aug3SSY Monthly Shipping Review - Aug 13

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ppvMonthly Shipping ReviewEditorial date: 13 August 2013

Dry bulk: Softer; Tankers: Weaker; Ship values: Wet: Mixed; Dry: Stable

Published by SSY Consultancy & Research Ltd, Lloyds Chambers, 1 Portsoken Street, London, E1 8PHTelephone: 020-7977 7400, Fax 020-7265 1549, Email: [email protected], Website: www.ssyonline.com

Registered: in England number 1971247While care has been taken to ensure that the information in this publication is accurate SSY Consultancy & Research Limited can accept no responsibility foran errors or an conse uences arisin therefrom. Re roducin an material from this re ort without ro er attribution to SSY is strictl forbidden.

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Index

Baltic Exchange Dry Index

www.balticexchange.com

Existing No. MDwt No. MDwt No. MDwt No. MDwt

Tanker 5,388 448.4 5,605 477.7 5,715 494.4 5,789 503.3

Bulk 8,013 534.2 8,771 610.6 9,323 674.2 9,483 697.8

Combi 48 5.2 37 4.4 24 3.3 21 3.1

Tanker 494 22.3 449 20.8 430 19.7 468 23.7

Bulk 2,417 117.4 2,111 101.8 1,568 77.8 1,355 73.7

Combi 19 1.3 8 0.5 5 0.2 4 0.1

Tanker 966 116.2 636 75.9 514 55.0 475 3.3

Bulk 2,931 251.0 2,401 196.5 1,537 122.6 1,415 112.5

Combi 4 1.3 0 0.0 0 0.0 0 0.0

Fleet >= 20 years

Fleet Developments

Orderbook

1.1.11 1.1.12 1.1.13 1.8.13

Dry Bulk

BDI records its highest monthlyaverage since 2011 in July (1123points) before sinking back below1,000 points for the first time in sevenweeks on August 12.

Positive impact of record South

American grain season (and portcongestion) may finally be on the wane.

Grain activity from the Black Sea formsthe biggest positive development forSupramaxes, with agri-analysts raisingthe regions grain export forecasts.

Capesize TCs look to regain positivemomentum as the FFA market surges.

Tanker Transatlantic westbound MR earnings

reached a peak of $15,750/day at thestart of August, the highest since May,

having risen throughout late July.Levels have since come off as thegasoline arb to the US has closedagain.

West African Suezmax rates haveremained above $21,000/day in August,having firmed in the second half of July,on high levels of spot fixing, particularlyfrom India.

Operations at several Libyan exportterminals have been halted again whichcould affect the Aframax market.

Fleet Developments

Dry bulk tonnage supply grew further inJuly, with 4.85mdwt of new shipdeliveries far outweighing 1.84mdwt offleet removals. This took total net growthin the dry bulk fleet to 25.5mdwt in thefirst seven months of 2013.

By contrast, oil tanker supply fell slightlyin July, as fleet removals surged, amidthe scrapping of 5 VLCCs. At 1.99mdwt,total tanker tonnage removed fromservice exceeded new ship deliveries of

1.73mdwt, yet the fleet still grew by a net10.55mdwt in January-July inclusive.

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Crude Tanker Spot EarningsWeekly TCE Rates, US$000s/day

260 MEG-Japan

130 W.Africa-USAC

80 N.Sea-UKC


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Dry Bulk Market

Representative Rates Last Day of Month Jul-11 Jul-12 May-13 Jun-13 Jul-13 13/12%

Baltic Exchange Dry Index (4/1/85=1,000) 1,264 897 809 1,171 1,062 +18.4%

Avg 4 Handysize T/C's 9,944 8,438 7,906 8,272 7,778 -7.8%

Avg 4 Supramax T/C's 13,161 10,789 9,104 9,973 9,539 -11.6%

Trans-Atlantic Round - Panamax $14,394 $7,694 $7,439 $10,100 $10,496 +36.4%

Trip Cont/Far East - Panamax $21,515 $16,649 $12,850 $15,694 $16,684 +0.2%

Trans-Pacific Round - Panamax $8,375 $7,443 $4,961 $6,358 $6,547 -12.0%

TC Trip Far East/Cont 70,000 $3,961 -$436 $67 -$124 -$98 -77.5%

Iron Ore 150,000 Tub/Rotterdam $9.61 $7.26 $7.59 $10.95 $8.96 +23.4%

Iron Ore 140,000 Tub/Beilun+Baoshan $19.38 $17.95 $17.65 $21.42 $20.32 +13.2%

Coal 140,000 Richards Bay/Rotterdam $9.44 $6.13 $6.44 $9.48 $8.36 +36.4%

12 Month T/C modern type - 24,000 $10,375 $7,000 $5,500 $6,000 $6,000 -14.3%





12 Month T/C modern type - 170,000 $11,250 $10,500 $10,500 $12,500 $13,000 +23.8%

SSY Superhandymax Index/BSI 1,259 1,032 871 954 912 -11.6%

Baltic Exchange Panamax Index 1,511 982 795 1,007 1,057 +7.6%SSY Atlantic Capesize Index (2/10/89=5,000) 6,696 5,335 5,161 6,283 6,353 +19.1%

