Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — Investor Day (April 2021)
56 slides from Pacific Basin Shipping's investor day presentation, Apr 21, 2021
Slide 1: Analyst Day 21 April 2021
Ee Pacific Basin Analyst Day 21 April 2021 Our Pacific Basin Crew are our Heroes at Sea
Slide 2: Virtual Analyst Day
Virtual Analyst Day 21 April 2021, Wednesday 2.30pm-5.45pm HKT 2.30pm 4.15pm Mats Berglund, CEO – Introduction Surinder Brrar, Director, Chartering (Pacific) 3.00pm – Charter Market Morten Ingebrigtsen, Director, Asset Management 5.15pm – Supply and Demand Fundamentals Peter Schulz, CFO – Forecastin
Slide 3: Introduction
Ee Pacific Basin Introduction Mats Berglund CEO
Slide 4: Pacific Basin Overview
Pacific Basin Overview We operate the world’s largest fleet of interchangeable high-quality Handysize and Supramax ships, equipping us for efficient trading and reliable service any time and anywhere Cargo system business model – with long track record outperforming market rates Own 117* Handy
Slide 5: Experienced Board & Management Team
Experienced Board & Management Team Chairman & BOD Numbers Indicate Years in Company / Years in Shipping CEO Mats Berglund (Until 31 July 2021) Asset Management 9/35 Morten Ingebrigtsen 32/35 Finance & Accounting, CFO Martin Fruergaard 0/32 Daigoro Oyama 17/22 Peter Schulz 4/6 (+20 years in finance)
Slide 6: Understanding Our Core Market
Understanding Our Core Market Pacific Basin 6
Slide 7: Key Components of Our Business Model
Key Components of Our Business Model Our business model has been refined over many years. We generate a TCE earnings premium over market rates primarily because of our high laden percentage (minimum ballast legs), which is made possible by a combination of Versatile ships and diverse trades in min
Slide 8: We Continue to Outperform on Every Level
We Continue to Outperform on Every Level Handysize Performance vs Market Supramax Performance vs Market US$1,720/day average premium US$1,490/day average premium in last 5 years in last 5 years US$/day US$/day PB Performance PB Performance $11,720 12,000 $11,140 12,000 BHSI BSI $9,630 10,000 10,000
Slide 9: Positive TCE Trend Continues
Positive TCE Trend Continues Handysize Core Business TCE Supramax Core Business TCE US$/day net US$/day net 19,000 19,000 18,000 17,000 17,000 16,100 15,000 15,000 79% of 14,630 days 13,000 77% 13,000 of days 11,000 11,000 10,950 9,000 9,000 7,000 7,000 5,000 5,000 1H20 2H20 1Q21 Actual TCE 2Q21 For
Slide 10: Exceptionally Strong Start to 2021
Exceptionally Strong Start to 2021 Handysize Market Spot Rates in 2017-2021 Supramax Market Spot Rates in 2017-2021 US$/day net* US$/day net* 24,000 24,000 22,000 22,000 19 April 2021 20,000 20,000 $19,630 18,000 18,000 19 Apr 2021 16,000 16,000 $15,260 14,000 14,000 12,000 12,000 10,000 10,000 8,00
