1. The New Dynamic Face of Greek Shipping
Market Overview
Many Faces, Many Futures
The New Dynamic Face of Greek Shipping
4th Hydra Shipping Conference
15th September 2012
Dr Martin Stopford,
President, Clarkson Research, London
Martin Stopford, 8th August 2012 1

2. How do you play this hand?
Market Overview
Developments in the Shipping Cycle & the Impact on Revenues & Asset Values
The Drivers of Change
How do you play this hand?
The 7 Faces of Shipping
Dynamics of Globalization
Greek Shipping Evolution
Six Challenges
Conclusions
Martin Stopford 15th September 2009
Martin Stopford, 8th August 2012 2 2

3. 1. The Seven Faces of Shipping
3. PUBLIC
COMPANY
2. PRIVATE
COMPANY
4. PRIVATE
PARTNERSHIP
KG etc
5. SHIP
OPERATOR
1. Shipowner
7. LEASING
COMPANY
6. MANAGEMENT COMPANY

4. We must build a dynamic world economy
2. The Dynamics of Trade
We must build a dynamic world economy
Before the 2nd World War the world the world (and shipping) was dominated by European Empires
In 1944 at the Bretton Woods conference in USA set the scene to change the system
The aim was to “globalize” of the world economy
But 1957 turned out to be an economic crossroads.
The end of the imperial era which had lasted for a century and the beginning of what we now refer to as “Globalization”.
After a century of neo-colonial stability the world was starting to move towards a new global economy. Over the next fifty years five fundamental developments worked together to create a global economic system which produced 50 years of uninterrupted economic growth and by 2005 world GDP had expanded to almost eight times its 1950 level (Figure 1).
US Treasury Secretary Henry Morgenthau at Bretton Woods in 1944 4

5. 1944 Global Free Trade Policy
Introduction to Shipping
1944 Global Free Trade Policy
MEETING AT BRETTON WOODS IN USA
“The objective, gentlemen, is to create a dynamic world economy”
At Bretton Woods in 1944 US Treasury Secretary Henry Morgenthau outlined the objective of creating "a dynamic world economy ".
The method was to establish a new, liberalized trade regime
To assist in achieving this aim the World Bank, the IMF and GATT were founded.
Global free trade policy was the first.
The plan to replace the imperial world with a new system of free trade was laid out at the Bretton Woods conference in 1944.
Henry Morgenthau the US Treasury Secretary outlined the objective of creating "a dynamic world economy".
The World Bank; the International Monetary Fund; and GATT were founded.
Delegates at the Bretton Woods
Conference in 1944
11/04/2017
2nd April 2008 5
Martin Stopford April 5

6. The Result – A “Flood” of Trade 1950-2011
Index 1950=100
2012
Sea trade
16 times as big as in 1950
Sea trade grew at 4.3% per annum
2012
World GDP 8 times as big as in 1950
For all these reasons the 50 years since the Hong Kong shipowners set up their association were very prosperous.
World GDP grew at 8 time
But world sea trade grew even faster, increasing to 13 times its 1950 level by 2005.
In the process almost every aspect of the shipping business changed.
World GDP
Grew at average of 3.6% per annum

7. The Shipbuilding Cycle
Shipyards expand to replace the ships built in the 1970s boom 2
Million Dwt
Deliveries m dwt in 2012
FORECAST
Deliveries 61 m dwt in 1976 1
Last phase of 1970s scrapping!

