HM Strategies /// January 2013Hammer Maritime Strategies 1 Shipping Forum, 23 January 2013 Shipping Forum, 23 January 2013 Shipping Market Update & Ecoship

HM Strategies ///

January 2013Hammer Maritime Strategies 1

Shipping Forum, 23 January 2013 Shipping Forum, 23 January 2013

Shipping Market UpdateShipping Market Update

& Ecoship Considerations & Ecoship Considerations Shipping Adviser Shipping Adviser

Jarle Hammer Jarle Hammer

22.0122.01

Shipping Forum, 23 January 2013 Shipping Forum, 23 January 2013

Shipping Market UpdateShipping Market Update

& Ecoship Considerations & Ecoship Considerations Shipping Adviser Shipping Adviser

Jarle Hammer Jarle Hammer

22.0122.01

HM Strategies ///


18.01

HM Strategies ///


Countercyclical Investments

18.01

18.01

HM Strategies ///


‘000 USD/d

Volatility:Highest in % above Lowest

Volatility 485% 293% 220% 260% 173%

Source: Fearnleys

16.01

HM Strategies ///


TIME FOR M&A and Supply Measures

HM Strategies ///


Source: Clarkson

Substantial Slow-SteamingFleet ReserveCapacity

0

5

10

15

20

25

30

35

40

45ja

n.95

jan.

96

jan.

97

jan.

98

jan.

99

jan.

00

jan.

01

jan.

02

jan.

03

jan.

04

jan.

05

jan.

06

jan.

07

jan.

08

jan.

09

jan.

10

jan.

11

jan.

12

jan.

13

Containership T/C Rates 12 Months

2750 TEU gless

1000 TEU grd

1700 TEU grd

'000 USD/d

18.01

Substantial Slow-SteamingFleet ReserveCapacity

HM Strategies ///


VERY STRONG & WELL EQUIPPED – ABOUT SAME PRICE AS VLCC

HM Strategies ///


Source: Clarkson

18.01

HM Strategies ///


HM Strategies ///


JACK-UP G o M JACK-UP NWE

SEMI’s 5,000 ft +SEMI’s 2 - 5,000 ft

IHS Petrodata: Rig Utilization & Rates Index 1994 = 100

HM Strategies ///


Source: ClarksonWorld Shipyard Monitor

HM Strategies ///


HM Strategies ///


Economic Performance & Growth. Economic Performance & Growth. Economist Economist

17.01.13 17.01.13 % change IP-12m Infl-12m GDP-% change IP-12m Infl-12m GDP-

1010 -11 -12 -13 -11 -12 -13 USA 2.2 USA 2.2 1.7 2.9 1.7 2.2 2.0 1.7 2.9 1.7 2.2 2.0

Euro area - 3.7 2.2 1.7 1.7 - Euro area - 3.7 2.2 1.7 1.7 - 0.4 - 0.1 0.4 - 0.1 Japan - Japan - 5.8 - 0.2 4.2 - 0.7 1.8 0.7 5.8 - 0.2 4.2 - 0.7 1.8 0.7 S. Korea 2.9 1.4 6.1 3.6 S. Korea 2.9 1.4 6.1 3.6 2.2 3.32.2 3.3 China 10.1 2.5 1.9 China 10.1 2.5 1.9 9.2 7.7 8.5 9.2 7.7 8.5 India - 0.1 India - 0.1 10.6 9.1 7.1 5.4 6.5 10.6 9.1 7.1 5.4 6.5 Russia Russia 1.9 6.5 6.4 4.3 3.7 3.6 1.9 6.5 6.4 4.3 3.7 3.6 Brazil - 1.0 5.8 7.7 Brazil - 1.0 5.8 7.7 2.92.9 1.01.0 3.53.5 Thailand 83.3 3.6 Thailand 83.3 3.6 7.0 1.2 7.0 1.2 5.85.8 4.24.2 Malaysia 7.5 Malaysia 7.5 1.3 1.3 6.9 4.8 5.2 4.56.9 4.8 5.2 4.5 Indonesia Indonesia 20.1 4.3 20.1 4.3 6.1 6.5 6.3 6.1 6.5 6.3 6.4 6.4 Philippines 9.6 2.9 Philippines 9.6 2.9 6.9 3.6 5.5 6.9 3.6 5.5 6.1 6.1 Vietnam 5.9 6.8 Vietnam 5.9 6.8 6.8 6.8 5.9 4.9 5.45.9 4.9 5.4

Economic Performance & Growth. Economic Performance & Growth. Economist Economist

