shipbuiliding market develpment

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Shipping Market Overview29 October 2013 Moore Stephens Opcost Launch

29th October 2013 Shipping Market Overview / Moore Stephens

Steve Gordon, MD, Clarkson Research Services Limited.


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About us

2

Broking

Clarksons shipbroking servicesare unrivalled: for the numberand calibre of our brokers; breadthof market coverage; geographicalspread and depth of marketintelligence; analysis and support.We aspire to be best-in-class andmarket leaders in all key sectors.

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Research

Up-to-the-minute intelligence is thecornerstone of any shippingorganisation and Clarksons

Research Services is recognisedworldwide as the market-leadingprovider of comprehensive andreliable maritime information.


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Research

3

Offshore and energy

The leading provider of data to the offshoreindustry for more than 30 years. Providing clientswith the key information they need to operatetheir business more effectively. Marketintelligence is available on more than 25,000structures, vessels and companies and 6,000 oiland gas fields.

Shipping and trade

Market leaders in providing timely andauthoritative information on all aspects ofshipping. Data is available on over 100,000vessels either in service or on order, 10,000

companies and 600 shipyards as well asextensive trade and commercial data, and over100,000 time series.

Valuations

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Market Overview

October 2013 4

Agenda:

1.Market Cycle2.Seaborne Trade3.Fleet & Shipbuilding4.Ownership Dynamics5.Summary


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(ClarkSea Index is a weighted average of earnings by tankers, bulkers, containerships & gas carriers)

2004c.$40,000/day

2008$48,000/day

2000c.$24,000/day

Shipping Cycle 1965-2013: ClarkSea Index

US$000/day

Index avg value 90s: $12,018/day

Index avg value 00s: $21,690/day

Index avg value 2012: $9,957/day

18th October 2013 -$12,286 / day highestlevel this year, drivenby improved Capesize

market.

October 2013


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1.Huge Cash Pressures & Cost Focus

2.Surplus in the Volume Markets

3.Cash is King

4.Wide Spread Of Trading Regions &Demand OK

5.Some Sectors Have Done Better

6.Ships Still Trading & Slow Steaming butNot Laid Up

7.Big Change in Ship Economics Fuel &Regulations

8.Financing Squeeze

Five Years of Shipping Downturn

OPEX weighted using ClarkSea assumptions

$000/day

18th October - $12,286/ day but fell as lowas $7,920 / day in

February

ClarkSea Index 2008-13


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Earnings versus OPEX

ClarkSeaIndex

OpexIndex

$/day $/day

2008 32,947 6,8612009 11,407 6,6362010 15,345 6,8302011 12,463 6,9762012 9,586 7,1852013 9,539 7,400Source: Clarkson Research, October 2013

The Opex index is generated using the sameassumptions as the ClarkSea Index for

comparison purposes.

In February 2013, the two indexes reached theirsmallest differential in the downturn just $508per day across the 20,000 ships in theClarkSea fleet.

In May 2008, the differential was $40,633 perday and equated to $680 million dollars a dayacross the ClarkSea fleet.


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Cycle Position October 2013

This chart shows

average 1 year TC

rate for each ship

type as at

October 2013

compared to the

average 1 year TC

rate during the

last 10 years.

Crude stillstruggling but

Products &Chemicals better

Earnings remainclose to historic lows


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Earnings Since the Big Crash Whos Top Dog?

October 2013 9

Who Did Best Since the Crash? Whos Doing Best at Present?


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5 Year Old Prices

Secondhand & Newbuild Prices

24 October 2013

Source: Clarkson Research, October 2013

Newbui lding Prices


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World Seaborne Trade GrowthWorld Seaborne Trade Growth

Historically, world seaborne tradeexpansion has generally been relativelywell correlated to global economicgrowth.

In 2003, trade exceeded more than atonne for every person on the planet.

2009 was the first year of significanttrade contraction since 1983 but tradehas recovered well.

Sea trade cycles generally follow cyclesin world GDP but not precisely. 2013

2.9% GDP growth and 3.6% growth intrade.

In 2014, we expect trade to exceed 10billion tonnes for the first time.

October 2013


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World Seaborne Trade

4.1% average

Growth in world seaborne tradein last decade led by

Iron Ore

Containers

LNG

Coal

Vehicles

Average per annum rate ofaround 4% per annum.

2002-12 Trade Growth, avg pa%

Source : CRSL, 2011.