SSY Pacif ic Capesize Index (6/1/97=4,114) 5,661 4,155 4,727 5,325 5,283 +27.1%

HS 380 CST Rotterdam/tonne $659.00 $613.00 $577.00 $579.00 $600.00 -2.1%

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INDEX

SSY Capesize Indices

New Atlantic New Pacific

SSY Consultancy & Research Ltd - 2 - August 2013

Cape TCs RemainOver $10,000/Day

An easing of rates across allbulker sizes led the BalticExchange below 1,000 points on12 August for the first time inseven weeks. Nonetheless, this

still represents a significantimprovement on the depressedyear-ago level of 764 points,thanks in most part to Capesize4TCs averaging more than$10,000/day (the Cape averagehad dipped below $4,000/day atthis point in 2012). At time ofwriting the spot physical markethad regained some upwardmomentum, while on the papermarket, the 4q13 was tradingaround $19,000/day, having

been priced at $14,250/day justone month previously.

Official data for July confirm anincrease in iron ore exports fromBrazil to a year-to-date high of29.7 Mt, which contributed to theJune/July rally in Cape spotrates. With Chinese importsadvancing to a monthly all-timehigh of 73.1 Mt in July and thedelivered spot price of iron oreclimbing above $140/t from

$110/t in June, this gives a goodindication of the strength ofChinese demand. The contrastin steel production levels

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Ind

ex

Baltic Exchange Dry Index


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between China and the rest ofthe world remain stark. Chinasmills produced 65.5 Mt of crudesteel in July, registering an

annual increase for the eleventhmonth in succession. Steelproduction in the rest of theworld on the other handexperienced annual declines inthe 13 months to June (the lastavailable data point). Theweakness in European steeldemand is analysed on page 6.

The fall in Cape earnings hadbeen Atlantic-led, with ongoingindustrial action by Colombianmine and port workers servingas a negative for freight rates.

The Panamax market has lostground in recent weeks, with theTC average edging lower to$7,428/day, a drop of almost$2,000/day from 19 July, with thelargest declines seen in theAtlantic. The positive impactfrom the record South Americangrain season may finally be onthe wane. SSY estimates thatthe number of Pananaxes

waiting to load grain has beenaround 90 for the last two weeks,having numbered 100+ for theprevious 17 weeks.

In recent weeks the steadiest ofthe four dry bulk carrier sizesmonitored by the BalticExchange has been theSupramaxes, where the 6 TCaverage has hovered around$9,500/day for three weeks.While there has been increasedport congestion involving gearedvessels either dischargingfertilizers or loading cargoessuch as grain, sugar or forestproducts in Brazil, the mainpositive gain for Supra earningshas been on the S1B route fromCanakkale to FE Asia, which hasjumped 28% in the last threeweeks to $17,620/day. This hasbeen driven by Black Sea grainmovements (page 8).

Handysize average earnings

have slipped to $7,548/day, thelowest since mid-March, withpronounced falls on routes fromSouth America and the US Gulf.

August 2013 - 3 - SSY Consultancy & Research Ltd

Dry Bulk Market

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$/Day

Average of the 4 Timecharter Routes

Handymax (45,000 dwt)

Panamax (74,000 dwt)

Capesize (172,000 dwt)

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$/TON

Coal Freight Rates

Coal 140,000 RB/Rotterdam

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12 Month Time-Charter Rates

25/32,000 40/47,000

70/75,000 170,000


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Coal


US Exports Under

Pressure

Alongside the grain effect fromthis years record South

American grain export season,shipments of US coal have playeda major role in shaping demandfor Panamaxes during 2013. Thepeaks in coal shipments in March2013 (see chart, right) coincidedwith a firmer phase in thePanamax market. The 4 TCsleapt from $5,100/day in earlyFebruary to nearly $9,700/day inlate March, but by early June the

TCs dipped as low as $6,000/dayas US coal exports slowed.

The spike in steam coal exports inMarch was largely a consequenceof various stoppages in Colombiain February (a mixture of strikeaction and legislation interruptingsome rail and port activities). Inaddition to the lower 2q forseaborne steam coal volumes,US coking coal exports in Junedropped to a 9-month low of 3.8

Mt (excluding cargoes toCanada), which compares with ayear-to-date average of 5.0 Mt. Asa result overall seaborne exportsin the 1h13 were almost 30 Mt,down by around 2.5 Mt on the1h12. However, the annualisednumber is still comparable withthe heights of the last 1980s/early1990s (see chart below).

