Eco-Ship Feasibilitythedigitalship.com/.../2014korea/day1/DSKorea2014_Rick_rhee.pdf · Hae Joon...

Eco-Ship Feasibility

Hae Joon RHEE Previous Hanjin Shipping

S&P Manager and Researcher

Hae Joon RHEE , alias Rick (previous- Hanjin Shipping S&P manager and Researcher) |

… Fuel efficiency of container fleet over time and vessel size

1

Eco-Ship Feasibility

Hae Joon RHEE , alias Rick (previous- Hanjin Shipping S&P manager and Researcher) | 2

Contents

What is Eco-ship

Where We Are

Feasibility


Assumptions Technology Development Out-Pacing Vessel Operators’ Fleet Management Skills

SOURCE: ex-Hanjin, inner research

What is Eco-ship

Operator-Owners

▪ Economies of Size than Eco-ship

Conventional Owners and Financiers

▪ Are Charterers Willing to Fix Eco-ship

Yards

▪ Design Pressure versus Market Sustainability

☞ How much ‘eco’ should future eco-ships be for market feasibility?



☞ Cash-tight operators not really ready to take new technology for premium

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

20

40

60

80

100

120

140

160

180

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Million TEU (Container,

only)

Trade

Bow, Solar, Wind-Panels (* NYK ‘2030, carrier) LNG-cells(*BYD Car: Lithium, part-maker)

< Volume Growth for Last Two Decades >

Propeller(*from yard’s R&D, maker)

Turbo -Charger, Heat -Recovery

Wind -resistant M&H, Bubble -coatings

MARPOL ANNEX IMO-SEEMP

ECA

What is Eco-ship


SOURCE: Clarksons, Clarksons Research Container Department(Dr. Stopford)


Assumptions

Previous Fleet Operation Future Fleet Operation

Technology Development Out-Pacing Vessel Operators’ Fleet Management Skills

▪ Operation with Second-hand Vessel

▪ Slot-sharing between local partners

▪ Upon maturity of vessel charter-tenure, enter into new building contracts

▪ Speculative new building when vessel prices rise, more ships per loop

▪ Slow steaming

▪ Scope-Incremental Consumption

▪ ULCS(ULCV) in Supply-Demand Squeeze (against ‘EEE’-sized scales’ cost benefits)

▪ Operators now just too cash-stricken to swallow-in eco-ship premiums

▪ Sector Shift, Supply-Demand Squeeze

▪ Slot, Terminal-Inland Operation, EQ: Expertise and skill-sharing scheme

▪ Eco-ships, but only selected trades, more cascading(s)

▪ Most charter-owners already possess ample eco-ships

▪ More slow steaming (‘Extra’-slow steaming, ‘Super’-slow steaming)

▪ Vessel Age Incremental Consumption

▪ Yards design under pressure as room for more eco-ships are not big enough

What is Eco-ship



Contents

What is Eco-ship

Where We Are

Feasibility



SOURCE: HIS Global Insight(ex-DRI WEFA), Analyst & JOC Columnist Professor Ben Hackett, CEO of Hackett Industry: http://www.thehackettgroup.com

Where We Are

Source: Global Insight Global Macro and World Trade Services

(Annual percent change) Demands

▪ Recovery from Europe and also at US, recently

Supply

▪ Additional 20,000TEU under discussion with yards

Yards

▪ Product Portfolio Being Tested to other sectors, e.g. Power Industry, FPSO, etc.

☞ Volume growth always super-ceded economic growth frictions: High or Low



Where We Are

-9-6-30369

NAFTA OtherAmericas

WesternEurope

EmergingEurope

Mideast-N. Africa

Sub-Saharan

Africa

Japan OtherAsia-

Pacific2009 2010 2011 2012 2013-20

(Annual percent change)

Source: Global Insight Global Macro and World Trade Services

< Consumption Dynamics >

Vessel Age

Fleet Optimization, Economies of Size

(NM Efficiency) Class age Built

1000 Average 17.685

2000 Average 10.635451513000 Average 12.030418254000 Average 7.479638009

5000 Average 8.158536585

6000 Average 5.6453488377000 Average 5.8888888898000 Average 4.181259000 Average 4.044117647

10000 Average 2.42857142911000 Average 1.187512000 Average 0.333333333

< Not Much Scrap Candidates >

(New-Building Needs)

SOURCE: HIS Global Insight(ex-DRI WEFA), Analyst & JOC Columnist Professor Ben Hackett, CEO of Hackett Industry: http://www.thehackettgroup.com, with private source and experience

http://www.thehackettgroup.com/



Where We Are

0

50

100

150

200

250

VLCC 200k+ Persian Gulf–Republic of Korea

Panamax 40k-70k Caribbean–East Coast of North America/Gulf

of Mexico

CPP 70k–80k Persian Gulf–Japan

2010

2011

2012

Jan-13

Feb-13

Mar-13

Apr-13

May-13

< Tanker Market – World Scale >

< Container Market – Shanghai Container Freight Index >

BDI BCI 2008 Super-Cycle: BDI was at 11,793 ~!!!

