues at a faster pace forward than we currently estimate, there could very well be further
downside to our current demand growth expectations. We also
note that the estimated demand growth for 20152016 is at the
lowest level since 2002, when demand stood still. Even during the
financial crisis in 20082009, demand grew by 78 percent.
14
05
AHTS
06
07
PSV
08
09
10
11
12
13
14
PSV 500 m2
415
71
PSV 500749 m2
511
93
PSV 750899 m2
147
129
PSV 900+ m2
379
111
PSV Total
1,452
404
Total Fleet/Orderbook
3,401
660
39
THE O FFSHO RE SUP P O RT VESSEL M ARK ET
RIG MARKET SUPPORTIVE OF AHTS ACTIVITY THROUGH 2014
attrition and no further orders placed. Both elements are likely we currently expect 2015 charter rates to drop 1520 percent for
unrealistic, and we estimate vessel attrition to increase moving OSVs, compared to 2014 average levels. We also estimate rates to
drop slightly further in 2016. Our estimates naturally vary someforward, whereas ordering activity is likely to come down.
Ordering activity for OSV newbuilds remained high through- what across regions and vessel specifications, but there are no
out 2014, in spite of the market starting to come down during the regions where we expect positive rate development during 2015.
second half of the year. In total, we estimate 271 OSVs to have
been ordered, consisting of 191 PSVs and 80 small AHTS vessels. THE NORTH-SE A A HT S M A RK E T ( >10,0 0 0BHP)
This implies an ordering activity roughly in line with previous The North Sea AHTS market also remained decent through 2014,
years, with 290 OSVs ordered in 2013 and 273 OSVs in 2012.
but with somewhat mixed development, as for the OSV segment.
We saw a strong reduction in the active AHTS fleet, but without
U TILIZ ATION A ND DAY R ATE S E X PEC TED TO DROP
utilization seeing any meaningful improvement. Term and spot
With demand growth expected to fall strongly and fleet growth rates were nevertheless largely unchanged on average, with slight
estimated to remain high, we expect utilization and charter rates variances. As usual, weather conditions have also in 2014 been
to drop further in 2015 and 2016. We have already started to see highly important, leading to periods of unforeseen tightening of
this materialize, with charter contracts late 2014 and early 2015 the market balance and coherent spot rate spikes.
entered into at rates significantly below 2014 averages. On average,
40
TOUGH TIME S A HE A D
Activity in the North Sea rig market increased in 2014 compared Looking ahead, the North Sea AHTS market clearly appears chalto 2013, measured by the number of rigs on contract, and was thus lenging. A significant number of rigs are scheduled to come off
supportive of the AHTS market. At the beginning of 2014, we firm contracts both on the Norwegian and UK side of the North
observed a total of 89 MODUs on contract in the Greater North Sea during 2015. As for the rest of the world, North Atlantic fixing
Sea, of which 41 were jack-ups and 48 floaters. This increased to activity has also been depressed through 2014. During the second
98 units during the course of the year, an increase of nine units. half of 2014, we further saw Statoil cancel one rig contract and
The number of active MODUs in the Norwegian and UK North suspend four rigs in Norway, while ConocoPhillips exercised
Sea also increased through 2014, from 68 at the beginning of the early termination clauses on two jack-ups on the UK side. We do
year to 75 at year end, an increase of seven units. Six of these units not rule out the potential for further suspensions and/or early
came on the UK side, whereas the Norwegian side increased by contract terminations in 2015.
one unit. Note that the numbers above correspond to rigs on conThe strong oil price drop has further reduced oil companies
tract and do not take into account temporarily suspended rigs.
demand for exploration drilling, and we expect the number of
Exxon/Rosnefts drilling campaign in the Kara Sea was also North Sea exploration wells to come down in 2015. Sanctioning of
strongly supportive for the North Sea AHTS market during 2014, new field developments is also likely to remain subdued as long as
utilizing a high number of large AHTS vessels for part of the year, the oil price remains at low levels, which will impact development
and contributing to tightening of the market balance. Due to the drilling in both 2015 and 2016. Against this backdrop, we expect
current sanctions impacting Arctic activities in Russia, we currently few rig contract options to be exercised, accompanied by further
do not expect a corresponding campaign and effect in 2015.
depressed fixing activity. There are also a highly limited number
The underlying trend of increased pre-lay activity and of new contracted rigs expected to enter the North Sea and start
more efficient rig moves (caused by better planning and more drilling during 2015.
efficient vessels) also continues to impact AHTS demand growth
At the same time, we are seeing reduced demand for the large
negatively, despite an increase in the number of rigs on contract. AHTS vessels, also internationally, with, for example, Petrobras
We expect this trend to sustain forward, continuing to have a recently cancelling an important tender. More vessels coming off
dampening effect on vessel demand.
contracts internationally will likely find their way to the North
Sea spot market, as vessel owners have few other places to trade
large AHTS vessels. Arctic campaigns (e.g. Greenland, Russia)
FLEE T, U TILIZ ATION A ND R ATE DE V ELOPMENT IN 2014
The North Sea AHTS fleet dropped strongly during 2014, from have in the previous years absorbed significant capacity in the
around 75 units at the beginning of the year to around 59 units high-end of the AHTS market, but such campaigns also seem
by year end. The number of AHTS vessels on term contracts highly unlikely for the foreseeable future.
Future fleet growth remains highly limited, and we estimate
increased by three vessels during the year, while the spot fleet
decreased from 38 to 21 units. The North Sea AHTS fleet has the large AHTS fleet to grow by 23 percent in both 2015 and 2016
declined gradually since early 2011, but the reduction observed in (disregarding potential vessel attrition). This is naturally positive,
2014 is stronger than in any of the preceding years, and fleet size is but with the strong expected demand reduction, we nevertheless
currently back at 20072009 levels.
forecast utilization and rates to come down strongly.
The strong fleet reduction was not sufficient to improve vessel
utilization, and we estimate average utilization through 2014 at 62 THE INTERN ATION A L A HT S M A RK E T S
percent, down slightly from 65 percent in 2013. The 1015,999 BHP The international markets for large AHTS vessels largely mirror
category is estimated to have dropped to 45 percent from 57 per- development in the North Sea, but are more tilted towards jack-up
cent in 2013, while the 1619,999 BHP category dropped slightly support, rig towage, FPSO support and offshore construction
less, from 71 percent in 2013 to an estimated 68 percent in 2014. support. The same forces affecting the North Sea market are, howFinally, we estimate utilization for the largest vessels (20,000 ever, expected to also impact international AHTS markets, with
BHP+) to have increased slightly, from 66 percent in 2013 to 71 reduced rig activity being of particular importance. As for the North
percent in 2014.
Sea, we expect utilization and rates to come down, and vessels to
Average day rates also displayed a somewhat mixed develop- come off contracts. In sum, we currently forecast on average 2025
ment. Term charter rates were largely unchanged for the 1015,999 percent drop in average rates for large AHTS vessels globally, with a
BHP and 1619,999 BHP categories, while the 20,000+ BHP cate- particularly strong drop in the North Sea.
gory saw term rates increase on average by 89 percent. Note
however that there have been very few term fixtures in the market,
and the rate increase for the largest vessels likely to some extent
ERIK TNNE
reflects the high rate levels achieved for Kara Sea contracts. Spot
RS Platou Offshore Research
market rates displayed the opposite development, with average
rates for the year being up 1318 percent for the small and midsized categories (1019,999 BHP) and down some 78 percent on
average for the largest vessel category (20,000+ BHP).
41
RS P LATO U M ARK ETS
RS P L ATO U MA RKET S
TIME FOR CONSOLIDATION

