IFCHOR Group Research

Marine Money Geneva Forum - 29th June 2016

Un

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16

DRY BULK SUPPLY OVERVIEW

FUNDAMENTALS TOWARD SUPPLY RE-BALANCE

THE INFLUENCE OF SENTIMENT ON THE RECOVERY PROCESS

CONCLUSIONShips

0

50

100

150

200

250

0

500

1'000

1'500

2'000

2'500

3'000

3'500

4'000

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

OV

ER

SU

PP

LY

-M

io d

wt

BD

I

BDI OVERSUPPLY at actual speed(Weighted for average number of voyages per year)

3

DRY BULK SURPLUS CAPACITY

Source: IFCHOR Research, Seaweb IHS

Dry Bulk Supply Overview

4

-10

0

10

20

30

40

50

60

70

80

Mil

lio

n D

WT

DRY BULK FLEET - NET INCREASE

how much?

<

Source: IFCHOR Research, Seaweb IHS

Dry Bulk Supply Overview

Dry bulk fleet size

5

A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE

0

20

40

60

80

100

120

140

160

180

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Apr-16 May-16

Nu

mbe

rof S

hip

s

Supra

Handy

Panamax

Capesize

DRY BULK ORDERBOOK (2017-2018 DELIVERY)

Source: IFCHOR Research, Seaweb IHS

Fundamentals Toward Supply Re-balance

6

A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE

Source: IFCHOR Research, Seaweb IHS

Fundamentals Toward Supply Re-balance

ORDERBOOK CANCELLATION POTENTIAL

Other countries

China

9

34

1112

14

15

16

Already cancelled Under construction

could be prior cancelling date could have passed the cancelling date

ORDERS AT CHINESE YARDSNOT

STARTED

YET45 Mio DWT

UNDER CONSTRUCTION57Mio DWT

CHINA PUBLICYARDS

CHINA PRIVATEYARDS

0

1

2

3

4

5

6

7

Mill

ion dw

t

MONTHLY SCRAPPING ACTIVITY

7

2008 2009 2010 2011 2012 2013 2014 2015 2016

CANCELLATIONS HIGH DEMOLITION RATEA FLAT ORDERBOOK

Improved freight conditions

Source: IFCHOR Research, Seaweb IHS

Fundamentals Toward Supply Re-balance

8

Factors influencing market sentiment:

-

EXPECTATIONS

SHORT TERM RE-ADJUSTMENT MEASURES

DEMAND AND SUPPLY FUTURE EXPECTATIONS

LAY-UP

SLOW STEAMING

SLIPPAGE

MARKET ROCK-BOTTOM PERCEPTION

Influence of Sentiment on the Recovery Process

PAST EXPERIENCE BIAS

9

SLIPPAGE LAY-UP AVERAGE SPEED

11.85 Mio Dwt scheduled to be

delivered in 2016, but not

commenced yet

* as of June Source: IFCHOR Research, Seaweb IHS

Influence of Sentiment on the Recovery Process

0

2

4

6

8

10

12

Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16

Mill

ion

DW

T

scheduleddeliveredon order but not commenced yet

BDI

Accumulated slippage

BDI

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

January February March April May June

Nu

mb

er

of C

ap

esiz

e

NOS OF CAPESIZE IN LAY-UP (WEEKLY)

10

SLIPPAGE LAY-UP AVERAGE SPEED

50 ships= 3% of the

Capesize fleet

Week num.

Source: Marine Traffic, IFCHOR Research

BDI

Influence of Sentiment on the Recovery Process

9

9.5

10

10.5

11

11.5

12

12.5

13

13.5

14

11

2016 Ave. speed = 11.4 knots

DRY BULK FLEET AVERAGE SPEED

SLIPPAGE LAY-UP AVERAGE SPEED

Kn

ots

Source: Reuters, BIMCO reports, AXS Marine

Influence of Sentiment on the Recovery Process

*Singapore IFO 180

*

0

5

10

15

20

25

30

Ne

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rs a

t ya

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M

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WT

BDI

2013 orders boom 87 mio DWT

-stocking cycle

Rock-bottom perception

2nd hand prices +65% YoY

12

2010 orders boom 102 Mio DWT

2008 2009 2010 2011 2012 2013 2014 2015 2016

new orders

PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS

China releases its 5 years plan

with USD 1trln investments

Fleet ave. age: 14 yrs old

Memory of the recent prices

2nd hand prices +25% YoY

Influence of Sentiment on the Recovery Process

SUPPLY AND DEMAND GROWTH

2'500

3'000

3'500

4'000

4'500

5'000

5'500

6'000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 13

S +26%

D +14%

D +13%

S +13%

D +19%

D +10%

S +1.5%

D +0.5%

Supply

Demand BDI

PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS

Su

pp

ly a

nd

De

ma

nd

-M

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on

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Influence of Sentiment on the Recovery Process

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Age Profile

n.ships 3'585 36% 3'342 33% 1'219 12% 959 10% 950 9%

Mio Dwt 291.3 38% 267.2 35% 91.9 12% 59.7 8% 56.1 7%

0-5 5-10 10-15 TOTAL

10'055

766.4

>2015-20

Scenarios For The Future

15

17

19

21

23

25

27

29

31

33

35

-

5'000'000

10'000'000

15'000'000

20'000'000

25'000'000

30'000'000

35'000'000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Ave

rag

e s

cra

pp

ing

ag

e

Mio

DW

T -

sc

rap

ped

total DWT scrapped Average scrapping age

35

30

25

20

25

10

5

0

23 yrs old

- 40 Mio

0 50 100 150 200

15

Baseline Scenario

Scenarios For The Future

High Scenario

High Scenario

Hp:

o Jan 2017 fleet = 770 Mio DWT

o 2017 deliveries = 30 Mio DWT

o Stable financial conditions

o Seaborne demand 2017: + 0.7%

+ 30 Mio

+ 30 Mio

- 45 Mio

2017 deliveries

2017demolitions

SURPLUS OF CAPACITY Mio DWT

0 50 100 150 200

2017 deliveries

- 40 Mio+ 30 Mio

- 45 Mio

16

High Scenario

Scenarios For The Future

Hp:

o Jan 2017 fleet = 770 Mio DWT

o 2017 deliveries = 30 Mio DWT

o Stable financial conditions

o Seaborne demand 2017: + 0.7%

+ 30 Mio

SURPLUS OF CAPACITY Mio DWT

2017demolitions

Baseline Scenario

High Scenario

China does not acquire the status of market economy:

Water Ballast Treatment convention is implemented:

17

Fleet size most likely to increasein 2016. However, if the order bookremainsflat anddemolitionsmaintainthe current pace,a net fleet decreaseisenvisagedfor 2017

Asseabornedemandstrugglesto grow, the re-balancingof the Dry Bulkfleet will beheavilydependentuponscrappingactivity

Nonstructuralsupplyreductionsdo moreharmthan good

External disruptive factors affecting fundamentals can lead to a re-balancingsoonerthan later