May 29, 2013 1

Different types
 Hard Coal (energy content above 4,500 kcal/kg and
water content lower than 35%)
– Thermal Coal: used primarily for power generation and
for industrial applications; and
– Coking Coal: used by the iron and steel industry to make
coke
 Only Hard coal is traded internationally

 Lignite or Brown coal : Mainly used in regional/local

markets and almost exclusively for power generation

May 29, 2013 2

 So far….
 Steam coal trade rose from 304 million tons in 1995 to
985 million tons in 2012, an average annual growth rate
of 7.2%.
 Coking coal trade rose from 172 million tons in 1995 to
291 million tons in 2012, an average annual growth rate
of 3.1%.
 Total international trade still represents a small share
of coal production.
 Only 17% of hard coal production is traded
internationally, whereas this share is above 60% for oil
and 33% for natural gas.
 The global coal market remains a thin market dominated
by few players. Small changes are able to shake and
reshape
May 29, 2013 the market. 3
May 29, 2013 4
May 29, 2013 5
May 29, 2013 6
 Low Rank Coal Trade
 The growth of low rank steam coal is a new trend in global seaborne trade.
 Low rank coal also designed as “off-spec” consists of sub-bituminous coal
with a low calorific value (4,900 kcal/kg in the case of Indonesia, 5,500 kcal
for Australia) and a high ash content (up to 24%).
 Sold at a discount
 An estimated 200 million tons traded in 2011
 Australia is now a regular supplier of low rank coal on the spot market.
 The suppliers save money as they don’t have to wash the coal.
 The buyers get lower prices. In the importing countries, low rank coal is
blended with other coals.

May 29, 2013 7

 Low rank coal trade contd…
 Since 2000, most of coal power plants have been designed with the
possibility to burn coals with a wide range of calorific value.
 As more tonnage is needed to produce the same unit of energy, this new
trend explains part of the high growth in steam coal imports by some
countries (China, South Korea).
 In Indonesia, low rank coal, accounts for about half of coal reserves in the
country
 A ban on exports of low calorific value coal was planned from 2014 so as to
enrich the resource to high value product.
 The government however decided in Jan 2013 not to proceed with the
proposed ban as technology required for upgradation of the low rank coal
is currently unavailable

May 29, 2013 8

May 29, 2013 9
May 29, 2013 10
 Broadly 70:30 Ratio

May 29, 2013 11

 Coking Coal – A Global Market
 Four countries/regions dominate coal imports

 China, India, the grouping Japan/South Korea/Taiwan

which constitutes the traditional Asian buyers, and Europe

 Together they account for 84% of total coal imports.

 China became the world’s top importer in 2011, taking over

the position that Japan has occupied for three decades.

 India became the third largest importer in 2012, overtaking

South Korea

May 29, 2013 12

 Coking Coal – A Global Market
 Concentration of exports in one country, Australia, which accounts
for half of global coking coal trade.

 Australia is therefore responsible for supplying customers all

around the world with its high-quality coking coals

 The other exporters include the United States, Canada, Mongolia

and Russia

 Coking coal exports amounted to 291 million tons in 2012 (254

million tons were seaborne trade)

 Whereas steam coal trade accounts for 15% only of steam coal
production, coking coal trade reaches 29% of coking coal
production (2011).

May 29, 2013 13

May 29, 2013 14
 Major coal Importers

May 29, 2013 15

May 29, 2013 16
 Coal Exporters

• Six countries dominate coal exports: Indonesia, Australia, Russia, the

United States, Colombia and South Africa
• They account for 84% of total trade.
May 29, 2013 17
 Top ten exporters

May 29, 2013 18

May 29, 2013 19
May 29, 2013 20
 China-Big Turnaround
 China, which was still a net exporter in 2008, became the world’s
first coal importer in 2011(Japan has occupied top slot for three
decades).
 China imported 289 million tons of coal in 2012 (+30% over 2011).
 China is now responsible for 23% of global coal imports.
 China is the world’s largest coal producer.
 Chinese imports, even at record levels, account for 7% only of the
Chinese market.
 A small change in Chinese consumption or production is able to
transform the status of the country from the number one importing
country to a self-sufficient country.

