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Shipping Market Review – May 2021 1 HEAD OF INNOVATION & RESEARCH Christopher Rex, [email protected] ANALYTICAL TEAM Jonas Hoffmann, Senior Analyst Sebastian Müllertz, Analyst Pardeep Singh, Analyst Stasia Winther, Junior Analyst Shipping Market Review – May 2021 2 TABLE OF CONTENTS Fast forward, 4 Shipping Markets At A Glance, 13 Shipbuilding, 18 Container, 20 Dry Bulk, 27 Crude Tanker, 35 Product Tanker, 43 LPG Carriers, 50 Shipping Market Review – May 2021 3 FAST FORWARD Commercial levers for decarbonising the shipping industry Shipping Market Review – May 2021 4 VESSELS COULD BECOME A CATALYST FOR CHANGE The commercial levers facilitating decarbonisation could outpace global regulation A transition to carbon neutrality in large-scale fleet renewal programmes allow new services to grow which, at the shipping industry is possible. The in place. Most seem to be waiting to some point, may disintermediate the industry is making progress with see how the regulatory framework traditional operator that delivers existing assets and known plays out, as well as the selection of transportation from A to B. technologies but will at some point the zero-carbon fuel of the future. Existing owners and operators are need to introduce zero-carbon fuels. THE COMPETITIVE LANDSCAPE working to transform themselves. Hybrid-electric and hydrogen- The next generation of zero-carbon Few elements of the current industry powered vessels could contribute vessels could be owned by entities structures are likely to remain greatly to the short-sea shipping that benefit not only from lower untouched by the waves created by industry reaching the next stage of costs, but also from additional the call to decarbonise. efficiency. streams of revenue. COMMERCIAL FORCES AT PLAY For deep-sea shipping, the bulk of We invite you to imagine a scenario There is much discussion in the Vessels-as-a-service emissions need to be eliminated by where vessels could be supplied to shipping industry about the need for switching to a zero-carbon fuel. the market as-a-service. additional global regulation, brings more value per (government) subsidies and carbon Existing players are burdened by Over time, this could result in radical taxes in one form or another. The moved unit than legacy assets that are hard to changes to revenues and margins for goal is to level the playing field to upgrade to a degree where additional ship-owning companies. The entire traditional shipping enable the green transition to take value potential can be developed. competitive landscape could be up for off. review if vessels-as-a-service become Many will simply upgrade existing the new norm in the shipping In this report, we focus on the vessels to extend their lifetimes while industry. commercial forces of change that hoping to enjoy another period of could drive some aspects of the higher freight rates and secondhand We see multiple pathways towards industry’s decarbonisation efforts. prices. vessels-as-a-service, but they all require consolidation and scale to The risk of stranded assets will We invite our readers to imagine unlock the value potential of become more apparent when new some quite fundamental changes to transport-as-a-service (i.e. the data vessels burning zero-carbon fuels are asset ownership and the competitive potential from supply chain delivered. landscape. integration). Few owners currently seem to have The benefits of vessel sharing could Shipping Market Review – May 2021 5 WILL MANY PLAYERS NEED TO TRANSFORM THEMSELVES? Resetting the destination or navigating a new route? Many shipowners currently seem to medium-sized owners are further via lower speeds or by be postponing major investment increasingly struggling to upgrade blending conventional fossil fuels decisions until a clearer pathway to their digital capabilities to continue with, for example, biofuels. These the future becomes visible. Existing bringing down costs and leverage measures are hardly long-term vessels are being retrofitted to lower data to boost value generation. solutions, though. their emissions and make them Market leaders are actively seeking Fleets do not have much potential for compliant with the upcoming new additional revenue sources and ways additional value creation. Vessels are, environmental regulation. to improve operational efficiency in in general, non-standardised and The short-term market outlook order to lower costs. Many traditional offer little scope for economies of signals that many vessel segments owners seem to be ‘going asset light’; scale or valuable pools of data that The fuel transition could could enjoy another cycle of higher few are exploring ways to maximise can be monetised, even by the freight rates and increasing asset monetisation. largest and most consolidated become an unprecedented secondhand prices in the years to entities. The risk of stranded assets There is a clear trend of increased come. will increase in the coming years. business opportunity to digital adaptation. So far, this has DECARBONISATION STRATEGIES mostly been targeted at reducing We see strong value potential for create value significantly The call to decarbonise the industry costs, while other industries have vessel owners that harvests not only beyond freight rates and could be a game changer. For some managed to create new digital significant cost savings but also players, switching fuels may simply business models that deliver manages to introduce additional the asset play be an operational challenge that additional value. streams of revenue. needs to be solved alongside the NAVIGATING LEGACY ASSETS Vessel ownership models seem to be issue of paying the green premium. The number of straightforward levers approaching a fork in the road: one For others, the fuel transition could that can be applied to existing path leads to reinvention and become an unprecedented business vessels is limited. Only around 20- potential long-term value generation, opportunity to create value 30% of emissions can be reduced while the other means high volatility significantly beyond freight rates and through cost-efficiency levers such and cyclicality continuing. the asset play. as improved vessel design, more efficient operations and better The shipping industry is approaching routing. a tipping point. Asset owning is becoming more complex. Small and The fleet’s emissions can be reduced Shipping Market Review – May 2021 6 EMBRACING A NEW-GENERATION OPERATING MODEL Radical simplification and new capabilities Digitalisation has never been the end markets. Imagine that some shipowners and game but rather a means for new investors see great value The spark of decarbonisation could developing new value drivers and potential in a framework where the initiate major changes in the shipping new business models. zero-carbon challenge is melded with industry’s competitive landscape. a new digital business model for The shipping industry has yet to Zero-carbon fuels present a classic vessel ownership. identify and commercialise new chicken-and-egg problem across value drivers and new business Additional value can be created by industries. Decarbonisation is a global models. players that superscale and package challenge facing all industries and levers such as standardisation, Experience from other industries sectors of the economy, not just economies of scale, digitalisation and suggests that additional value can be maritime players. circularity into a redesigned ‘as-a- created if we reinvent the business In a digital future, Solving these issues represents an service’ business model for vessel models and allow more value to be extraordinary business opportunity to ownership. competition will no created by opening the gates to a be tackled within the next decade. broader ecosystem