Freight Market• The Baltic Dry index peaked in May 2008 at 11,793 points and

bottomed out in December 2008 at 663 points with relative strong market in parts of 2009-2011 with peaks close to 4500-5000 points, while it hit all time low levels in 2012 at 647 points. Today it hovers around 1000 points.

• Dow Jones Index and S&P 500 are both above pre-financial crisis peak levels in 2008.

• Price for bunkers are about 20% lower than record high prices.

• Global drybulk volumes are around 30% higher than before the financial crisis, when the shipping market was at its peak.

• Global drybulk fleet supply has nearly doubled in capacity since the 2008 peak levels of the shipping market.

Future market• Newbuilding orders have been placed at significant levels with

shipyards having filled their orderbooks up until ultimo 2017 with forward orderbook standing at about 25-30% of current fleet.

• Second hand prices of ships have increased over the last two years and newbuilding ship yard are booked at.

• Shipowners expect an imminent recovery of the freight market.

• The Chinese economy is growing at the lowest levels since 1990 and indications are growth rates may decline further.

• We believe freight markets will remain depressed for balance of this year and well into next year.

Lower market, does not always give lower rate per ton

• Low forward expectations to earnings can lead to higher freight rates:– Owners less willing to ‘’invest’’ in backhaul positions

• USG• West Africa/EC South America• South/East Africa

– Weak earnings on traditional «high earning» legs means owners seek better earnings into these areas

- Owners alternatives- Lower average earning «rounds» in Pacific / Atlantic markets- Lay up

Earnings vs. Freight

1/2/

2009

3/6/

2009

5/8/

2009

7/10

/200

9

9/11

/200

9

11/1

3/20

09

1/15

/201

0

3/19

/201

0

5/21

/201

0

7/23

/201

0

9/24

/201

0

11/2

6/20

10

1/28

/201

1

4/1/

2011

6/3/

2011

8/5/

2011

10/7

/201

1

12/9

/201

1

2/10

/201

2

4/13

/201

2

6/15

/201

2

8/17

/201

2

10/1

9/20

12

12/2

1/20

12

2/22

/201

3

4/26

/201

3

6/28

/201

3

8/30

/201

3

11/1

/201

3

1/3/

2014

3/7/

2014

-5000

0

5000

10000

15000

20000

25000

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Backhaul earnings vs China/USG Freight

Panamax Daily Earnings Backhaul China/USG Freight Rate

Lower market, does not always give lower rate per ton

1/2/

2009

3/6/

2009

5/8/

2009

7/10

/200

9

9/11

/200

9

11/1

3/20

09

1/15

/201

0

3/19

/201

0

5/21

/201

0

7/23

/201

0

9/24

/201

0

11/2

6/20

10

1/28

/201

1

4/1/

2011

6/3/

2011

8/5/

2011

10/7

/201

1

12/9

/201

1

2/10

/201

2

4/13

/201

2

6/15

/201

2

8/17

/201

2

10/1

9/20

12

12/2

1/20

12

2/22

/201

3

4/26

/201

3

6/28

/201

3

8/30

/201

3

11/1

/201

3

1/3/

2014

3/7/

2014

-10000

0

10000

20000

30000

40000

50000

60000Cost / Earnings relative to Backhaul

Panamax 1 Year Period Daily Cost Panamax Daily Earnings Fronthaul

Panamax Daily Earnings Backhaul Panamax Average Daily Earnings

FRONTHAUL = DAILY COST ->NO BENEFIT TO DO BACKHAUL ->HIGHER BACKHAUL FREIGHT RELATIVE TO MARKET

Bunkers vs Earnings

1/2/

2009

3/6/

2009

5/8/

2009

7/10

/200

9

9/11

/200

9

11/1

3/20

09

1/15

/201

0

3/19

/201

0

5/21

/201

0

7/23

/201

0

9/24

/201

0

11/2

6/20

10

1/28

/201

1

4/1/

2011

6/3/

2011

8/5/

2011

10/7

/201

1

12/9

/201

1

2/10

/201

2

4/13

/201

2

6/15

/201

2

8/17

/201

2

10/1

9/20

12

12/2

1/20

12

2/22

/201

3

4/26

/201

3

6/28

/201

3

8/30

/201

3

11/1

/201

3

1/3/

2014

3/7/

2014

-5000

0

5000

10000

15000

20000

25000

-

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

Backhaul earnings vs. Bunker prices

Panamax Daily Earnings Backhaul Bunker Prices

Bunkers

4%

20%

14%63%

Bunkers vs Total Costs

Earnings Port costs Panama Canal Fees Bunkers

Bunkers

• Bunker prices constitute 50-70% of total freight on backhaul cargoes.

• Bunker costs are becoming an even bigger part of the equation from 01 January 2015 with extended ECA and SECA zones and revised rules.

• ECA zone for North America – only Gas Oil can be used within zone including in ports adding about USD 1.25-1.50pmt on freight in bunker costs for a panamax shipment.

• HFO = currrently about USD 600pmt• MGO = currrently about USD 1000pmt• MGO prices are likely to rise relatively to HFO on back of

higher demand