Slide 11: Demand Fundamentals have Driven the Market
Demand Fundamentals have Driven the Market Core Market Drivers Continued strong Chinese demand for dry bulk imports even through the normally weaker Chinese New Year period but also good demand from non-Chinese destinations Global grain loadings in the first quarter were 15% higher than the same
Slide 12: Significant Leverage from Our Larger Owned Fleet
Significant Leverage from Our Larger Owned Fleet Well Timed Acquisition of Four Ultramaxes in Significant Growth of Overall Fleet and Supramax November 2020 Million dwt Proportion US$ Million 5.0 4.8* 24 4.5 23 4.0 22 Second-hand 5-year old benchmark 3.5 (60-61,000 dwt): US$22.5m 3.0 21 2.5 20 2.0 1
Slide 13: A Remarkable Recovery – Back to 2010 Rate Levels
A Remarkable Recovery – Back to 2010 Rate Levels Baltic Handysize Index (BHSI 28,000 dwt) Baltic Supramax Index (BSI 58,000 dwt) Net US$/day (net*) US$/day (net*) $30,000 $30,000 $25,000 $25,000 $20,000 $20,000 $15,000 $15,000 $10,000 $10,000 $5,000 $5,000 $0 $0 2010 2011 2012 2013 2014 2015 2016 20
Slide 14: Handysize Values and Earnings
Handysize Values and Earnings Newbuilding Second Hand Resale Contract 5 YO 10 YO 15 YO Value end 2010 (mill) 30.0 26.5 25.0 21.5 15.0 Value now (mill) 24.8 25.0 19.5 11.5 6.8 Upside to 2010 value 21% 6% 28% 87% 121% Approx Q2 Rate/day ($) 18,000 17,000 16,000 15,000 EBITDA*/year (mill) 4.2 3.8 3.5 3
Slide 15: Supramax Values and Earnings
Supramax Values and Earnings Newbuilding Second Hand Resale Contract 5 YO 10 YO 15 YO Value end 2010 (mill) 37.0 31.0 29.0 24.0 19.0 Value now (mill) 29.5 27.0 22.5 14.5 10.3 Upside to 2010 value 25% 15% 29% 66% 84% Approx Q2 Rate/day ($) 20,000 19,000 18,000 18,000 EBITDA*/year (mill) 4.9 4.6 4.2 4
Slide 16: Orderbook as a % of Existing Fleet
Orderbook as a % of Existing Fleet 25% 23.6% 20% 16.3% 15% 13.5% 10% 8.9% 6.0% 5.6% 5% 3.5% 0% LNG LPG Container Crude Product Dry Bulk Handysize Pacific Basin 16
Slide 17: We are Well Positioned for the Future
We are Well Positioned for the Future Healthy Demand Favourable Supply Pacific Basin Outlook Fundamentals Operating Leverage • Dry bulk orderbook at 5.6% • Large owned fleet Earnings • Vaccine and (lowest in modern with fixed costs economic time) including increasing sensitivity to stimulus expected
Slide 18: Q&A
FE) Q&A Pacific Basin [Ss == a With you for the long haul
Slide 19: Supply and Demand Fundamentals
Ee Pacific Basin Supply and Demand Fundamentals Morten Ingebrigtsen Director, Asset Management
Slide 20: Dry Bulk Market Overview
Dry Bulk Market Overview Supply / demand balance reached a tipping point in 1Q21 evidenced by Handysize and Supramax earnings reaching 10-year highs Dry bulk net fleet growth peaked mid last year and is now in a decline that will continue Dry bulk orderbook is record low and new contracting is
