《船舶采购、销售和运营 Ship Purchase, Sales and Operations》课程教学资源（资料）Materials to read for 2014-2015_SRO_Autumn_2008_SHIPPING MARKET OUTLOOK.pdf_大学文库

1.SHIPPING MARKET OUTLOOK EXECUTIVE SUMMARY As we write this report the market has a late Summer,astonishing service providers distinctly schizophrenic feel about it.One by the speed of the collapse.China's exports persona is basking in the warm aura of the are faltering this year and fleet growth is best year so far in this historic bulk shipping enormous,an additional 1m TEU in the first boom.With so much cash in the bank,why eight months of the year (9%growth) worry?The other,more nervous,persona, Another 1.8m TEU is scheduled for 2009,so already fretting about the giant order book,is the market has good reason to be nervous. now even more worried about the financial crisis and what it might do to the demand for The shipbuilding industry has attracted much ships.He has a point. attention.At the beginning of September it had an order book of 592m dwt,52%of the The tanker market has done much better than fleet.It is difficult to see how the markets expected.With oil prices surging to $130/bbl can absorb so much tonnage and the best and the IEA marking down its oil demand hope is that the shipyards fail to deliver.We growth forecast month-by-month,the track over 600 shipyards and about 30%of demand side of the tanker market has been the order book is held in new capacity. disappointing.Growth of 2-3%for crude and Getting shipyards up and running is tricky products cargo during the year will be a good and a certain amount of slippage is likely, outcome.But,so far,the combination of a though we would expect some yards to cope little scrapping and a significant number of much better than others. large tankers withdrawn for conversion to offshore structures or bulk carriers has kept On the demolition front things have been supply under control.The fleet only grew very quiet with only 5.8m dwt scrapped in 1.5%in the first nine months.As a result the first eight months of 2008,mainly in tankers enjoyed a much better than expected Bangladesh.The trend scrapping rate for a Summer. fleet of 1 billion dwt would be around 35m dwt a year,so a backlog of older tonnage is The real money was made in the dry bulk building up.This may be helpful in the next market,where rates surged and Capesizes year or two. earned an average of $142,000/day over the last six months.Demand grew briskly at The financial crisis of September 2008 has around 5-6%a year and supply grew a little crystallised a lot of negative sentiment which faster.However logistics disruptions, had been building up in the market.The congestion and possibly some increased ton- orderbook in itself presents a threat,but miles worked their magic on freight rates (for supply pressures take time to build up and ship owners,anyway).Rates have eased off slippage,scrapping,conversion and other in the Autumn and the prospect of a slowing factors might reasonably have mitigated that. Chinese economy and 66m dwt of deliveries The threat which the financial crisis poses to in 2009 looks daunting. the growth of seaborne trade is more immediate,and potentially much sharper.So It looks like the containership market is there is every reason to be nervous about heading into recession.The Pacific trade fell how the market develops in the next 12 away in the Spring and after a brief surge of months. growth,the Asia to Atlantic trade followed in Clarkson Research Services Autumn 2008

Clarkson Research Services Autumn 2008 7 1. SHIPPING MARKET OUTLOOK SHIPPING MARKET OUTLOOK EXECUTIVE SUMMARY ! As we write this report the market has a distinctly schizophrenic feel about it. One persona is basking in the warm aura of the best year so far in this historic bulk shipping boom. With so much cash in the bank, why worry? The other, more nervous, persona, already fretting about the giant order book, is now even more worried about the financial crisis and what it might do to the demand for ships. He has a point. ! The tanker market has done much better than expected. With oil prices surging to $130/bbl and the IEA marking down its oil demand growth forecast month-by-month, the demand side of the tanker market has been disappointing. Growth of 2-3% for crude and products cargo during the year will be a good outcome. But, so far, the combination of a little scrapping and a significant number of large tankers withdrawn for conversion to offshore structures or bulk carriers has kept supply under control. The fleet only grew 1.5% in the first nine months. As a result tankers enjoyed a much better than expected Summer. ! The real money was made in the dry bulk market, where rates surged and Capesizes earned an average of $142,000/day over the last six months. Demand grew briskly at around 5-6% a year and supply grew a little faster. However logistics disruptions, congestion and possibly some increased tonmiles worked their magic on freight rates (for ship owners, anyway). Rates have eased off in the Autumn and the prospect