May 29, 2013 21

May 29, 2013 22
 In 2011, China alone accounted for nearly half the
world’s coal consumption
May 29, 2013 23
May 29, 2013 24
May 29, 2013 25
May 29, 2013 26
May 29, 2013 27
May 29, 2013 28
 China domestic coal industry

May 29, 2013 29

May 29, 2013 30
May 29, 2013 31
May 29, 2013 32
 China is essentially a “cost minimizer”

 Chinese coal imports are driven by coal price arbitrage between

domestic and international coal prices.
 The high cost of moving coal to the heavily industrialized coastal
area has enabled the entry of import coals to compete with domestic
coal products
 “Swing buyer” in the coal market
 In early 2011, when Australian coal prices,China was a net exporter,
with Chinese traders reselling their coal cargoes
 In 2012, imports grew sharply (up 30%) driven by low international
prices

May 29, 2013 33

May 29, 2013 34
 West Australia -Qingdao Freight (USD/tonne)
55

50

45

40

35

30

25

20

15

10

May 29, 2013 35

West Australia -Qingdao Freight (USD/tonne)
May 29, 2013 36
May 29, 2013 37
May 29, 2013 38
 Consolidation Drive
 Push to move small individual mines
into the ownership of the SOE
mining companies
 Creation of 14 large coal production
centers
 These bases to be operated by 20
companies
 Out of which 10 will have an output
above 100 mtpa and others should
have above 50 mtpa
 Production growth to continue,
despite the ongoing closures of
smaller mines, albeit cost pressure to
exist

May 29, 2013 39

 China Infrastructure
Expansion
 According to the 12th FYP by 2015 Chinese coal transported via
railways is projected to be 2.6 Bt, which corresponds to an average
annual growth of 5.4%.
 Railway capacity dedicated to coal is expected to grow to around 2.8
Gt to 3-3.3 Gt by 2015.
 Construction of new power plants closer to the mine site
 Construction of ultra high voltage (UHV) grid systems
 The current plan is to invest RMB 500B in the roll out of this grid to
2015.
 The UHV grid will then extend to some 40,000 km and by 2020 the
target is to reach 300 GW of transmission capacity.
 This should also reduce operational transmission losses from 6.6%
to 5.7%.

May 29, 2013 40

 12th Five Year Plan –
Production Boost
 The plan foresees a huge development of coal production in
western regions (the Xinjiang region mainly), which account for
72% of the new capacity to be added during the five-year plan.

 This corresponds to a capacity of an additional capacity of 530

million tons per year.

 The government aims to build 17 super-large coal mines in the

region, boosting annual coal output of Xinjiang to 400 million tons
by 2015.

May 29, 2013 41

 Challenges…
 Xinjiang region is located nearly 3,000 km away from major
northeastern ports.

 Xinjiang holds 40% of the country's coal resources (2.19 trillion tons),
but produced only 120 million tons in 2011 (an estimated 140 million
tons in 2012).

 Water management will be a key issue for coal miners

 The railway from the west to the east is still very limited

 To tackle this issue, a railway line is under construction between the

Xinjiang region and the Gansu Province which will be able to transport
50 million tons a year by 2015.

 Coal by wire is also under consideration

May 29, 2013 42

 China coal import boom
underway??
 Domestic production and consumption to be capped at 3.9 billion tons by 2015.
 Most analysts forecast a growth in coal consumption to 4.3 billion tons by 2015,
requiring a large call on imports (almost 400 million tons depending on the actual
level of production)
 However, if the government manages to actually cap coal consumption at 3.9 billion
tons, China could regain its self-sufficiency
 Imports in that case would be limited to specific coal qualities, mainly coking coal
and high caloric value thermal coal, which are not widely available on the Chinese
market
 12th Five-Year Plan foresees a diversification of the electricity mix away from coal.
 Share of non-fossil fuels in generating capacity- Expected to increase to 30% by 2015
(up from 20% currently).
 Efforts are focused on the development of hydropower (more than 50% of the
increase in non-fossil energy consumption by 2020)

May 29, 2013 43

 Diversification Is Already Underway

May 29, 2013 44

 Disconnect..