Slide 21: A Remarkable Recovery – Back to 2010 Rate Levels
It’s Worth Mentioning it Again…. A Remarkable Recovery – Back to 2010 Rate Levels Baltic Handysize Index (BHSI 28,000 dwt) Baltic Supramax Index (BSI 58,000 dwt) Net US$/day (net*) US$/day (net*) $30,000 $30,000 $25,000 $25,000 $20,000 $20,000 $15,000 $15,000 $10,000 $10,000 $5,000 $5,000 $0 $0 2010
Slide 22: Dry Bulk Orderbook is at a Multi-Decade Low
Dry Bulk Orderbook is at a Multi-Decade Low Total Dry Bulk Orderbook 5.6% % of Fleet 6.0% 6.0% 5.4% 90% 80% 3.5% 70% 60% Handysize Supramax Panamax Capesize 50% (25,000- (42,000- (65,000- (120,000+ 41,999 dwt) 64,999 dwt) 119,999dwt) dwt) 40% 30% 20% 8.0% 7.2% 8.4% 10% 5.6% 0% 1995 2000 2005 2010 20
Slide 23: Improving Demand / Supply Balance
Improving Demand / Supply Balance Minor Bulk Demand and Supply Total Dry Bulk Supply and Demand % YOY Change % YOY Change 6% 6% 4.8% 5% 5% 3.7% 3.7% 3.7% 4% 4% 2.9% 2.8% 3% 3% 2.6% 1.8% 2% 2% 1.0% 1% 1% 0.2% 0.9% 0% 0% -1% -1% -1.3% -2% -2% 2016 2017 2018 2019 2020E 2021F 2022+F 2016 2017 2018 2019
Slide 24: Loading Data Explains the Strong Start to 2021
Loading Data Explains the Strong Start to 2021 Million tonnes (annualised) Grains Million tonnes (annualised) Iron Ore 1,800 650 3M 2021 +16.8% YoY 3M 2021 +9.0% YoY 600 1,700 550 1,600 500 1,500 450 2018 2018 1,400 2019 400 2019 2020 2020 1,300 2021 350 2021 300 1,200 Jan Feb Mar Apr May Jun Jul Au
Slide 25: Good Growth for Key Grain Trades in 2021
Good Growth for Key Grain Trades in 2021 US and Canadian Grain, Soybean and Brazil and Argentina Grain, Soybean Million tonnes Million tonnes (per month) Soymeal Loadings (per month) and Soymeal Loadings 24 30 3M 2021 +0% YoY 22 2016 25 2016 20 3M 2021 +57% YoY 2017 2017 18 2018 20 2018 16 2019 15 2
Slide 26: Commodity Prices
Commodity Prices Corn US$/tonne Iron Ore RMB$/Bushel 200 3,500 175 3,000 150 2,500 125 2,000 100 1,500 75 1,000 50 500 25 0 0 2010 2012 2014 2016 2018 2020 2005 2008 2011 2014 2017 2020 Steel Copper RMB$/tonne US$/tonne 6,000 12,000 5,250 10,000 4,500 3,750 8,000 3,000 6,000 2,250 4,000 1,500 2,000
Slide 27: Handysize and Supramax Trades by Oceanic Basin
Handysize and Supramax Trades by Oceanic Basin Trade by Oceanic basin for 25-65k dwt Million tonnes (per month) Inter Pacific represents the greatest volume and has seen the largest volume growth in 1Q21 90 Inter Pacific +16.6Mt 80 YoY 70 60 Inter Inter Atlantic trade saw a decline in 2020 however 5
Slide 28: US Grain Exports to China Taking a Larger Share of a Growing Trade
US Grain Exports to China Taking a Larger Share of a Growing Trade World Total Grain Loadings for China Discharge 26.0 2020 YoY change for China Million tonnes grain discharge by load area (per month) Total 39.8 mill tonnes / +38% 18 3M 2021 +43% YoY 16 14 2016 12 2017 10 2018 6.5 8 2019 3.6 2020 2.