There were especially severeyear-on-year falls into China andIndia in the 1h13 with Junestotal shipments to Far East Asiaof 2.2 Mt the lowest this year anddown from 4.0 Mt in March.Despite this years downwardtrend, County Coal has recentlyconfirmed that it is continuing todevelop plans to build a 10+

Mtpa brownfield export terminalcapable of loading Panamaxesup to 60,000 dwt on the US WestCoast to enable coal to beshipped to Asia. This is additionto the companys plans for a 20+Mtpa Capesize coal terminal onthe Canadian West Coast.

By contrast, Kinder Morgan

announced in May that it was nolonger planning to construct acoal export facility at PortWestward on the Columbia River(with a targeted annualthroughput of 22 million shorttons by 2022) in the face of localopposition on environmentalgrounds. However, thecompanys commercial director

was reported by McCloskey ashaving interest in constructing acoal terminal somewhere on theUS West Coast.

Three other west coast projectsare still at consultation stage.These include Ambre EnergysMorrow Pacific project, whichhas a first stage capacity of 3.5Mtpa then 8 Mtpa in the secondstage. A proposal fromMillennium Bulk Terminals

Longview (jointly owned byAmbre Energy and Arch Coal)involves converting an aluminaimport facility at Longview on theColumbia River into a coalexport terminal. MBTL aims tocommence operations in 2015and reach 44 Mtpa capacity by2018. SSA Marine subsidiaryPacific International Terminalshas proposed a new facility atCherry Point eventually handlingup to 48 Mtpa of coal. A draft

environmental impact statementis being prepared, with publicconsultation to follow in 2014/15.

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million

tonnes

US Coal Exports: Long-Term Perspective

Steam coal

Coking coal

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US Coal Exports: Recent Perspective

Steam coal

Coking coal


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Coal

Coal Exports Mt 1990 1995 2000 2005 2009 2010 2011 2012 2013 Annlsd

USA: Coking 53.6 43.2 26.3 22.0 31.5 47.8 59.3 59.0 59.9

(ex. Canada) Thermal 28.3 28.2 9.6 5.4 13.0 15.6 31.5 48.1 45.8

Total 81.9 71.4 35.9 27.4 44.5 63.4 90.8 107.1 105.7 [Jun]Canada: Coking 25.9 26.6 26.3 25.1 21.0 25.7 26.4 29.8 32.7

(ex. USA) Thermal 3.9 5.4 3.5 1.1 5.8 5.5 5.7 3.9 3.6

Total 29.8 32.0 29.8 26.2 26.8 31.2 32.1 33.7 36.3 [Jun]

Australia: Coking 57.1 74.6 99.6 122.0 135.0 158.9 132.9 144.9 159.2

Thermal 49.5 62.1 87.1 111.7 139.6 142.1 148.2 171.2 176.8

Total 106.6 136.7 186.8 233.7 274.6 301.0 281.1 316.1 336.0 [Jun]

South Africa: Coking 3.6 6.2 2.1 1.0 0.5 0.6 0.8 0.8 0.3

Thermal 46.0 55.6 68.1 70.0 62.1 68.2 67.6 76.6 71.0

Total 49.6 61.7 70.2 71.0 62.6 68.8 68.4 77.4 71.3 [May]

Poland: Coking 8.9 4.9 3.0 1.4 0.5 0.1 0.0 0.2 0.1

Thermal 6.5 13.1 15.3 13.6 5.2 7.1 3.8 3.9 4.6

Total 15.4 18.0 18.3 15.0 5.7 7.2 3.8 4.1 4.7 [SSY]

Colombia Thermal 13.7 18.7 34.0 54.6 63.4 69.2 76.1 79.7 71.2 [Jun]Indonesia Thermal 4.4 31.3 57.1 128.7 233.5 290.6 323.3 347.1 380.6 [SSY]

PR China Coking 4.0 4.6 6.5 5.3 0.6 1.1 3.6 1.3 1.2

Thermal 13.7 24.1 48.6 66.4 21.7 17.8 10.9 7.8 6.1

Total 17.7 28.6 55.1 71.7 22.3 18.9 14.5 9.1 7.3 [Jun]

Other Exporter s Coking 11.1 10.4 16.0 24.5 26.4 32.8 30.2 36.7 37.3

Thermal 12.9 12.2 20.5 59.6 86.2 72.6 97.3 101.9 115.2

Total 23.9 22.6 36.5 84.1 112.6 105.4 127.5 138.6 152.5

Total Seaborne Coking 164.1 170.5 179.8 201.3 215.5 267.0 253.2 272.7 290.7

Thermal 178.8 250.6 343.8 511.1 630.5 688.7 764.4 840.2 874.9

Total 342.9 421.1 523.6 712.4 846.0 955.7 1017.6 1112.9 1165.6 [SSY]