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We expect trade to grow by 3.5%in 2013 but risks remain giveneconomic developments /uncertainty and there is a lag ontrade data.

China accounts for over 40% ofthe growth in imports in the past

decade. For planning purposes, 4% per

annum growth in trade over thenext decade does not seemunreasonable, backed by

continued development of theglobalised world economy.

Seaborne Trade Outlook

Period %p.a.

1951-60 8.3%

1961-70 9.1%

1971-80 3.5%

1981-90 2.2%

1991-00 3.7%

2010-10 3.7%

October 2013


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Where Will The Trade Growth Be?

Estimated Share of Trade Growth2012-2024, Importers

Growth in world seaborne trade likely to be led

by import into China

Other Asian economies

Developing regions

According to approximate projections Chineseimport growth could account for 46% of thegrowth in tonnes in global seaborne imports,with other Indian imports accounting for 11%and other Asian economies 19%.


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Structural Patterns

US energy balance

China and India

Containers : Asia and Panama

Offshore energy contribution

Africa : energy and minerals

Unlocking the Arctic

Wildcards

Globalisation vs Protectionism;

Reshoring

Political instability

Fuel prices

Infrastructure and supply

Global economic growth story

Wildcards?


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World Offshore Producing Regions

London, September 2013 | OFC Club

September 2013

1. N. AmericaOffshore: 4.0 m bpd

Growth: 0.2% pa

2. S&CAmericaOffshore:

2.8 m bpdGrowth:2% pa

4. EuropeOffshore:2.9 m bpd

Growth: -5% pa

7. AsiaPacific

Offshore:3.4 m bpd

Growth: 1%pa

5. Med/ CaspianOffshore: 2.1 m

bpd

Growth: 0.2% pa

6. M East& India

Offshore:7.1 m bpd

Growth:2% pa

3. WestAfr ica

Offshore:4.2 m bpd

Growth:3% pa

Offshore Oil Product ion 2013 Forecasts


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Shipping Market Overview | Clarkson Research

www.clarksons.com

The World Fleet: GT

From 1990 to 2004 the fleetgrew at 2-3% but then surgedto 7-9%. Fleet growth is nowstarting to slow.

Merchant Fleet August 2013:

1. 87,369 vessels over 100 GT

2. 1,125 million GT

3. $868 billion in value

The Size of the World Fleet (GT)


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www.clarksons.comOctober 2013

Orderbook As & % Of FleetOrderbook % Fleet By (Dwt), Start Year

Orderbook % Fleet

Orderbook x 1.5 ofProduction but

number of activeyards declining

O/B as at August2013 is 242m dwt

$ 280bn


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0%

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Fleet, end year

Fleet Growth % (RHS)

World Fleet Growth Development

Million GTFleet growth peaked at

c. 9% in 2010

Projected deliveries basedon current orderbook.

By 2023 ourforecasts

suggest thefleet will top1.5 billion GT

October 2013

Shipbuildingproductiondown 20% in2013 in dwtand 2012 arecord

demolitionyear.


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Shipping Market Overview | Clarkson Research

www.clarksons.com

Regional Market Share Development

Global Shipbuilding Share of Contracting (CGT)Global Shipbui lding Share(2013 ytd Contracting in CGT)


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www.clarksons.comOctober 2013

Offshore & Marine Orderbook by estimated contract value

Bulkers

31.3%

Contship

s

21.4%

Gas

14.5%

Other

16.2%

Tankers

16.0%

Marine $163bn $182 bn

Survey2%

Mobile OffshoreDrilling

52%

Construction11%

Mobile OffshoreProduction

20%

Logistics2%

AHTS4%

Supply8%

Rescue &Salvage

0%

Utility Support1%

Offshore $182bn


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0

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Rising Fuel Costs

$/day

MR 1 Year TimecharterRate

MR Bunker Cost $/day

October 2013


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Environmental Regulation Timeline


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Fleet(No)

Fleet(GT)

Value($bn)

2013Growth

OB(GT)

OB %

Europe 29,945 501.2 366.4 1.7% 69.9 13.9%

Asia/Pacific 36,308 448.1 295.1 4.1% 61.2 13.7%

Americas 8,982 91.5 129.2 0.9% 17.3 18.9%

Africa, Mid-East, S. Asia

7,993 75.2 55.2 4.3% 4.8 6.3%

Greece 4,673 157.5 78.6 4.2% 23.3 14.8%

Japan 8,600 157.3 104.0 2.0% 13.6 8.6%

China 6,236 110.8 68.9 4.6% 22.6 20.4%

Germany 4,316 96.5 60.4 -1.5% 8.4 8.7%

South Korea 2,657 54.4 27.9 5.8% 6.8 12.6%

Others 60,589 543.7 510.8 2.6% 92.1 16.9%

Total 87,071 1,120.2 850.6 2.7% 166.8 14.9%

World Fleet by Owner


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Regional Ownership Europe v Asia During the market boom, European ownershipgrew strongly and maintained market share witharound 45% of global fleet by GT.