May 29, 2013 45

 Coal Prices have been
Deregulated
 Price liberalization has not
yet led to a rise in
domestic coal prices
 Current overcapacity in
the Chinese market
 Impact is not yet seen on
the competitiveness of
imported coal relative to
domestic coal

May 29, 2013 46

May 29, 2013 47
May 29, 2013 48
 Bearish Outlook

May 29, 2013 49

 Market Rumours
 China's NEA is framing a policy to curb import of low grade thermal and coking coal
by imposition of import ban
 Unconfirmed reports say that thermal coal with low calorific value less than
4,500kcal/kg, ash content of more than 25% and a sulphur content of more than 1%
will be banned.
 Possible ban on coking coal import with more than 12% ash content, 1.75% sulphur
and more than 12% total moisture
 Timeline for the implementation is not clear
 NEA is also proposing to tighten coal import procedures by setting criteria for
Chinese coal importers
a. Registered capital of more than RMB 5000 million
b. Traded volumes of 100 mn tonnes in the past three years
c. Must have adequate stockyards
 Market participants are skeptical about implementation of this policy.
 Indonesia would be the biggest looser with almost 100 mn tonnes at stake.
 The limit on sulphur would also effect US coal miners.
 The proposal will get support from Chinese coal miners, who are reeling under
severe cost pressures amid low cost imports

May 29, 2013 50

May 29, 2013 51
 India
 Although India is the third largest producer of coal
(577 million tons in 2012),
 Domestic production is insufficient to cover the
country’s fast-growing needs
 Large-scale blackout experienced in July 2012.
 In 2012, the country imported a record 134 million
tons (15% over 2011)
 Consequently India appears as the next area of
surging coal imports
 Ultimately, India could overtake China as the
world's largest importing country.
 As 40% of the population still lacks access to electricity
 Large power plants, most often located on the coast
and powered by coal, resulting in a high demand for
imported coal.

May 29, 2013 52

 Indian Coal Dynamics

May 29, 2013 53

 India’s Coal Imports-200 mts
by 2017??

 India is the world’s fourth largest producer of

steel (77 million tons produced in 2012)
 Reserves of coking coal are of poor quality (34
million tons imports in 2011).
May 29, 2013 54
 India’s Power(less) Ambition
 India has an ambitious electrification program -Initiative for the
construction of 14 coal-based UMPPs each with a capacity of 4 GW.

 India’s current power capacity is approx 224 GW, with 58% based
on coal (130 GW)

 The new 12th Five-Year Plan (FY2012/13-2016/17) has confirmed

this program, with the aim of adding 64 GW of thermal capacity in
the next five years, almost entirely powered by coal (63 GW).

 Coal consumption could reach 980 mn tons v/s production estimate

of approx. 795 mn tons by 2016-2017
 Gap would be approx. 185 mn tons
 Government has introduced the so-called captive mines policy to
open State mines to private investment.
 Out of over 200 coal blocks, containing coal reserves of over 50
billion tons, only 30 mines have started production and contributed
merely 36.3 million tons in FY 2011 against a target of 104 mn tons

May 29, 2013 55

 India’s Power(less) Ambitions
contd..
 Licenses are now auctioned to avoid discretionary allocation.
 A fierce battle has developed between the Ministry of Coal and the Ministry of the
Environment.
 However a large part of the increase is expected to come from the captive mines,
which contribution to domestic supply is very uncertain.