The RS Platou Markets Group performed at record levels in 2014, despite the major drop in oil prices and relatively
weak economic activity. We continued to increase our position in the global shipping ECM market to above 60 per
cent mostly due to our activity in the US markets.
From an economic and market perspective, 2014 was dominated by
four themes: relatively weak economic activity (outside the US and
UK), falling oil prices (a decline of almost 50 percent since the June
peak), lower inflation expectations (and, with them, lower government bond yields), and a rise in the US dollar.
Since late June 2014 we have seen a 55 percent plus drop in the
Brent oil price to around USD 50 a barrel. The sharp decline has
been driven by OPECs quest for a higher global market share,
softening demand in China, Europe and Japan, increased US
onshore production, and slightly lower global demand. At the time
of writing, the oil price stands at USD 57 per barrel.
Meanwhile, both the stock and bond markets performed far
better than we expected at the beginning of the year. While the
markets were occasionally turbulent, we were spared a full-blown
stock market correction. For the year, the S&P 500 was up 11.4
percent and the bond market has also seen smart gains, with US
Treasuries returning 6.2 percent this year on track for the best
performance since 2011, according to the Bloomberg US Treasury
Bond Index.
The gap between yields available in cash or government bonds
and the dividend yield in equities is extreme by historical comparison, particularly across Europe. While confidence in the sustainability of dividends has been dented by the financial crisis,
the large companies are now flush with cash and generally have
strong balance sheets. This will set the scene for consolidation in
the energy markets, as the rich stand to survive the challenging
markets ahead.
For RS Platou Markets, 2014 was a very good year, especially
within the shipping sector. At the end of the year, RS Platou Markets had raised a total of 4.2 bill USD to shipping companies globally,
out of a total of 6.9 bill USD globally. This constitutes a 61 percent
market share, compared to a 44 percent market share in 2013.
Global IPO volume reached 263.3 bill USD in 2014, up 52 percent from 173.5 bill USD in 2013, and was the highest IPO volume
since 2010 according to Dealogic. The volume was driven by Alibaba
42
Group Holding Ltds 25 bill USD IPO on NYSE in September, which

stands as the biggest IPO globally on record. Global DCM volume
totaled 6.29 trill USD in 2014, up 3 percent from 6.13 trill USD in 2013.
Activity fell 2 percent to 20,351 deals, bringing the average deal size to
309 mill USD, the highest annual average on record.
Overall in 2014, RS Platou Markets participated in 26 transactions, divided over 16 equity deals and seven debt transactions,
compared to 30 transactions during 2013. In addition, RS Platou
Markets managed three M&A transactions and advisory assignments of various structures. The RS Platou Group raised a total of
5.5 bill USD to companies within our core sectors in 2014, down
30 percent from 7.4 bill USD in 2013. Despite a lower transaction
volume, revenues and costs were maintained at 2013 levels.
With the acquisition of the Platou Group, the RS Platou
Markets Group is in process of integrating with the Capital Markets
Group of Clarkson, forming a strong and diversified investment
banking arm of the consolidated company with a continued focus
on our core sectors and a strong presence in the US. With our full
set of licenses we have taken on transactions as Sole Lead or Lead
Manager in US deals, increasing our visibility and presence, a position we intend to cultivate during 2015.
OUTLOOK FOR 2015
We believe that 2015 will continue to be a constructive year, but with