Coal Im ports Mt 1990 1995 2000 2005 2009 2010 2011 2012 2013 Annlsd

Japan Coking 74.1 73.4 75.2 78.7 65.6 76.6 68.7 70.5 76.9 Jan to:Thermal 31.4 49.6 66.4 96.1 92.0 101.7 101.2 107.7 101.5

Anthracite 2.0 2.8 3.7 5.9 4.2 6.2 5.4 6.0 5.2

Total 107.5 125.8 145.3 180.7 161.8 184.5 175.3 184.2 183.6 [Jun]

Europe Coking 56.6 49.8 51.4 52.2 36.5 55.1 58.2 53.8 53.7

Thermal 83.3 99.6 121.4 161.2 140.6 118.8 144.5 161.8 158.2

Total 139.9 149.4 172.8 213.4 177.1 173.9 202.7 215.6 211.9 [SSY ]

South Kore a Coking 11.3 17.2 19.6 16.2 16.0 23.4 25.9 25.7 25.3

Thermal 11.6 26.0 42.3 56.1 80.5 87.8 94.4 91.1 92.3

Anthracite 1.1 0.7 2.0 4.5 6.5 7.4 8.8 7.8 8.0

Total 23.9 43.8 63.9 76.8 103.0 118.6 129.1 124.6 125.6 [Jun]

Taiwan Coking 4.6 5.3 7.3 9.8 9.4 10.2 10.7 10.5 10.8

Thermal 14.8 23.9 38.1 51.3 49.2 53.2 56.0 55.2 56.4

Total 19.4 29.2 45.3 61.1 58.6 63.4 66.7 65.7 67.2 [Jul]China Coking 0.9 0.4 0.5 7.2 34.5 47.3 44.7 53.6 70.7

Thermal 1.1 1.3 1.6 18.9 92.1 119.0 138.4 181.5 186.3

Total 2.0 1.7 2.1 26.1 126.6 166.3 183.1 235.1 257.0 [Jun]

India* Coking 5.4 9.9 11.2 19.7 29.0 35.3 33.0 35.5 37.5

Thermal 0.1 2.1 12.5 24.5 58.3 74.5 92.7 123.4 143.3

Total 5.5 12.0 23.7 44.2 87.3 109.8 125.7 158.9 180.8 [SSY]

USA Thermal 2.4 6.5 11.2 27.6 21.5 17.7 11.9 8.3 7.6 [Jun]

Other Importer s Coking 11.3 14.5 14.6 17.5 24.5 19.1 12.0 23.1 15.8

Thermal 31.0 38.1 44.6 65.0 85.6 102.4 111.1 97.4 116.1

Total 42.3 52.7 59.2 82.5 110.1 121.5 123.1 120.5 131.9

Total Seaborne Coking 164.1 170.5 179.8 201.3 215.5 267.0 253.2 272.7 290.7

Thermal 178.8 250.6 343.8 511.1 630.5 688.7 764.4 840.2 874.9

Total 342.9 421.1 523.6 712.4 846.0 955.7 1017.6 1112.9 1165.6 [SSY]

* Based on exporter data to India

Seaborne Coal Trade


6/24

Steel/Iron Ore


Protracted Decline

in EU Markets

With growth in the EUstagnating and steel

product prices continuing to fall,the regions crude steel outputendured further decline in the1h13. According to the latestdata from the World SteelAssociation, total EU-15 outputin Jan-June of 71.8 Mt was down3.9% year-on-year. Indeed,monthly production within the EU-15 has not seen an annualincrease since September 2011

(see chart below).

Furthermore, regional steelprices continue to exert negativepressure. For example, WSDsSteelBenchmarker at the end ofJuly showed that HRB priceswithin the EU of $588/t weretheir lowest since August 2012and down by 11% from their yearto date high in late January.

Without a revival in domestic

demand fundamentals, EUproduction is unlikely to seepositive growth resume as theregion is already a significant netexporter of steel products. Yetthe latest short term outlookpublished by the European SteelAssociation (Eurofer) offers littleprospect for a rapidimprovement in EU markets.

Although modest positive growthis expected to resume in the4q13, this will not prevent totalapparent steel consumption in2013 from being down 3.1% on2012 at 137 Mt (which would bethe second lowest annual total,after 2009, since 1996).

All of the major steel usingsectors continue to be impactedby recession with EU automobile

production predicted by Euroferto drop 4% this year, whileconstruction activity is forecast todecrease by around 3.5%. OnlyGermany, Austria, Sweden andHungary are expected to recordslight growth in construction.

Eurofer is predicting positivegrowth in EU-15 apparent steel

consumption for 2014 at 1.8%.This is chiefly based on a low-level stabilisation of constructionactivity and an upturn in keyindustrial sectors, such asmechanical engineering, asslowly improving economic andfinancial conditions boostinvestment growth.

However, at 140 Mt, projectedapparent steel demand next year

would still be below thecorresponding 2012 level andsome 30% lower than the record2007 total.