8. 6 billion Non-OECD population want to consume at OECD levels
Globalization Part 1
OECD’s 1.3 billion
population
6 billion Non-OECD population want to consume at OECD levels

9. Sea Transport was mechanized:-
A new Shipping Model developed in the 1950s
Bulk
Liquids
Manufactures
Refrigerated
Container
Shipping
Unitized cargoes
Homogeneous cargoes
Bulk carrier, tanker
Specialised ship
Specialised
Specialized cargoes
Unit Load
Container ship
Air
Freight
Urgent cargo
Air freighter
The mechanization of sea transport lies at the heart of globalisation – adding value takes place by inter-segment competition

10. Business Model Maturing
Low
High
3. Specialised
Transport
Volume tonnes per year
Value $ per tonne
Figure 3 The Potential Cargo Matrix (PCM)
2. Air
Freight
4. Bulk
1. Liner A B C
Low returns, chasing size
High investment requirement
Finance problems
Increased energy costs
Complexities of globalization

11. 3. Greek Owners' Evolution
Globalization provided a massive opportunity for independents
Control of the fleet moved from imperial owners to independents
Greece led the way
Built as Bellucia, 1937 renamed Leonidas M. Leonidas M SS was a Greek Cargo Steamer of 4,573 tons built in On the 19th July 1942 when on route from RIO DE JANEIRO for SYDNEY (N.S.) carrying a cargo of 6,700 tons of iron ore she was torpedoed by U-332 and sunk and finally sunk by gunfire see wreck

12. Greek Owned Fleet & Globalization
Million GRT
Shows Gross tonnage and growth rate
Greek owners used charter back $ loans to build the fleet in the 1960
2000s
5% pa
1990s
7% pa
1970s
7% pa
1980s
-1.4% pa
1960s
6% pa
Source: orderbook by month.xls deliveries & OB tab
1950s
18% pa

13. Greek Finance1949 to 2012
Greece’s share of the fleet grew from 3% in 1949 to 18% in 2008
% World Fleet
Steady at 15-17%
5% cut back during 1970s/80s recession
Rapid growth based on time charters & Euro$ loans
Equity Markets
Bond Markets
Euro$ market starts 1958
Source: orderbook by month.xls deliveries & OB tab
Charter backed finance

14. Greek Owned Fleet - Top 10 Owners in 1969
In 1969 the ten biggest international Greek companies owned 502 ships, accounting for 28% of Greek owned GRT

15. Greek Owned Fleet - Top 10 Owners in 2012
In 2012 the ten biggest international Greek companies owned 672 (much bigger) ships, accounting for 29% of Greek owned GRT.

16. 546 Greek companies owning ships over 5000 dwt
Greek Owned Fleet 2012
546 Greek companies owning ships over 5000 dwt
Number of ships owned
Top 10 own 672 ships
The core are the medium sized companies with 3-15 ships
Small
Medium
1st May
Big Owners
Top 10 Owners

17. Greek Owned Fleet: Ship Value
Greek companies owned ships worth $70.6 billion
$14.8 billion owned by listed companies
Medium companies have assets worth $32 billion (funding requirement of, say, $20 billion??)
Small
(5% value)
Medium
(45% value)
Big Owners
(27% value)
Top 10 Owners
(23% value)
Values at 1st May 2012 (over 5000 dwt)

18. Greek Owned Fleet By Type
Tankers 37%
Broad portfolio, 80% tankers and bulkers
Containers only 10% which is low for the third biggest world fleet segment (5,100 ships worth $100 billion).
Bulkers 42%
Other 20%

19. How do you play this hand?
Market Overview
Developments in the Shipping Cycle & the Impact on Revenues & Asset Values
Future Challenges
How do you play this hand?
Over-capacity
Energy costs
Regulatory focus
Globalization part 2
IT & Comms revolution
Container model
Martin Stopford 15th September 2009
Martin Stopford, 8th August 2012 19 19

20. Challenge 1: Shipping Over-Capacity
Market Overview
Challenge 1: Shipping Over-Capacity
World Cargo Fleet
Surplus shipping capacity (% right axis)
From 2009 world fleet surges ahead of demand
Demand for sea transport runs ahead of supply
See data in Market Data /SupplyDamand Updated July 2012
Martin Stopford, 8th August 2012 20

21. Challenge 2: Energy Costs
THE SHIP USED TO COST MUCH MORE THAN BUNKERS BUT. TODAY BUNKERS COST MORE THAN THE SHIP.
2005
Ship costs 3x fuel
2012
Ship costs half fuel
Source: bunker data/bunker analysis model.xls
Based on Aframax tanker, 1 year TC rate and Rotterdam bunker price

22. Challenge 3: Regulation
Requirement that new ships must comply with the EEDI, a clear attempt to drive efficiency improvements
The focus on air emissions; ballast water; recycling; energy efficiency and the carbon footprint.
The dilemma of gas oil versus scrubbers and the uncertainty over of which ballast water system.
Many shipyards, after a decade when they were able to sell standard ships, are struggling to respond.