17.01.13 17.01.13 % change IP-12m Infl-12m GDP-% change IP-12m Infl-12m GDP-

1010 -11 -12 -13 -11 -12 -13 USA 2.2 USA 2.2 1.7 2.9 1.7 2.2 2.0 1.7 2.9 1.7 2.2 2.0

Euro area - 3.7 2.2 1.7 1.7 - Euro area - 3.7 2.2 1.7 1.7 - 0.4 - 0.1 0.4 - 0.1 Japan - Japan - 5.8 - 0.2 4.2 - 0.7 1.8 0.7 5.8 - 0.2 4.2 - 0.7 1.8 0.7 S. Korea 2.9 1.4 6.1 3.6 S. Korea 2.9 1.4 6.1 3.6 2.2 3.32.2 3.3 China 10.1 2.5 1.9 China 10.1 2.5 1.9 9.2 7.7 8.5 9.2 7.7 8.5 India - 0.1 India - 0.1 10.6 9.1 7.1 5.4 6.5 10.6 9.1 7.1 5.4 6.5 Russia Russia 1.9 6.5 6.4 4.3 3.7 3.6 1.9 6.5 6.4 4.3 3.7 3.6 Brazil - 1.0 5.8 7.7 Brazil - 1.0 5.8 7.7 2.92.9 1.01.0 3.53.5 Thailand 83.3 3.6 Thailand 83.3 3.6 7.0 1.2 7.0 1.2 5.85.8 4.24.2 Malaysia 7.5 Malaysia 7.5 1.3 1.3 6.9 4.8 5.2 4.56.9 4.8 5.2 4.5 Indonesia Indonesia 20.1 4.3 20.1 4.3 6.1 6.5 6.3 6.1 6.5 6.3 6.4 6.4 Philippines 9.6 2.9 Philippines 9.6 2.9 6.9 3.6 5.5 6.9 3.6 5.5 6.1 6.1 Vietnam 5.9 6.8 Vietnam 5.9 6.8 6.8 6.8 5.9 4.9 5.45.9 4.9 5.4

HM Strategies ///


Source: Fearnleys

Potential Revival?Ballast reduction

ExcessiveOrdering

Small DemandGrowth

HM Strategies ///


Million tonnes oil equivalent

Source: BP

HM Strategies ///


N.AMERICA

W.EUROPE

JAPAN

FSU

M.EAST

R-O-W

HM Strategies ///


M.EAST OPEC

N.AMERICA

N.SEA

FSU

DEPLETION

PEAK OIL IRRELEVANTSupply is a function ofPrice & Technology

HM Strategies ///


HM Strategies ///


HM Strategies ///


Million dwt Sources: Fearnleys & HMS

Slippage 2011: 30%2012: 40%

HM Strategies ///


Million tonnes

Source: Clarkson

HM Strategies ///


Billion cbm

Source: BP

HM Strategies ///


Source: BP

LNG very hot after closureof nuclear power plants

However, shale gas a veritable negativegame changer

US could well becomea net gas exporter

Stokhman gas field shelved ?

HM Strategies ///


MINOR BULKRoughly1,550 mt in 2012

Sources: Clarkson, Fearnleys, HMS

HM Strategies ///


Source: Clarkson

HM Strategies ///


Source: WSA

201211 monthsannualized

HM Strategies ///


Million tonnes. 3m av.

China imp 2012 + 8.6%

HM Strategies ///


Forecast October 2012 2011 2012 2013China 6.2 2.5 3.1 R-O-W 6.3 1.7 3.3World 6.2 2.1 3.2

HM Strategies ///


Compiled by HMS

HM Strategies ///


BDIMillion dwt. 3m av.

HM Strategies ///


Million dwt Source: Fearnleys

HM Strategies ///


Cheap Financefrom Yards andGovernmentsEco ships

?2012 8m annualized

Million GTAll Types

HM Strategies ///


HMS est

Million dwt Sources: Fearnleys, Clarkson, HMS

HM Strategies ///


HMS est

HM Strategies ///


Container Fleet Decisions & Deliveries

HMS est

HM Strategies ///


HM Strategies ///


Sources: Fearnleys & ClarksonMillion dwt Soucrces: Fearnleys & Clarkson

HM Strategies ///


‘000 USD/d USD/t

Source: Fearnleys

IncreasedFocus onFuelEconomy

HM Strategies ///


HM Strategies ///


Containership Fuel Consumption by Size & Speed

Size in teu

11 K

Slow-steaming open for substantial cost savings

370

105

ULTRA LARGEfrom 25k to 17k (370 - 105 = 265 t)x USD 625 per t =about USD 165,000reduction per day

HM Strategies ///


Target Target

Source: Maersk Post

-5%

-13%-11%

-12% -3%-10%

50% reduction over period.Considerably smaller reduction per teu transported due to slowsteaming

HM Strategies ///


ECO SHIPS – CENTRAL ISSUESECO SHIPS – CENTRAL ISSUES Environmental benefits Environmental benefits Less and cleaner fuel Less and cleaner fuel

What about Company Economics ?What about Company Economics ?