bumps and turns throughout, as markets should be more volatile.
We expect investors to retain their risk appetite, as some good bargains may appear despite the lagging Eurozone economy and low
oil prices. The US economy will still be strong, which will drive the
expectation of a stronger and higher dollar.
We expect the market pricing to ease further in Europe while
we might see the Fed in the US hiking interest rates for the first
time since 2006. A sign of a divided growth picture is German
10-year government bonds yielding 0.44 percent, while the equivalent yield in the US is 1.84 percent. Furthermore, a EUR/USD
exchange rate of 1.16, the lowest since 2003, is a sign that all is not
great within the Eurozone. Greece has again emerged as a point of

worry, as the Parliament failed to elect a new President at year-end
2014. The ECB is likely to remain in the headlines, while another
national bank will be closely watched. The Swiss National Bank
kicked off 2015 by releasing the CHF from the EUR and dropping
interest rates to a negative 0.75 percent. On the other side of the
globe, China seems to be holding up fairly well. Along with most
of the developed economies, China is estimated to see a significant
GDP growth effect related to the reduced oil prices.
Record low oil prices will force major companies to curb their
ambitions, whereas lesser names will struggle to break even. We are
expecting to see consolidation and acquisitions in the market and
the survival of the richest. Highly leveraged exploration and production companies, as well as equipment providers, will be in for a
very difficult 2015.
Despite the sharp drop, we remain positive that we will see a
rebound in the oil price in the second half of 2015. We forecast an
average oil price for 2015 of USD 75 a barrel and expect the rebound
to be driven by a general slowdown in US oil production, combined
with an increased demand driven by lower oil price.

The drop in the oil price has led to an expected decline in 2015
E&P spending of more than 10 percent. This will have a negative
effect on all oil services sub segments that are already struggling
with a significant oversupply. This is particularly evident within
offshore drilling and the OSV sector. A reverse of the current E&P
spending trend is dependent on a strong rebound in the oil price.
However, we expect the spending slowdown to lead to an acceleration of consolidation and restructuring within the oil services
industry sub-segments.
OPECs quest for higher market share has been very positive
for the international tanker market for both near term and for long
term growth prospects. Spot VLCC rates have consistently been at
the highest level since 2008 since the summer of 2014, while one
year charter rates have reached the highest levels in 5 years. For 2015,
the tanker market is accommodating the favorable demand outlook with the lowest fleet growth in 13 years. This, combined with
investors search for liquidity and scale, will also give room for an
active 2015 especially within the M&A market.
43
RS P LATO U P RO JEC T FINANC E
RS P L ATO U PROJECT FINANCE
NORWEGIAN KS MARKET
GAINING MOMENTUM
2014 was a very positive year in shipping project finance, as transaction volume
and total market size improved significantly.
Although freight rates for most shipping segments (with the exclusion of LPG, and recently crude and product tankers) have not
been fantastic, it has been possible to structure and place projects.
In 2014, the majority of the shipping projects in the market focused
on historically low asset prices as well as profit split structures to
secure investors attractive entry points before an eventual recovery.
In offshore, most projects were structured as long-term
sale-leaseback deals with a solid dividend yield.
The main macroeconomic event of 2014 was undoubtedly the
major fall in the oil price in Q4. This has already had a widespread
impact on the global markets, and is expected to have a positive
effect on world economic growth.
In the oil and gas services sector, a low oil price has put further
pressure on day rates for OSVs, as oil companies have postponed
new investments and are in cost cutting mode. It is clear that
increased liquidity will be in focus for offshore companies going
forward and looking to weather the storm. In these situations, a
sale-leaseback structure could work well in order to release equity
while retaining commercial and technical control.
In last years report we commented that it was challenging to
get debt finance for projects, as banks were focusing on existing
customers and resolving problem loans. In 2014, banks have been
more interested in financing shipping and offshore projects, as

there is intense competition for the same clients on the corporate loan side. The higher margins and lower leverage in the project market has become more and more attractive to lenders. As a
result of more competition among banks for projects, we have seen
a reduction in their pricing by about 75 bps. The pricing for loans in
projects now ranges between 250450 bps.
In both shipping and offshore we see that there are owners with
excellent operational capabilities that have a desire to expand or
refinance their fleet, but are lacking the equity. Banks are not willing
to finance above 60 percent for most owners, leaving a funding gap
and opportunities for sources of alternative financing to come in. A
structure that has proven to work well is when investors come in
with 20 percent equity and the shipowner contributes the remaining 20 percent in the form of Sellers Credit.
The combination of these market conditions and the increased
debt and equity available for project financing could make 2015 the
year of the sale-leaseback.
THE NORWEGIAN KS MARKET IN 2014
Last year we saw increased activity in the project market, which

