16 Mar 23 Mar 2012

Dry Bulk Market - Weekly Report

Chartering
Supramax (52,000 dwt)
Rates continued to firm slowly on the Continent throughout the week despite a lack of strong activity; as it would appear the surplus of vessels that has been blighting the region over the past few months is finally easing. Despite the increased activity and more positive sentiment within the Atlantic, Owners were still prepared to look for business heading to Far East. A 52,000 dwt vessel was rating trips from the Continent at USD 12,000 a day, but fixed for a trip out of the US Gulf to Far East with petcoke in the region of USD 23,000 a day. Business within the Atlantic remained at fairly uninspiring levels; a modern 55,000 dwt vessel was fixed passing Skaw for a trip via the Baltic into the US Gulf at USD 3,000 daily. There was little change within the Mediterranean this week, with rates holding their level of late. Business heading to the Far East was still concluding in the low teens; a 53,000 dwt vessel managed such for a trip out of the Black Sea to Singapore-Japan range for USD 13,000, a steady number in line with market expectations. With firm interest in business from the USG with petcoke, and scrap from the Continent, it would appear that the levels of tonnage within the Mediterranean will be maintained steadily for the foreseeable future. The US Gulf revival carried on throughout this week as Supramax Owners were able to demand higher rates due to a lack of prompt tonnage and more fresh stems hitting the market. One Tess 52 managed a healthy USD 17,000 for a trip from Mississippi River going into Turkey with scrap. More and more Owners were looking to cash in and head to the Far East with the good reward there was to do so. Rumours of a 52,000 dwt vessel fixing what now seems to be a market USD 22,500 for a trip to Singapore-Japan range. We fully expect these levels to continue into next week, with perhaps rates starting with a 2 in front for trips in all directions by the end of the week. Indonesia continued to push up rates in the Pacific this week with enough fresh cargoes to keep the market firm. An economical 53,000 dwt vessel fixed retro Rizhao via Indonesia to India at a strong USD 12,750. Vessels able to load nickel ore continued to get a healthy premium with a 55,000 dwt vessel fixing basis dop Xingang at a strong USD 14,000 with China redelivery. Northern Pacific round rates moved up for another week but this was mainly due to Charterers having to remain competitive with levels tonnage in the North China-Japan range were seeing for Indonesian round trips rather than a great increase in cargoes out of West Coast North America. Backhaul rates over the last couple of weeks have been rising steadily but rates now seem to have flattened. A 52,000 dwt vessel fixed delivery Japan for a trip via the Philippines with nickel ore to the Eastern Mediterranean at an uninspiring USD 5,000. The Indian market saw another gradual increase in activity this week with a few more cargoes coming into the market but on the whole it remained a market devoid of activity. One encouraging fixture reported was a 57,000 dwt vessel fixing for a spot trip from West Coast India to China at USD 12,000, up from what was last done. With so much tonnage coming open in the area, vessels were still ballasting out of the region to pick up better paying business elsewhere. What seems to be the favourite tactic of Owners now is to ballast to Singapore, to take advantage of the high rates seen for Indonesian cargoes. Activity in the period market was limited, with many Charterers not willing to take anything longer than short period. Having said that, an SPP 59,000 dwt vessel fixed for 1 year at a much lower USD 10,300 and reports emerged of a 55,000 dwt vessel fixed for 1 year at USD 11,000 delivery Durban end of last week.

Maersk Broker's illustrative spot and period rates basis 23rd March 2012 (USD/day):
Mar 2012 Tess 52,000 dwt Spot 1 year 2 years 3 years 5 years 10 years Tess 58,000 dwt 1 year 2 years 3 years 5 years 10 years LME 74,000 dwt Spot 1 year 2 years 3 years 5 years 10 years Kamsarmax 82,000 dwt 1 year 2 years 3 years 5 years 10 years 10,819 10,500 10,750 10,750 12,000 13,250 11,000 11,250 11,250 12,500 13,750 8,288 10,500 10,500 11,000 12,500 13,750 11,000 11,000 11,500 13,000 14,250
Change

Jan 2013 n/a n/a 11,500 12,000 13,000 13,500 n/a 12,000 12,500 13,500 14,000

Change

Jan 2014 n/a n/a n/a 13,500 13,750 14,000 n/a n/a 14,000 14,250 14,500 n/a n/a n/a 13,500 14,000 14,500 n/a n/a 14,000 14,250 15,000

Change

2012 High 11,623 11,250 11,500 12,250 12,750 13,250 11,750 12,000 12,750 13,250 13,750 12,272 12,000 12,000 12,250 13,000 14,000 12,500 12,500 12,750 13,500 14,500 Low 6,353 10,000 10,250 10,750 12,000 13,250 10,500 10,750 11,250 12,500 13,750 5,509 10,250 10,500 11,000 12,500 13,750 10,750 11,000 11,500 13,000 14,250

+/873 (750) (750) (750) (250) 0 (750) (750) (750) 0 0 516 (250) (250) (250) 0 0 (250) (250) (250) 0 0

