1. Macro overview The end of an era? Jon Hille-Walle, 01.09.2015

2. Jon Hille-Walle 01.09.2015 2 So someone in China decided to «support» the stock market:

3. Chinese Gross Domestic Product Growth has come down form previous stellar levels Still, 7% sounds rather good? Jon Hille-Walle 01.09.2015 3

4. China, some reasons to worry Credit growth has been high, large parts of which in the unregulated «shadow bank system» Levels of debt are now high by any comparison Indications that industrial production is slowing down. Jon Hille-Walle 01.09.2015 4

5. …and some more: Jon Hille-Walle 01.09.2015 5

6. Where are we coming from? Jon Hille-Walle 01.09.2015 6

7. Chinese GDP Investments have historically been a large, and growing part of GDP. Currently constitutes 45% of GDP. Net Exports is about 5% Public and private consumption makes out the remaining 50%. The official growth rate of 7% is made out of roughly 3% points investments and 4% points consumption. Is this a problem? Jon Hille-Walle 01.09.2015 7

8. What is the problem with continued high investments? Over time there is a risk of diminishing returns That risk is not smaller in a planned economy Jon Hille-Walle 01.09.2015 8

9. This has happened before Anyone remember the Asian Crisis in 1998? Back when investments stalled… Jon Hille-Walle 01.09.2015 9

10. Why we don’t think China is headed for a hard landing (at least not today or tomorrow...) Lots of «dry gun powder» in the shape of: Monetary policy (interest rates) Fiscal policy State controlled banks, with high margins (for now), and large reserves. Limited capital movement abroad High domestic savings Continued urbanisation Jon Hille-Walle 01.09.2015 10

11. The way forward China will invest MUCH less aggressively The economic growth will be driven by consumption, but at a significantly lower rate than today. This is bad news for commodity prices. Jon Hille-Walle 01.09.2015 11

12. Currencies – Can anyone spot a trend? Jon Hille-Walle 01.09.2015 12

13. Oil - demand Over the past 15 years +, increase in demand has come from the non-OECD part of the world. Reason: weaker economic growth in OECD coupled with efficiency gains, environmental challenges and substitutive technology Jon Hille-Walle 01.09.2015 13

14. Oil – Supply – Plenty of oil US-onshore (shale) oil has increased production by roughly 1 million barrels per day, per year since 2010. Iraq is coming back on stream Finally – Saudi Arabia got tired of defending the oil price by cutting its own production to balance supply-demand and decided to fight for market share. Jon Hille-Walle 01.09.2015 14

15. Jon Hille-Walle 01.09.2015 15 Oil – US production They just won’t quit…

16. Jon Hille-Walle 01.09.2015 16 Oil – will low investments reduce output and support prices? Yes – but that takes time

17. Implications for shipping Jon Hille-Walle 01.09.2015 17

18. The good – Oil transport, product & chemicals Low price triggers increased demand. High oil-volumes to be shipped Increasing distances in major trades Spill over effect to smaller tank, product and chemicals And hey; bunker is low! Jon Hille-Walle 01.09.2015 18

19. The good – LPG High US oil production generates excess LPG. High supply drives prices down. This generates a large arbitrage to Asia and currently ship owners take all the profits. What’s next – Ethane export? Jon Hille-Walle 01.09.2015 19

20. The bad - Bulk The China investment party coming to an end. Construction is currently 50% of steel demand, infrastructure is 8%. The dry bulk fleet is relatively young, and low speed puts a roof on rates. The super cycle is over. Jon Hille-Walle 01.09.2015 20

21. The ugly – Oil / Offshore / Seismic Jon Hille-Walle 01.09.2015 21

22. Oil companies spending Jon Hille-Walle 01.09.2015 22

23. What does the fixed income part of the word think? Jon Hille-Walle 01.09.2015 23 Offshore Supply and AHTS companies

24. Drilling companies Jon Hille-Walle 01.09.2015 24 What does the fixed income part of the word think?

25. Seismic companies Jon Hille-Walle 01.09.2015 25 What does the fixed income part of the word think?

26. Shipping companies Jon Hille-Walle 01.09.2015 26 What does the fixed income part of the word think?

27. Luckily it’s not all about China Jon Hille-Walle 01.09.2015 27 ROW: 50.090. bln USD, 64% USA: 17,419. bln USD, 22% China: 10.360. bln USD, 13%

28. The oil burden on the global consumer Jon Hille-Walle 01.09.2015 28 77.869 bln USD * 2,5% = 1.679 bln USD

29. Thank you! Jon Hille-Walle jon.hille-walle@nordea.com