Punit Oza - Dry Freight Markets
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Dry Bulk Market – Rough Seas Ahead10th March 2016Punit OzaVice President, Torvald Klaveness
Cape earnings and forward curves
Source:Klaveness Research
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-170
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Cal 15 = 12,775 Cal 16 = 12,900 Cal 17 = 13,800
Cal 15 Actual = 6,900 Cal 16 = 4,600 Cal 17= 6,750
C4TC C4TC Forward 02.12.2014 C4TC Forward 25.02.16
Panamax earnings and forward curves
Source:Klaveness Research
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-170
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Cal 15 = 12,775 Cal 16 = 12,900 Cal 17 = 13,800
Cal 15 Actual = 5,500 Cal 16 = 4,300 Cal 17= 5,200
P4TC P4TC Forward 02.12.2014 P4TC Forward 25.02.16
Supramax earnings and forward curves
Source:Klaveness Research
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-172,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Cal 15 = 8,800 Cal 16 = 8,900 Cal 17 = 9,200
Cal 15 Actual = 6,900Cal 16 = 4,700 Cal 17 = 5,300
S6TC S6TC Forward 02.12.2014 S6TC Forward 27.11.15
The lowest % fleet growth since 2003…
Source:Klaveness Research/Clarksons
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015200
300
400
500
600
700
800
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
4.6% +5.0 %
+3.0%
Total Dry Bulk Fleet Growth<<Mdwt YoY Growth>>
Mdw
t
… is not enough when demand growth is zero
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20151,800
2,300
2,800
3,300
3,800
4,300
4,800
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
+4.8%
0.0%
Total Dry Bulk Trade Growth<<Million tonnes YoY Growth>>
Mill
ion
tonn
es
Iron Ore
Iron ore is the largest drybulk commodity…
Source:Klaveness Research/Clarksons
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015100,000,000
300,000,000
500,000,000
700,000,000
900,000,000
1,100,000,000
1,300,000,000
1,500,000,000Global Iron Ore Export
Mill
ion
tonn
es
Iron Ore 1386 Mt30 %
Coal 1 197 Mt 25 %
Grains 659 Mt
14 %
Minor Bulks 1 453 Mt
31 %
2015 Seaborne Volumes
…this year’s trade growth is the slowest in our timeseries
Source:Klaveness Research/GTT
Global steel production is historically closely correlated to GDP growth…
Source:Klaveness Research/Worldsteel
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
20122014
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Global Steel Production
-100% 0% 100% 200% 300% 400% 500% 600% 700%-10%
-5%
0%
5%
10%
15%
20%
f(x) = 0.0351694335793578 x − 0.0972863251357484R² = 0.741162915943535
Global Steel Production and GDP growth
GDP Growth
Stee
l Pro
ducti
on G
row
th
0% 100% 200% 300% 400% 500% 600%-10%
-5%
0%
5%
10%
15%
20%
2014
2015
R² = 0.725322388710269
Global Steel Production and GDP growth
GDP Growth
Stee
l Pro
ducti
on G
row
th
…but steel production in 2015 is well below trend and down 2.9% Y..