we attribute to several factors. While the stock markets performed
well in 2014, investors are looking to diversify their portfolio by ESTABLISHING RS PLATOU PROJECT SALES
placing some of their funds in well-structured shipping and off- On January 1st 2015, RS Platou Project Finance established a new
shore projects with cash flow visibility and a solid dividend yield. division designated to sourcing equity and increasing liquidity of
A low interest rate has also contributed to more equity in the project shares in the secondhand market. The new focus on sales
market and a greater demand for investment opportunities within will allow us to further increase our project activity and deal size.
shipping and offshore.
The team will consist of three brokers and a Compliance Officer.
The reported project value among the top four KS houses was Increasing the liquidity in the secondhand market will provide
about 1.2 bill USD in 2014. This represents a 78 percent increase added value to our existing investors and opportunities for new
from last years reported activity, continuing a four-year positive investors to enter existing projects.
growth trend. We observed that the number of deals placed in the
market was significantly higher, but that the average deal size was CO-OPERATION AGREEMENT WITH CIT MARITIME FINANCE
slightly smaller than previous years.
In 2014, we have completed three deals through our co-operation
agreement with CIT. These deals involve two dry-bulk vessels and
four seismic support newbuildings. The relationship with CIT
RS PLATOU PROJECT FINANCE PORTFOLIO OF PROJECTS
This year RS Platou Project Finance placed seven new projects allows us to compete on large deals with credit-rated counterparts.
through the KS Market and CIT co-operation agreement. In 2013, While many potential leasing deals have been dropped into MLP
the combined project value of our new projects was 78 mill USD. structures, we still see a growing number of deals in the market
For 2014, the total value of shipping and offshore projects placed where we can be competitive.
equaled 250 mill USD. The increased activity is due to a more
active market, alongside new and returning sources of equity and
debt financing.
In total, RS Platou Project Finance is now the corporate
manager for 47 vessels in 26 different projects.
The corporate management also includes some projects limited to pure accounting services. There is a market for professional
independent corporate management services and RS Platou Project Finance has been appointed by several domestic and foreign
shipowners to perform this job.
The current portfolio consists of 19 offshore vessels, nine product
tankers, six chemical tankers, six bulk carriers, four multipurpose
vessels, two container vessels and one veteran passenger ship.
The majority of our existing projects are performing well, allowing us to pay out a good amount of dividends to our investors.
The delivery of FS Cygnus at SIMEK Shipyard in November 2014
TOTAL PROJECTS BY SEGMENTS
TOTAL PROJECTS BY EMPLOYMENT
Multipurpose
9%
Timecharter
15%
Bulk
13 %
Spot
2%
Offshore
40 %
Product tankers
19 %
83%
Bareboat
Other
2 % Container
4%
44
SUMMARY KS HOUSES 20052014

(FEARNLEYS, NRP, PARETO, PLATOU)
Chemical
13 %
Mill $
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
05
Project price
06
07
Paid in equity
08
09
10
11
12
13
14
Uncalled capital
45
RS P LATO U REAL ESTATE
RS P L ATO U REAL ESTAT E
2014 TRANSACTION MARKET

FUELED BY CHEAP FINANCING
NORWEGIAN MARKET 2014
In 2014, RS Platou Real Estate concluded 15 projects with a total

investment value of just above 2.2 bill NOK, making 2014 the
best year since our inception in 2009. Our subsidiary, RS Platou
Property Management, also had a record year, with a net inflow
of three new projects in 2014. The company nearly doubled its
revenues over the previous year and now manages a portfolio of
14 projects.
In 2013, mid-size transactions dominated the market. In spite
of the challenges with a decreasing LTV-ratio and the lack of
competition in the banking sector, financing terms and access to
capital improved considerably after the difficulties experienced in
2012. The transaction year 2014 has been a continuation of what
started in 2013, with sharply declining interest rates and reduced
loan margins increasing competition among banks. The access to
cheap financing has fueled the investment appetite in the market,
leading to major market activity and the completion of a broad
range of real estate transactions. For syndicate transactions, bank
margins have declined by 50 bps over the year, with interest rates
declining even more.
The transaction market is expected to end up at an all-time
high, estimated at 75 bill NOK, if the sale of Entra is included. The
initial public offering of Entra generated great interest and was fully
underwritten when it was listed on 17 October on the Oslo Stock
Exchange. The companys total market value was 11.9 bill NOK,
giving the stock a price of 65 NOK. At years end 2014, the stock
price had increased to 76.50 NOK, providing shareholders with a
return of just under 20 percent since first listing.
TRANSACTION VOLUME
Bill NOK
80
70
60
50
40
30
20
10
0
46
03
04
05
06
07
08
09
10
11
12
13
14E
As in earlier years, professional investors have dominated the

equity market and, especially from Q3 and on, there has been a clear
tendency towards excess demand in the market. Stakeholders wanting to realize profits have initiated several of the transactions, and the
trend of syndicates being on the sell side has become more evident
throughout the year. Nevertheless, it is relevant to note that many
projects on the sell side are struggling with negative swap values,
making it more challenging for stakeholders to secure profits.
Moreover, foreigners continue to increase their market share
after doubling their volume in 2013 and, supported by the weakening of the NOK against foreign currencies, they are expected to be
strong contenders for top Oslo CBD properties in the coming year.
MARKET OUTLOOK
In December Norges Bank lowered the key policy rate by 25 bps to

