Unlawful distribution of this report is prohibited. IFCHOR Group Research

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1 Unlawful distribution of this report is prohibited IFCHOR Group Research Marine Money Geneva Forum - 29 th June 2016

2 DRY BULK SUPPLY OVERVIEW Capacity Surplus... Yearly net fleet change..... FUNDAMENTALS TOWARD SUPPLY RE-BALANCE Order book.. Cancellations Scrapping activity. THE INFLUENCE OF SENTIMENT ON THE RECOVERY PROCESS Factors influencing the market sentiment.. CONCLUSION Ships in scrapping zone and scenarios for the future

3 BDI OVERSUPPLY - Mio dwt Dry Bulk Supply Overview 4'000 3'500 3'000 2'500 2'000 1'500 1' DRY BULK SURPLUS CAPACITY Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 0 BDI OVERSUPPLY at (Weighted actual speed for average number of voyages per year) Source: IFCHOR Research, Seaweb IHS 3

4 Million DWT Dry Bulk Supply Overview 80 DRY BULK FLEET - NET INCREASE Negative but by how much? -10 Dry bulk fleet size < Source: IFCHOR Research, Seaweb IHS 4

5 Number of Ships Fundamentals Toward Supply Re-balance A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE 180 DRY BULK ORDERBOOK ( DELIVERY) Supra Handy Panamax Capesize 0 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Apr-16 May-16 Source: IFCHOR Research, Seaweb IHS 5

6 Fundamentals Toward Supply Re-balance A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE ORDERBOOK CANCELLATION POTENTIAL NOT STARTED YET 45 Mio DWT ORDERS AT CHINESE YARDS 9 34 Already cancelled 14 could be prior cancelling date CHINA PRIVATE YARDS 12 CHINA PUBLIC YARDS 11 Under construction UNDER CONSTRUCTION 57 Mio DWT Other countries China could have passed the cancelling date Source: IFCHOR Research, Seaweb IHS 6

7 Million dwt Fundamentals Toward Supply Re-balance A FLAT ORDERBOOK CANCELLATIONS HIGH DEMOLITION RATE 7 6 MONTHLY SCRAPPING ACTIVITY 5 Improved freight conditions Source: IFCHOR Research, Seaweb IHS 7

8 Influence of Sentiment on the Recovery Process Factors influencing market sentiment: NON-STRUCTURAL POSITIVE TRENDS SHORT TERM RE-ADJUSTMENT MEASURES SLIPPAGE LAY-UP SLOW STEAMING EXPECTATIONS MARKET ROCK-BOTTOM PERCEPTION PAST EXPERIENCE BIAS DEMAND AND SUPPLY FUTURE EXPECTATIONS 8

9 Million DWT Influence of Sentiment on the Recovery Process SLIPPAGE LAY-UP AVERAGE SPEED scheduled delivered on order but not commenced yet Accumulated slippage Mio Dwt scheduled to be delivered in 2016, but not commenced yet 6 BDI Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 * as of June Source: IFCHOR Research, Seaweb IHS 9

10 Number of Capesize Influence of Sentiment on the Recovery Process SLIPPAGE LAY-UP BDI AVERAGE SPEED NOS OF CAPESIZE IN LAY-UP (WEEKLY) 50 ships = 3% of the Capesize fleet BDI 10 0 Week num January February March April May June 10 Source: Marine Traffic, IFCHOR Research

11 Knots Influence of Sentiment on the Recovery Process SLIPPAGE LAY-UP AVERAGE SPEED DRY BULK FLEET AVERAGE SPEED 2016 Ave. speed = 11.4 knots * *Singapore IFO 180 Source: Reuters, BIMCO reports, AXS Marine 11

12 New orders at yards Million DWT Influence of Sentiment on the Recovery Process PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS 30 PAST EXPERIENCE S INFLUENCE ON MARKET SENTIMENT BDI 2010 orders boom 102 Mio DWT China releases its 5 years plan with USD 1trln investments Fleet ave. age: 14 yrs old Memory of the recent prices 2 nd hand prices +25% YoY 2013 orders boom 87 mio DWT China s re-stocking cycle Rock-bottom perception 2 nd hand prices +65% YoY 10 new orders

13 Supply and Demand - Million tonnes Influence of Sentiment on the Recovery Process PAST EXPERIENCE BIAS SUPPLY AND DEMAND EXPECTATIONS SUPPLY AND DEMAND GROWTH 6'000 S +13% S +1.5% 5'500 5'000 S +26% D +19% 4'500 4'000 D +14% D +10% D +0.5% 3'500 Supply D +13% 3'000 2'500 Demand BDI

14 Mio DWT - scrapped Average scrapping age Scenarios For The Future 35'000' '000' yrs old '000' '000' '000'000 total DWT scrapped Average scrapping age '000' '000' Age Profile >20 TOTAL n.ships 3'585 36% 3'342 33% 1'219 12% % 950 9% Mio Dwt % % % % % 10'

15 Scenarios For The Future SURPLUS OF CAPACITY Mio DWT 2017 deliveries 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 - 45 Mio Baseline Scenario 2017demolitions - 40 Mio High Scenario + 30 Mio High Scenario

16 Scenarios For The Future SURPLUS OF CAPACITY Mio DWT 2017 deliveries Hp: o Jan 2017 fleet = 770 Mio DWT o 2017 deliveries = 30 Mio DWT o Stable financial conditions o Seaborne demand 2017: + 0.7% Baseline Scenario China does not acquire the status of market economy: 2017demolitions + 30 Mio - 40 Mio High Scenario Water Ballast Treatment convention is implemented: + 30 Mio - 45 Mio High Scenario

17 Fleet size most likely to increase in However, if the order book remains flat and demolitions maintain the current pace, a net fleet decrease is envisaged for 2017 As seaborne demand struggles to grow, the re-balancing of the Dry Bulk fleet will be heavily dependent upon scrapping activity Non structural supply reductions do more harm than good External disruptive factors affecting fundamentals can lead to a rebalancing sooner than later 17

18 Thank You! Contact: Services: Lausanne Athens Singapore Panamax Capes Projects/S&P Research Hong Kong Genoa Handy/Supra New York Tankers Ship Finance Operations LEGAL DISCLAIMER: The information contained in this report has been obtained from diverse sources. IFCHOR S.A. considers such information to be reliable but IFCHOR S.A. does not guarantee its accuracy or completeness. Whilst every care has been taken in the production of the report no liability can be accepted for any loss or damage incurred in any way whatsoever. This report has been produced for the internal use of the intended recipients only and no reproduction is allowed prior the authorization of IFCHOR S.A. 18