The implication, therefore, is that2014 will be another weak yearfor EU steel production and ironore imports. As the chart aboveshows, EU-15 imports areexpected to be close to 100 Mtfor a second consecutive year in2013, which compares with the

140 Mt imported in 2007. Theprospect for continued subduedlevels of activity on transatlanticiron ore trades from Brazil overthe next 12-16 months does,however, increase the upsidepotential for fronthaul cargomovements to Asia. This isreinforced in the short term byseasonal patterns (with recentyears seeing sharp rises inBrazils exports in the 3q and 4q)and, more fundamentally, by the

introduction of new mining andexport capacity (led by Vales 40Mtpa expansion at Carajas).

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'000tonnes

EU-15 Steel Production

Source: World Steel Association

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EU-15 Iron Ore Imports

Source: UNCTAD,SS Y


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November 2012 - 7 - SSY Consultancy & Research Ltd

Steel/Iron Ore

Million Tonnes 1985 1990 1995 2000 2005 2010 2011 2012 2013 Annlsd

Iron Ore Exports

Australia 88.0 100.0 137.1 165.2 250.8 422.6 458.9 518.1 567.5 [Jun]

Brazil 92.3 114.3 131.4 160.1 223.4 310.9 330.8 326.5 298.7 [Jul]

Canada 32.3 27.0 28.7 26.5 27.9 32.6 30.2 34.5 36.5 [SSY]India 28.8 31.6 32.3 34.9 80.9 95.9 78.8 35.0 13.0 [SSY]

S.Africa 10.2 17.0 21.8 21.4 26.6 48.0 53.3 54.0 54.4 [Apr]

FSU 43.9 38.6 30.0 27.4 35.6 57.6 58.1 58.0 60.0 [SSY]

Other 80.3 68.6 64.5 55.9 69.9 109.3 126.2 139.8 155.0 [Diff]

Total 375.8 397.1 445.8 491.4 715.1 1,076.9 1,136.3 1,165.9 1,185.1 [SSY]

Iron Ore Imports 1985 1990 1995 2000 2005 2010 2011 2012 2013 Annlsd

EU15 133.9 140.4 143.3 138.7 133.5 112.2 109.8 100.3 103.8 [SSY]

Other W.Europe 1.7 2.0 3.4 4.1 4.6 6.8 6.6 7.8 8.2 [SSY]

E.Europe 58.8 47.7 35.2 30.0 31.9 22.1 22.5 21.0 21.6 [SSY]

Europe (E+W) 194.4 190.1 181.9 172.8 170.0 141.1 138.9 129.1 133.6 [SSY]

Japan 124.5 125.3 120.4 131.7 132.3 134.3 128.4 130.2 134.5 [May]

South Korea 13.2 22.6 35.1 39.0 43.5 56.3 64.9 66.0 59.8 [May]Taiw an 4.9 7.8 9.2 14.9 14.6 18.9 20.5 18.5 20.4 [SSY]

China 10.0 14.3 41.2 70.0 275.2 618.6 686.8 743.6 784.6 [Jul]

Other Asia 3.8 5.7 7.7 9.1 6.9 8.6 9.6 8.5 8.7 [SSY]

Other 26.7 33.5 43.7 47.9 63.8 53.4 50.3 46.2 70.9 [SSY]

Total 377.5 399.3 439.2 485.4 706.3 1,031.2 1,099.4 1,142.1 1,212.5 [SSY]

Steel Production 1985 1990 1995 2000 2005 2010 2011 2012 2013 Annlsd

Austria 4.7 4.3 5.0 5.7 7.0 7.2 7.5 7.4 7.9 -0.7%

Belgium 10.7 11.5 11.6 11.6 10.4 8.0 8.1 7.3 7.0 -10.1%

France 18.8 19.0 18.1 21.0 19.5 15.4 15.8 15.6 16.1 -1.1%

Germany 40.5 38.4 42.1 46.4 44.5 43.8 44.3 42.7 43.4 -3.7%

Italy 23.9 25.5 27.8 26.8 29.4 25.8 28.7 27.3 25.4 -5.1%

Netherlands 5.5 5.4 6.4 5.7 6.9 6.7 6.9 6.9 6.2 -0.8%Spain 14.2 12.9 13.8 15.9 17.9 16.3 15.5 13.6 15.1 -12.0%