Source: Klaveness Research/Worldsteel/IMF
…as China’s steel production stalls…
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
100
200
300
400
500
600
700
800
900
-5%
0%
5%
10%
15%
20%
25%
30%
35%
29.6 %
18.7 %16.8 %
2.2 %
14.7 %
9.3 % 9.0 %
4.9 %
13.8 %
0.5 %
-2.4 %
Chinese Steel ProductionChina YoY Growth>>
Source:Klaveness Research/Worldsteel
…but Chinese steel consumption has fallen more than production…
Source:Klaveness Research/NBS China/Mysteel/CISA
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 20040
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
Chinese Steel Export (YTD Oct)
…Excessive Chinese Steel production is exported…
Jan Mar Apr May Jun Jul Aug Sep Oct Nov Dec50,000,000
52,000,000
54,000,000
56,000,000
58,000,000
60,000,000
62,000,000
64,000,000
66,000,000
68,000,000
China Real Steel Consumption
Range 13-14 2013 2014 2015
-5.8% YoY
Source:Klaveness Research/GTT
+32%+20%
Source:Klaveness Research/Clarksons/Worldsteel
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
100
200
300
400
500
600
700
800
900
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2.8 % 2.3 % 3.3 %
-2.0 %
-21.2 %
21.5 %
3.8 %
0.4 %
-3.8 %
0.4 %
-3.5 %
ROW Steel Production
EU -15 Japan USA India KoreaRussia Turkey Brazil Taiwan MexicoIran Other YoY Growth>>
..leading to negative growth also in ROW production…
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
100
200
300
400
500
600
700
800
900
1000
-30%
-20%
-10%
0%
10%
20%
30%
3.6 % 5.0 % 5.4 %
-2.2 %
-23.7 %
23.3 %
4.4 %1.1 %
-2.8 %
4.0 %
-1.1 %
ROW Steel Production + Chinese Steel Export<<ROW Steel Production <<Chinese Export YoY Growth>>
…which would have been less negative without Chinese exports
Source: Klaveness Research/Worldsteel/GTT
In the short/medium term global steel production is totally dependant on China
Source:Klaveness Research/Clarksons/Worldsteel
China
51%
EU -159%
Japan7%
USA5%
India5%
Korea4%
Russia4%
Turkey2%
Brazil2%
Taiwan1%
Mexico1% Iran
1%Other
7%
2015 Steel Production
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
200
400
600
800
1,000
1,200
1,400
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
Global Iron Ore importsChina ROW China Market Share>>
Source:Klaveness Research/Clarksons
…50% of Chinese steel production is directly linked to real estate…
Source:JP Morgan, Wood Mackenzie/Klaveness Research
Construction res-idential
21%
Construc-tion non-
residential29%
Machinery18%
Infrastructure14%
Transport11%
Household appliances3%
Other4%
China Steel Demand by end use - 2015E
…China used more concrete in 2011-2013
Source: Gatesnotes, USGS, Cement Statistics, Mineral Industry of China 1990-2013/forbes
than the U.S. did in the 20th century!...
2013 2014 20150
5
10
15
20
25
YTD FAI y/y: China
Total Real Estate
… and real estate is where we have seen growth slow down the mostConcrete consumption
Source:NBS China/Klaveness Research
Source:Clarksons/Klaveness Research
Jul-11Sep
-11
Nov-11Jan
-12
Mar-12
May-12
Jul-12Sep
-12
Nov-12Jan
-13
Mar-13
May-13
Jul-13Sep
-13
Nov-13Jan
-14
Mar-14
May-14
Jul-14Sep
-14
Nov-14Jan
-15
Mar-15
May-15
Jul-15Sep
-15
Nov-15Jan
-16-1.4 %
-0.9 %
-0.4 %
0.1 %
0.6 %
1.1 %
1.6 %
2.1 %
2.6 %
3.1 %
Average House Prices per Tier - MoM Change
Tier 1 Tier 2Tier 3 and lower
We see some green shoots..…housing sales have rebounded…
Source: Reuters Datastream/Klaveness Research Source: Reuters Datastream/Klaveness Research
… and house prices are rising in Tier 1 and Tier 3 cities and stabilizing in Tier 2
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
110,000,000
120,000,000
130,000,000
140,000,000
China: Floor Space of houses sold (3mma)
Range 2010-14 2014 2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
180,000,000
200,000,000
China: Floor Space of houses newly started
Range 2010-14 2013 2014 2015
…and inventory of unsold buildings has stabilized……but house starts have not yet recovered...
