What Is On the Horizon?Marine Money Shanghai

November 8, 2016

Agenda

• Where We Stand Now

• Transitions: Cyclical & Structural

• Investment Risks & Returns

2

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$U

SD/D

ay

Average Panamax, Aframax, & 2,000 teu TC Rates

Marsoft Shipping Index

3

Value Today: $10,400All-Time High: $43,500All-Time Low: $7,100

Shipping’s “Lehman Event” (Gerry Wang, CEO of Seaspan)

• Hanjin ≈ 3% of global liner fleet; insolvency impact global

– Shockwaves spread quickly beyond shipping markets

– Short term boost for box & charter rates due to disruption

– Korean government response may signal change in policy

• How will the industry be reshaped?

– True Consolidation – how hard will Maersk push?

– Japanese liners – NYK, MOL, and K Line join forces

– COSCOCS

• Banking sector– Funding gap

4

Agenda

• Where We Stand Now

• Transitions: Cyclical & Structural

– Demand

– Fleet Capacity

• Investment Risks & Returns

5

Global Growth Outlook Keeps Deteriorating

6

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Pe

rce

nt

Ch

ange

, ye

ar-o

n-y

ear

IMF Forecasts of Global Macro Growth

Forecast Apr-2011 Forecast Apr-2012 Forecast Apr-2013 Forecast Apr-2014

Forecast Apr-2015 Forecast Apr-2016 Forecast Jul-2016 Actual

Trade Intensity of Growth is Changing

7

Trad

e In

ten

sity

(ra

tio

tra

de

gro

wth

to

GD

P g

row

th)

Chinese Iron Ore Imports Set to Rise Despite Falling Steel Output

8

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mill

ion

To

nn

es

(60

% F

e)

Iron Ore Required Domestic Production

Chinese Production Not Profitable Below $70/tonneImports

1,017

7%

Imports 953

• Global supply has growth potential– North American output stopped growing,

although new discoveries will boost output in coming years

– Chinese crude production fell 10% in 2016 as expensive fields shut down

• Demand driven by China and India– Chinese consumption to grow 2.5% p.a. thru 2020

– China and India have been main sources of growth and will continue strategic builds

– OPEC Output must grow about 2.2% pa to meet gap

China Is A Key Driver of Oil Demand Growth

9

10

11

12

13

14

15

16

17

18

19

$0

$20

$40

$60

$80

$100

$120

Pro

du

ctio

n (

MB

D)

Oil

Pri

ce (

$U

SD/B

BL)

Oil Price North America Oil Production

Trade Multiplier: Rebound Likely if GDP Growth Accelerates

10

Fewer Ships on Order

11

Segment

Orderbook / Fleet

RatioProjected Fleet

Growth (YoY)

2016 – 2018* 2010 2016

Tankers 28% 17% 3.9%

Dry Bulk 59% 14% 1.2%

Containership (<5,000 TEU) 9% 6% -1.1%

Containership (>5,000 TEU) 59% 22% 8.1%

*) Including future orders

Agenda

• Where We Stand Now

• Transitions: Cyclical & Structural

• Investment Risks & Returns

12

Are Assets Mispriced?

13

$0

$10

$20

$30

$40

$50

$60

$70

Panamax Supramax Product VLCC 1,000 TEU 4,300 TEU

$M

M U

SD

Current Prices vs. Benchmarks

Lowest Ever Current Median

Lowest Ever and Median calculated over 1980 – 2016 period No adjustment for inflation

Where are the Mis-Priced Assets?

14

1000 TEU

2500 TEU

4800 TEU

9000 TEU

Handy

Handymax

Panamax Cape

MRAframax

Suezmax VLCC

140k CBM LNG

170k CBM LNG

0%

5%

10%

15%

20%

25%

30%

2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%

Bas

e C

ase

IRR

Base - Low IRR Difference

3-year All Equity 5-year-old Investment IRRsWith Capital Gain, in Marsoft's 16Q3 Base Scenarios

Confidential

Marsoft Helps Clients Anticipate Market Threats and Opportunities and

Act to Maximize Risk-Adjusted Returns

www.marsoft.com – info@marsoft.com

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