- Eco Ship Newbuilding orders will delay market upturn- Eco Ship Newbuilding orders will delay market upturn - Additional costs for fuel saving measures ?- Additional costs for fuel saving measures ? - Retrofitting / New ship ? - Future bunker price ?- Retrofitting / New ship ? - Future bunker price ? - Vast majority of conventional vessels will decide rate levels- Vast majority of conventional vessels will decide rate levels

- Lack of ability to skim future market peaks by speading up - Lack of ability to skim future market peaks by speading up

- Higher total fleet income per capital invested when - Higher total fleet income per capital invested when using larger number of medium age vessels in fairly using larger number of medium age vessels in fairly healthy markets healthy markets

ECO SHIPS – CENTRAL ISSUESECO SHIPS – CENTRAL ISSUES Environmental benefits Environmental benefits Less and cleaner fuel Less and cleaner fuel

What about Company Economics ?What about Company Economics ?

- Eco Ship Newbuilding orders will delay market upturn- Eco Ship Newbuilding orders will delay market upturn - Additional costs for fuel saving measures ?- Additional costs for fuel saving measures ? - Retrofitting / New ship ? - Future bunker price ?- Retrofitting / New ship ? - Future bunker price ? - Vast majority of conventional vessels will decide rate levels- Vast majority of conventional vessels will decide rate levels

- Lack of ability to skim future market peaks by speading up - Lack of ability to skim future market peaks by speading up

- Higher total fleet income per capital invested when - Higher total fleet income per capital invested when using larger number of medium age vessels in fairly using larger number of medium age vessels in fairly healthy markets healthy markets

HM Strategies ///


‘000 USD Source: HMSPanamax R/V Costs 4,500 n.m.

HM Strategies ///


PANAMAX BREAK-EVEN RATESPANAMAX BREAK-EVEN RATES New Eco Ship 10-yr Old New Eco Ship 10-yr Old

Price usd 27.0 m usd 13.5 mPrice usd 27.0 m usd 13.5 m Res. Value Res. Value (300 USD/ldt) (300 USD/ldt) usd 3.6 m usd 3.6 musd 3.6 m usd 3.6 m Rest life/Calc.interest 25 yrs/8% 15 yrs/8%Rest life/Calc.interest 25 yrs/8% 15 yrs/8% Capital element ~ 7,000 usd/d ~ 4,100 usd/dCapital element ~ 7,000 usd/d ~ 4,100 usd/d Operating cost * 6,500 usd/d 6,500 usd/dOperating cost * 6,500 usd/d 6,500 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d

Bunker advantage Bunker advantage (270 days at sea)(270 days at sea)

200 usd/t ~ 900 usd/d200 usd/t ~ 900 usd/d 600 usd/t ~ 2,700 usd/d600 usd/t ~ 2,700 usd/d 1,000 usd/t ~ 4,400 usd/d 1,000 usd/t ~ 4,400 usd/d Source: HMSSource: HMS

PANAMAX BREAK-EVEN RATESPANAMAX BREAK-EVEN RATES New Eco Ship 10-yr Old New Eco Ship 10-yr Old

Price usd 27.0 m usd 13.5 mPrice usd 27.0 m usd 13.5 m Res. Value Res. Value (300 USD/ldt) (300 USD/ldt) usd 3.6 m usd 3.6 musd 3.6 m usd 3.6 m Rest life/Calc.interest 25 yrs/8% 15 yrs/8%Rest life/Calc.interest 25 yrs/8% 15 yrs/8% Capital element ~ 7,000 usd/d ~ 4,100 usd/dCapital element ~ 7,000 usd/d ~ 4,100 usd/d Operating cost * 6,500 usd/d 6,500 usd/dOperating cost * 6,500 usd/d 6,500 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d

Bunker advantage Bunker advantage (270 days at sea)(270 days at sea)

200 usd/t ~ 900 usd/d200 usd/t ~ 900 usd/d 600 usd/t ~ 2,700 usd/d600 usd/t ~ 2,700 usd/d 1,000 usd/t ~ 4,400 usd/d 1,000 usd/t ~ 4,400 usd/d Source: HMSSource: HMS

HM Strategies ///


‘000 USD/d Source: HMS

Bunker price & voyage rate in USD/t

Investment 27 m USD

Documents

HM Strategies /// January 2013Hammer Maritime Strategies 1 Shipping Forum, 23 January 2013 Shipping Forum, 23 January 2013 Shipping Market Update & Ecoship