‘’14 Feb 1,140 ‘’14 Mar 1,484

‘’14 Feb 1,674 ‘’14 Mar 2,766

☞ Super-Cycle was Triggered by China WTO, aftermaths of New Building Surge

☞ For Eco-Ship Boom, May Need Another China

☞ Current Premium of Eco-Ships are Not Reflecting Future Risks

Source: SSE China, UNCTAD

Source: SSE China, UNCTAD

Source: Clarksons

SOURCE: HIS Global Insight(ex-DRI WEFA), Analyst & JOC Columnist Professor Ben Hackett, CEO of Hackett Industry: http://www.thehackettgroup.com, methodology with private experience

http://www.thehackettgroup.com/


Contents

What is Eco-ship

Where We Are

Feasibility


Assumptions

SOURCE: Alphaliner, 2009 Slow Steaming Studies, Captain YAN


Feasibility

<Alphaliner 2009 Speed-Consumption Study > <Alphaliner 2009 Loop-Cost Study on HAM-SHA >

Source: Alphaliner, Singapore Source: Alphaliner, Singapore


Assumptions

Baltic Exchange Index


Riverstone Holdings LLC Zhejiang Marine Leasing Co. Oaktree Capital Oaktree & Goldman Sachs Kelso & Company LP Ontario Teachers Pension Plan Seaborne Intermodal (Lindsay Goldberg LLC) Roullier, Group BPCE Perella Weinberg Southern Cross Latin America Private Equity Funds Leasing company formed by Regions Bank and the Royal Bank of Scotland Global Hunter Securities Trailer Bridge JP Morgan Consortium led by WL Ross & Co. (First Reserve Corporation, China Investment Corporation) Alterna Capital Partners Apollo Management Kelso & Company Littlejohn/Northern Kelso & Company Carlyle Eton Park/ Rhone Capital Greenbriar Equity Group Sterling Partners Fortress Investments Blackstone/Cerberus New Mountain Capital

0100200300400500600

Most Recent PEF investment into Shipping Sector

Value($mil)

0200400600800

1000120014001600

2008 2009 2010 2011 2012

DirtyTankerIndex

CleanTankerIndex

• Post sub-Prime PEF Investment into Shipping Sector

Source: Private, ex-Hanjin inner research

Source: Baltic Exchange, UNCTAD

Feasibility

SOURCE: Marine Money, Ship Finance Forum (Singapore), Baltic Exchange



SOURCE: Private, ex-Hanjin inner research

Feasibility

Handymax and Below(*)

▪ Annual $600,000~$700,000 Cost Favor in Addition to Minor Frictions to Supply-Demand

Post-Panamax and Above Handymax

▪ Annual $250,000~$300,000 Cost Favor in Addition to Less Supply-Demand Frictions

New Post-Panamax to ULCS, ULCV (and above) (*)

▪ Annual $550,000~$700,000 Cost Favor in Addition, Creation of Additional Volume to Load Full till BEP Level(s)

* Handymax and below class container ships are relatively old, but operating at slower speed than main East-West, thus eco-friendly must have additional merits than just fuel-savings ** New Post-Panamax to ULCS, ULCV class are pretty eco-type, and newly designed vessels must be far more competive than their latest design. (i-phone’s ‘Cannivalization’ in Shipping)

☞


Contents

Q&A

Q & A



mailto:[email protected]




SAFER, SMARTER, GREENER DNV GL © 2014

ECO Ships – Chances and Challenges

Shipping Advisory Hamburg – May 21st, 2014

MARITIME

Discussion with Rick RHEE, former Hanjin Researcher

ECO Ships - Chances and Challenges 02.06.2014


Today’s vessels will have to compete against vessels that are 30% more fuel efficient in the future

02.06.2014 ECO Ships - Chances and Challenges

17

Transportation costs, USD/TEU/1000 NM CONCEPTUAL

1. IMO with respect to required EEDI improvement (MEPC 60/4/14)

2012 2025

Profitable vessels

Unemployed vessels

Transport capacity (TEU)

Profitable vessels

Unemployed vessels

Transport capacity (TEU)

Market price

Demand

Vessel A

Market price

Demand

Vessel A

Efficiency in- crease of new vessels ca. 2,7% p.a. ( = 30% in 13 years)1

SOURCE: DNV ㆍGL inhouse research


The favourability of new optimized vessels vs. average existing vessels is significant at today’s operating conditions


