HM Strategies /// January 2013Hammer Maritime Strategies 1 Shipping Forum, 23 January 2013 Shipping Forum, 23 January 2013 Shipping Market Update & Ecoship Considerations Shipping Adviser Jarle Hammer Shipping Forum, 23 January 2013 Shipping Forum, 23 January 2013 Shipping Market Update & Ecoship Considerations Shipping Adviser Jarle Hammer 22.01

HM Strategies /// January 2013Hammer Maritime Strategies

HM Strategies /// January 2013Hammer Maritime Strategies 3 Countercyclical Investments 18.01

HM Strategies /// January 2013Hammer Maritime Strategies 4 ‘000 USD/d Volatility: Highest in % above Lowest Volatility 485% 293% 220% 260% 173% Source: Fearnleys 16.01

HM Strategies /// January 2013Hammer Maritime Strategies 5 TIME FOR M&A and Supply Measures

HM Strategies /// January 2013Hammer Maritime Strategies 6 Source: Clarkson Substantial Slow-Steaming Fleet Reserve Capacity Substantial Slow-Steaming Fleet Reserve Capacity

HM Strategies /// January 2013Hammer Maritime Strategies 7 VERY STRONG & WELL EQUIPPED – ABOUT SAME PRICE AS VLCC

HM Strategies /// January 2013Hammer Maritime Strategies 8 Source: Clarkson 18.01

HM Strategies /// January 2013Hammer Maritime Strategies 9

HM Strategies /// January 2013Hammer Maritime Strategies 10 JACK-UP G o MJACK-UP NWE SEMI’s 5,000 ft + SEMI’s 2 - 5,000 ft IHS Petrodata: Rig Utilization & Rates Index 1994 = 100

HM Strategies /// January 2013Hammer Maritime Strategies 11 Source: Clarkson World Shipyard Monitor

HM Strategies /// January 2013Hammer Maritime Strategies 12

HM Strategies /// January 2013Hammer Maritime Strategies 13 Economic Performance & Growth. Economist % change IP-12m Infl-12m GDP USA Euro area Japan S. Korea China India Russia Brazil Thailand Malaysia Indonesia Philippines Vietnam Economic Performance & Growth. Economist % change IP-12m Infl-12m GDP USA Euro area Japan S. Korea China India Russia Brazil Thailand Malaysia Indonesia Philippines Vietnam

HM Strategies /// January 2013Hammer Maritime Strategies 14 Source: Fearnleys Potential Revival? Ballast reduction Excessive Ordering Small Demand Growth

HM Strategies /// January 2013Hammer Maritime Strategies 15 Million tonnes oil equivalent Source: BP

HM Strategies /// January 2013Hammer Maritime Strategies 16 N.AMERICA W.EUROPE JAPAN FSU M.EAST R-O-W

HM Strategies /// January 2013Hammer Maritime Strategies 17 M.EAST OPEC N.AMERICA N.SEA FSU DEPLETION PEAK OIL IRRELEVANT Supply is a function of Price & Technology

HM Strategies /// January 2013Hammer Maritime Strategies 18

HM Strategies /// January 2013Hammer Maritime Strategies 19

HM Strategies /// January 2013Hammer Maritime Strategies 20 Million dwt Sources: Fearnleys & HMS Slippage 2011: 30% 2012: 40%

HM Strategies /// January 2013Hammer Maritime Strategies 21 Million tonnes Source: Clarkson

HM Strategies /// January 2013Hammer Maritime Strategies 22 Billion cbm Source: BP

HM Strategies /// January 2013Hammer Maritime Strategies 23 Source: BP LNG very hot after closure of nuclear power plants However, shale gas a veritable negative game changer US could well become a net gas exporter Stokhman gas field shelved ?

HM Strategies /// January 2013Hammer Maritime Strategies 24 MINOR BULK Roughly 1,550 mt in 2012 Sources: Clarkson, Fearnleys, HMS

HM Strategies /// January 2013Hammer Maritime Strategies 25 Source: Clarkson

HM Strategies /// January 2013Hammer Maritime Strategies 26 Source: WSA months annualized

HM Strategies /// January 2013Hammer Maritime Strategies 27 Million tonnes. 3m av. China imp %

HM Strategies /// January 2013Hammer Maritime Strategies 28 Forecast October China R-O-W World

HM Strategies /// January 2013Hammer Maritime Strategies 29 Compiled by HMS

HM Strategies /// January 2013Hammer Maritime Strategies 30 BDI Million dwt. 3m av.