of a slowing Chinese economy and 66m dwt of deliveries in 2009 looks daunting. ! It looks like the containership market is heading into recession. The Pacific trade fell away in the Spring and after a brief surge of growth, the Asia to Atlantic trade followed in late Summer, astonishing service providers by the speed of the collapse. China's exports are faltering this year and fleet growth is enormous, an additional 1m TEU in the first eight months of the year (9% growth). Another 1.8m TEU is scheduled for 2009, so the market has good reason to be nervous. ! The shipbuilding industry has attracted much attention. At the beginning of September it had an order book of 592m dwt, 52% of the fleet. It is difficult to see how the markets can absorb so much tonnage and the best hope is that the shipyards fail to deliver. We track over 600 shipyards and about 30% of the order book is held in new capacity. Getting shipyards up and running is tricky and a certain amount of slippage is likely, though we would expect some yards to cope much better than others. ! On the demolition front things have been very quiet with only 5.8m dwt scrapped in the first eight months of 2008, mainly in Bangladesh. The trend scrapping rate for a fleet of 1 billion dwt would be around 35m dwt a year, so a backlog of older tonnage is building up. This may be helpful in the next year or two. ! The financial crisis of September 2008 has crystallised a lot of negative sentiment which had been building up in the market. The orderbook in itself presents a threat, but supply pressures take time to build up and slippage, scrapping, conversion and other factors might reasonably have mitigated that. The threat which the financial crisis poses to the growth of seaborne trade is more immediate, and potentially much sharper. So there is every reason to be nervous about how the market develops in the next 12 months

SHIPPING MARKET OUTLOOK 1.1 Freight Market Overview Bulkcarrier Earnings When shipping got back to work after the Avg.$/day Sep'07- Mar '08- % holidays earnings were still positive,with the Mar'08 Sep'08 Change Clarksea Index at $30,348/day on 19th Capesize 138.414141,925 2.5% September.But the story was mixed and Panamax(Spot) 62,180 58,703 -5.6% sentiment was gradually accepting that the great Panamax(trip) 71.449 66,577 -6.8% bull market was at last coming to an end.This Handymax 51.971 48.151 -7.4% sense was reinforced by the deepening Handysize(t/c) 40.471 40,287 -0.5% problems in the world economy and the Weighted Avg. 55,752 53.969 -3.2% financial sector(more of which later). very large country with much scope for extending infrastructure and improving Tanker Earnings residential and commercial property.The energy industry is also delicately balanced and Avg.$/day Sep'07- Mar '08- coal and oil imports are potential wild cards. Mar'08 Sep '08 Change But by September the financial crisis damped VLCC(Modern) 85.492 112,256 31.3% down this positive sentiment. VLCC (Early '90s) 79.262 104.621 32.0% Suezmax (Modern) 51.806 86.661 67.3% Aframax(Modern) 35.439 58.535 65.2% Containership Earnings Products(Dirty) 29,202 42,596 45.9% Avg.$/day Sep'07- Mar'08- % Products(Clean) 22,373 30.243 35.2% Mar'08 Sep'08 Change Weighted Avg. 34,280 49,272 43.7% 3.500 teu gls 33.000 29,214 -11.5% 2.500 teu gls 30.250 24.643 -18.5% 2,000 teu gls 21.350 18,643 -12.7% For tankers it was an extraordinary summer, 1.700 teu grd 18.058 16.214 -10.2% with earnings surging from a very low level in 1.000 teu grd 12,717 11.757 -7.5% January to an unseasonable peak.For example 725 teu grd 8.933 8,171 -8.5% VLCC earnings jumped from around $53,000/ 350 teu grd 5,617 5,514 -1.8% day in January to $169,000/day in July.In the Weighted Avg 16.925 14.841 -12.3% six months since Spring,VLCC earnings are up 30%,Suezmaxes up 67%,Aframaxes up 65% and clean products up 35%(see the table The containership market continued on its above).But in August rates fell and by increasingly pessimistic course.In early September VLCCs were down to $59,000/day, summer there were problems on the trans- still enough to pay for a new ship even at Pacific route,as the American market for Asian today's inflated prices. exports slowed.Initially Far East to Europe trades took up the slack,but the European Bulk carriers followed much the same path, economy was tracking the decelerating path of with earnings for a modern Capesize up from the US economy.By August liner companies $68,000/day in January to $150,000/day in July. were astonished at how momentum had Over the six months Capes earned $142,000/ dropped away in this vital market.In terms of day (see table below),well above the three year charter earnings,rates fell by an average of time charter rate of $88,000/day.So it was a 12.3%during the half year,compared with the very profitable half-year,and other sizes did previous half-year(see table above). equally well.Panamaxes earned $60,000/day; and Handymaxes $48,000/day.Although there In conclusion,it was an excellent year for the were plenty of pessimists,a strong strand of bulk business but a less rewarding one for the market sentiment argued that supply would container business.But by September the remain tight until 2010,based on the growth diehard optimists who gave the market a year or potential in China and India.Although China two more were losing ground and the majority has grown very rapidly in last decade,and some shared a sense of foreboding that the boom was cities have reached Western standards,it is a at last drawing to a close. Clarkson Research Services Autumn 2008