May 29, 2013 56

 India’s Overseas Shopping Spree

• Coal India is ready with a war chest of USD 6.3 bn and

18 investment bankers to identify overseas coal assets to
meet domestic needs
• There have received 32 proposals from Indonesia,
Australia, Mozambique, South Africa,Chile and
Colombia
• India’s second largest power generator Tata Power is
scouting for cheap coal assets in US, Canada and
Colombia

May 29, 2013 57

May 29, 2013 58
 JST
 Japan, South Korea and Taiwan constitute the traditional
Asian buyers’ group

 The three countries, which do not produce coal, rely on

imported coal to fuel coal-based power generation and
to manufacture steel products.

 Japan imported around 182 million tons in 2012 (approx

108 mt steam coal)
 South Korean imports have increased rapidly from
Indonesia (129 mn tons in 2011)

May 29, 2013 59

May 29, 2013 60
 Taiwan

 Majority is steam coal (62 million tons) mostly used in

Taipower’s coal-fired power plants
 The country also imported 3.8 million tons of coking
coal.
May 29, 2013 61
 Europe
 European coal imports rose by 14% in 2011 and 11% in
2012

 Abundance of US coal at low price and the collapse of

CO2 prices, coal has regained its competitiveness in the
power sector.

 U.S. steam coal exports to Europe (including Turkey)

jumped 124% to 18 million tons in 2011 and 90% to 31
million tons in 2012.

 Coal gained a larger share of European electricity

generation, at the expense of natural gas
May 29, 2013 62
 Golden Age of Coal in Europe ?

May 29, 2013 63

 Surge in Atlantic Trade….

 In 2012, EU imported around. 210 mts

May 29, 2013 64
 German Coal Fired Power Stations Due to Open By 2020
Date
Operator Location MW Due Status
Trianel Lunen 750 2013 In Trial
EnBW Karlsruhe 874 2013 In Construction
GDF Wilhelmshaven 800 2013 In Construction
Steag Duisberg 725 2013 In Construction
E.ON Datteln 1055 2013 In Construction
RWE Hamm 1600 2013 In Construction
Vattenfall Hamburg 1640 2014 In Construction
GKM Mannheim 911 2015 In Construction
MIBRAG Profen 660 2020 A/W Approval
RWE Niederaussem 1100 n/a A/W Approval
GETEC Buttel 800 n/a A/W Approval
Dow Stade 840 n/a A/W Approval
May 29, 2013 65
 Europe Future
 In the future, European coal consumption and imports will mainly
be driven by national policies and are contrasted among countries.

 While the United Kingdom and Spain absorbed most of the U.S. and
Colombian tonnages made available on the market in 2012, the
trend may be short-lived as new regulations unfavorable to coal
burning are put in place in both countries.

 In Germany, at the opposite, the phase-out of nuclear power, leads

to resurgence in coal consumption. The building of new hard coal-
fired power plants will increase imports.

May 29, 2013 66

May 29, 2013 67
 Indonesia
 Massive transformation

 The country has significant reserves (Kalimantan and Sumatra) of

bituminous and sub-bituminous coal, well-suited to the needs of
Indian and Chinese power stations, Indonesia’s two main markets.

 Enjoys a strategic geographical position, very favorable production

costs and internal transport logistics (mainly by barge).

 Coal production reached an estimated 409 million tons in 2012.

 The country produces a large quantity of sub-bituminous coal, as

well as “off-spec” coal with a calorific value under 4,100 kcal/kg,
lignite and PCI.

May 29, 2013 68

 One of the lowest costs of
production
 Indonesia enjoyed one of
the lowest costs of
production in the world.

 Easiest mines are

depleting and the country
has to turn to more
difficult mines, located
farther from the ports,
and deeper.

 The cost of production,

including domestic
transportation cost are
now rising

May 29, 2013 69

 Indonesia trade pattern

May 29, 2013 70

 Indonesia is feeling the
pressure too!!
 Coal exports increased by 18 million tons only to 327 million tons in
2012.

