ShipRecycling TheGreatestHopefor Recovery??

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4thIronOreandCoalWorldShipping Summit2012

Agenda
1. 2. 3. 4. 5 5. 6. 7. Industry Facts (Scrapping volumes) Where it is done (Capacity) Prices Which is the right location? Headline Risk? Importance of Ship Recycling Closing Thought g g

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1.Industry Facts (Scrapping Volumes)

As of Sept 15, 2012 about 40.8 million DWT has been recycled vs. total of 40.6 million in 2011
Dry Bulk: 26.1 mill DWT vs. 25.3 mill in 2011 Wet: 10.5 mill DWT vs. 10.4 mill in 2011

In Dry Bulk Sector, Panamaxes and Handymaxes have surpassed last years totals year s In Wet Sector only Suezmaxes and Aframaxes have surpassed y p last years totals T t l scrap volumes i 2012 are expected t i Total in by l t d to increase b 40% over 2011 levels
Source: Clarksons September 2012

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1.1 Bulk Carriers

Sold for Recycling 2011 (No./DWT) 74 11,533,655 69 2012 YTD (No./DWT) 11,123,455

Capesize

Panamax

66

4,481,196

75

5,070,401

Handymax

48

2,239,479

74

3,374,724

Handysize

291

6,536,167

236

6,169,930

Minibulk

86

511,316

57

384,288

Total

565

25,301,813

511

26,122,798

Source: Allied Shipbroking Inc. September 2012

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1.2 Tankers
Sold For Recycling ULCC VLCC Suezmax Aframax Panamax Product Minitank Total 2 12 7 28 6 68 44 167 2011 (No./DWT) 618,576 3,239,246 1,002,063 2,656,659 411,956 2,207,837 225,574 10,361,911 2 8 21 30 3 48 20 132 2012 YTD (No./ DWT) 614,016 2,097,570 3,089,604 2,894,682 206,005 1,517,494 113,742 10,533,113
Source: Allied Shipbroking Inc September 2012

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1.3 Historical Highs 1985 42 6 Milli D t 42.6 Million Dwt 9 Million LDT 2012 Already 40.8 Million Dwt
1985 - 2012 Comparison
45

40

35

1985 2012

30

25

20 1985 2012

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2. Where it is done (Capacity)

Number of yards in each Country:
Indian subcontinent India (200) Bangladesh (35) Pakistan (50 of 125) China (20) Turkey (32) ________

Note: all figures are approximates

These 5 countries (with 80% Asian) recycle more than 90% of the worlds fleet.

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3. Prices
3.1 BDA: 9/2011 9/2012
600

550

500 D/TKR CHINA D/TKR SUBCON 450 C/TKR CHINA C/TKR SUBCON B/C CHINA 400 B/C SUBCON

350

300 9-5-2011 10-5-2011 11-5-2011 12-5-2011 1-5-2012 2-5-2012 3-5-2012 4-5-2012 5-5-2012 6-5-2012 7-5-2012 8-5-2012 9-5-2012

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3-2. Factors affecting Pricing

1. 2. 3. 4.

Supply Demand Capacity Domestic Fundamentals Steel Prices Currency y Government Regulations

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3.3 Fleet Investment

Many owners see an opportunity to capitalize on the current market and attempt to modernize their fleets. In addition to the various financing options (Cash reserves, Equity and Debt Financing), Cash surplus generated by ship recycling sales (including 30% cash deposits on sales)and Bareboat charter options have become relatively common.

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4. Which is the right location?

Containers:
India is the right place Decision lies with the shipowners Delivery expenses affect the choice

Bulk Carriers:
All markets respond to this type of tonnage The key is the size of the vessel Bangladesh has absorbed majority of Capes g j y India digests Handymax - Handysize

Tankers:
Buyers in Pakistan have show their interest Increased supply of Suezmax and VLCC Pakistan free for hot-works P ki t provides th d id the demand and gas f f h t d d k

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4. Which is the right location?

India Containers Handymax Panamax General Cargo Aframax Handysize Reefers g Bangladesh VLOC Capes Panamax VLCC Suezmax Handymax General Cargo Pakistan ULCC VLCC Suezmax Aframax Panamax Handymax General Cargo

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5. 1 Headline Risk? MV Asia Union

(Bulk Carrier/ 70,912 DWT/ 1982/ South Korea)
BBC News, Anbarasan Ethirajan,September 2011: Toxic Ship MV Asia Union leaves Bangladeshi waters Environmental groups said the vessel might possess hazardous substances including asbestos, toxic paints and chemical residues which are harmful to human health and the environment. Environmentalists allege that many old ships come with hazardous materials which Environmentalists are dumped in coastal areas, posing a danger to the environment and to workers.