+/-

+/-

0 0 0 0

0 0 0

0 0 0 0

0 0 0

n/a n/a 11,500 (250) 12,000 (250) 13,500 0 14,250 0 n/a 12,000 (250) 12,500 (250) 14,000 0 14,750 0

0 0 0

Panamax (74,000 dwt)

An influx of fresh stems this week has helped to sustain both the Pacific and Atlantic market with rates holding steady throughout. The Atlantic remains positional and still continues to be driven by ECSA although we have seen some more activity coming out of the USEC and the Baltic. In the Pacific the introduction of fresh cargoes has helped fuel positive sentiment here. The Baltic average of the four assessment routes ended the week up USD 516 to USD 8,288. The positive sentiment that echoed around the Atlantic Panamax market last week has continued to build over the past 5 days with rates holding firm. Again the driving force remains East Coast South America although we have also seen a significant increase in the level of activity coming out of both the USEC and the US Gulf. Indeed, those Owners with spot or prompt vessels open in either the USEC or US Gulf are seeing a premium for their vessels as a result of a tightness of tonnage causing Charterers to pay increased levels for their early requirements. Towards the end of the week we have seen a few Charterers trying to take vessels for short period reflecting that, for now, they feel the market will be stable in the coming weeks; it will be interesting to see how things develop with most hoping that this positivity remains moving forward. With regards to the trans-Atlantic business reported this week a 73,762 dwt, 2006-built vessel with delivery Corpus Christi was fixed at USD 9,600 + USD 260,000 for a trip from the US Gulf to Spain. In terms of front haul business we have seen a 1998-built, 72,651 dwt vessel with delivery Icdas fixed at USD 20,500 for a trip to Singapore Japan range, this was the highest rate we have seen this week. Trans-Atlantic rates ended the week at USD 7,119 and front-haul rates closed the week at USD 17,053. The Pacific this week seemed set to slide with a lack of stems creating a feeling of doom and gloom throughout the basin. However, a much needed influx of fresh cargoes helped to revitalise the market and levels have held fairly steady throughout the past 5 days. The driving force here has definitely been Indonesian coal stems although these have been supported by a smattering of Australian and Nopac cargoes. The improving fortunes of the Atlantic market also means that there have been fewer Owners with vessels here willing to consider front haul, as a result we are seeing a number of vessels ballasting to East Coast South America to cover these requirements. Moving forward many of the fresh requirements have now been covered and there are some who fear that levels could fall next week unless there is an introduction of some fresh stems. Among the Indo rounds reported was a 76,830 dwt vessel, built 2004, with delivery Hong Kong for a trip to South East Asia via Indonesia at USD 7,500 daily. In terms of Australian business reported we have seen a 75,318 dwt, 2003-built vessel with delivery Kinuura and redelivery China range fixed at USD 8,750 for a trip via Hay Point. The highest level we have seen this week was USD 10,800 on a 73,902 dwt, 2004-built vessel basis delivery Singapore for a trip via East Coast South America to Singapore-Japan range. Pacific round voyages ended the week at USD 8,155 and back-haul rates closed the week at USD 824. Sentiment in the period market is waning, with further news of various countries protectionism stifling optimism going forward. Charterers appetite in period tonnage was limited and Owners once again had to offer greater spreads in duration to attract takers. A 74,000 dwt vessel was taken for 20 to 26 months at USD 10,450.

0 0 0

Note: 1) All rates are basis Pacific delivery 2) The High and Low columns denote period rates recorded during 2012 ytd.

Baltic Daily Forward Assessment (BFA)

Baltic Forward Assessment
March April Q2 12 Q3 12 Q4 12

PANAMAX
4 BPI TC (Mar 15th)
7,900 10,200 10,396 9,600 10,221 10,064 10,757 11,911 12,564 12,793 13,121

SUPRAMAX
5 BSI TC (Mar 15th)
9,742 11,267 10,983 10,083 10,492 10,650 10,958 12,033 12,400 12,872 13,158

4 BPI TC (Mar 22nd)

7,771 9,893 9,929 9,129 9,854 9,854 10543 11,729 12,404 12,757 13,107

5 BSI TC (Mar 22nd)

9,725 11,650 11,396 10,033 10,267 10,492 10,817 12,054 12,350 12,842 13,112

Baltic Indices
BDI, BPI and BSI 2,500 2,000 1,500

Q1 13 CAL 13 CAL 14 CAL 15 CAL 16 CAL 17

BDI BPI BSI

Index

1,000 500 0

Note: (1) 4 BPI TC Weighted Average of the 4 Baltic Panamax Index Time Charter Routes (2) The Baltic Supramax Index represents vessels of 52,000 dwt

Source: Baltic Exchange

16 Mar 23 Mar 2012

Sale & Purchase

The week passed with low activity in the second-hand market. Main focus was on vintage tonnage, primarily within the Handysize/Handymax segments. The prolonged pressure on prices is keeping Buyers observant as Sellers might see themselves forced to offload tonnage in the near future. We expect the activity level to remain low and prices to be under continued pressure. The Panamax bulk carrier "SUMMER FORTUNE" (69,034 dwt, 1997 built at Imabari, JPN) was sold at USD 11.5 mill. to Chinese Buyers, which is in line with last done.