 Small coal mines, often operated illegally, were shut down in

response to lower prices.

 The major producers, such as Bumi and Adaro, which operate some
of the country’s least expensive mines, also saw their margins
squeezed.

 All companies have announced costs reductions and cut in coal

output and miners are reconsidering expansion plans.

May 29, 2013 71

 Challenges ahead
• Indonesian domestic consumption is booming
• The uncontrolled rise in coal exports has led the government to prioritize
the domestic use of coal over its exports and to introduce more regulation
in the sector.
• A ban on exports of low calorific value coal was planned from 2014.
• Government decided in January 2013 not to proceed with the proposed
ban and instead to control coal output by giving each producing region
an annual mining quota
• The government has also mandated producers to set aside part of their
production for domestic consumption (20-25%).
• A tax on the export of unprocessed coal is also under consideration,
although no date has been fixed yet.
• The government plans to raise coal mining royalties
• A new regulation, requires foreign investors in mining companies to divest
51% of their shares by the 10th year of production, but uncertainties remain
over applicability and pricing.

May 29, 2013 72

 Australia
 Largest player until 2011,
overtaken by Indonesia in
that year

 Largest exporter of coking

coal

 Represents nearly 50% of

the global coal exports

 Most of the hard coal

reserves are found in the
states of Queensland and
New South Wales (95% of
Aus hard coal production)

 Very sensitive to weather

events…2011 rains
disrupted Queensland
May 29, 2013 coal production
coking 73
 Australia

May 29, 2013 74

 Australian supply is not all
cheap
 Mining companies in Australia have to struggle with high production costs
and a decrease in productivity.
 Current production costs are among the highest in the world
 The industry has to move to lower quality deposits that are more costly to
exploit
 New developments are further away from major rail and port
infrastructure.
 Input costs such as labor, machinery, equipment’s hire and diesel fuel have
all increased dramatically.
 Margins are further squeezed by the rising cost of infrastructure access, the
appreciation of the Australian dollar against the U.S. dollar and escalation
in capital costs.
 Australia introduced a carbon tax in July 2012.The tax applies to the mining
of coal, as opposed to the burning of coal for electricity generation.
 The government also introduced a new tax on profit of coal and iron ore
companies in July 2012 (the Minerals Resource Rent Tax).

May 29, 2013 75

 Australia- port capacity issues
 Australia’s coal exports have been plagued by a structural shortage of rail
and port capacity over the past six years.

 Australia has started to lose its competitive edge and its share of the world
thermal coal trade has declined since 2006.

 Coal exports are serviced by nine major coal ports and export terminals
located in the states of Queensland and New South Wales.

 Recent expansions to capacity at Hay Point and Abbot Point ports added
some 50 million tons a year.

 Australia is increasing infrastructure capacity to add about 60 million tons a

year to annual coal export capacity by 2015.
 An additional capacity of 200 million tons a year is planned in the medium
term.

May 29, 2013 76

 Sunset industry???
 The reduced margins coupled with the recent fall in coal prices have
moderated Australia’s coal industry expansion.

 Mining companies have announced reviews of their investment

plans.

 BHP Billiton, Xstrata, Rio Tinto, Anglo and Peabody all cut output at
their highest cost mines or even close them.

 Workforce reduction amounted to 3,500 jobs from April to September

2012.

 The future expansion of Australian coal exports is strongly linked

with gains in productivity and a recovery in international coal prices.

 Development in competing countries, Indonesia and the United

States for steam coal, Mongolia, Mozambique, the United States
and Canada for coking coal, will be a determining factor as well as
the evolution of demand in importing countries, China and India
Mayparticularly
29, 2013 77
May 29, 2013 78
May 29, 2013 79
 US
 The collapse of U.S. gas prices, to $4/million Btu in 2011 and even
$2.75/million Btu in 2012, linked with the “shale gas revolution”,
has made coal uncompetitive in the electricity sector (92% of the
total coal demand)

 U.S. coal demand dropped 4% in 2011 and 11% in 2012. The

reduction in domestic demand has forced U.S. miners to look for
overseas outlets.