Clarkson Research Services 8 Autumn 2008 SHIPPING MARKET OUTLOOK When shipping got back to work after the holidays earnings were still positive, with the Clarksea Index at $30,348/day on 19th September. But the story was mixed and sentiment was gradually accepting that the great bull market was at last coming to an end. This sense was reinforced by the deepening problems in the world economy and the financial sector (more of which later). For tankers it was an extraordinary summer, with earnings surging from a very low level in January to an unseasonable peak. For example VLCC earnings jumped from around $53,000/ day in January to $169,000/day in July. In the six months since Spring, VLCC earnings are up 30%, Suezmaxes up 67%, Aframaxes up 65% and clean products up 35% (see the table above). But in August rates fell and by September VLCCs were down to $59,000/day, still enough to pay for a new ship even at today's inflated prices. Bulk carriers followed much the same path, with earnings for a modern Capesize up from $68,000/day in January to $150,000/day in July. Over the six months Capes earned $142,000/ day (see table below), well above the three year time charter rate of $88,000/day. So it was a very profitable half-year, and other sizes did equally well. Panamaxes earned $60,000/day; and Handymaxes $48,000/day. Although there were plenty of pessimists, a strong strand of market sentiment argued that supply would remain tight until 2010, based on the growth potential in China and India. Although China has grown very rapidly in last decade, and some cities have reached Western standards, it is a very large country with much scope for extending infrastructure and improving residential and commercial property. The energy industry is also delicately balanced and coal and oil imports are potential wild cards. But by September the financial crisis damped down this positive sentiment. The containership market continued on its increasingly pessimistic course. In early summer there were problems on the transPacific route, as the American market for Asian exports slowed. Initially Far East to Europe trades took up the slack, but the European economy was tracking the decelerating path of the US economy. By August liner companies were astonished at how momentum had dropped away in this vital market. In terms of charter earnings, rates fell by an average of 12.3% during the half year, compared with the previous half-year (see table above). In conclusion, it was an excellent year for the bulk business but a less rewarding one for the container business. But by September the diehard optimists who gave the market a year or two more were losing ground and the majority shared a sense of foreboding that the boom was at last drawing to a close. 1.1 Freight Market Overview Avg. $/day Sep '07- Mar '08- % Mar '08 Sep '08 Change VLCC (Modern) 85,492 112,256 31.3% VLCC (Early '90s) 79,262 104,621 32.0% Suezmax (Modern) 51,806 86,661 67.3% Aframax (Modern) 35,439 58,535 65.2% Products (Dirty) 29,202 42,596 45.9% Products (Clean) 22,373 30,243 35.2% Weighted Avg. 34,280 49,272 43.7% Tanker Earnings Avg. $/day Sep '07- Mar '08- % Mar '08 Sep '08 Change Capesize 138,414 141,925 2.5% Panamax (Spot) 62,180 58,703 -5.6% Panamax (trip) 71,449 66,577 -6.8% Handymax 51,971 48,151 -7.4% Handysize (t/c) 40,471 40,287 -0.5% Weighted Avg. 55,752 53,969 -3.2% Bulkcarrier Earnings Avg. $/day Sep '07- Mar '08- % Mar '08 Sep '08 Change 3,500 teu gls 33,000 29,214 -11.5% 2,500 teu gls 30,250 24,643 -18.5% 2,000 teu gls 21,350 18,643 -12.7% 1,700 teu grd 18,058 16,214 -10.2% 1,000 teu grd 12,717 11,757 -7.5% 725 teu grd 8,933 8,171 -8.5% 350 teu grd 5,617 5,514 -1.8% Weighted Avg. 16,925 14,841 -12.3% Containership Earnings

SHIPPING MARKET OUTLOOK 1.2 World Economy Sea Trade second quarter of 2008 due to problems in the housing market.Falling company profits and In our last half-yearly review we drew attention the cost of averting a major financial crisis to the similarities between the period of rapid suggest a poor outcome next year,with GDP economic growth during the 1960s,when growth of 1.3%in 2009. Europe and Japan were globalising,and the recent surge in seaborne trade driven by the The central issue is whether the problems in the globalisation of China and other parts of Asia. North Atlantic will spread to Asia.Over the last five years Europe and United States have been In both cases rapidly growing demand for sea important markets for Asian exports, transport produced a"golden era"for