1. DNV GL © 2014 Ungraded 01 September 2015 SAFER, SMARTER, GREENER DNV GL © 2014 01 September 2015 Jakub Walenkiewicz MARITIME Market Update – Time to redesign our models? 1 INCENTRA Council Meeting - Haugesund

2. DNV GL © 2014 Ungraded 01 September 2015 JM Keynes – AGGREGATED DEMAND  Boost the economy  Increase spending  CREATE additional demand! (called aggregated demand)  USE public sector if the private one is insufficient 2 John Maynard Keynes British economist 1883-1946

3. DNV GL © 2014 Ungraded 01 September 2015 Contracting vs earnings 3

4. DNV GL © 2014 Ungraded 01 September 2015 Demand vs Supply  Seaborne trade growth has been satisfactory, with annual growth 3-4%  Sizable drop in world trade in 2009 is casually neglected  Yet the fleet growth is notoriously faster then demand  There seems to always be a reason to contract a new ship 4 6-8% 3-4% 5-6%

5. DNV GL © 2014 Ungraded 01 September 2015 Reasons for contracting  Renewal  Purpose built (for complex projects)  Trading areas – ECA  Cargo demand (very specific segments only)  Counter cyclical orders  Capital availability (PE)  Increased efficiency and/or competitiveness  Incentive schemes (i.e. China)  Limited capacity in yards?  “Last one in the queue” syndrome  Stakeholders pressure 5  “my ship will be ready by the time the market has recovered”  currency exchange  killer offers from yards (and financiers) Reasonable Speculative/politicalInsane

6. DNV GL © 2014 Ungraded 01 September 2015 Contracting 2015 1H 6 Av. 350/month Av. 250/month Av. 150/month???  Continued slow-down in the NB market  Substantially lower volume of contracts – 1H 2015 over 50% below 1H 2014  South Korea - 38% share (GT) : – crude, container, products, gas  China – 27% share (GT): – crude, bulk, containers, gas  Japanese - 25% share (GT): – bulk, containers, crude, products, gas

7. DNV GL © 2014 Ungraded 01 September 2015 7 “doing the same thing over and over again, each time expecting different results” INSANITY

8. DNV GL © 2014 Ungraded 01 September 2015 New contracts activity  Obvious slow down y-o-y  Biggest correction in bulk and offshore segments  Despite fewer vessels ordered, the tanker segment remains strong  Container market stronger!  Still positive sentiment in the gas sector despite large orderbook  So far 1050 contracts (41.9 mill. GT) 8

9. DNV GL © 2014 Ungraded 01 September 2015 World Seaborne Trade  Seaborne trade in 2014 reached 10.537 billion tonnes  Expected growth in 2015 – 10.959 billion tonnes (UP 4.1%)  Iron Ore + 6.4%  Coal + 2.3%  Crude Oil + 1.4%  Oil Products + 3.4%  Containers + 7.1%  Gas & Chem + 5.1% 9

10. DNV GL © 2014 Ungraded 01 September 2015 Orderbook composition 10

11. DNV GL © 2014 Ungraded 01 September 2015 2009 vs 2015? 11

12. DNV GL © 2014 Ungraded 01 September 2015 2015 World Economy – 4 drivers 1.Uneven global growth  World – 3.5%  advanced world - 2.4%  developing world - 4.3% 2.Weak banks and high debt  public, household, corporate, bank debt  interest rates low  relaxed fiscal policy 3.Low oil prices  always good news for oil importers  oil exporters will survive 4.Strengthening of the US dollar  substantial help for importing countries  stimulates exporters outside US dollar 12 Developed economies World average Emerging economies 2.1% 4.2% 3.3% …..and other commodities!!!!

13. DNV GL © 2014 Ungraded 01 September 2015 Commodities 13 $ 40-ish $ 55-ish $ 60-ish

14. DNV GL © 2014 Ungraded 01 September 2015 Drivers 14

15. DNV GL © 2014 Ungraded 01 September 2015 Drivers 15

16. DNV GL © 2014 Ungraded 01 September 2015 Weather chart 16 CRUDE OILPRODUCTS LNG LPG BULKERSCONTAINERSOFFSHORE

17. DNV GL © 2014 Ungraded 01 September 2015 Contracting 17 Forecast

18. DNV GL © 2014 Ungraded 01 September 2015 Conclusions  Our models gradually stop working  Read between the lines as supply/demand changes directions and forms  Excess of capacity!  Reduction in the NB activity, shipyards squeezed, orderbook on a downhill trend  …but there are many reasons to order new ships, particularly is there is money to be spent  Don’t expect the supply/demand calculations to provide you with the accurate number of new contracts 18

19. DNV GL © 2014 Ungraded 01 September 2015 SAFER, SMARTER, GREENER www.dnvgl.com Thank You 19 Jakub Walenkiewicz Jakub.Walenkiewicz@dnvgl.com