 Their exports surged by 31% in 2011 and 16% in 2012. They reached
112 million tons in 2012, more than twice the level of 2009.

May 29, 2013 80

 Coal use is a taboo in US!!

 Stricter environmental standards in terms of coal production and its

consumption in power plants cloud the future of coal in the country.
 The expected outcome of the new regulations on air pollution is the
retirement of 27 GW of capacity between 2012 and 2016
 Decrease in the coal demand has resulted in a decrease in the coal
production in the country
 In 2013/2014,coal is likely to atleast partially gain its lost market share
visa vis gas (as gas prices have bounced back from low levels
unsustainable for shale gas producers)
May 29, 2013 81
 US Export Outlet

May 29, 2013 82

 US Competitiveness
 No large coal ports on the U.S. West coast, steam coal (as well as
coking coal) has to be exported from the Gulf coast.

 Large maritime freight disadvantage compared with Australian or

Indonesian coal.

 Steam coal prices therefore have to be sufficiently high to cover

production, internal transportation, handling costs, and maritime
freight(this was the case in 2011). The fall in steam coal prices since
February 2012 makes this new business unprofitable.

 Trade to Europe at current prices (US$90/t beginning of December

2012) is not profitable for most mines.

 Therefore although exports were at record levels in 2012, they

should decrease in the short term

May 29, 2013 83

 US – Still a swing supplier??
 They enter the international coal market when prices are high and
withdraw when prices come down

 Exports have started to decrease compared with their peak level

reached in June and July 2012 and the scale back is expected to
continue in 2013.

 The EIA expects that coal exports will decline in 2013 but remain
above 90 million tons for the third straight year

May 29, 2013 84

 PRB coal exports to Asia???
 There are several projects of new ports and railways under the planning
stage. Two large port projects have been proposed in Washington State,
Longview Terminal and Gateway Pacific Terminal.
 Along with three smaller projects in Oregon State, the proposals would
add between 115 and 138 million tons a year in total export capacity .
 In addition, 10 proposed terminals, although each small in scale, would
together add 86 to 138 million tons a year in port capacity along the Gulf
Coast.
 Projects face strong local opposition and challenging permitting issues.
 Community and environmental groups are concerned about coal dust from
increased train traffic and the broader climate impacts from the coal being
burned overseas.
 Pending construction of new ports on the West coast of the United States,
the port capacity of the West coast of Canada is being used.

May 29, 2013 85

 US West Coast port infra plans

May 29, 2013 86

 Expansion of Panama Canal
 Many of Colombia's port expansion projects lie on the Caribbean near the eastward
opening of the Panama Canal.
 Slated for completion by 2015, the Panama Canal expansion should enhance
opportunities for coal exports to Asian markets.
 The freight cost will be largely reduced as it will then be possible for smaller
Capesize ships (the so-called "Post-Panamax" vessels) to use the canal instead of
having to sail around the Cape of Good Hope
 Also, a 220 km railway line between the port of Cartagena (on the Atlantic coast)and
the Pacific Ocean is under consideration by the Chinese Development Bank
 China and Colombia are also considering an 800 km railway from central Colombia
to the Pacific and expansion of the port of Buenaventura on the Pacific coast.
 The US$2.7 billion project would be funded by the Chinese Development Bank and
would facilitate coking coal exports to China.
 In 2012, India’s Aditya Birla Group announced its plan to purchase a US$1 billion
stake in Drummond's Colombian coal mines.
 Greater exports of Colombian coal to Asia in the future could be expected

May 29, 2013 87

 Supplies to Increase!!

May 29, 2013 88

 So what to expect for the
future??…

May 29, 2013 89

 Moderate Growth...!!