shipping. particularly China,and this fuelled an increase But the rapid growth also put pressure on the in the trend growth rate of container cargo from world economy and its resources.The 1960s around 8-9%to over it 11%a year. cycle ended with commodity prices out of control and the famous "oil crisis"of October China holds a pivotal position,but its prospects 1973 when economics and politics combined to are not easily weighed.The economy is facing produce an embargo on Middle East oil exports. many new problems.Inflation has increased to 7%in some areas and the government has History rarely repeats itself in detail,but there allowed the currency to strengthen against the are similarities with recent events.During the dollar. These are reducing China's last four years world GDP has grown at over competitiveness in the export market and the 5%a year,the fastest sustained growth since new labour contract law is also pushing up the 1960s.Commodity prices have also surged, domestic labour costs in some key areas.The in particular oil prices,which started 2008 at rise and fall of the Shanghai stock market has $60/bbl.but reached $140/bbl over the summer. dented consumer confidence.Based on the first Today there are also imbalances in world seven months of this year,China's exports may financial markets,resulting from a period of actually reduce this year.On the import front, high growth and saving in Asia and much the continuing role of the iron ore import trade slower growth and dis-saving in the Atlantic. is absolutely crucial,and any weakness would The resulting flow of capital into the housing be very serious for shipping.Unfortunately this market and financial assets of dubious value. scenario looks increasingly likely. combined with the complex derivatives trades in which many of these institutions are Generally,across Asia,the same sort of pattern involved,has cast a shadow over at the credit occurs,with forecasts indicating continued worthiness of many Atlantic based banks. growth,but slowing economic activity in the coming year.The concerns about the effects of So after a long boom the global economy is the credit crisis and oil prices on these slipping into recession,initially in the North economies remain very real. Atlantic,but probably also in Asia in due course.Table 1.1 shows that World GDP Against this background of slowing economic growth is expected to slow from 5.0%in a 2007 growth,the outlook for sea trade is weak.The to 3.9%in 2008.The deceleration of industrial crude oil trade continues to be sluggish and the production has been even more severe.In products trade has finally slowed after three Europe at mid-year it was negative in every years of exceptional growth since 2004.Dry country in the Euro-zone,which registered cargo trade continues to steam along,and is -1.2%growth in July.The latest predictions expected to grow at 5.5%in 2008,down have been revised down to 0.9%GDP growth slightly from 6.3%in 2007.2009 remains very for 2009.Consumer confidence indices have uncertain with more downside than up. shown a sharp drop in the 12 months since the Meanwhile,we expect the container trade to credit crunch started in August 2007. slow from 10.4%in 2007 to 7.6%in 2008. Against the very unsettled background there Although the USA is not formally in recession seems very little chance that,in the coming (defined as two consecutive quarters of negative year,trade growth will match the excellent growth),US GDP fell to 2.2%growth in the performance of recent years. Clarkson Research Services 10 Autumn 2008

Clarkson Research Services 10 Autumn 2008 SHIPPING MARKET OUTLOOK In our last half-yearly review we drew attention to the similarities between the period of rapid economic growth during the 1960s, when Europe and Japan were globalising, and the recent surge in seaborne trade driven by the globalisation of China and other parts of Asia. In both cases rapidly growing demand for sea transport produced a "golden era" for shipping. But the rapid growth also put pressure on the world economy and its resources. The 1960s cycle ended with commodity prices out of control and the famous "oil crisis" of October 1973 when economics and politics combined to produce an embargo on Middle East oil exports. History rarely repeats itself in detail, but there are similarities with recent events. During the last four years world GDP has grown at over 5% a year, the fastest sustained growth since the 1960s. Commodity prices have also surged, in particular oil prices, which started 2008 at $60/bbl, but reached $140/bbl over the summer. Today there are also imbalances in world financial markets, resulting from a period of high growth and saving in Asia and much slower growth and dis-saving in the Atlantic. The resulting flow of capital into the housing market and financial assets of dubious value, combined with the complex derivatives trades in which many of these institutions are involved, has cast a shadow over at the credit worthiness of many Atlantic based banks. So after a long