Source: Reuters Datastream/Klaveness Research
Feb-09Apr-0
9Jul-0
9Oct-
09Jan-10
Mar-10Jun-10
Sep-10
Dec-10
Feb-11
May-11
Aug-11
Nov-11Jan-12
Apr-12Jul-1
2Oct-
12
Dec-12
Mar-13Jun-13
Sep-13
Dec-13
Feb-14
May-14
Aug-14
Nov-14Jan-15
Apr-15Jul-1
5Oct-
150
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Unsold Sqm
Tier 1 Tier 2 Tier 3
...except of the September blip
Source: NBS China/Klaveness Research
Even though Chinese steel production growth is negative YTD…
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec110
120
130
140
150
160
170
IO and Steel Inventories China
Range 12-15 2014 2015 2016
MT
Iron
Ore
Equ
ival
ents
Source: Klaveness Research ,Clarksons, WorldSteel Source: Klaveness Reserach, Mysteel, CISA
…and despite inventory destocking..
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
100
200
300
400
500
600
700
800
900
-5%
0%
5%
10%
15%
20%
25%
30%
35%
29.6 %
18.7 %16.8 %
2.2 %
14.7 %
9.3 % 9.0 %
4.9 %
13.8 %
0.5 %
-2.4 %
Chinese Steel ProductionChina YoY Growth>>
…Chinese Iron Ore imports are flat YoY……as Chinese domestic iron ore production has been displaced...
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
700,000,000
800,000,000
900,000,000
1,000,000,000
Chinese Iron Ore Imports
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
China Implied Domestic IO Consumption (3mma)
Range 13-14 2013 2014 2015
Source:Klaveness Research/GTT Source:Klaveness Research/NBS China/Mysteel/CISA
2013 2014 2015 2016 2017 2018 20190
200
400
600
800
1000
1200
1400
1600
Export Capacity from Majors
Vale Rio Tinto BHP Fortescue Anglo Roy Hill
… with low cost production from the majors..
Source:Klaveness Research/JP Morgan/Company Data Source:Klaveness Research/GTT
… which also has displaced marginal seaborne producers
Jan-13
Mar-13
May-13
Jul-13Sep
-13
Nov-13Jan
-14
Mar-14
May-14
Jul-14Sep
-14
Nov-14Jan
-15
Mar-15
May-15
Jul-15Sep
-15
Nov-15Jan
-16350000000
400000000
450000000
500000000
550000000
600000000
650000000
90000000
110000000
130000000
150000000
170000000
190000000
210000000
230000000
250000000
270000000
290000000
Chinese Iron Ore Imports (mtpa, 3mma)
Australia<< Brazil+South Africa>> Other>>
Coal
Source:Klaveness Research/GTT
Coal is the second biggest Dry Bulk Commodity…… and was down 7% in 2015
Source:Clarksons/Klaveness Research
Steam Coal1 002Mt
Coking Coal; 262Mt
2007 2008 2009 2010 2011 2012 2013 2014 2015 -
200000 000
400000 000
600000 000
800000 000
1000000 000
1200000 000
1400000 000
-10.0 %
-5.0 %
0.0 %
5.0 %
10.0 %
15.0 %
0.0 %
3.9 %
0.9 %
10.5 %
9.0 %
12.4 %
8.0 %
0.6 %
-7.4 %
Global coal importsChina India Stable AsiaUK EU (ex UK) Emerging Asia
…as a rapid fall in Chinese imports… …and in U.K. imports…
2007 2008 2009 2010 2011 2012 2013 2014 20150
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
Chinese Seaborne Coal imports 2015
2007 2008 2009 2010 2011 2012 2013 2014 201510,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
UK Coal Imports 2015
-87Mt
-17Mt
Source:Klaveness Research/GTT Source:Klaveness Research/GTT
…overshadows healthy growth in India...…and steady growth in the ROW
Source:Klaveness Research/GTT Source:Klaveness Research/GTT
2007 2008 2009 2010 2011 2012 2013 2014 2015 -
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
India Coal imports (YTD Sep)
+6 Mt
2007 2008 2009 2010 2011 2012 2013 2014 2015400,000,000
450,000,000
500,000,000
550,000,000
600,000,000
650,000,000
700,000,000
750,000,000
ROW imports (YTD Sep)
The largest export cuts is in Indonesia…
2007 2008 2009 2010 2011 2012 2013 2014 2015100,000,000
120,000,000
140,000,000
160,000,000
180,000,000
200,000,000
220,000,000
240,000,000
260,000,000
280,000,000
300,000,000
Indonesian Export (YTD Sep)
2007 2008 2009 2010 2011 2012 2013 2014 20150
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
North American Exports (YTD Sep)
USA Canada
…and North America
-41 Mt
-19 Mt
Source:Klaveness Research/GTT Source:Klaveness Research/GTT
Source:Clarksons/Klaveness Research
Have Chinese seaborne coal imports found a floor?