Sw eden 4.8 4.5 5.0 5.2 5.7 4.8 4.9 4.3 4.6 -11.1%

United Kingdom 15.7 17.8 17.6 15.2 13.3 9.8 9.5 9.6 11.4 1.3%

Other EU 8.8 9.1 8.5 10.0 9.2 8.4 8.4 7.2 6.4 -14.5%

EU15 Total 147.6 148.4 155.8 163.4 163.8 146.2 149.7 141.9 143.5 -5.2%

Turkey 4.9 9.4 13.2 14.3 21.0 29.1 34.1 35.9 34.8 5.2%

Other Europe 6.4 5.1 1.9 3.2 9.7 6.9 7.7 6.7 8.3 -13.3%

TOTAL EUROPE 158.9 162.9 170.9 180.9 194.5 182.2 191.4 184.5 186.6 -3.6%

Canada 14.6 12.3 14.4 16.6 15.3 13.0 13.0 13.5 12.6 4.2%

United States 80.1 89.7 95.2 101.8 93.2 80.5 86.4 88.7 86.5 2.7%

N. AMERICA 94.7 102.0 109.6 118.4 108.6 93.5 99.4 102.2 99.1 2.9%

Brazil 20.5 20.6 25.1 27.9 31.6 32.9 35.2 34.5 33.9 -2.0%

Mexico 7.4 8.7 12.1 15.6 16.2 16.7 18.1 18.1 17.9 0.0%Other L&S America 7.9 9.2 10.3 12.2 15.1 12.1 14.6 13.2 12.4 -9.6%

L&S AMERICA 35.8 38.5 47.5 55.7 62.9 61.8 67.9 65.8 64.2 -3.1%

Japan 105.3 110.3 101.6 106.4 112.5 109.6 107.6 107.2 109.4 -0.3%

Australia 6.6 6.7 8.5 7.1 7.8 7.3 6.4 4.9 4.7 -23.6%

South Africa 8.5 8.6 8.7 8.5 9.5 7.6 7.5 6.9 6.7 -8.1%

India 11.9 15.0 22.0 26.9 40.9 68.3 73.6 77.6 79.3 5.4%

Rep of Korea 13.5 23.1 36.8 43.1 47.8 58.6 68.5 69.1 66.1 0.8%

Taiw an 5.2 9.7 11.6 16.9 18.6 19.8 21.2 20.7 23.1 -2.6%

Czech+Slovakia 15.0 14.9 11.2 9.9 10.7 9.8 9.8 9.5 9.9 -3.5%

Poland 16.1 13.6 11.9 10.5 8.4 8.0 8.8 8.4 7.9 -4.7%

Romania 13.8 9.8 6.6 4.7 6.2 3.7 3.8 3.6 4.0 -5.0%

CIS 154.7 154.4 79.1 98.5 113.3 108.3 112.7 111.0 110.2 -1.5%

China 46.8 66.3 95.4 128.5 353.6 623.8 684.4 713.9 778.2 4.3%N.Korea 6.5 7.0 0.6 0.3 0.3 0.3 0.3 0.3 0.3 0.0%

Other 25.5 27.5 30.4 32.5 51.0 69.2 72.8 61.3 52.3 -15.9%

WORLD 718.9 770.5 752.3 848.9 1,146.5 1,431.7 1,536.2 1,546.8 1,602.0 0.7%


8/24

Grain


Black Sea Grains

in Season

Running counter to virtuallyevery other component

route of the BSI, the SupramaxCanakkale trip to the Far Easthas seen a marked rise over thepast month, lifting earnings bymore than $4,000/day to an 12-month high of $17,600/day.

Such relative strength in spotearnings has coincided with theonset of a seasonal upswing ingrain exports from Russia and,

especially, the Ukraine whererecord volumes are anticipated.

In its latest (August) forecastupdate, the US Department ofAgriculture (USDA) has furtherraised its expectations for wheatand coarse grain exports fromthe Ukraine. Projected wheatexports of 10 Mt in the July 2013-June 2014 trade year are up 2Mt on the previous forecast and2.8 Mt on the estimated 2012-13

total, while forecast coarse grainvolumes in Oct 2013-Sep 2014have been lifted by 1.5 Mt to20.2 Mt, which would be up bymore than 4 Mt on the estimated2012-13 level.

After allowing for forecastvolumes from Russia (of 17.0Mt) and Kazakhstan (of 9.0 Mt),both of which are expected to be

significantly higher than in 2012-13 (by 5.7 Mt and 2 Mt), thenthe USDA are predicting thatformer Soviet Union countries at36 Mt will collectively be a largerwheat exporter than the US (30Mt) in 2013-14.

In the case of coarse grains, thelatest USDA forecast is for ayear-on-year increase of 1.5 Mt

from Russia to 5.9 Mt.

Given the typical seasonaldistribution of grain exports fromRussia and Ukraine, the revisedannual forecasts imply that newquarterly peaks could be set fortheir combined shipments in the3q and 4q13. As shown in thechart above, SSY are nowpredicting that combined exports

from the two countries will morethan double between the 2q and3q13, which helps account forthe steepness of the recent climbin regional Supramax rates.

The seasonal acceleration in theBlack Sea trades also providesan important source of grain-related employment for dry bulkcarriers between the passing of

the 2q highs for Latin Americanshipments (which have beenconfirmed as an all-time record)and the arrival of peak USexports in the 4q.