boom the global economy is slipping into recession, initially in the North Atlantic, but probably also in Asia in due course. Table 1.1 shows that World GDP growth is expected to slow from 5.0% in a 2007 to 3.9% in 2008. The deceleration of industrial production has been even more severe. In Europe at mid-year it was negative in every country in the Euro-zone, which registered -1.2% growth in July. The latest predictions have been revised down to 0.9% GDP growth for 2009. Consumer confidence indices have shown a sharp drop in the 12 months since the credit crunch started in August 2007. Although the USA is not formally in recession (defined as two consecutive quarters of negative growth), US GDP fell to 2.2% growth in the second quarter of 2008 due to problems in the housing market. Falling company profits and the cost of averting a major financial crisis suggest a poor outcome next year, with GDP growth of 1.3% in 2009. The central issue is whether the problems in the North Atlantic will spread to Asia. Over the last five years Europe and United States have been important markets for Asian exports, particularly China, and this fuelled an increase in the trend growth rate of container cargo from around 8-9% to over it 11% a year. China holds a pivotal position, but its prospects are not easily weighed. The economy is facing many new problems. Inflation has increased to 7% in some areas and the government has allowed the currency to strengthen against the dollar. These are reducing China's competitiveness in the export market and the new labour contract law is also pushing up domestic labour costs in some key areas. The rise and fall of the Shanghai stock market has dented consumer confidence. Based on the first seven months of this year, China's exports may actually reduce this year. On the import front, the continuing role of the iron ore import trade is absolutely crucial, and any weakness would be very serious for shipping. Unfortunately this scenario looks increasingly likely. Generally, across Asia, the same sort of pattern occurs, with forecasts indicating continued growth, but slowing economic activity in the coming year. The concerns about the effects of the credit crisis and oil prices on these economies remain very real. Against this background of slowing economic growth, the outlook for sea trade is weak. The crude oil trade continues to be sluggish and the products trade has finally slowed after three years of exceptional growth since 2004. Dry cargo trade continues to steam along, and is expected to grow at 5.5% in 2008, down slightly from 6.3% in 2007. 2009 remains very uncertain with more downside than up. Meanwhile, we expect the container trade to slow from 10.4% in 2007 to 7.6% in 2008. Against the very unsettled background there seems very little chance that, in the coming year, trade growth will match the excellent performance of recent years. 1.2 World Economy & Sea Trade

Clarkson Research Services Autumn 2008 11 SHIPPING MARKET OUTLOOK Table 1.1 Economic Growth Table 1.2 Seaborne Trade Figure 1.2.1 Figure 1.2.2 Industrial Production -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Source: Clarkson Research Services % p.a. Atlantic - US & Europe Pacific - S/SE Asia & India Seaborne Trades 1987-2009 0 500 1,000 1,500 2,000 2,500 3,000 3,500 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 (f) Source: Clarkson Research Services m tonnes Iron Ore Coal Grain Minor Bulks Crude Oil Oil Products GDP (% yoy) 2005 2006 2007 2008 2009 OECD 2.5 3.0 2.6 1.5 0.5 USA 3.1 2.8 2.0 1.6 0.1 Japan 1.9 2.4 2.1 0.7 0.5 European Union 2.0 2.8 2.6 1.3 0.2 Germany 0.8 2.9 2.5 1.9 0.0 France 1.7 2.2 2.2 0.8 0.2 UK 1.8 2.8 3.0 1.0 -0.1 Italy 0.1 1.8 1.5 -0.1 -0.2 Russia 6.4 7.4 8.1 7.0 5.5 China 10.4 11.6 11.9 9.7 9.3 Asian NIEs 4.7 5.6 5.6 4.0 3.2 South Korea 4.2 5.1 5.0 4.1 3.5 Taiwan 4.1 4.9 5.7 3.8 2.5 Hong Kong SAR 7.5 7.0 6.4 4.1 3.5 Singapore 6.6 8.2 7.7 3.6 3.5 Thailand 4.5 5.1 4.8 4.7 4.5 Malaysia 5.2 5.8 6.3 5.8 4.8 India 9.0 9.8 9.3 7.9 6.9 Africa 5.6 6.1 6.3 5.9 6.0 S & C America 4.6 5.5 5.6 4.6 3.2 WORLD 4.8 5.1 5.0 3.9 3.0 * Forecast, Source: IMF Forecast 2005 2006 2007 2008 2009 Iron Ore 658 720 781 866 912 12.1% 9.5% 8.5% 10.9% 5.3% Coking Coal 184 190 211 224 234 3% 3.2% 11.1% 5.9% 4.7% Steam Coal 507 543 576 593 616 5% 7.0% 6% 3.0% 3.9% Grains inc. s'beans 272 291 303 316 308 -1.2% 7.1% 4.1% 4.1% -2.4% Other Bulks 1,038 1,093 1,147 1,186 1,203 2.2% 5.3% 4.9% 3.5% 1.4% 2,660 2,838 3,018 3,185 3,279 4.7% 6.7% 6.3% 5.5% 3.0% Crude 1,885 1,933 1,984 2,043 2,079 1.9% 2.5% 2.6% 3.0% 1.8% Products 671 712 736 755 767 8.2% 6.0% 3.3% 3% 1.5% 2,556 2,644 2,719 2,798 2,846 3.5% 3.4% 2.8% 2.9% 1.7% Container Trade Europe 77 82 90 94 98 Asia 197 221 250 279 315 N.America 43 45 47 46 48 Others 66 72 78 83 89 Total (mTEU lifts) 383 420 464 503 550 106 117 129 139 152 10.6% 10.7% 10.4% 7.6% 9.0% Seaborne Trades (mt / mTEU) Total Dry Bulk Trades (mt) Total Oil Trades (mt) Total Container Trade (mTEU)

