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01 September 2015 SAFER, SMARTER, GREENER1 DNV GL © 2014

01 September 2015Jakub Walenkiewicz

MARITIME

Market Update – Time to redesign our models?

INCENTRA Council Meeting - Haugesund

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01 September 20152

JM Keynes – AGGREGATED DEMAND

Boost the economy

Increase spending

CREATE additional demand! (called aggregated demand)

USE public sector if the private one is insufficient

John Maynard Keynes

British economist

1883-1946

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01 September 20153

Contracting vs earnings

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01 September 20154

Demand vs Supply

Seaborne trade growth has been satisfactory, with annual growth 3-4%

Sizable drop in world trade in 2009 is casually neglected

Yet the fleet growth is notoriously faster then demand

There seems to always be a reason to contract a new ship

6-8%

3-4%

5-6%

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01 September 20155

Reasons for contracting

Renewal

Purpose built (for complex projects)

Trading areas – ECA

Cargo demand (very specific segments only)

Counter cyclical orders

Capital availability (PE)

Increased efficiency and/or competitiveness

Incentive schemes (i.e. China)

Limited capacity in yards?

“Last one in the queue” syndrome

Stakeholders pressure

“my ship will be ready by the time the market has recovered”

currency exchange

killer offers from yards (and financiers)

Reasonable Speculative/political Insane

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Contracting 2015 1H

Av. 3

50/m

onth

Av. 250/m

onth

Av. 150/m

onth???

Continued slow-down in the NB market

Substantially lower volume of contracts– 1H 2015 over 50% below 1H 2014

South Korea - 38% share (GT) :

– crude, container, products, gas

China – 27% share (GT):

– crude, bulk, containers, gas

Japanese - 25% share (GT):

– bulk, containers, crude, products, gas

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01 September 20157

“doing the same thing over and over again, each time expecting different results”

INSANITY

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01 September 20158

New contracts activity

Obvious slow down y-o-y

Biggest correction in bulk and offshore segments

Despite fewer vessels ordered, the tanker segment remains strong

Container market stronger!

Still positive sentiment in the gas sector despite large orderbook

So far 1050 contracts (41.9 mill. GT)

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01 September 20159

World Seaborne Trade

Seaborne trade in 2014 reached 10.537 billion tonnes

Expected growth in 2015 – 10.959 billion tonnes (UP 4.1%)

Iron Ore + 6.4%

Coal + 2.3%

Crude Oil + 1.4%

Oil Products + 3.4%

Containers + 7.1%

Gas & Chem + 5.1%

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Orderbook composition

Ship Type Number of vessels Share (%) DWT Share (%)Bulker 1624 24,7 % 133963997 46,0 %Tanker 1027 15,6 % 78851704 27,1 %Container 445 6,8 % 40511835 13,9 %LNG Carrier 159 2,4 % 12354974 4,2 %Offshore 1317 20,0 % 10806838 3,7 %LPG Carrier 220 3,3 % 6934009 2,4 %Dry Cargo 337 5,1 % 4445869 1,5 %Roro 128 1,9 % 1513708 0,5 %Miscellaneous 1134 17,2 % 1136413 0,4 %Pass./Ferry 175 2,7 % 484395 0,2 %Reefer 9 0,1 % 68060 0,0 %

0,0 % 0,0 %Grand Total 6575 100,0 % 291071802 100,0 %

Orderbook acc. by ship type as of 2015.06.01Operator Country Number of vessels Share (%) DWT Share (%)

Greece 397 6,0% 41 309 879 14,2%Singapore 599 9,1% 27 991 740 9,6%China 456 6,9% 23 742 634 8,2%Japan 366 5,6% 18 497 906 6,4%Norway 254 3,9% 12 968 913 4,5%Hong Kong 209 3,2% 10 948 166 3,8%Bermuda 133 2,0% 10 848 428 3,7%Germany 202 3,1% 10 765 474 3,7%Chinese Taipei (Taiwan) 84 1,3% 9 783 895 3,4%Korea (South) 116 1,8% 9 637 972 3,3%Monaco 128 1,9% 9 460 264 3,3%Others 3631 55,2% 105 116 531 36,1%Grand Total 6575 100,0% 291 071 802 100,0%

Orderbook acc. by country of domicile operator as of 2015.06.01Builder Country Number of vessels Share (%) DWT Share (%)

China 2576 39,2% 124 570 167 42,8%Korea (South) 870 13,2% 85 666 353 29,4%Japan 954 14,5% 53 959 996 18,5%Philippines 102 1,6% 8 742 504 3,0%Brazil 161 2,4% 5 607 710 1,9%Romania 74 1,1% 3 263 884 1,1%Vietnam 212 3,2% 2 220 439 0,8%Chinese Taipei (Taiwan) 36 0,5% 1 531 281 0,5%United States of America 131 2,0% 1 291 256 0,4%Croatia 33 0,5% 552 867 0,2%Singapore 84 1,3% 414 318 0,1%Others 1342 20,4% 3 251 027 1,1%Grand Total 6575 100,0% 291 071 802 100,0%

Orderbook acc. by country of domicile builder as of 2015.06.01

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01 September 201511

2009 vs 2015?

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01 September 201512

2015 World Economy – 4 drivers

1. Uneven global growth World – 3.5%

advanced world - 2.4%

developing world - 4.3%

2. Weak banks and high debt public, household, corporate, bank debt

interest rates low

relaxed fiscal policy

3. Low oil prices always good news for oil importers

oil exporters will survive

4. Strengthening of the US dollar substantial help for importing countries

stimulates exporters outside US dollar

Developed economies

World average

Emerging economies

2.1%

4.2%

3.3%

…..and

other

commoditie

s!!!!

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01 September 201513

Commodities

$ 40-ish

$ 55-ish

$ 60-ish

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01 September 201514

Drivers

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01 September 201515

Drivers

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01 September 201516

Weather chart

CRUDE OIL PRODUCTS LNG LPG

BULKERS CONTAINERS OFFSHORE

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01 September 201517

Contracting

Forecast

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01 September 201518

Conclusions

Our models gradually stop working

Read between the lines as supply/demand changes directions and forms

Excess of capacity!

Reduction in the NB activity, shipyards squeezed, orderbook on a downhill trend

…but there are many reasons to order new ships, particularly is there is money to be spent

Don’t expect the supply/demand calculations to provide you with the accurate number of new contracts

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01 September 201519

SAFER, SMARTER, GREENER

www.dnvgl.com

Thank You

Jakub WalenkiewiczJakub.Walenkiewicz@dnvgl.com