Latest forecasts from the USDAdo show some moderation in theoutlook for US coarse grain andsoya exports in 2013-14 withdownward revisions totalling 2.8Mt. Nevertheless, with offsettingupward revisions for other key

exporting countries and ageneral raising of expectationsfor world wheat trade, SSY arepredicting that the 4q13 will seea new record for global seabornegrain exports.

This is, of course, dependent onsufficient levels of world importdemand and, significantly, thismonth has seen anotherincrease in USDA projections forChinese wheat and coarse grain

imports in 2013-14 (by 1 Mt to9.5 Mt and 0.2 Mt to 9.7 Mt,respectively).

6,000

10,000

14,000

18,000

22,000

26,000

30,000

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-1

1

Feb

-11

Mar-11

Apr-11

May-

11

Jun-1

1

Jul-11

Aug-1

1

Sep-1

1

Oct-11

Nov-

11

Dec-

11

Jan-1

2

Feb

-12

Mar-12

Apr-12

May-

12

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-

12

Dec-

12

Jan-1

3

Feb

-13

Mar-13

Apr-13

May-

13

Jun-1

3

Jul-13

Aug-1

3

Sep-1

3

Oct-13

Nov-

13

Dec-

13

$/Day

Milliontonnes

Russia & Ukraine Grain Exports Vs Supramax Rates

Grain ExportsTurkey-Far East Supra Rate (monthly avg)

Estimated

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

1q09

2q09

3q09

4q09

1q10

2q10

3q10

4q10

1q11

2q11

3q11

4q11

1q12

2q12

3q12

4q12

1q13

2q1

3E

3q1

3F

4q1

3F

Mt

Quarterly Grain Exports From Russia & Ukraine

Source: IGC & SSY


9/24

July 2013 - 9 - SSY Consultancy & Research Ltd

Grain

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Diff

Exporters:

USA: Wheat 25.0 34.3 27.3 24.2 35.7 27.9 27.6 29.5 +1.9

Coarse Grain 60.0 70.3 50.4 55.2 52.0 44.7 22.9 31.7 +8.8Total 85.0 104.6 77.7 79.4 87.7 72.6 50.5 61.2 +10.7

Canada: Wheat 19.4 16.4 18.3 18.3 16.3 18.2 19.0 19.2 +0.2

Coarse Grain 3.6 6.2 3.9 3.1 4.9 3.5 4.5 3.9 -0.6

Total 23.0 22.6 22.2 21.4 21.0 21.7 23.5 23.1 -0.4

Australia: Wheat 11.4 7.5 13.5 13.7 18.5 23.1 21.5 19.7 -1.8

Coarse Grain 2.6 3.8 4.9 4.3 4.7 7.1 5.8 5.0 -0.8

Total 14.0 11.3 18.4 18.0 23.2 30.2 27.3 24.7 -2.6

Argentina: Wheat 11.9 10.0 8.5 5.1 7.6 11.3 7.0 5.5 -1.5

Coarse Grain 14.3 16.9 13.8 14.9 18.5 20.2 25.4 24.9 -0.5

Total 26.2 26.9 22.3 20.0 26.1 31.5 32.4 30.4 -2.0

EU: Wheat 12.8 11.2 24.5 20.8 22.1 15.6 22.0 23.0 +1.0

Coarse Grain 4.4 4.4 5.5 2.8 6.0 6.3 6.6 5.9 -0.7

Total 17.2 15.6 30.0 23.6 28.1 21.9 28.6 28.9 +0.3Russia: Wheat 10.9 12.1 18.3 18.8 4.0 21.6 11.2 14.5 +3.3

Coarse Grain 1.7 1.3 4.8 3.2 0.3 5.6 4.3 4.7 +0.4

Total 12.6 13.4 23.1 22.0 4.3 27.2 15.5 19.2 +3.7

Others: Wheat 19.4 18.8 26.4 27.2 21.5 27.1 31.8 27.7 -4.1

Coarse Grain 24.3 26.2 29.4 28.8 30.6 37.4 55.9 51.5 -4.4

Total 43.7 45.0 55.8 56.0 52.1 64.5 87.7 79.2 -8.5

World: Wheat 110.8 110.3 136.8 128.1 125.7 144.8 140.1 139.1 -1.0

Coarse Grain 110.9 129.1 112.7 112.3 117.0 124.8 125.4 127.6 +2.2

Total 221.7 239.4 249.5 240.4 242.7 269.6 265.5 266.7 +1.2

Importers 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Diff

Japan: Wheat 5.6 5.7 4.9 5.5 6.0 5.8 6.2 5.8 -0.4

Coarse Grain 19.1 17.7 18.9 19.9 18.7 17.2 18.0 18.2 +0.2Total 24.7 23.4 23.8 25.4 24.7 23.0 24.2 24.0 -0.2