SHIPPING MARKET OUTLOOK 1.3 The Shipbuilding Market extends for years ahead,many shipping companies preferred to defer financing. The shipyards have a very big order book and Questions over pre-delivery finance,which the circumstances in which it was created requires a first-class bank guarantee,and the presents investors with a tricky task in assessing post delivery finance for vessels ordered at such how things will develop over the next two high prices remains a matter of conjecture, years.The problem is that the great expansion especially against the background of the in shipyard output scheduled over the next deepening credit crisis. couple of years was a rush job.The shipyards limped into the boom of 2003 with a short order For all these reasons,the growth of the world book and no thought of expansion. fleet,which is generally quite straightforward to predict a couple of years ahead,has taken on a Shipyard Capacity Plans new and "fuzzy"character.With a third of the order book in new facilities,we feel that As a result,when the freight boom took off in slippage of 20%or even 30%is quite likely.No 2003 the yards had little additional capacity to doubt there will be some cancellations also, offer and the surge of demand for new ships though once shipyard contracts are signed, was mainly channelled into prices,doubling the history says they are usually built -but in newbuilding price index from 90 to 180(see today's credit climate,who knows? Figure 1.3.4).The high prices made shipbuilding very profitable and,as the Order Book by Type shipyards became convinced the boom was here to stay,they set about expanding existing Investment during 2007 hit a record $240bn, facilities and building new yards.This new and in the year to August 2008 $104bn had capacity started to be marketed in 2006,and the been invested.Although this is a 35%fall it is first deliveries from it appeared in 2008. still higher than in any year prior to 2007.In September 2008 the tanker order book of 188m As a result shipbuilding deliveries developed in dwt accounted for 48.1%of the fleet;the bulk two separate phases.The first phase from 2003- carrier order book of 288m dwt for 70.3%of 2007 reflected the limited available capacity the fleet;LPG orders of 5.2m m3 for 31.6%of and a small increase in shipyard production.For the fleet:the LNG order book of 17.7m m3 for example,output increased by only 7%in 2006 48%the fleet;and containership orders of 6.5m and 5%in 2007.The second phase started in TEU for 54.4%of the fleet.By any standards 2008 with the commissioning of new capacity. these are very high order book figures Deliveries should increase by 32%,followed by 48%in2009,and18%in2010. Shipbuilding Prices The problem for market analysts is that, Newbuilding prices continue to edge up,with because the expansion plans were developed in the Clarkson Index up 3%in the year to haste,it is not clear whether implementation September 2008.Prices for VLCCs,which were will be as clear-cut as the order book suggests. in demand,increased by around 10%to $162m, There are questions about whether the and other sizes followed a similar trend.But production management;skilled labour;and the bulker prices,which were heavily ordered in supply of key components such as propellers, 2007,only edged up by 1-2%. stern frames,shafts and engines will be available in sufficient quantities to satisfy this In conclusion,the shipyards,now entering the great surge in production.In addition,there second phase of the investment cycle,must may have been“overselling”.The high prices demonstrate they can build the order book to created an incentive to sell as many ships as schedule and their customers must arrange possible,but the shipyards'sales forces may not finance in increasingly difficult circumstances. always have fully understood the practical If they are successful,the world fleet will grow difficulties of commissioning new facilities, by a third during 2007-10.If not,as the saying even in existing yards.Finally there is the goes "it's an ill wind that blows nobody any question of finance.Since the order book good". Clarkson Research Services 12 Autumn 2008

Clarkson Research Services 12 Autumn 2008 SHIPPING MARKET OUTLOOK The shipyards have a very big order book and the circumstances in which it was created presents investors with a tricky task in assessing how things will develop over the next two years. The problem is that the great expansion in shipyard output scheduled over the next couple of years was a rush job. The shipyards limped into the boom of 2003 with a short order book and no thought of expansion. Shipyard Capacity Plans As a result, when the freight boom took off in 2003 the yards had little additional capacity to offer and the surge of demand for new ships was mainly channelled into prices, doubling the newbuilding price index from 90 to 180 (see Figure 1.3.4). The high prices made shipbuilding very profitable and, as the shipyards became convinced the boom was here to stay, they set about expanding existing facilities and building new yards. This new capacity started to be