Source:Klaveness Research/GTT *Excluding imports from Mongolia (railed) and imports from North Korea (carried in shortsea vessels)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
China Seaborne Coal Imports*
range 2011-2015 2014 2015 2015 Avg 2016
Chinese Coal Imports is only a fraction of domestic production…
Chinese Power Plant Projects, #
4%
5%
7%
6%
8%
7%
Source:Klaveness Research, China NBS/GTT Source:Global Coal Plant Tracker
…and there are still many coal fired power plants being built
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
500
1000
1500
2000
2500
3000
3500
4000
4500
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%China Coal Production China Coal Import Imports (% of production)
Chinese coal import vs. domestic production
It is not only imports that are falling…
Source: Klaveness Research/China NBS
2011 2012 2013 2014 20153,400
3,500
3,600
3,700
3,800
3,900
4,000
4,100
China: Raw Coal Output 2015
Mill
ion
tonn
es
-5%
2011 2012 2013 2014 20151800
1900
2000
2100
2200
2300
2400China: Coal Transported by rail 2015
Mill
ion
tonn
es
-12%
…Raw coal output is down 5%…and coal transported by rail is down 12%
Source: Klaveness Research/China NBS
29
Indian coal imports was up a massive 30% YoY in FH-15……but is down YoY in SH…
Source:Klaveness Research/GTT
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Range 2012-2015 2015 2014
India: Coal Imports
India Coal Import...but what about domestic production?
Source:Klaveness Research/Coal India
… as Coal India’s production is up 9% April to October……and total Indian production up about 7.5%
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-200
100
200
300
400
500
600
700
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Coal Production IndiaCIL SCCL Private YoY Growth>>
Mill
ion
tonn
es
…and as Indian power plants has turned restocking into destocking..
Source:Klaveness Research/India Central Electricity Authority
1 2 3 4 5 6 7 8 9 10 11 124
9
14
19
24
29
Indian Coal Stocks (days)Range 11-14 2014 2015 2016
India Power Plant Projects, #
India’s coal consumption has grown faster than production……we are confident than India’s coal consumption will continue to grow…
Source: Klaveness Research/Coal India Source:Global Coal Plant Tracker
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-150
100
200
300
400
500
600
700
800
900
5%
10%
15%
20%
25%
30%Domestic Coal Production Coal Import Import Percentage>>
Mill
ion
Tonn
esIndia's Coal Consumption by source
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-200
200
400
600
800
1000
1200
1400
1600
Coal Production IndiaCIL SCCL Private
India Coal Import...but what about domestic production?
Source:Klaveness Research/Coal India/News articles
CAGR=6.8%CAGR=1.6%
+6.0%
CAGR=20%???
…but how fast will domestic production grow going forward?
YTD+ 10%
… but current production growth is probably enough to cover demand growth… the governments 2020 production forecast is too ambitious…
34
South East Asia is coming from a low base import volume but is expected to grow considerably over the next 5 years
South East Asian Power Plant Projects, #
Source:Klaveness Research/News articles Source:Global Coal Plant Tracker
2015 2016 2017 2018 2019 20200
20
40
60
80
100
120
Emerging Pacific Expansions
Vietnam Malaysia Phllippines Pakistan
Mill
ion
tonn
es
35
Turkey have plans to quadruple their import based on new coal fired capacity
Turkish Power Plant Projects, MW
Source: Klaveness Research /GTT
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 202010,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
Turkey Coal Import
Base Case, CAGR = +10%
Source: Klaveness Research/Yildirim Group
Grains and Oilseeds
Source: Klaveness Research/GTT/Various port data
The Grain and Oilseed trade constituted 14% of 2014 volumes
Source:Clarksons/Klaveness Research
2012 2013 2014 2015 Est0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
Grain Export from Atlantic HubsSouth America U.S. Black Sea EU
… Grain trade in 2015 at all time high
+39Mt
Source:Clarksons/Klaveness Research
…a prolonged and all time high ECSA grain season...