1.25 percent, after the Swedish Central Bank unexpectedly lowered
its to zero percent at the end of October. As a result the NOK has
weakened, contributing to increased inflation levels and positively
influencing investment appetites in real estate. The 5Y swap rate has
dropped by 130 bps over the last year and is now at an all-time low.
The reduction of interest rates and loan margins affected the
pricing for CBD properties quite quickly, and the target prime
yield has been downgraded by 50 bps, from 5.25 to 4.75 percent since
June. On the other hand, real estate located in the segment between
CBD and secondary areas has not experienced similar yield compression. In this segment, yield development can be categorized as
relatively flat, or there has been a marginal reduction compared to
CBD, contributing to an increasing and historically high yield-gap.
RS Platou Real Estate has concluded several projects in 2014 that
fall into this segment. With the record high yield-gap for normal
real estate and with future expectations of continued low interest
rates, we consider a yield compression in this segment as likely, adding value for our investors.
Going forward, RS Platou Real Estate will focus on both yielding and operational projects. Regarding yielding assets, investors
focus on annual equity dividend and buildings of high quality,
preferably future built. We seek operational projects where an
underlying cash flow is combined with the opportunity for further
development and/or refurbishment. However, with our newly
established sales department, one of our top aims for 2015 is to
enhance our distribution capabilities and strengthen our market
position in the competition for long-term cash flow projects.
Residencekvartalet, Trondheim
47
STATISTIC S
STATISTICS
48
TA NKER S
CH EMICA L
CA R R IER S
B ULK
CA R R IER S*
COMB INED
CA R R IER S
OT H ER S
TOTA L
2005
295.0
25.7
318.7
11.6
200.5
851.5
2006
317.7
26.9
340.7
11.6
213.3
910.1
2007
334.7
29.0
363.7
11.2
232.5
971.2
2008
352.3
31.7
387.8
11.2
253.5
1,036.5
2009
369.0
34.0
414.7
10.4
273.1
1,101.3
2010
396.2
35.8
456.2
9.6
294.9
1,192.6
2011
413.1
36.1
533.8
6.8
309.9
1,299.8
2012
439.0
36.5
617.1
326.3
1,418.9
2013
460.5
36.6
682.5
334.1
1,513.7
2014
471.3
36.3
718.7
343.6
1,569.8
2015
478.4
36.5
750.3
366.7
1,631.8
TA NKER S
CH EMICA L
CA R R IER S
B ULK
CA R R IER S
COMB INED
CA R R IER S
OT H ER S
TOTA L
2005
28.0
1.5
23.1
13.8
66.4
2006
23.0
2.4
25.5
20.3
71.2
2007
28.7
3.0
24.8
23.0
79.5
2008
33.2
2.9
31.8
28.4
96.4
2009
45.7
2.2
51.7
28.4
128.0
2010
38.9
1.7
84.6
0.6
22.7
148.4
2011
39.7
1.0
101.2
1.0
22.7
165.5
2012
31.4
0.5
99.5
19.2
150.7
2013
21.3
0.2
58.9
21.5
101.9
2014
16.4
0.2
46.5
23.1
