PRESENTATION BY LLEW RUSSELL AM,SPECIALIST CONSULTANT, MARITIME AUSTRALIA LIMITED

TO THE FOURTH INDIAN OCEAN NAVAL SYMPOSIUMPERTH, 25-27 MARCH 2014

ON ISSUES FACING THE INTERNATIONAL SHIPPING INDUSTRY AS PART OF A PANEL ON INDUSTRY RESPONSES TO THE THEME -

“PROTECTING THE ABILITY TO TRADE IN THE INDIAN OCEAN

MARITIME ECONOMY “

Indian Ocean Region, very important from a shipping

perspective

• Annually, 66% of the world’s seaborne trade in oil,

• 50% of the world’s seaborne container traffic• 33% of the world’s seaborne bulk cargo passes

through this region

• Involving some 100,000 vessels both large and small

LNG Carriage; a star in a generally gloomy outlook

In Bulk, Container and Crude Oil Tanker fleets currently 20% more tonnage than required

Outlook for cruise and pure car carriers not as gloomy

Worrying amount of ordering for new vessels is still taking place

Ever increasing environmental regulation imposing costs on the industry at a time when it can ill afford them

-fortunately IMO moving towards some alleviation with a fuel oil availability study by 2018 and a more realistic timetable for fitting of on-board ballast treatment systems.

A Crystal Ball …IMF predicts 2014 global GDP and world import volume growth to hit a three year high of 3.6% and 4.8% respectively but emerging economies should remain strong with a 5.1% growth rate.

OECD is concerned world trade, as a percentage of global GDP, is not following the same progressive growth trend as it did in the past:

• 1990’s generally 15%• 1998 hit 20%• 2006 25%• 2009 26% and has remained at that figure

Segment Forecasts:Dry bulk: BIMCO expects demand to grow 4.5% to 6% in 2014 but more recently excess capacity has lowered earnings

Tankers: Expectation rates for Very Large Crude Carriers and Suezmax vessels to soften with Aframax vessels to remain more or less unchanged. However, product tankers expecting better earnings

Container shipping: Freight rates in the major trade lanes expected to fall in 2014 due to excess capacity but prospects in Intra-Asian trade lanes a little brighter. Prospects for the North-South trades are patchy

Scrapping of vessels is increasing but not fast enough to counter new capacity coming onto the berth

Reduction in Major Oil Spills

Source: ITOPF

Average spills per year over 700 tonnes

Ships are CO2 Efficient

Australian National Ports Strategy

• Reserved land/sea access and corridors with transparent and long-term fixed buffers around port areas

• A 30-year planned national ports system fully integrated with urban and jurisdictional plans

• Shortened approval times for expansion and new port infrastructure

• Easing of obtaining infrastructure funding • Simplified port planning and improved productivity

Maritime School of Strategic Thought:Excellent idea being promoted by the Chief of Navy: development of a new strategy with the ADF focussed more on understanding our commercial maritime trade in order for the ADF to play a central role in a critical Australian mission -the protection of our ability to trade.

Indian Ocean Region an important component of that strategy

Maritime School of Strategic Thought: One Example of Possible Collaboration

Government to build two Roll on/Roll off vessels for the coastal trade Sydney, Melbourne and Fremantle leased out to a private operator but configured to support the Navy in support services as required. Extra berths would enhance our maritime training capability.

A concept worth exploring but needs to fit within the Government’s emerging new coastal shipping policy.

In Brief Summary….….Whilst the outlook for many shipping sectors remains gloomy hopefully 2014 will be an improvement on 2013

Vessels rapidly increasing in size imposes challenges for countries in this regionEnvironmental regulation and current timetables remain of serious concern for our industry

Local issues of interest include new ports strategy, revitalisation of Australian Shipping, updated Navigation Act and importantly a new network of shipping fairways

Development of maritime school of strategic thought strongly supported by industry