CLARKSON RESEARCH SERVICES LTD

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1 Tanker Market Outlook In its second year of the eruption Martin Stopford, Managing Director, Clarkson Research 1th May 21

2 Today s Agenda 1) How the Eruption s Going 2) The Tanker Market Model 3) The World Economy 4) Shipbuilding 5) Tanker Demand 6) Oil Tanker Supply 7) Outlook 8) Conclusion Less a disaster, more a dust up

3 WHEN DO YOU EVACUATE? Although it may seem safe to stay at home and wait out a disaster, doing so could be very dangerous. For example, the rock debris from an exploding volcano can break windows and set buildings on fire. Stay safe. Follow authorities instructions and leave the area. US Navy disaster preparedness office, Naples Disaster supply kit

4 Tanker Market Eruptions Freight cost $/ba arrel Boom s Recession The chart shows annual average transport cost per barrel of oil AG to Rotterdam (excluding port costs) s Recession Boom Boom Boom Operating costs Boom Boom 27 21*

5 d a y e a r $ / Tanker Earnings $8 Crude Tankers 12 M onth Average Products Tankers 12 Month Average $7 $6 $4 n i n g s$5 $3 $2 $1 $ Chart shows 12 month moving average of tanker earnings (i.e. $23,/day is average for crude tankers Mar 29 to April 21 ) 1 Asia Crisis 2 New record for tanker earnings $71,/day 3 4 J a n - 9 J a n J a n J a n J a n J a n J a n J a n J a n J a n J a n - J a n - 1 J a n - 2 J a n - 3 J a n ' 4 J a n ' 5 J a n ' 6 J a n ' 7 J a n ' 8 J a n ' 9 J a n '1

6 Tanker Earnings Monthly April 21 $2 VLCC Suezm ax A fram ax Products $18 $16 $14 $12 $1 earning s $8 $6 $4 $2 $ $ /day J an-9 J an-91 J an- 9 2 J an-93 J an- 9 4 J an-95 J an-96 J an-97 J an-98 J an- 9 9 J an- J an- 1 J an-2 J an- 3 J a n ' 4 J a n ' 5 J a n ' 6 J a n ' 7 J a n ' 8 J a n ' 9 J a n '1 Figure 11 Tanker earnings trends 24 to 21

7 Tanker Prices Bottom Out VLCC Price hit trough of $62.5 MM in Sept 22, but in 28 reached $16 MM New price was down 4% to $97MM but has now edged back up to $99MM 5 year old was down to $8MM but up to $82MM this month Price $ m ill l io n 195 New VLCC Year Old VLCC '9 '9 '9 '9 '9 ' ' ' ' ' '1

8 per da ay $ VLCC Cost & Revenue Note: this chart shows month by month the cost of a New VLCC depreciated over 2 years, paying interest at LIBOR (no spread), and OPEX $9,/day 9 3 Year TC This is the 3 year time charter rate for a modern ship Interest Depreciation Operating Costs Cost now Say $24,/day Ja an '9 Ja an '91 Ja an '92 Ja an '93 Ja an '94 Ja an '95 Ja an '96 Ja an '97 Ja an '98 Ja an '99 Ja an ' Ja an '1 Ja an '2 Ja an '3 Ja an '4 Ja an '5 Ja an '6 Ja an '7 Ja an '8 Ja an '9 Ja an '1 SHIPPING MAJOR BENEFICIARY OF THE FINANCIAL CRISIS

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10 Oil price World Economy Energy Demand 229 m bpd Oil Demand 85 m bpd Local Oil Production 47.1 m bpd 29 Trade CRUDE IMPORTS 37.9 m bpd W. Europe 1.1 m bpd N. America 6.6 m bpd Japan 3.5 m bpd S. Korea 2.5 m bpd India 3. m bpd China 3.5 m bpd Singapore 1 1. m bpd Other Asia 2.6 m bpd Others 2.9 m bpd PRODUCTS 16 m bpd Asia 5. m bpd CRUDE EXPORTS 37.9 m bpd Long Haul Middle East 14 m bpd 6-12, m Short Haul N. Sea 2.7 m bpd L. America 3.9 m bpd Africa 6.7 m bpd Indonesia.3 m bpd FSU m bpd Others 3.6 m bpd Oil Traders Demand Time charter Own Trade Cargo Owners 16 W/S VLCC 3 Month Av. Layup Freight market Supply '73 '75 '77 '79 '81 '83 '85 '87 '8 9 '91 '93 '95 '97 '99 '1 Shipowners FLEET 439 m dwt Orderbook 129 m dwt VLCCs 162 m dwt Suezmax 62 m dwt Aframax 9 m dwt Panamax 28 m dwt Products 99 m dwt Scrapping 9 m dwt Shipyards Bank Credit Policy Deliveries 49 m dwt Cash Refinery Consumer