There has been a long term trend towards AsiaPacific ownership which topped 40% in 2013.

Will changes in cargo base and financing impactthis trend further?

Greece and Japan the two biggest fleets andneck and neck. China has overtaken Germanyto take third position and the fleet is growingrapidly

In the past five years, Brazil, China, Turkey,South Korea and Indonesian fleets have grownthe most in % terms.

70% of the world fleet is in Open registriescompared to under 30% in the 1980s.

Asian Owners Growing Market Share



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World Fleet by Company Size The average shipping company runs 5 shipsbut this is dragged down by thousands ofowners only owning one or two ships.

28% of world tonnage is controlled by ownersrunning 21 to 50 ships.

30% of world tonnage is owned by ownersrunning over 50 ships.

There is a lot of noise in the data so identifyingclear trends towards consolidation is difficult.

World Fleet by Company Size



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World Fleet by Owner Type Approximately 56% of the worlds tonnage is stillowned by independent private companies.

Approximately 37% of the world fleet by tonnageis owned by corporates but this includes listedoil companies and other cargo interests.

The share of the stock listed fleet has beensteady following strong growth from 2003 to

2008 but there is some more activity at present.

With the difficulties in securing finance and thecurrent private equity interest there may bedrivers towards larger and more corporatecompanies.

Others includes state owned shippingcompanies and state owned oil companies andother cargo interests.

World Fleet by Type

24 October 2013



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IPO, Follow & Bond Activ ity 2004-13 NYSE exchange is the largest exchange with 60companies operating 104m gt, (9% of the worldfleet).

2005 was a record year for IPOs with 25 placedglobally.

Activity hit a low in 2012 with only 4 IPOs and 5Follow On offerings.

Activity has increased recently with a number ofIPOs placed.

Bond activity was strong in the period 2009 to2012.

Capital Market Activity

24 October 2013



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Summary In 2013, we have been at the bottom of the cycle and market conditions are sti ll

challenging but there are a few encouraging signs. Some of the niche sectors havebeen better posi tioned Offshore, Gas, Chemicals, Products.

Following the demand shock in 2009, trade has recovered well and we expect 3.5%growth in 2013. In 2014 we forecast trade will top 10 bil lion tonnes for the first t ime.4% is a reasonable base case for the future assuming globalisation.

Fleet growth is slowing, from 8% in 2011 to 5% in 2012. We expect growth to drop to4% in 2013 and below 4% in 2014 but keep an eye on ordering.

Despite the difficult spot market conditions, we have seen newbuild interest frominvestors in 2013.

Regulatory Economics & Fuel Economics are important to current investment.Financing remains diff icult and has limited investment but there are new sources

such as Private Equity and Capital Markets.

Asian owners growing market share with double the fleet growth of Europeans in2013. Greeks and Japanese the largest owners but China has surged past Germany.Norwegians, Greeks and Chinese have topped the investment charts in recent years.


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The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the

Company and its employees cannot accept liability for loss suffered in consequence of reliance on the

information provided. Provision of this data does not obviate the need to make further appropriate enquiriesand inspections. The information is for the use of the recipient only and is not to be used in any document for

the purposes of raising finance without the written permission of Clarkson Research Services Limited.

The statistical and graphical information contained herein is drawn from the Clarkson Research Services

Limited ("CRSL") database and other sources. CRSL has advised that: (i) some information in CRSL's

database is derived from estimates or subjective judgments; and (ii) the information in the databases of other

maritime data collection agencies may differ from the information in CRSL's database; and (iii) whilst CRSLhas taken reasonable care in the compilation of the statistical and graphical information and believes it to be

accurate and correct, data compilation is subject to limited audit and validation procedures and may

accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss

suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such

information does not obviate any need to make appropriate further enquiries; (vi) the provision of such

information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (vii)

shipping is a variable and cyclical business and any forecasting concerning it cannot be very accurate.

shipbuiliding market develpment

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