May 29, 2013 90

 Moderate Growth Contd...!!
• Overall, expect fairly moderate volume growth (4-5% at best) in coal
trade over the medium term
• Distance travelled is likely to improve going forward as Atlantic basin
exporters overcome infrastructure hurdles to meet rising Asian demand
• Expect bouts of volatility in sync with price arbitrage opportunity

May 29, 2013 91

 Key risks...!!
• Supply disruptions- Both weather-related (e.g. Queensland
floods) and man-made (e.g. industrial action at mines, rail and
ports)
• Forex risk- USD appreciation against AUD,RMB etc can directly
impact seaborne competitiveness
• Govt Policies- esp Chinese,India,Indonesia
• Power deregulation in India
• Enviromental Policies

May 29, 2013 92

 Grain & Minor Bulk Trade!!
Seaborne minor bulk trade
Seaborne Grain trade
1800
380

370 5 year CAGR of 4.21% 367 1600 5 year CAGR of 2.48% 1544
1481
360 1366 1363
1400 1359
350 345
343 1197
1200
340

330
1000
321
319
320
800
310 306

300 600

290
400
280

270 200
2007 2008 2009 2010 2011 2012

0
2007 2008 2009 2010 2011 2012
Grains
Seaborne minor bulk…
May 29, 2013 93
May 29, 2013 94
 Medium Term Supply Outlook
CAPESIZE FLEET SUPPLY PROJECTIONS
Year 2013E 2014E 2015E 2016E 2017E 5 yr CAGR (%)
Capesize - Current fleet 284
NB Orderbook contracted post 2010 15 10 29 20 20
NB Orderbook contracted pre 2010 9 5 1
Slippage 20%
Slippage dwt > 2010 3 2 6 4 4
Slippage dwt < 2010 5 2 0
Net deliveries (full cancelation) 12 11 25 22 20
Net deliveries (half cancelation) 16 13 26 22 20
Demolition age @25yrs 4 2 5 3 6
Net Supply (100% contracted <2010) 279 292 300 321 340 354 4.86%
% growth 4% 3% 7% 6% 4%
Net Supply (50% contracted <2010) 279 296 307 328 347 361 5.29%
% growth 6% 4% 7% 6% 4%
PANAMAX FLEET SUPPLY PROJECTIONS
Year 2013E 2014E 2015E 2016E 2017E 5 yr CAGR (%)
Panamax - Current fleet 183
NB Orderbook contracted post 2010 21 13 16 11 11
NB Orderbook contracted pre 2010 6 2
Slippage 20%
Slippage dwt > 2010 4 3 3 2 2
Slippage dwt < 2010 3 1
Net deliveries (full cancelation) 17 14 16 12 11
Net deliveries (half cancelation) 20 15 16 12 11
Demolition age @25yrs 8 2 2 2 1
Net Supply (100% contracted <2010) 175 192 204 218 229 239 6.38%
% growth 10% 6% 7% 5% 4%
Net Supply (50% contracted <2010) 175 196 209 222 233 243 6.74%
May 29, 2013 95
% growth 12% 7% 6% 5% 4%
 Medium Term Supply Outlook
HANDYMAX FLEET SUPPLY PROJECTIONS
Year 2013E 2014E 2015E 2016E 2017E 5 yr CAGR (%)
Handymax - current fleet 142
NB Orderbook contracted post 2010 11 4 14 9 9
NB Orderbook contracted pre 2010 2 0 0
Slippage 20%
Slippage dwt > 2010 2 1 3 2 2
Slippage dwt < 2010 1 0 0
Net deliveries (full cancelation) 9 6 12 10 9
Net deliveries (half cancelation) 10 6 12 10 9
Demolition age @25yrs 9 1 1 1 1
Net Supply (100% contracted <2010) 140 142 147 158 167 176 4.70%
% growth 2% 3% 7% 6% 5%
Net Supply (50% contracted <2010) 140 144 148 159 168 177 4.88%
% growth 3% 3% 7% 6% 5%
DRYBULK FLEET SUPPLY PROJECTIONS
Current fleet 2013 2014 2015 2016E 2017E 5 yr CAGR (%)
DryBulk Total 695
NB Orderbook contracted post 2010 52 29 66 45 45
NB Orderbook contracted pre 2010 19 8 2
Slippage 20%
Slippage dwt > 2010 10 6 13 9 9
Slippage dwt < 2010 10 4 1
Net deliveries (full cancelation) 42 34 58 49 45
Net deliveries (half cancelation) 51 38 59 49 45
Demolition age @25yrs 40 6 9 6 8
Net Supply (100% contracted <2010) 679 696 724 774 816 853 4.68%
% growth 3% 4% 7% 6% 5%
Net Supply (50% contracted <2010) 679 706 738 788 831 868 5.03%
May 29, 2013 96
% growth 3% 4% 7% 5% 4%
 Yardwise breakup of the orderbook..
CAPE ORDER BOOK (TOP 10) PANAMAX ORDER BOOK (TOP 10)
Shipyard % of total Shipyard % of total
Japan Marine Utd 13.18% Oshima S.B. Co. 9.38%
Shanghai Waigaoqiao 11.00% Tsuneishi Zosen 7.42%
Namura Shipbuilding 9.69% Japan Marine Utd 6.03%
Imabari S.B. 7.97% Imabari S.B. 5.53%
Jiangsu Rongsheng 7.39% Jiangsu Rongsheng 4.84%
STX Dalian 6.62% Jinhai Heavy Ind. 3.83%
STX SB 1.72% Jiangsu New YZJ 3.01%
Sungdong S.B. 4.89% Jiangsu Eastern 3.00%
Beihai Shipyard 4.24% STX S.B. 2.84%
Koyo Dock K.K. 4.03% STX Dalian 0.36%
Shanghai Jiangnan 2.82% Tsuneishi Zhoushan 2.66%
Total Top 10 73.55% Total Top 10 48.91%