86.2
TA NKER S
CH EMICA L
CA R R IER S
B ULK
CA R R IER S
COMB INED
CA R R IER S
OT H ER S
TOTA L
2005
24.0
0.9
16.9
25.9
67.7
2006
74.7
6.8
36.7
25.7
143.8
2007
42.1
10.1
158.3
3.4
52.4
266.3
2008
47.4
2.7
90.4
20.4
160.9
2009
10.3
0.8
33.6
1.5
46.2
2010
38.5
1.6
82.3
10.8
133.2
2011
9.2
0.5
27.9
25.7
63.2
2012
14.2
0.9
17.8
11.1
44.0
2013
31.0
1.2
73.0
29.8
135.0
2014
24.1
1.0
66.9
21.2
113.2
1
WORLD FLEET DEVELOPMENT
Mill dwt
* F RO M 2 0 1 2 CO M BI N E D CA R R I E R S I N C L .
I N BU L K CA R R I E R F L E E T
2
DELIVERIES
Mill dwt
3
NEW ORDERS
Mill dwt
49
STATISTIC S
TAN K E RS
C HE MI CAL
CARRI E RS
BU LK
CARRI E RS
CO M B INED
CARRIERS
OT H ERS
TOTAL
2005
72.0
11.6
60.6
56.2
200.4
2006
76.5
3.3
61.4
68.1
209.3
2007
128.7
11.0
78.9
80.0
298.6
2008
147.7
19.0
216.1
3.4
105.7
491.9
2009
164.0
18.4
286.3
3.4
92.2
564.3
2010
120.6
13.9
268.7
3.4
70.5
477.1
2011
113.4
9.7
246.5
2.76
53.7
426.0
2012
75.0
1.4
191.5
53.7
321.5
2013
49.4
1.6
105.4
54.6
211.0
2013
4.6
2.7
4.7
9.5
21.5
2014
51.4
2.1
117.8
67.1
238.5
2014
5.2
2.2
1.3
7.9
16.6
2015
63.4
3.9
146.0
63.0
276.2
TAN K E RS
C HE MI CAL
CARRI E RS
BU LK
CARRI E RS
CO M B INED
CARRIERS
OT H ERS
TOTAL
10 69, 999
70 119, 999
120 199, 999
200, 000+
TOTA L
2005
5.3
0.3
1.2
0.0
1.0
7.8
2006
6.0
0.2
2.5
0.3
1.1
10.1
2007
11.1
0.4
0.7
0.0
2.1
14.2
2008
16.6
0.5
4.9
0.8
8.8
31.6
2009
18.4
0.5
10.2
0.9
6.7
36.7
2010
22.0
1.3
6.9
0.1
7.7
38.0
2011
13.8
0.6
23.4
6.3
44.1
2012
11.7
0.8
33.9
11.4
57.8
2013
11.6
0.5
22.8
12.0
46.8
2014
9.1
0.3
14.9
9.4
33.7
1 0 6 9 ,9 9 9
7 0 1 1 9 ,9 9 9
1 2 0 199,999
200,000+
TOTAL
2005
68.8
75.6
39.7
136.6
320.7
2006
73.4
83.5
42.9
144.6
344.5
2007
79.4
89.6
46.2
148.6
363.7
2008
85.9
97.1
48.4
152.6
383.9
2009
93.6
103.6
47.8
157.9
403.0
2010
106.5
108.5
59.4
157.6
432.0
2011
109.1
116.0
62.6
161.5
449.3
2012
112.2
121.0
68.2
174.2
475.6
2013
114.3
123.8
72.8
186.2
497.1
2014
116.9
123.7
76.5
190.5
507.6
2015
120.2
123.3
76.5
194.9
514.9
50
4
ORDER BOOK
Mill dwt
5
TONNAGE SOLD FOR SCRAPPING,
LOST AND OTHER REMOVALS
Mill dwt
10 69, 999
70 119, 999
120 199, 999
200, 000+
TOTA L
2005
6.7
9.6
4.0
9.1
29.5
2006
8.1
7.9
4.0
5.5
25.4
2007
9.4
8.6
4.2
9.5
31.7
2008
11.2
10.3
2.2
12.4
36.1
2009
16.4
7.3
13.3
11.0
48.0
2010
8.4
9.9
5.7
16.6
40.5
2011
5.9
8.4
7.0
19.4
40.7
2012
3.4
5.8
7.4
15.4
32.0
2005
7.0
5.8
1.1
11.0
24.9
2006
16.2
21.6
13.3
30.3
81.5
2007
15.4
13.5
8.3
15.0
52.2
2008
6.3
5.3
5.8
32.8
50.1
2009
1.4
0.6
3.3
5.8
11.1
2010
2.1
6.8
11.3
19.9
40.1
2011
2.7
1.9
2.8
2.2
9.6
2012
6.1
1.1
2.5
5.3
15.1
2013
10.8
7.1
0.6
13.6
32.2
2014
5.5
5.0
6.2
8.5
25.1
10 69, 999
6
TANKER FLEET BY SIZE
Mill dwt (incl. chemical carriers)
Q
2013
2014
DWT
NO
70 119, 999
DWT
NO
120 199, 999