1 2 3 4 5 6 7 8 9 10 11 126,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
22,000,000
24,000,000
ECSA Grain Export (Port data)
Range 12-14 2014 2015 Actual2015 Estimate 2016
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
US Grain ExportRange 2010-2014 2014 2015 2015 Estimate2016 Projection
Source:Klaveness Research/GTT/USDA Source:Klaveness Research/GTT/USDA
…has displaced U.S. export in Q4...and pushed some of it to Q1-16???...together with prospects of a new all time high ECSA export season... ...grain shipments are expected to be very strong in FH-16...
As the major exporters are in the Atlantic…and majority of imports are in the Pacific.....the grain trade generates a lot of ton mile
Source:Klaveness Research/USDA
176Mt
41 71Mt
174Mt
25
105Mt
87Mt
47
105Mt46
27
23
China Thermal Coal Import- Power output growth continued to slow in Q1…- …and hydro production growth continued to post YoY growth…
Source:Klaveness Research/USDA
Long term trend: USDA forecast a low but steady growth in the next 10 yearsExport will grow from Atlantic HubsImport will grow in China and emerging economies
Export Import-20
-15
-10
-5
0
5
Export Import-40
-35
-30
-25
-20
-15
-10
-5
0
Export Import-202468
10
Export Import-4-202468
10
Export Import-14-12-10
-8-6-4-20
Export Import-15-10
-505
1015202530
Export Import-10
0
10
20
30
40
50
60
Export Import-10
-8-6-4-20
China Thermal Coal Import- Power output growth continued to slow in Q1…- …and hydro production growth continued to post YoY growth…
Source:Klaveness Research/GTT
Short term:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1,410,000.0
2,410,000.0
3,410,000.0
4,410,000.0
5,410,000.0
6,410,000.0
7,410,000.0
China Grain import
Range 12-14 2014 2015 2016
Minor Bulks
Minor bulks constitutes 29% of Dry Bulk Volumes
Source:Clarksons/Klaveness Research
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 FC 800
900
1,000
1,100
1,200
1,300
1,400
Total Minor Bulk Trade
Mill
ion
tonn
es
Source:Clarksons/Klaveness Research
Chinese minor bulks imports are up YoY…up 17% YoY in the last 8 months
Source:Klaveness Research/GTT
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
Chinese Minor Bulk Import (YTD Oct)
Nickel Ore Bauxite Pulp Fertilizers Steel Scrap
Alumina Manganese Ore Chromium Ore Copper Concentrates Petcoke
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
22,000,000
24,000,000
26,000,000
Chinese Minor Bulk ImportRange 11-14 2013 2014 2015
-39% YoY +17% YoY
Source:Klaveness Research/GTT
Fleet Growth
Total Dry Bulk Fleet Growth- Lowest since 2003
Source:Klaveness Research/Clarksons
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-60
-40
-20
0
20
40
60
80
100
120
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2.3 %
4.2 %
3.2 %
2.1 %
4.6 %
7.2 % 6.9 %
6.6 %
6.7 %
7.6 %
14.7 %15.7 %
13.8 %
7.2 %
5.0 %
3.0 %2.1 % 2.0 %
Total dry bulk fleet growth
Deliveries Scrapping Additions/Removals YoY growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-20
-10
0
10
20
30
40
50
60
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
3.7 %
5.1 %
3.1 % 3.2 %
7.2 %
9.5 % 8.8 % 8.8 % 8.3 %
13.3 %
22.5 %
20.4 %
16.9 %
7.1 %
4.7 % 1.9 %0.6 %
0.2 %
Deliveries Scrapping Additions/Removals yoy fleet growth >>
Mdw
tCapesize Fleet Growth- Lowest since 2003
