The national shipping company of saudi arabia - Bank Audi

THE NATIONAL SHIPPING COMPANY OF SAUDI ARABIA
Stable demand combined with
moderate supply
December 30, 2011
COMPANY UPDATE EQUITY RESEARCH
2011 is a crisis year for the VLCC shipping market and according to current figures, 2012 will
continue to be a difficult year. Data from brokers are showing a decreasing trend in the chartering
rates. Some vessels were currently chartered for about USD 20,000 per day for 2-3 years, compared
to about USD 30,000 at the beginning of the year. Operating costs are about USD 10,000 – 11,000
per day, excluding financing costs. If we account to the latest, cost could rise to about USD 26,000
per day. Rates in the spot market barely cover operating costs, and during some periods in the year
rates were below costs, putting serious question marks on the ability of some tanker owners to
survive. During the last months, some US tanker companies, as Omega Navigation, Marco Polo and
General Maritime, seek protection from their creditors by filing for Chapter 11 bankruptcy. Others
are creating pools to jointly manage their VLCC fleet, a way that could decrease competition, share
cost and increase operational power, which could increase income. Currently, 4 tanker owners,
Mitsui OSK Lines’ Phoenix Tankers, Maersk Tankers, Samco Shipholding and Ocean Tankers, are
forming a pool of 50 VLCCs to start operations by the end of 2012.
CHEMICAL-OIL SHIPPING MARKET
The crude oil and petrochemical shipping markets moved in opposite directions in 2011 and this
trend is expected to continue in the future, as petrochemical fundamentals are better.
Currently, there are 1,486 vessels active in the market with a total capacity of 48.03 million dwt. 49
vessels with total capacity of 1.56 million dwt are expected to join the fleet in 2012, representing
an increase of 3.2%.
Chart 5: Oil-Chemical Current Fleet
Source: Lloyd’s List
Chart 6: Oil-Chemical Order Book
Source: Lloyd’s List
Demand for chemical vessels is increasing considerably, especially from the US to Asia because of
the peak garment production season which usually occurs in the fourth quarter. Rates for small size
(5,000 dwt) vessels, for example, increased 60% from October levels to reach USD 113 per tone last
week. In the coming few years, global demand is expected to grow at a pace of more than 4%.
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