Slide 29: Chinese Strong Minor Bulks Imports
Chinese Strong Minor Bulks Imports Million tonnes 30 China imports year-to-date 2021 growth +24 Total up 12Mt / +3% YoY 20 +10 10 +4 +2 0 0 +1 0 (1) (1) -10 -20 -30 (26) -40 Iron Ore Coal Soybean Cereal C-conc Ferts Steel Logs Bauxite Ni-ore +9% -28% +20% +164% +9% +12% +18% +25% -6% -31% Covering J
Slide 30: Minor Bulks in Further Detail
Minor Bulks in Further Detail Million tonnes Global Minor Bulk Loadings 2020 Global Minor Bulk Loadings 1Q21 Million tonnes 20 14 +3.0% +5.2% Minor Bulks Q1 2021 YoY 10 12 up 34.4 Mt / +11.0% +27.0% 8.0 0.0 +0.3% +4.4% 0.5 5.3 0 -2.7 -3.5 +21.3% 10 (2.6%) (2.0%) -10 8 +4.0% Minor Bulks 2020 YoY 6 +2
Slide 31: Australian coal volume declined as China disappeared
Australian coal volume declined as China disappeared but supra/ultramax employment has increased Supra/Ultra up in 2020 2020 Volume was Down 2021 Volume was Down Million tonnes Australian Coal Loadings by Destination 40 Supra/Ultra up in 2021 35 30 25 20 15 10 5 Measured as number of voyage days w
Slide 32: Looking ahead
Looking ahead With tighter Supply / demand balance we expect greater volatilty from a higher base level Net fleet growth will continue to decline Dry bulk cargo volume has a seasonal boost-effect later in the year Large parts of the world economy has yet to open fully from Covid lockdowns
Slide 33: Q&A
FE) Q&A Pacific Basin [Ss == a With you for the long haul
Slide 34: Charter Market
Pacific Basin Charter Market Surinder Brrar Director, Chartering (Pacific)
Slide 35: Overview
Overview Pacific Basin Business Model Chartering Market Update Cover Management Explaining backhauls How our backhaul cover works When to lock in fronthaul cover Fleet Optimisation TCE Outperformance Pacific Basin 35
Slide 36: Pacific Basin Business Model
Pacific Basin Business Model Our business model has been refined over many years. In the longer term, we are able to generate a TCE earnings premium over market rates because of our high laden percentage (minimum ballast legs), which is made possible by a combination of: Fleet scale and interchangea
Slide 37: Chartering Market Update: Positive TCE Trend Continues
It’s Worth Mentioning Again…. Chartering Market Update: Positive TCE Trend Continues Handysize Core Business TCE Supramax Core Business TCE US$/day net US$/day net 19,000 19,000 18,000 17,000 17,000 16,100 15,000 15,000 79% of 14,630 days 13,000 77% 13,000 of days 11,000 11,000 10,950 9,000 9,000 7,
Slide 38: Chartering Market Update (cont’d)
Chartering Market Update (cont’d) Key drivers of current market are many – all adding to the strong underlying demand story unfolding 39% Synchronicity in strong cargo demand in almost all global markets Minor Bulk De-containerisation from box into bulk and MPPs largely out of dry bulk sector
Slide 39: Chartering Market update (cont’d)
Chartering Market update (cont’d) Front haul trades Pacific: very strong demand in Indian Ocean, Australian, New Zealand and South East Asian markets. North Pacific last to join this demand story with all key markets now in an upswing 39% Atlantic: market turned positive after just a few weeks o
Slide 40: Chartering Market Update: Atlantic vs Pacific TCE Rates
Chartering Market Update: Atlantic vs Pacific TCE Rates US$/day BHSI 38k dwt TCE US$/day US$/day BSI 58K dwt TCE US$/day 26,000 27,000 24,000 25,000 US$22,779 22,000 US$21,490 23,000 Atlantic TCE 20,000 21,000 Last Pacific TCE Last 19,000 18,000 week week 17,000 16,000 US$14,629 15,000 US$15,847 14,
Slide 41: Chartering Market Update: Atlantic vs Pacific Fleet Allocation
Chartering Market Update : Atlantic vs Pacific Fleet Allocation Number of Handysize Vessels in Atlantic Number of Handysize Vessels in Pacific No. of Vessels No. of Vessels 1,225 1,650 1,200 1,600 1,175 1,550 1,150 1,125 1,500 1,100 1,450 1,075 1,400 1,050 1,025 1,350 Jan Feb Mar Apr May Jun Jul Aug
Slide 42: Cover Management: Explaining Backhauls
Cover Management: Explaining Backhauls A normal cargo system comprises 1 empty ballast leg + 1 laden fronthaul leg By combining backhaul and fronthaul cargoes, we achieve higher utilisation and outperform the market (Baltic Exchange indices and peer group) Pacific Basin 42
Slide 43: Cover Management: How Our Backhaul Cover Works
Cover Management: How Our Backhaul Cover Works (in $10,000/day market) Value TCE Backhaul Voyage Discounted positioning cost for 35 days ($100,000) $7,143 Front haul TCE Premium position value for 35 days $200,000 $15,714 Round Voyage TCE Premium for 70 days = ($100,000/70 days) $100,000 $11,429 (i.