Source:Klaveness Research/Clarksons
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-10
-5
0
5
10
15
20
25
30
-5%
-3%
-1%
1%
3%
5%
7%
9%
11%
13%
15%
5.6 %
9.2 %
5.5 %
1.6 %
4.7 %
8.3 %8.7 %
7.2 %6.0 %
5.1 %
9.0 %
12.3 %
13.5 %
9.7 %
7.1 %
2.6 %
1.3 %
-1.0 %
Deliveries Scrapping Additions/Removals yoy fleet growth >>
Mdw
tPanamax Fleet Growth- Lowest since 2003
Source:Klaveness Research/Clarksons
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-5
0
5
10
15
20
25
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1.7 %
6.1 %
8.5 %6.5 %
5.9 %
8.4 % 8.2 %7.2 %
8.3 %
9.3 %
16.3 %
18.7 %15.4 %
9.1 %
5.8 %
6.6 %
6.2 % 5.6 %
Deliveries Scrapping Additions/Removals yoy fleet growth >>
Mdw
tSupramax Fleet Growth- Continued high fleet growth
Source:Klaveness Research/Clarksons
Handysize Fleet Growth- Slightly higher, but remains fairly low
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-10
-5
0
5
10
15
-6%
-4%
-2%
0%
2%
4%
6%
8%
-1.7 %
-2.4 % -2.6 %
-1.8 %
0.3 %1.6 % 0.8 %
1.9 %
3.4 %
-0.5 %
6.1 % 6.1 % 3.6 %
-0.1 %
0.6 %
0.7 %2.3 % 2.0 %
Deliveries Scrapping Additions/Removals yoy fleet growth >>
Mdw
t
Source:Klaveness Research/Clarksons
Q1-00Q3-00
Q1-01Q3-01
Q1-02Q3-02
Q1-03Q3-03
Q1-04Q3-04
Q1-05Q3-05
Q1-06Q3-06
Q1-07Q3-07
Q1-08Q3-08
Q1-09Q3-09
Q1-10Q3-10
Q1-11Q3-11
Q1-12Q3-12
Q1-13Q3-13
Q1-14Q3-14
Q1-15Q3-15
9
10
11
12
13
14
15
Optimal Speed Panamax Actual Speed
Knot
s
53
Effective supply growth dependant on speed- Short term demand shocks can be met by speed increases
Source:Klaveness Research
Supply increaseof 16%
Conlusions
• xxxx
Conclusions
Conlusions
• Chinese real estate market the main driver for iron ore imports If the house prices keep rising and destocking of housing continues, new activity
may follow.
• Chinese coal import policies and Indian domestic coal production the main drivers for coal trade
We think Chinese coal imports bottomed out in 2015 and expect it to stagnate during 2016 and thereafter grow at a moderate pace as domestic output reduces.
We think that demand growth will eventually outperform production growth in India and expect imports to stagnate/reduce during 2016 and thereafter grow at a steady pace.
• We expect all time high grain/oilseed trade in 15/16 Marketing Year and steady growth thereafter.
• We expect a steady growth in Minor Bulks trade and shifting trade patterns
• Earnings will be rangebound over 2016 as supply is elastic to demand through: Speed optimalization Scrapping/Slippage/Cancellations Newbuildings
Conlusions
• Shipping as well as Commodities move in Cycles
• 2003 to 2008 period was an exceptional period and an aberration
• As it stands today, both shipping and commodities are back to moving in cycles
• Historically, the low prices of commodities and low shipping costs should spur new trades and boost existing trades as well.
• China remains a huge influence due to its sheer size, even if in a subdued form.
• Due to the technological advances and economic interdependence, there is a massive intent among countries, especially in Asia, to promote trade and stimulate demand.
• Geo political uncertainties have brought together unlikely allies and therefore the possibility of new trades and deals.
4%
5%
7%
6%
8%
7%