11 M. Dwt 6 Supply/Demand Balance Tanker Market Balance % S urplus 6% Available tanker fleet Surplus tanker capacity Fleet growing slower than demand due to low investment t Tanker demand growing faster than supply Surplus? 5% 4% 3% 2% 1% % -1%

12 M. Dwt Supply/Demand Balance Tanker Market Balance Available tanker fleet Supply now ahead of demand but floating storage and falling oil transport by the single hull fleet has disguised the surplus so far Tanker demand runs ahead of supply 23-7 % S urplus 6% Fall in demand in 29 5% 4% 3% 2% 1% 1 Surplus tanker capacity % Surplus? -1%

13 Predicting what is going to happen next in the world economy is very difficult. There are so many obscure consequences These volcanoes are not very easy to model

14 World GNP & Oil Trade Growth Oil trade % growth 14% 12% 1% 8% 6% 4% 2% % -2% -4% -6% -8% -1% Oil trade forecast Oil Trade (left axis) World GDP (right axis) the forecasts (yellow line) show substantial bounce back Oil trade (left axis) fell 3.7% in 29 World GDP % growth 7% 6% 5% 4% 3% 2% 1% % -1% -2% st Oil Crisis nd Oil Crisis Figure 8 World GDP cycles 1966 to Financial Crisis 1997 Asia Crisis 21 Dot.com crisis

15 $/Barrel Brent Crude The Oil Price 135 Oil price $7/bbl in This involved an increase in the world oil bill of $1.5-2 trillion EIA forecast June Oil price started to escalate in IEA s 3 year planning scenario 23 was $24/bl 15-5 Ja an- Ja an-1 Ja an-2 Ja an-3 Ja an-4 Ja an-5 Ja an-6 Ja an-7 Ja an-8 Ja an-9 Ja an-1 Ja an-11

16 Index 1992=1 Industrial Production Asian Economies Index 1992=1 14 (excluding Japan) Atlantic economies Feb Feb Feb Feb Feb Feb Feb Feb '3 '4-5 '6 '7 '8 '9 '1

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18 World Energy: Oil Losing market share % total t world energy demandd 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % COAL Oil Demand Over the last decade oil s share of total energy demand has fallen by 4.2% NUCLEAR BY 215 Oil -2% Coal +3% GAS Gas +%

19 World Oil Demand & IEA Forecast World oil demand is very cyclical In 28 oil demand was expected to grow, but it fell to 84m bpd in early 29 The forecast is not very exciting Million bpd world oil demand Oil demand falls to 84 mbpd Q99 9 1Q 1Q1 1 1Q2 1Q3 World Oil Demand World fortecast Source: IEA Monthly Review of Oil Industry 1Q4 1Q5 1Q6 1Q7 1Q8 1Q9 1Q1

20 World Oil Demand & IEA Forecast World oil demand is very cyclical In 28 oil demand was expected to grow, but it fell to 84m bpd in early 29 The forecast is not very exciting Million bpd world oil demand Oil demand falls to 84 mbpd World Oil Demand World fortecast Importer demand f 1Q99 9 1Q 1Q1 1 1Q2 1Q3 1Q4 1Q5 1Q6 1Q7 1Q8 1Q9 1Q1 Source: IEA Monthly Review of Oil Industry

21 Oil Demand Trends for In 25N American oil demand hit a plateau at m bpd, before falling to 23 m bpd in 29. EIA 2. says demand has peaked out 15. Europe has settled down at 15 m bpd China and other Asia are 1. growing but are still quite small consumers 5. Millio n barrels per day IEA Forecast April 21 N America Europe Other Asia China

22 Demand for tankers fell by about 2.7% in 29 A 3.7% fall in trade was partly compensated by falling efficiency of the single hull tanker fleet and tankers used for temporary storage But this was the biggest fall in tanker demand since the 198s Now recovering Tanker Demand dwt Million 5 Base Case 45 Tanker demand We estimate Tanker demand d fell by roughly 3% in