marketed in 2006, and the first deliveries from it appeared in 2008. As a result shipbuilding deliveries developed in two separate phases. The first phase from 2003- 2007 reflected the limited available capacity and a small increase in shipyard production. For example, output increased by only 7% in 2006 and 5% in 2007. The second phase started in 2008 with the commissioning of new capacity. Deliveries should increase by 32%, followed by 48% in 2009, and 18% in 2010. The problem for market analysts is that, because the expansion plans were developed in haste, it is not clear whether implementation will be as clear-cut as the order book suggests. There are questions about whether the production management; skilled labour; and the supply of key components such as propellers, stern frames, shafts and engines will be available in sufficient quantities to satisfy this great surge in production. In addition, there may have been “overselling”. The high prices created an incentive to sell as many ships as possible, but the shipyards’ sales forces may not always have fully understood the practical difficulties of commissioning new facilities, even in existing yards. Finally there is the question of finance. Since the order book extends for years ahead, many shipping companies preferred to defer financing. Questions over pre-delivery finance, which requires a first-class bank guarantee, and the post delivery finance for vessels ordered at such high prices remains a matter of conjecture, especially against the background of the deepening credit crisis. For all these reasons, the growth of the world fleet, which is generally quite straightforward to predict a couple of years ahead, has taken on a new and "fuzzy" character. With a third of the order book in new facilities, we feel that slippage of 20% or even 30% is quite likely. No doubt there will be some cancellations also, though once shipyard contracts are signed, history says they are usually built - but in today's credit climate, who knows? Order Book by Type Investment during 2007 hit a record $240bn, and in the year to August 2008 $104bn had been invested. Although this is a 35% fall it is still higher than in any year prior to 2007. In September 2008 the tanker order book of 188m dwt accounted for 48.1% of the fleet; the bulk carrier order book of 288m dwt for 70.3% of the fleet; LPG orders of 5.2m m³ for 31.6% of the fleet; the LNG order book of 17.7m m³ for 48% the fleet; and containership orders of 6.5m TEU for 54.4% of the fleet. By any standards these are very high order book figures. Shipbuilding Prices Newbuilding prices continue to edge up, with the Clarkson Index up 3% in the year to September 2008. Prices for VLCCs, which were in demand, increased by around 10% to $162m, and other sizes followed a similar trend. But bulker prices, which were heavily ordered in 2007, only edged up by 1-2%. In conclusion, the shipyards, now entering the second phase of the investment cycle, must demonstrate they can build the order book to schedule and their customers must arrange finance in increasingly difficult circumstances. If they are successful, the world fleet will grow by a third during 2007-10. If not, as the saying goes "it's an ill wind that blows nobody any good". 1.3 The Shipbuilding Market

SHIPPING MARKET OUTLOOK 1.4 The Demolition Market We recorded only two bulk carrier sales.which is hardly surprising in view of their high level In the booming freight markets of the last six of freight earnings.But 15 small cellular months,it is hardly surprising that demolition is containerships were scrapped,along with 5 negligible,with only 167 ships of 5.3m dwt general cargo liners;1 tramp;8 ro-ros;and 31 scrapped.Although 50%above the same period reefers of 11m cu.ft in total.The other notable of last year,it is way below trend.The normal area of activity was LPG where 13 ships of scrapping rates for a 1bn.dwt fleet with an 386,000 dwt were scrapped,including some average vessel life of 28 years is 35m dwt a VLPG vessels. year. Regulation 13 G Phase-out So current scrapping levels are about 75% below trend,as Figure 1.4.1 demonstrates. The progression towards the phase-out of Scrapping was under 5m dwt in 1991,rose to tankers under Regulation 13 G continues and 18m dwt in 1992 and peaked at 30m dwt in remains as controversial as ever.Currently no 1999.But only in the last three years has single hull tankers are trading in the Atlantic, scrapping fallen to such a low level due to the other than some vessels loading cargo in West strength of the market.If freight rates fall Africa for India.But in the Pacific and Asia substantially,scrapping is likely to pick up to single hull tankers continue to be used in many 20m dwt a year or more.A rough idea of the trades.However,the future remains as murky volumes can be obtained from the tanker and as ever.Following the "HEBEI SPIRIT" bulk carrier fleet age profiles shown in figures incident in South Korea in December 2007, 1.4.3 and 1.4.4.The tanker fleet is now many argued that all the