DWT
NO
200, 000+
DWT
NO
7
TANKER DELIVERIES BY SIZE
8
NEW ORDERS OF TANKERS
BY SIZE
TOTA L
DWT
NO
2,6
57
1,4
12
0,2
3,5
11
7,6
81
1,7
35
2,0
18
0,5
0,0
4,2
56
1,9
45
1,8
16
0,0
2,2
5,9
68
4,7
114
1,9
17
0,0
7,9
25
14,5
156
1,8
57
2,5
27
0,3
5,6
18
10,2
104
1,9
58
0,5
2,1
13
0,0
4,5
76
1,4
48
0,6
1,0
2,6
5,5
69
0,4
17
1,3
14
2,8
18
0,3
4,9
50
9
NEW ORDERS OF TANKERS
BY SIZE QUARTERLY
Mill dwt and number of vessels
(incl. chemical carriers)
51
STATISTIC S
1 0 6 9 ,9 9 9
7 0 1 1 9 ,9 9 9
1 2 0 199,999
200,000+
TOTAL
2005
1.9
1.5
0.4
0.0
3.8
2006
2.0
1.2
0.0
0.0
3.2
2007
2.6
0.7
0.2
0.0
3.5
2008
1.8
0.8
0.2
1.3
4.0
2009
3.0
1.3
1.1
2.4
7.7
2010
5.3
1.8
1.4
3.4
11.9
2011
2.4
2.6
1.0
3.0
9.0
2012
1.1
3.7
3.2
2.8
10.8
2013
2.2
2.8
1.1
4.4
10.6
2014
1.9
2.5
1.2
2.7
8.2
H A N DYS I Z E
HAN DYMAX/
S U P RAMAX
PAN AMAX/
K AMS ARMAX
PO ST
PANAM AX
CAPESIZE
TOTAL
2005
70.0
71.7
70.7
4.8
101.8
318.7
2006
71.2
76.9
76.9
5.5
110.6
340.7
2007
71.9
81.4
83.6
7.0
120.3
363.7
2008
73.8
86.5
88.5
8.8
130.8
387.8
2009
75.1
92.5
93.4
10.5
143.7
414.7
2010
74.7
100.9
97.4
14.2
169.5
456.2
2011
80.2
118.4
105.3
22.4
208.0
533.8
2012
84.2
135.1
117.3
34.6
242.7
613.4
2013
87.2
146.3
133.8
44.2
268.6
679.6
2014
86.6
153.9
146.6
48.3
281.0
716.0
2015
87.8
160.8
154.1
50.4
295.0
748.2
H A N DYS I Z E
HAN DYMAX/
S U P RAMAX
PAN AMAX/
K AMS ARMAX
PO ST
PANAM AX
CAPESIZE
TOTAL
2005
1.8
5.5
6.3
0.9
9.0
23.1
2006
1.6
4.9
7.2
1.4
10.3
25.5
2007
2.3
5.2
4.9
1.8
10.5
24.8
2008
3.1
7.0
5.6
1.8
14.3
31.8
2009
5.1
10.8
4.9
3.9
27.0
51.7
2010
8.4
18.1
8.3
8.4
41.5
84.6
2011
9.2
21.0
13.7
12.8
44.6
101.2
2012
10.1
19.5
20.8
10.5
38.6
99.5
2013
5.7
12.4
15.3
4.5
21.1
58.9
2014
4.7
10.6
11.2
2.3
17.7
46.5
52
10
TANKERS SOLD FOR RECYCLING
BY SIZE
H A NDYSIZ E
H A NDY MA X /
SUP R A MA X
PA NA MA X /
K A MSA R MA X
P OST
PA NA MA X
2005
1.8
4.2
3.0
2006
4.8
7.5
5.5
2007
10.5
27.2
2008
12.8
19.7
2009
4.0
2010
8.3
2011
3.1
2012
3.7
2013
2014
CA P ESIZ E
TOTA L
0.9
6.9
16.9
0.9
18.0
36.7
18.5
21.9
80.2
158.3
8.5
9.2
40.2
90.4
7.8
5.0
2.2
14.6
33.6
12.7
28.1
5.7
27.5
82.3
5.3
8.1
1.5
9.8
27.9
5.4
4.4
0.4
3.9
17.8
8.6
21.1
11.4
0.7
31.3
73.0
6.8
21.8
9.7
0.2
28.4
66.9
H A NDYSIZ E
11
BULK CARRIER FLEET
BY SIZE
2013
2014
Mill dwt
12
BULK CARRIERS DELIVERIES
BY SIZE
Mill dwt incl. converted tonnage
H A NDY MA X /
SUP R A MA X
PA NA MA X /
K A MSA R MA X
P OST
PA NA MA X
CA P ESIZ E
13
NEW ORDERS OF BULK CARRIERS
BY SIZE
Mill dwt
TOTA L
DWT
NO
DWT
NO
DWT
NO
DWT
NO
DWT
NO
DWT
NO
1.1
36
2.0
35
1.0
13
0.1
8.9
47
13.2
132
2.2
63
3.1
51
3.0
37
0.4
7.3
37
15.9
192
2.1
60
7.1 117
2.6
32
0.2
4.5
23
16.5
234
3.2
92
8.8 141
4.8
59
0.0
10.7
54
27.4
346
1.7
48
9.6 159
5.2
64
0.1
16.0
80
32.6
352
1.6
43
5.4
90
2.2
28
0.0
5.5
25
14.7
186
2.0
56
4.3
70
1.8
22
0.1
5.3
25
13.4
174
1.4
38
2.6
43
0.6
0.0
1.6
6.2
97
H A NDYSIZ E
H A NDY MA X /
SUP R A MA X
PA NA MA X /
K A MSA R MA X
P OST
PA NA MA X
CA P ESIZ E
TOTA L
2005
0.6
0.2
0.1
0.1
0.1
1.2
2006
0.9
0.4
0.4
0.0
0.7
2.5
2007
0.4
0.2
0.1
0.0
0.0
0.7
2008
1.8
0.9
0.7
0.1
1.4
4.9
2009
5.5
2.4
0.8
0.2
1.3
10.2
2010
2.9
0.6
0.4
0.2
2.9
6.9
2011
5.2
4.3
1.7
0.6
9.9
21.6
2012
7.1
8.3
4.3
0.8
12.7
33.2
2013
6.2
4.8
2.6
0.4
8.6
22.6
2014
3.5
3.7
3.7
0.1
3.8
14.7
14
NEW ORDERS OF BULK CARRIERS
BY SIZE QUARTERLY
Mill dwt and number of vessels
15
BULK CARRIERS SOLD FOR
RECYCLING BY SIZE
Mill dwt
53
STATISTIC S
YE AR O F B UILT
TOTAL
9 4
9 5 9 9
0004
0509
1014
1069,999
10.1
11.0
25.0
45.9
28.3
120.2
70119,999
3.6
12.6
28.3
50.3
28.5
123.3
120199,999
2.4
8.6
18.1
21.7
25.8
76.5
200,000+
Total
2.3
19.2
50.3
52.9
70.2
194.9
18.4
51.4
121.6
170.8
152.7
514.9
SIZ E
16
AGE PROFILE FOR TANKERS
Mill dwt (incl. chemical carriers) 1.1.2015
YE AR O F B UILT
9 5 9 9
0004
0509
1014
Handysize
17.0
9.5
6.0
14.1
41.3
87.8
Handymax/Supramax
11.5
15.7
18.6
32.2
82.9
160.8
Panamax/Kamsarmax
11.6
20.4
23.9
28.1
70.2
154.1
Post Panamax
1.6
0.9
2.7
7.4
37.9
50.4
Capesize
27.1
26.5
28.1
58.7
154.6
295.0
Total
68.8
73.0
79.2
140.5
386.8
748.2
AGE PROFILE FOR