23. Eco-Ship Design – Complex
Shows the effect on fuel cost (green lines) & ship cost (yellow line) of changing speed in 1 knot increments on 5000 mile voyage
EEDI
Shipping lanes
Back haul
LNG
scrubbers
best speed at $1500/tonne bunkers
NUCLEAR
wind
No ballast
Fuel Cells
COATINGS
logistics
best speed at $200/tonne bunkers
80%
saving
Hull form
Engineering
Speed of ship (knots)
Note 1: Just difficult decisions

24. Challenge 4: Globalization Part 2
Non OECD
Over the last 50 years the OECD countries dominated growth
Asia started to grow in 1970s & China in the 1990s.
Non OECD trade overtook OECD in 2006
The next phase of globalization will see more countries; more pressure on resources; and more geo-political tension (piracy a sign)
Fleet Ownership
OECD

25. Challenge 5: IT & Comms Gordon Moore Invented “Moore’s Law”
A vast majority of Internet data and voice traffic is transmitted through undersea cables spread across oceans. This Google Maps gives the physical routes of these submarine cables.
Fibre optic cable network

26. Challenge 6: Container Business Model
The container business will be at the heart of change
Billion tons
Will the exponential trend of 8.8% trend continue?
“Over the centuries technical developments in liner shipping has been not so much a continuous process as an occasional leap forward precipitated by a compelling call for change.
In between there have been long periods of conservatism".
Ronnie Swayne, Chairman OCL 1973
This chart shows container cargo growing to 1.5 billion tonnes today. In 2009 the trade had its first serious “wobble”.
(Ships cargo cargo ships edited by Henri Kummerman, page 113).

27. “fuel costs and environmental regulations are the Wild Cards”
7. Conclusions
Lousy hand so aim 1 is to survive
Major revolution in fuel costs, technology, software and systems
Challenging regulatory focus which the industry is still struggling with
Globalization “Part 2” will change the pattern of trade & it’s geopolitics
IT Revolution will create “soft” opportunities
The container business is due for a “great leap forward”
“fuel costs and environmental regulations are the Wild Cards”

28. Amarillo Slim’s Advice
“Play the players, not the cards.
Watch them from the minute you sit down.
Play fast in a slow game , slow in a fast game.
Never get out when you are winning.
Look for the sucker and, if you don’t see one , get up and leave because the sucker is you”
Amarillo Slim’s Advice

29. Oceanic Steam Navigation Company Ltd
The company is better known as White Star Line which owned the Titanic
100 years ago the Chairman was Thomas Bruce Ismay
In the film Titanic he is the arrogant man who ordered the Captain of the Titanic to go imprudently fast
He looks bad, but he had a problem the film did not tell you about, which you will understand.
Chairman Bruce Ismay
Chairman 1912

30. 7 year average earnings (in arrears)
Oceanic Steam Navigation Company Ltd
7 year average earnings (in arrears)
Titanic loss 2012
Collapse of earnings 1900 to 2010
Cut throat competition between Cunard and White Star
Updated chapter 2 Final.xls
Bruce Ismay, Chairman

31. Seaborne Trade – 9 billion Tonnes
Sea Trade in 2011

32. Seaborne Imports – 9 billion Tonnes
China
Sea Trade in 2011
Rest of the world

33. Greek Owned Fleet - Ship Type Prospects
The “Ratio” is “orderbook as a % fleet” ÷ trade growth trend