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5.2 Headline Risk? Oriental Nicety ex Exxon Valdez

(Ore Carrier / 213,555 DWT/ 1986 / USA) 213 555
NGO Shipbreaking Platform, March 2012: Media Alert-Toxic ship Exxon Valdez sent for dismantling Basel Action Network: It is outrageous that this ship, that has already created one environmental catastrophe is being allowed to kill and pollute yet again Global Marketing Systems (GMS) a US company specialised in the brokering of Global (GMS), vessels for demolition recently bought the ship. NGO Shi b ki Pl tf Shipbreaking Platform, August 2012: Exxon Valdez Prompts Indias A t 2012 E V ld P t I di Supreme Court to Blow Whistle on Toxic Shipbreaking Beaches Indian authorities claimed their inspection did not reveal any hazardous materials on-board the vessel as cargo, they could not determine what hazardous waste was contained in the ships structure, which most likely include PCBs, asbestos, and p , y , , residual fuels amongst many others

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5.3 Headline Risk? Northen Vitality

(Container / 40,080 DWT/ 1997 / South Korea)
NGO Shipbreaking Platform, Ingvild Jenssen, 7 September 2012 : NGOs call on Germany: stop toxic ship before it reached Alang graveyard The Northern Vitality was sold last week by its German owner to the famous shipbroker GMS along with its sister ships: the Northern Dignity currently located GMS, Northern Dignity in Singapore, and the Northern Felicity anchored in Dubai. Hazardous materials such as asbestos, refrigerants, oil residues, sludge and heavy metals are bound to be onboard the Northern Vitality, either in its structure or in electronic equipment, p q p paints and the ships stores p

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6.1 Importance of Ship Recycling Economically Smart and Environmentally Friendly

Electrical Cables

Chilling Compressors

Engine

Furniture

Steel Scrap

Kitchen Ware

Spare Parts

Re-Rollable Steel

Waste <2-4% (only!)

Pipes

Motors

When properly handled, ship recycling is, without question, a Green industry!
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6.2 Importance of Ship Recycling Socio-Economic SocioBenefits of Ship Recycling As per Institute of Scrap Recycling Industries: It takes four times as much energy to make steel from ore. Benefits of using recycled steel instead of ore to make new steel: S i i Savings in energy: 74% Savings in virgin materials: 90% Reduction in water use: 40% Reduction in water pollution: 76% Reduction in air pollution: 86% Reduction in mining wastes: 97% Reduction in consumer waste generated: 105%

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6.3 Environmentally Responsible and Safe Ship Recycling y g

What are the options to owners?
1.Ignore CSR 2.Create a robust CSR program a. Si ki (reefing) ships Sinking ( fi ) hi b. Resell to trading buyers (assuming they exist!!!) c. c Sell as is where is...don t ask, dont tell is dont ask don t d. Other 1) Create own program / follow Guidelines on Transitional Measures for Ship-owners Selling Ships for Recycling 2) Use Cash Buyers

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6.4 Ship Recycling - Greatest Hope for Recovery?

Important Pillar (Balancer) of Shipping Newbuilding record years (pre-2008) R Recycling record years (2011 ?) li d (2011-?) Impact of Ship Recycling on: New Building Orders Charter rates (new/old ships, availability, etc) Sale and Purchase (2nd values at par with scrap values) Ship Finance (residual values) Developments in Ship Design and Fuel Efficiency

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7. Closing Thought
Ship recycling affects almost every aspect of shipping, chartering, sale & purchase, new buildings, repairs, finance, etc. A vibrant ship recycling industry is essential to bring stability to the shipping industry. Ship recycling is NOT AN HEADLINE RISK! IMOs Hong Kong Convention has created clear g g g guidelines safe and environmentally recycling of ships SHIP RECYCLING IS GOOD FOR THE ENVIRONMENT!!!

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GMS
Established in USA in 1992.LARGEST CASH BUYER IN THE WORLD! In last two years, principals of GMS have delivered more than a quarter of the world s worlds fleet sold for recycling. World's FIRST ISO 9001:2000 certified Cash Buyer. EXCLUSIVE sales offices i all FIVE of th major ship recycling markets i th world l ffi in ll f the j hi li k t in the ld (Bangladesh, China, India, Pakistan and Turkey). Offices in USA, UAE and CHINA to provide 24/7/ service to clients worldwide. , p Financial and Management capability to: Buy fleets on simple CASH "as is where is terms. Take forward positions Structure deals Leader in Green Recycling: IMOs Hong Kong Convention GMS-GL Program Development of Green Yards

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