23 The shipping market is in danger of being run over by a large lava flow The lava flow is coming!

24 World Container Orderbook M dwt o18 m dw t o n rd er Following a decade with a very small orderbook, container investors were the first in the market and started building the orderbook in early 23 Orderbook 15% of the fleet in May 1998 The orderbook peaked aty 6.5 m TEU (6% of the fleet) in uary 28 CONTAINERSHIP ORDERBOOK (Mill TEU) m illio n t eu on order '1

25 Container & Tanker Orderbook M dwt o18 m dw t o n rd er Tanker Orderbook peaks at 48% of the fleet in September 28 Containers (right axis) Tankers (left axis) Tanker investors started to invest seriously in uary 26 and the orderbook TANKER ORDERBOOK m illio n t eu on order '1

26 M dwt m dwt on order World Orderbook Containers (right axis) Tankers (left axis) Bulkers (left axis) Note how container investors started t building the orderbook in 23, three years ahead of bulk investors Bulk carrier orderbook takes off in 27, peaking at 73% of the fleet in October on orde er mil llion teu '1

27 Shipbuilding Bubble: Delivery Profile GT Del iveries M illion The blue bars show projected output in March 29 and the yellow line shows the latest projection An investment bubble is trade in high volumes at prices that are considerably at variance with intrinsic values Restructuring of capacity % slippage In 21? 25% slippage In /5/ % Slippage In 211?

28 VLCC New Prices Down 33% $/million VLCC $14 newbuilding price $12 $1 $8 $6 $4 $2 $ s Recession Year End

29 Single Hulls to be phased out by 21

30 Non-Double Hull Fleet By Size & YOB Million Dwt (year en nd) Double Hull April 21 Single hull April 21 Double Hull Single Hull The Single hull fleet was 45 million dwt at the end of April 21. Scrapping below expectation SINGLE HULL TANKER FLEET Tanker fleet 441 m dwt April

31 Single Hull Tankers by M Dwt Single Hull Tankers in M Dwt As of 1 st April 21 there are 2.m dwt of single hull VLCCs, 2.6m dwt Suez, 2.7m dwt Afra, 1.4m dwt Panamax and 6.3m dwt Handys left in the fleet VLCC Aframax Handy Source: Clarkson Research Services, April 21 Suezmax Panamax

32 Single Hull Spot Fixtures Single Hull Spot Fixtures, total number In each year VLCC SUEZ AFRA Source: Clarkson Research Services, April 21 The graph shows the total number of spot fixtures recorded in each year for the crude carrying sectors for single hull vessels. As of 22 nd April 21, only 56 VLCC single hull spot fixtures have been recorded in 21 year to date, 11 Suezmax and 22 Aframax.

33 Single Hull Trading Patterns No of VLCC Spot Fixtures in 24 1 AG- Japan AG- Singapore 14 3AG- Korea 1 4 AG- South China 84 5 AG- West Coast India 75 6 AG- Taiwan 66 7 AG- Thailand 61 8AG- US Gulf 32 9WAF- US Gulf 19 1 AG- South America 18 Others 672 Total 841 No of VLCC Spot Fixtures in 29 1 AG- Thailand 69 2AG- Korea 47 3 AG- West Coast India 41 4AG- Taiwan 37 5 AG- South China 23 6 WAF- West Coast India 15 7 WAF- East Coast India 9 8 AG- Singapore 7 9 AG- East Coast India 7 1 AG- Red Sea 6 Others 21 Total 282 No of VLCC Single Spot Fixtures, 21 ytd 1 AG-Thailand 16 4 AG- West Coast India 11 2AG- Taiwan 1 3AG- Korea 7 5 AG- South China 3 6 AG- East Coast India 2 7AG-AG 1 8 AG-Singapore 1 9 WAF- West Coast India 1 1 Japan- Taiwan 1 Others 3 Total 56 AG- East trades remained active for VLCCs through 21, as did discharges in India from West Africa. The Atlantic has effectively remained closed to spot trading single hulls since 25. Saudi Arabia are not expected to accept single hulls from 211 onwards.