18

Cost composition1, USD/TEU/1000 NM SPEED: 19 KNOTS

1. 750 USD/t HFO, operating speed 19 knots, excl. port and canal costs

4,500 TEU Reasons for better cost position of new optimized vessels

12 8

18

7

45

25

-47%

OPEX

CAPEX

Bunker

40

Optimized new

vessel

Average existing vessel

75

• Improved propulsion efficiency due to lower rpm • Higher efficiency of engines • Reduced hull resistance due to optimization for lower target speeds • Better specific costs due to higher TEU intake (at 14t) due to less ballast

• Less steel work due to shorter vessels at same capacity • Better specific costs due to higher TEU intake (at 14t) due to less ballast • Stronger competition of yards for newbuilding contracts

• Less lubrication oil consumption of smaller engines • Better supporting systems of modern engines • Less maintenance effort of shorter vessels • Better specific costs due to higher TEU intake (at 14t) due to less ballast



Panamax vessels show the most significant difference between average existing vessels and new optimized vessels


19

Cost composition1, USD/TEU/1000 NM SPEED: 19 KNOTS

1. 750 USD/t HFO, operating speed 19 knots, excl. port and canal costs

2,500 TEU 4,500 TEU 9,500 TEU

14 12

1310

34

50

OPEX

CAPEX

Bunker

Optimized new

vessel


77

-27%

56

12 8

18

7

25

45


75

-47%

40

Optimized new

vessel

9

136

7

23

33 36

-35%

Optimized new

vessel


55

11

76

6

17

24 29

Optimized new

vessel

-31%


42

13,1/14,000 TEU



Case study Panamax container vessel (1/3) – with slow steaming the operating pattern changed strongly compared to initial design


20

1. 750 USD/t HFO

Initial vessel design Current operations Saving from slow steaming Bunker costs, USD/TEU/1000 NM1

38

75

37

Slow steaming

Slow steaming saving

-49%

Initial consump-

tion

Main dimensions ▪ LPP ▪ B ▪ D ▪ Speed ▪ Container (nominal) ▪ Container (@14t) ▪ Power ▪ Fuel oil consumption

Optimization ▪ Meet design speed at design

draft at sea trial (full load, one point)

▪ Minimize newbuild costs (engineering, building equipment installed)

Actual operations ▪ 24.5 kn ▪ 22.0 kn ▪ 20.0 kn ▪ 17.0 kn ▪ 14.0 kn ▪ Port Speed/draught matrix

EXAMPLE



Case study Panamax container vessel (2/3) – various measures help optimizing the vessel for today’s operating pattern


21

1. 750 USD/t HFO, if measures are implemented during dry docking planned anyway

Cost composition1, USD/TEU/1000 NM

Item Saving Invest. Payback1 Saving from retrofitting Bunker costs, USD/TEU/1000 NM1

37

3338

75

5

-49%

Retro- fitting saving

-13%

Today’s

cons.

Slow steamin

g cons.

Slow steamin

g saving

Initial cons.

Bow

Propeller

Turbo-charger

Systems

~ 6%

~ 3%

~ 3%

~ 1%

~ 600 k USD

~ 250 k USD

~ 250 k USD

~ 80 k USD

~ 9 months

~ 6 months

~ 6 months

~ 8 months



Case study Panamax container vessel (3/3) – retrofitting provides advantage vs. market average, but new vessels are out of reach


22

Cost composition1, USD/TEU/1000 NM SPEED: OPERAT. PROFILE

1. 750 USD/t HFO, operating speed according to speed profile, excl. port and canal costs

14 128

16 17

7

25

3338

Optimized

new vessel

Bunker

62

40

-9% -41%

OPEX

CAPEX

Retrofitted

existing vessel

Average

existing vessel

68

Whom do you need to beat? The few optimized new vessels currently entering the market? The majority of the 600+ Panamax vessels sailing today?



A market average of bunker cost in USD per 1,000 TEU nautical miles is calculated based on the operating profiles

2a

ECO Ships - Chances and Challenges

Each square represent a ship in the current world container fleet (except vessels with missing data) Economies of scale for larger vessels are clearly shown by sinking trend of the USD per 1,000 TEU NM cost curve A large spread in bunker cost per 1,000 TEU nautical miles can be seen for all vessel size groups

Source: IHS Fairplay, DNV GL

02.06.2014 23 SOURCE: DNV ㆍGL inhouse research


SAFER, SMARTER, GREENER

www.dnvgl.com

ECO Ships – Chances and Challenges

Dr. Jan-Henrik Hübner – Global Head of Shipping Advisory Practice [email protected] +49 (0) 40 - 36149 - 8770

ECO Ships - Chances and Challenges

02.06.2014 24 SOURCE: DNV ㆍGL inhouse research

Q & A






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