BULK CARRIERS
Mill dwt 1.1.2015
S I ZE
TOTAL ON ORDE R
2 015
2016
2017+
18.4
9.1
7.3
1.9
70119,999
13.5
6.2
6.0
1.4
200,000+
Total
9.4
25.9
67.3
2.6
7.1
25.0
4.1
16.2
33.7
2.7
2.5
8.5
18
ORDERBOOK BY YEAR OF
DELIVERY TANKERS
Mill dwt (incl. chemical carriers) 1.1.2015
S I ZE
TOTAL ON ORDE R
D ELIVERY SCH ED ULE

2 015
2016
2017+
Handysize
13.5
8.1
4.0
1.3
Handymax/Supramax
37.5
20.6
13.7
3.2
Panamax/Kamsarmax
28.0
14.9
9.4
3.8
Post Panamax
Capesize
Total
2016
2017+
0.0
0.0
0.8
1,0001,999
132.0
61.1
62.7
8.2
2,0003,999
228.4
133.8
69.8
24.8
4,0005,999
62.9
57.9
5.0
0.0
6,0007,999
27.4
27.4
0.0
0.0
845.0
605.3
220.9
18.8
10,000 +
8,0009,999
1,886.3
998.1
637.1
251.0
Total
3,182.7
1,883.7
995.4
303.6
A FR A MA X
SUEZ MA X
20
DELIVERY CONTAINER SHIPS
1,000 TEUs 1.1.2015
V LCC
2005
39.0
56.0
71.5
106.0
2006
45.0
61.5
75.0
113.5
2007
45.0
64.0
81.0
118.0
2008
50.0
68.0
93.0
136.0
2009
38.0
53.0
71.0
102.0
2010
25.0
40.0
56.0
82.0
2011
27.0
40.0
58.0
85.0
2012
27.0
35.0
45.0
62.0
2013
24.0
28.0
44.0
60.0
2014
28.0
32.0
40.0
62.0
2015
27.0
44.0
58.0
77.0
21
SECOND HAND PRICES OF
5 YEAR OLD TANKERS
Mill $
D ELIVERY SCH ED ULE
1069,999
120199,999
2015
0.8
MR P ROD UCT
17
D ELIV ERY SCH ED ULE
Below 1,000
TOTAL
9 4
TOTA L ON OR D ER
1.9
1.3
0.6
0.0
65.0
28.0
29.8
7.2
146.0
73.0
57.5
15.5
H A NDY MA X
PA NA MA X
CA P E S I ZE
2005
31.0
38.0
64.0
2006
25.5
29.0
55.0
2007
40.5
45.5
80.0
2008
73.0
88.0
138.0
2009
26.5
30.0
49.0
2010
28.0
34.0
55.0
2011
31.5
37.5
52.0
2012
25.0
26.0
38.0
2013
19.0
29.0
31.0
2014
25.0
25.5
41.0
2015
21.5
20.5
38.0
22
SECOND HAND PRICES OF
5 YEAR OLD BULK CARRIERS
Mill $
19
DELIVERY BULK CARRIERS
Mill dwt 1.1.2015
54
55
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THE PLATOU REPORT

THE PLATOU REPORT 2015

THE WORLD ACCORDING TO RS PLATOU

MOBILE OFFSHORE DRILLING UNITS

THE SHIPPING MARKET ENVIRONMENT

THE OFFSHORE SUPPORT VESSEL

THE TANKER MARKET

RS PLATOU PROJECT FINANCE

THE DRY BULK MARKET

RS PLATOU REAL ESTATE

THE CONTAINER SHIP MARKET

THE CAR CARRIER MARKET

THE LNG SHIPPING MARKET

SMALL SCALE LNG MARKET

THE LPG SHIPPING MARKET

THE SHIPBUILDING MARKET

THE PLATOU REPORT 2015

INTRO DUC TIO N

Managing Partner & CEO (19872015)

THE PLATOU REPORT 2015

THE SHIP P ING M ARK ET ENVIRO NM ENT

T H E S H IPPIN G MA R K ET EN VIRO N MEN T

WORLD SHIPPING 2014:

As in recent years, geopolitical crises again made the headlines.

LEAVING THE WARS TO THE MARKET

THE PLATOU REPORT 2015

THE SHIP P ING M ARK ET ENVIRO NM ENT

TANKERS IN 2014: STRONG START, STRONGER FINISH

The tanker market very closely mirrored 2013s performance, with

total shipping demand remained unchanged. The LNG carrier fleet

WORLD ECONOMY AND WORLD SHIPPING

CAR CARRIERS: LOCAL PRODUCTION

WORLD MERCHANT FLEET 20052014

Tonnage demand growth, world merchant fleet, annual change in percent

World output growth, percent

THE PLATOU REPORT 2015

WORLD SEABORNE TRADE AND ECONOMIC GROWTH

GLOBAL ECONOMIC GROWTH 20052015

ANNUAL GROWTH IN REAL GDP

Seaborne dry trade

M. East and N. Africa

SUPPLY, DEMAND AND UTILIZATION RATE 19902014

Source: IMF (forecast per Oct. the year before)

Utilization rate (%)

THE PLATOU REPORT 2015

TO NNAGE SURP LUS: A C O M P LIC ATED EXERC ISE

trend, not a function of market cycles.

THE PLATOU REPORT 2015

THE TANK ER M ARK ET

FREIGHT RATES: ACROSS-THE-BOARD GAINS

THE TANK ER MA RKET

FREIGHT RATES SINGLE VOYAGE 20052014

AVERAGE FREIGHT RATES $1,000 PER DAY

Freight rose across-the-board and despite a steep second quarter

THE OIL MARKET: ONE MANS CURSE

Following three years of remarkable stability, the oil market

TANKER FLEET 20052014

FREIGHT RATES SINGLE VOYAGE 20052014

THE PLATOU REPORT 2015

THE TANK ER M ARK ET

entire seaborne oil trade increased by 3 percent, handily offsetting

DELIVERIES AND REMOVALS OF TANKERS 20052014

WORLD OIL PRODUCTION AND TRADE 20052014