34 Single Hull Phase-Out in 21 1 Single Hull Phase-Out in 21 by Month 1 Single Hull SCRAPPING in 21 by Month 8 VLCC Aframax Suezmax Panamax 8 VLCC Aframax Suezmax Panamax 6 Handy 6 Handy Feb Mar Apr May Jun Jul Aug Sep Oct Nov Source: Clarkson Research Services, uary 21 Dec Feb Mar Apr May Jun Jul Aug Sep Oct Nov Source: Clarkson Research Services, April 21 Dec

35 Tanker Orders, Delivs & Demo Million dwt VLOC Conv 9 FPSO Conversion Orderbook 8 Deliveries 7 Deliveries Forecast Demolition forecast 6 27 Orders Orders Demolition Strict phase out profile based on Reg 13G and 25 m dwt con- 21 orderbook of 52 m dwt cut back to 46 m dwt 211 orderbook of 48 m dwt cut back to 44 mdwt Figure 13: Tanker orders, deliveries, scrapping and future deliveries

36 Tanker Fleet Scenario Since the boom started in 23 there has been a great surge in the tanker fleet After growing g by less than 5 million dwt between 199 and 23, in the last seven years it has increased by 15 million dwt There is still another 139 million dwt on the orderbook so the fleet is likely to grow to 55 m dwt by end 214 dwt Million 6 55 Tanker Fleet Forecast 5 Tanker Fleet

37 We must start out with the premise that forecasting is not a respectable human activity and not worthwhile beyond the shortest t of periods Peter Drucker the one management thinker every educated person should read

38 Tanker Supply/Demand Balance M. Dwt Surplus tanker capacity (right axis) Available tanker fleet Supply now ahead of demand but floating storage and falling oil transport by the single hull fleet has disguised the surplus so far % Surplus Fall in demand in 29 6% 5% 4% 3% 2% 2 1 Tanker demand runs ahead of supply 23-7 Tanker demand falls by 35% in the 198s recession 1% % -1% Figure 1: Supply demand balance for tankers (estimate only)

39 Tanker Supply/Demand Balance MDwt % Surplus 6% 5 4 Surplus tanker capacity (right axis) Fleet growing faster than demand due to deliveries 5% 4% Available tanker fleet (mid year) Tanker demand growing g less than fleet 3% 2% 1% % -1% Figure 3: Supply demand balance for tankers (estimate only)

40 Wild Cards We didn t use the right assumptions China coal supply Congestion in Bosphorus Nigerian tribal war Nuclear problems Hurricanes Contango/storage at sea These have a bigger impact in a tight market!

41 Three Oil Transport Cost Scenarios Afram max Tanker Earnings $/day 24 1 (Aframax tanker earnings based on $39,/day portfolio of routes.) super cycle with rather high 9 blood pressure "Rates boomed" "Worst ever" $8,7/day Super-Slump 1989 Far Better! 1992 A year owners would rather forget 1991 $16,/ day 1999 What a miserable six months 1997 A significant upturn $15,6/day 2 $5,/day Wow Dr ress reh earsal $37,226/day Super-Boom Scenario Updated 22 Mar 9 Source: Clarkson Research Services Ltd

42 What An International Group Thinks Probability of occurring % 2% 4% 6% I showed the three scenarios to an international group drawn Scenario 1 from banks, shippers and 25% (Low) shipping companies mostly middle management I asked them to give the Scenario 2 probability of each scenario occurring (Mid) The results are shown opposite they were optimistic Scenario 3 (High) 34% 41%

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44 LNG Deliveries Almost All Delivered! Millio on M3 Delivere ed 1 Under 4k 6-1k k Over 14k Column 5 Orderbook

45 Gas Trade Not Delivering Yet 28 LNG Trade LNG Fleet Million tonnes LNG (e) LNG Fle et M dwt

46 1. Tanker markets have always been cyclical and in the last two years we had a volcanic eruption. 2. The tanker shortage of the 2s has turned into a surplus in the 21s 3. Sentiment is moving towards Scenario 3, but Scenario 1 or 2 have significant probabilities 4. The possible surplus is large and European shipping is navigating g through difficult and unknown seas. 5. I am optimistic we have the seafaring skills to do this, but I don t underestimate the scale of the challenge for Europe in the coming decade. 12/5/21 46

47 Disclaimer The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the Company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does not obviate the need to make further appropriate enquiries and inspections. Forecasts are frequently wrong and the information on which they are based is not always accurate, so they are not a reliable basis for business decisions. Always consult as many sources as possible and check the validity of each to the extent the decision justifies. The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services Limited, England, No Registered Office at St. Magnus House, 3 Lower Thames Street, London, EC3R 6HE.