Slide 44: Cover Management: When to Lock-in Cover?
Cover Management: When to Lock-in Cover? 3) Long-term COA 2) Medium-term COA 4) Medium-term COA 1) Spot trade 5) Reduce charter-in exposure Shipping Market Cycle Watch the cycle carefully Stay close to customers and take cover as they come, step-by-step Continue positioning our ships to where
Slide 45: Fleet Optimisation
Fleet Optimisation 117Vessels 16 LT 138 ST 271 Chartered-in Chartered-in Total owned* Grown large owned fleet – lower fixed costs Reducing long-term chartered-in ships Strategically top-up short-term chartered-in ships to allow for: higher vessel utilisation vessel repositioning and planni
Slide 46: Fleet Optimisation: Our Two Main Activities
Fleet Optimisation: Our Two Main Activities Core Business Operating Activity Contract and spot cargoes Spot cargoes Owned and long-term chartered ships Short-term ships carrying spot cargoes Short-term ships carrying contract cargoes Costs largely fixed and disclosed Costs fluctuate with freight mar
Slide 47: TCE Outperformance
TCE Outperformance Our outperformance has been developed over time to primarily optimise in lower markets now swiftly readjusting to optimise in higher markets 39% there will always be a lag in both rising and falling markets Minor Bulk market dynamics necessitates re-optimisation of routes
Slide 48: Q&A
FE) Q&A Pacific Basin [Ss == a With you for the long haul
Slide 49: Forecasting Our Business
Pacific Basin Forecasting Our Business Peter Schulz Chief Financial Officer
Slide 50: Our Two Main Activities
Our Two Main Activities Core Business Operating Activity Contract and spot cargoes Spot cargoes Owned and long-term chartered ships Short-term ships carrying spot cargoes Short-term ships carrying contract cargoes Costs largely fixed and disclosed Costs fluctuate with freight market Key KPI = TCE pe
Slide 51: Our TCE Reporting Methodology
Our TCE Reporting Methodology Our “core business” is to optimally combine our owned and long-term chartered ships with multi-shipment contract cargos and spot cargoes to achieve the highest daily TCE earnings. Our core business also uses short-term chartered ships to carry contract cargoes to maximi
Slide 52: How to Model Pacific Basin
How to Model Pacific Basin Handysize contribution Core TCE1 x owned & LTC 2 revenue days + Blended cost x owned & LTC cost days 3 - = X Supramax contribution Core TCE1 x owned & LTC revenue days + Blended cost x owned & LTC cost days 3 - = X Operating Activity Operating margin x operating days X Pos
Slide 53: Understanding the Sensitivity
Understanding the Sensitivity Key Assumptions % of Open • No change in Number of Operating Activity +/- Days in Next Sensitivity Owned + LT 360 profitability US$1,000/day 12 Months +/- Chartered On-hire Days • No change in G&A Market Rate (excl. CoA Underlying Profit Ships cover) 75-80% US$35-40m 2Q
Slide 54: Capital Allocation
Capital Allocation Should the Market Recovery Continue A) Pacific Basin’s operating cash flow will be healthy (operational leverage) B) The pace of fleet growth could slow as vessels become more expensive – the pace of selling older tonnage * might increase Priorities will be 1) Delever balance shee
Slide 55: Q&A
FE) Q&A Pacific Basin [Ss == a With you for the long haul
Slide 56: Pacific Basin
Ee Pacific Basin Our Pacific Basin Crew are our Heroes at Sea