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![Page 1: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/1.jpg)
Shipping Industry and market
developments
2nd International meeting on ironmaking
1st International symposium on iron ore
Vitòria ES
12-15 September 2004
![Page 2: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/2.jpg)
Market reached unprecedented peaks
![Page 3: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/3.jpg)
Chinese iron ore imports
5,000
10,000
15,000
20,000
Jan-02 Jan-03 Jan-04
'000t
What caused the freight rise?
![Page 4: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/4.jpg)
Bulk carrier Newbuildings
0%
2%
4%
6%
8%
10%deliveries as % fleet
forecast
Fleet growth
2003 deliveries lowest for 10 years
![Page 5: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/5.jpg)
Australia coal port delays
24
39 40 43 4532
186 8 12
4
412
20 16
12
5
3
14 3
10
16
13
3 5
4
5
5
16 28
7
1
7 8 6
4
1
0
7
13
0
20
40
60
80
Dec-03 Feb-04 Apr-04 Jun-04 Aug-04
No
. s
hip
s w
ait
ing
Other
Dalrymple Bay
Gladstone
Newcastle
Dalrymple bay 28 vsls
26 due to arrive nxt 9 days
Port delays
![Page 6: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/6.jpg)
US prices at all time highs
100
200
300
400
500
600
700
800
Jan-03 Jul-03 Jan-04 Jul-04
$/t
China HRC import price
USA Midwest HRC
…iron ore demand strong
Short term outlook: steel prices high…
![Page 7: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/7.jpg)
USDA Soybean/meal export forecastsmt 2002/03 2003/04 2004/05USA 33.9 28.1 32.8 4.7 16.5%Brazil 33.9 34.4 40.7 6.3 18.3%Argentina 27.2 27.7 28.4 0.7 2.5%India 1.2 3.4 2.1 -1.3 -38.2%Paraguay 4.0 3.4 4.0 0.6 17.6%Other 4.0 4.5 5.0 0.5 12.2%Total: 104.2 101.5 113.0 11.5 11.3%
Forecast growth
Note: crop season runs Oct-Sept
Substantial soybean growth in 2004/05
![Page 8: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/8.jpg)
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%Ja
n-95
Jan-
97
Jan-
99
Jan-
01
Jan-
03
Jan-
05
% y
r o
n y
r
-
5,000
10,000
15,000
20,000
25,000
30,000
$pd
Iron ore trade % change Capesize earnings
Forecast 30mt growth in 2005-06
Long term outlook: Cape market follows iron ore trade
![Page 9: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/9.jpg)
Steam Coal FOB prices
20
40
60
80
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
$/t
Rbay FOB
Newcstle FOB
Price gap too narrow for long haul
Coal prices over the peak
Long haul trade takes off Long haul
trade disappears
![Page 10: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/10.jpg)
Bulk carrier Newbuildings
0%
2%
4%
6%
8%
10%deliveries as % fleet
forecast
Newbuildings not excessive by historical standards
![Page 11: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/11.jpg)
Bulk carrier fleet growth
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%1
98
0
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
3yr cumulative
but zero scrapping means fleet is growing fast
![Page 12: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/12.jpg)
4 consecutive months of decline
Peak in Industrial production growth Jul/Aug
If continued,negative for freight market for end 2005 & 2006
OECD lead indicators decline
![Page 13: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/13.jpg)
• Generally bullish for Q4 2004 and 1st half 2005
• Steel market very strong
• Chinese ore demand recovered after blip
• Growth in Soybean trade
• Nuclear power stations in Japan to shut down
• Port congestion increasing.
Conclusions
![Page 14: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/14.jpg)
Risks for 2005
– OECD economic slowdown – Slower growth in Chinese ore imports– Fleet expanding fast due to lack of scrapping– Expect correction in freight market by mid 2005
Long term (1 to 5 years)
– Contract rates to stay well above historic averages
![Page 15: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/15.jpg)
General comment
• The rules of the game seem to have permanently changed
• Is India the next China?
• As long as the chinese banking system does not collapse, their high pace of growth should be maintained.
![Page 16: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/16.jpg)
Market reached unprecedented peaks
![Page 17: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/17.jpg)
BCI Weekly change
-15,000
-10,000
-5,000
-
5,000
10,000
15,000
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04
$pd
4TCs
Risks of freight exposure are now much greater
Freight volatility has increased
![Page 18: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/18.jpg)
Traditional shipping industry
• Vessel’s cost lower then coa’s revenue
• Cargo combinations were the sole tool for improvement
• Derivatives market non existing or with very little liquidity.
• Limited volatility
![Page 19: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/19.jpg)
The new shipping industry
• Shipping is traded as a commodity
• Very large use of derivatives for hedging and speculation.
• FFA market with extreme liquidity
• Very high exposure due to market fluctuations and counterparty risk.
![Page 20: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/20.jpg)
• High critical mass and financially strong
• Defines clear medium to long term market views, and behaves accordingly.
• Plays the short term volatility by going short, or long, very quickly
• Provides top quality service and flexibility to its clients
The modern shipping company
![Page 21: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/21.jpg)
The modern charterer
• Carefully select his counterparts.
• Reaches optimum operation management.
• Starts opening to FFA trade for hedging purposes.
![Page 22: Shipping Industry and market developments 2nd International meeting on ironmaking 1st International symposium on iron ore Vitòria ES 12-15 September 2004.](https://reader036.fdocuments.net/reader036/viewer/2022062519/56649cd55503460f9499c4a9/html5/thumbnails/22.jpg)