HM Strategies /// January 2013Hammer Maritime Strategies 31 Million dwtSource: Fearnleys

HM Strategies /// January 2013Hammer Maritime Strategies 32 Cheap Finance from Yards and Governments Eco ships ? m annualized Million GT All Types

HM Strategies /// January 2013Hammer Maritime Strategies 33 HMS est Million dwtSources: Fearnleys, Clarkson, HMS

HM Strategies /// January 2013Hammer Maritime Strategies 34 HMS est

HM Strategies /// January 2013Hammer Maritime Strategies 35 Container Fleet Decisions & Deliveries HMS est

HM Strategies /// January 2013Hammer Maritime Strategies 36

HM Strategies /// January 2013Hammer Maritime Strategies 37 Sources: Fearnleys & Clarkson Million dwt Soucrces: Fearnleys & Clarkson

HM Strategies /// January 2013Hammer Maritime Strategies 38 ‘000 USD/d USD/t Source: Fearnleys Increased Focus on Fuel Economy

HM Strategies /// January 2013Hammer Maritime Strategies 39

HM Strategies /// January 2013Hammer Maritime Strategies 40 Containership Fuel Consumption by Size & Speed Size in teu 11 K Slow-steaming open for substantial cost savings ULTRA LARGE from 25k to 17k ( = 265 t) x USD 625 per t = about USD 165,000 reduction per day

HM Strategies /// January 2013Hammer Maritime Strategies 41 Target Source: Maersk Post -5% -13% -11% -12% -3% -10% 50% reduction over period. Considerably smaller reduction per teu transported due to slowsteaming

HM Strategies /// January 2013Hammer Maritime Strategies 42 ECO SHIPS – CENTRAL ISSUES ECO SHIPS – CENTRAL ISSUES Environmental benefits Less and cleaner fuel Environmental benefits Less and cleaner fuel What about Company Economics ? What about Company Economics ? - Eco Ship Newbuilding orders will delay market upturn - Eco Ship Newbuilding orders will delay market upturn - Additional costs for fuel saving measures ? - Retrofitting / New ship ? - Future bunker price ? - Additional costs for fuel saving measures ? - Retrofitting / New ship ? - Future bunker price ? - Vast majority of conventional vessels will decide rate levels - Vast majority of conventional vessels will decide rate levels - Lack of ability to skim future market peaks by speading up - Higher total fleet income per capital invested when using larger number of medium age vessels in fairly healthy markets ECO SHIPS – CENTRAL ISSUES ECO SHIPS – CENTRAL ISSUES Environmental benefits Less and cleaner fuel Environmental benefits Less and cleaner fuel What about Company Economics ? What about Company Economics ? - Eco Ship Newbuilding orders will delay market upturn - Eco Ship Newbuilding orders will delay market upturn - Additional costs for fuel saving measures ? - Retrofitting / New ship ? - Future bunker price ? - Additional costs for fuel saving measures ? - Retrofitting / New ship ? - Future bunker price ? - Vast majority of conventional vessels will decide rate levels - Vast majority of conventional vessels will decide rate levels - Lack of ability to skim future market peaks by speading up - Higher total fleet income per capital invested when using larger number of medium age vessels in fairly healthy markets

HM Strategies /// January 2013Hammer Maritime Strategies 43 ‘000 USD Source: HMS Panamax R/V Costs 4,500 n.m.

HM Strategies /// January 2013Hammer Maritime Strategies 44 PANAMAX BREAK-EVEN RATES New Eco Ship 10-yr Old PANAMAX BREAK-EVEN RATES New Eco Ship 10-yr Old Price usd 27.0 m usd 13.5 m Price usd 27.0 m usd 13.5 m Res. Value (300 USD/ldt) usd 3.6 m usd 3.6 m Res. Value (300 USD/ldt) usd 3.6 m usd 3.6 m Rest life/Calc.interest 25 yrs/8% 15 yrs/8% Rest life/Calc.interest 25 yrs/8% 15 yrs/8% Capital element ~ 7,000 usd/d ~ 4,100 usd/d Capital element ~ 7,000 usd/d ~ 4,100 usd/d Operating cost * 6,500 usd/d 6,500 usd/d Operating cost * 6,500 usd/d 6,500 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d Bunker advantage (270 days at sea) Bunker advantage (270 days at sea) 200 usd/t ~ 900 usd/d 200 usd/t ~ 900 usd/d 600 usd/t ~ 2,700 usd/d 600 usd/t ~ 2,700 usd/d 1,000 usd/t ~ 4,400 usd/d Source: HMS 1,000 usd/t ~ 4,400 usd/d Source: HMS PANAMAX BREAK-EVEN RATES New Eco Ship 10-yr Old PANAMAX BREAK-EVEN RATES New Eco Ship 10-yr Old Price usd 27.0 m usd 13.5 m Price usd 27.0 m usd 13.5 m Res. Value (300 USD/ldt) usd 3.6 m usd 3.6 m Res. Value (300 USD/ldt) usd 3.6 m usd 3.6 m Rest life/Calc.interest 25 yrs/8% 15 yrs/8% Rest life/Calc.interest 25 yrs/8% 15 yrs/8% Capital element ~ 7,000 usd/d ~ 4,100 usd/d Capital element ~ 7,000 usd/d ~ 4,100 usd/d Operating cost * 6,500 usd/d 6,500 usd/d Operating cost * 6,500 usd/d 6,500 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d Calculated B/E 13,500 usd/d 10,600 usd/d Bunker advantage (270 days at sea) Bunker advantage (270 days at sea) 200 usd/t ~ 900 usd/d 200 usd/t ~ 900 usd/d 600 usd/t ~ 2,700 usd/d 600 usd/t ~ 2,700 usd/d 1,000 usd/t ~ 4,400 usd/d Source: HMS 1,000 usd/t ~ 4,400 usd/d Source: HMS

HM Strategies /// January 2013Hammer Maritime Strategies 45 ‘000 USD/dSource: HMS Bunker price & voyage rate in USD/t Investment 27 m USD