Newbuilding
The newbuilding market did not see any new orders come in to effect during the past week. However, we do see signs that cash-rich Buyers are feeling tempted by the improved eco-designs that are being promoted with attractive pricings, especially from Chinese yards. We expect to see a slight improvement in activity level in the next 3-6 months with prices continuing at a low level.

Estimated Second Hand Prices - 5 yrs old (USD Million)

Handysize
(32,000 dwt)*

Estimated Newbuilding Prices (USD Million)

Handysize*
21-23

Supramax
(58,000 dwt)*

Panamax
(76,000 dwt)*

Capesize
(180,000 dwt)**

Supramax*
24-26

Panamax*
27-29

Capesize**
50-52

18-20

21-23

22-24

34-36

Price Development Since Last Week Source: Maersk Broker

Price Development Since Last Week Source: Maersk Broker

*based on Japanese built vessel **based on Korean built vessel

*based on Chinese built vessel for 2013 delivery **based on Korean built vessel for 2013 delivery

Market Developments and Drivers

World crude steel production increased by 1.9% y-o-y in February to 119.2 mill. tonnes. In the first two months of 2012 steel production has increased 0.6% compared to 2011. February production in China was 55.9 mill. tonnes, an increase of 3.3% y-o-y. In the first two months of 2012 China produced 113 mill. tonnes which represents an increase of 2.2% compared to 2011. Meanwhile, production in Japan decreased by 3.7% to 8.6 mill. tonnes in February, with production ytd of 17.2 mill. tonnes representing a total decrease of 7.3% compared to the same period in 2011. The US increased production to 7.2 mill. tonnes which is an increase of 8.5% y-o-y, and ytd production was 15.0 mill. tonnes which is an increase of 7.8% compared to the two first months last year. February production in Germany was down by 3.1% y-o-y to 3.6 mill. tonnes, with a total production of 7 mill. tonnes ytd representing a decline of 5.6% compared to the first two months of 2011. Home prices in China fell in February in a third of the major cities. Prices fell in 27 of the 70 large and mid-size cities tracked in February compared to a year earlier, and prices were unchanged in six cities. Home prices fell in 45 of 70 cities m-o-m. Among the major cities both Beijing and Shanghai prices fell by 0.4% y-o-y. In the south, prices in Shenzhen fell 0.2% y-o-y while those in Guangzhou rose by 0.3% y-o-y. The target for Chinas coal industry is to reach production capacity of 4.1 bill. tonnes by the end of 2015, but total output will be kept within 3.9 bill. tonnes in order to reduce carbon emissions, according to the Chinese National Energy Administration. China will continue to expand existing large-scale coal production bases in China and coal companies will be encouraged to go overseas to explore resources. Vale, Rio Tinto and BHP Billiton will join the new Chinese spot iron ore trading platform. The worlds three largest exporters are follwoing Fortescue, Australias third largest exporter, in joining the agreement. Large Chinese steelmakers, Baosteel amongst others, have previously agreed on becoming members. The platform will open up for trade in the first half of 2012, a system which will bring steelmakers and producers into a common platform with the ambition to strengthen pricing power and improve transparency, an agreement that came two years after the mining companies broke with the 40-year custom or annual pricing. Japan reported a trade surplus of 32.9 bill. Yen (USD 395 mill.) for February. Exports fell 2.7% y-o-y and imports rose 9.2% y-o-y creating the first trade balance surplus in 5 months. The Yen declined 7% against the US Dollar in February making Japanese exports more competitive on the world market. Korean steel plate exports rose in February to 160,199 tonnes, an 119% increase y-o-y. Shipments were up 9% m-o-m. China and Japan received the lions part of the exports. Koreas total imports of steel plate last month increased by 16% m-o-m to 324,244 tonnes, whereof imports from Japan were 140,606 tonnes. India will raise steel import duties from 5% to 7.5% for the fiscal year April 2012 March 2013. The tax will be on non-alloy, flat-rolled steel. Australia passed a tax on iron ore and coal mining profits. The tax of 30% is expected to reap USD 11 bill. within three years. The legislation will become law on 1 July 2012. EU construction output fell 1% y-o-y in January. Construction output declined 2.3% y-o-y in the UK, the EUs biggest construction market. German construction output increased 6.5% y-o-y. On a seasonally adjusted basis output decreased by 4.1% m-o-m in the EU to the lowest in more than a year and eased 0.8% m-o-m in the Euro-area. Vale has resumed operations at its rail line linking the Carajs iron ore mine to the terminal of Ponta da Madeira in Brazil. It was closed on 16 March after the collapse of a bridge.

This report is based on our knowledge of relevant market conditions. Our estimates are made on the basis of this knowledge, but other circumstances, or new circumstances, as well as general uncertainty could cause the market to develop differently. We take general reservation for misprints. All rights reserved. No part of this publication may be reproduced in any material form (including photocopying or storing it in any medium by electronic means) without the written permission of the copyright owner. Likewise, any quoting is prohibited without the written permission of the copyright owner.