HANDYMAX ORDER BOOK (TOP 10) HANDYSIZE ORDER BOOK (TOP 10)
Shipyard % of total Shipyard % of total
Oshima S.B. Co. 9.88% Saiki Hvy. Ind. 7.11%
CIC (Jiangsu) 8.68% Imabari S.B. 6.51%
Mitsui SB 6.23% Weihai Samjin 5.48%
STX Dalian 5.43% Zhejiang Yangfan 5.04%
Tsuneishi Zhoushan 5.31% Chengxi Shipyd. 4.03%
Hantong S.Y. 5.12% Hakodate Dock 3.80%
Taizhou Sanfu 4.48% Jinling Shipyard 3.69%
Tsuneishi Cebu 3.99% SPP Shipbuilding 3.57%
Bohai Shipbld. 3.84% Onomichi Dockyd 3.45%
STX S.B. 3.62% Hyundai Mipo 3.39%
Total Top 10
May 29, 2013 56.59% Total Top 10 46.07% 97
May 29, 2013 98
 Overall conclusion

• Iron trade growth to likely outperform coal trade growth

• Capesizes to outperform Panamax in the medium term
• At current NB prices, 10 yr BE for a NB Cape dely (Japan) would we
approx. USD 16,300/day
• Long term Capes to Panamax Spot Earnings ratio has been close to 1.6
• Booking NB Capes at USD 16,300/day BE would be equivalent to
building a NB Panamax with a USD 10,200/day BE
• Overall would suggest
– Build 2 NB Capes dely Q3/Q4 2015
• Atleast book Cal 2015 FFA contract fro 2 Capes @ USD 14,000/day
– Build 2 NB Supramax dely Q3-Q4 2015
– Build 2 NB Kamsarmax dely Q4 2015/ Q1 2016
• Unless S/H market for Panamaxes corrects 15% below current
market levels

May 29, 2013 99

 Overall conclusion

May 29, 2013 100

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