vessels trading in the relatively young;with only around 5m dwt a Pacific and Asian areas would be phased out year in the 20-25 years old age bracket,but the promptly on their anniversary date in 2010. bulk carrier fleet is relatively old,with 10-15m However,a number of countries have said they dwt a year in the 20-25 years old age bracket. will continue to accept single hull tankers (or have not said that they will not),and some well- Demolition Prices placed commentators have recently suggested that some of the single hull vessels will trade Demolition prices,which were around $450/ldt on.Ultimately the market will probably decide. in 2007,increased to $600/ldt in 2008,tracking steel prices which touched $1,000/tonne in Spring 2008.Since then demolition prices have World Fleet Age Profile 90 m.dwt eased back to $580/ldt in September for a bulk Others year to date carrier and $600/ldt for a tanker. 80 ▣Gas Carriers Cellular Containerships Demolition by Region 70 Bulkcarriers ■Tankers About two-thirds of demolition activity in 2008 60 Based on total world fleet of took place in Bangladesh.China bought only 36.628 vessels. one deep-sea vessel,India just 1.2m dwt and 0 Pakistan purchased a mere 0.4 m dwt. 40 Demolition By Ship Type 30 Tankers accounted for almost three-quarters of 20 the ships demolished in the first nine months of 2008,with 3.6m dwt of ships scrapped.This 10 included 5 VLCCs,2 Suezmaxes 7 Aframaxes and some handy tankers.The single hull tanker phase-out date is now less than two years away. Source:Clarkson Research Services Clarkson Research Services 14 Autumn 2008

Clarkson Research Services 14 Autumn 2008 SHIPPING MARKET OUTLOOK In the booming freight markets of the last six months, it is hardly surprising that demolition is negligible, with only 167 ships of 5.3m dwt scrapped. Although 50% above the same period of last year, it is way below trend. The normal scrapping rates for a 1bn. dwt fleet with an average vessel life of 28 years is 35m dwt a year. So current scrapping levels are about 75% below trend, as Figure 1.4.1 demonstrates. Scrapping was under 5m dwt in 1991, rose to 18m dwt in 1992 and peaked at 30m dwt in 1999. But only in the last three years has scrapping fallen to such a low level due to the strength of the market. If freight rates fall substantially, scrapping is likely to pick up to 20m dwt a year or more. A rough idea of the volumes can be obtained from the tanker and bulk carrier fleet age profiles shown in figures 1.4.3 and 1.4.4. The tanker fleet is now relatively young; with only around 5m dwt a year in the 20-25 years old age bracket, but the bulk carrier fleet is relatively old, with 10-15m dwt a year in the 20-25 years old age bracket. Demolition Prices Demolition prices, which were around $450/ldt in 2007, increased to $600/ldt in 2008, tracking steel prices which touched $1,000/tonne in Spring 2008. Since then demolition prices have eased back to $580/ldt in September for a bulk carrier and $600/ldt for a tanker. Demolition by Region About two-thirds of demolition activity in 2008 took place in Bangladesh. China bought only one deep-sea vessel, India just 1.2m dwt and Pakistan purchased a mere 0.4 m dwt. Demolition By Ship Type Tankers accounted for almost three-quarters of the ships demolished in the first nine months of 2008, with 3.6m dwt of ships scrapped. This included 5 VLCCs, 2 Suezmaxes 7 Aframaxes and some handy tankers. The single hull tanker phase-out date is now less than two years away. We recorded only two bulk carrier sales, which is hardly surprising in view of their high level of freight earnings. But 15 small cellular containerships were scrapped, along with 5 general cargo liners; 1 tramp; 8 ro-ros; and 31 reefers of 11m cu.ft in total. The other notable area of activity was LPG where 13 ships of 386,000 dwt were scrapped, including some VLPG vessels. Regulation 13 G Phase-out The progression towards the phase-out of tankers under Regulation 13 G continues and remains as controversial as ever. Currently no single hull tankers are trading in the Atlantic, other than some vessels loading cargo in West Africa for India. But in the Pacific and Asia single hull tankers continue to be used in many trades. However, the future remains as murky as ever. Following the “HEBEI SPIRIT” incident in South Korea in December 2007, many argued that all the vessels trading in the Pacific and Asian areas would be phased out promptly on their anniversary date in 2010. However, a number of countries have said they will continue to accept single hull tankers (or have not said that they will not), and some wellplaced commentators have recently suggested that some of the single hull vessels will trade on. Ultimately the market will probably decide. 1.4 The Demolition Market World Fleet Age Profile 0 10 20 30 40 50 60 70 80 90 <=1973 1977 1981 1985 1989 1993 1997 2001 2005 Source: Clarkson Research Services m. dwt Others Gas Carriers Cellular Containerships Bulkcarriers Tankers year to date Based on total world fleet of 36,628 vessels