PR China: Wheat 0.4 0.2 0.5 1.4 1.0 3.0 3.5 7.0 +3.5

Coarse Grain 1.4 1.2 1.5 2.6 3.8 7.1 6.0 9.8 +3.8

Total 1.8 1.4 2.0 4.0 4.8 10.1 9.5 16.8 +7.3

S.Korea: Wheat 3.2 3.0 3.3 4.4 4.9 5.1 5.6 4.8 -0.8

Coarse Grain 8.7 9.3 6.9 7.8 7.6 7.2 8.1 8.2 +0.1

Total 11.9 12.3 10.2 12.2 12.5 12.3 13.7 13.0 -0.7

Taiwan: Wheat 1.1 1.3 1.1 1.2 1.3 1.4 1.4 1.4 +0.0

Coarse Grain 4.2 5.0 4.4 4.6 4.4 4.5 4.3 4.4 +0.1

Total 5.3 6.3 5.5 5.8 5.7 5.9 5.7 5.8 +0.1

EU: Wheat 6.3 7.9 9.2 6.6 6.1 8.7 6.9 5.9 -1.0

Coarse Grain 7.4 22.4 5.1 3.3 9.4 7.5 12.4 8.7 -3.7

Total 13.7 30.3 14.3 9.9 15.5 16.2 19.3 14.6 -4.7

Algeria: Wheat 4.9 5.8 6.3 5.1 6.4 6.3 6.2 6.3 +0.1

Coarse Grain 2.6 1.9 2.6 2.4 2.8 3.4 2.9 3.4 +0.5

Total 7.5 7.7 8.9 7.5 9.2 9.7 9.1 9.7 +0.6

Egypt: Wheat 7.1 7.6 9.8 10.2 10.4 11.6 8.5 9.0 +0.5

Coarse Grain 4.8 4.4 5.2 5.4 5.9 6.8 5.2 5.3 +0.1

Total 11.9 12.0 15.0 15.6 16.3 18.4 13.7 14.3 +0.6

Iran: Wheat 0.3 0.1 8.9 3.0 0.1 2.4 5.3 3.5 -1.8

Coarse Grain 3.1 3.1 5.8 4.6 4.1 4.9 5.7 5.1 -0.6

Total 3.4 3.2 14.7 7.6 4.2 7.3 11.0 8.6 -2.4

Brazil: Wheat 7.9 7.1 6.3 6.7 6.6 6.8 7.5 6.8 -0.7

Coarse Grain 1.5 1.6 1.3 1.3 0.7 1.2 1.0 0.8 -0.2

Total 9.4 8.7 7.6 8.0 7.3 8.0 8.5 7.6 -0.9

Others: Wheat 74.0 71.6 86.5 84.0 82.9 93.7 89.0 88.6 -0.4

Coarse Grain 58.1 62.5 61.0 60.4 59.6 65.0 61.8 63.7 +1.9

Total 132.1 134.1 147.5 144.4 142.5 158.7 150.8 152.3 +1.5

Source: IGC July to June - mill ion tonnes.

World Grain Trade


10/24

Fleet Developments


China Unveils New

Shipyard Policy

China has revealed plans fora radical restructuring of itsshipbuilding sector in the next 3years. A new strategy unveiledby the State Council at end-Julyseeks to address excess yardcapacity and the over-reliance ofPRC-based yards on orders forless sophisticated vessel types.The new policy recognises thatthe countrys shipbuilders facelower demand than in the boomyears before global recession set

in late in 2008 and that contractprices have fallen steeply fromlevels prevailing at that time.

The State Council calls on localgovernments to veto applicationsto add to existing yard capacity.It also calls on them to promoteinnovation and initiatives to winhigher-value orders (e.g. foroffshore vessels), and to providemore financial support to yards.Rationalisation of existing

capacity is also to be achievedby measures facilitating mergersand greater pooling of resources(e.g. shared research or designprogrammes). Yet it is unclearhow these objectives are to beattained and the strategy hasalready been criticised in Chinafor its failure to specify moreexplicitly how these goals can beachieved.

According to the State Council,

one of the main problems thatthe Chinese shipbuilding sectorfaces is its over-emphasis onconstructing relatively low-valuetonnage. Accordingly, the newpolicy calls on yards to targetorders for offshore vessels andeco-type ships. Yet this may bedifficult to achieve, given the lackof experience that many yardshave in building sophisticatedship types. Analysis of Chinasrecent vessel completions shows

that these have been dominatedby construction of bulk carriers.So far in 2013, PRC-based yardshave built 19.9mdwt, or 11.1

million gross tons (mgt) of suchvessels, these equating in grosstonnage terms to 65.5% of total

completions. By comparison, 5.3mdwt (2.9mgt) of tankers weredelivered in the same period, yetof these only 0.1mdwt comprisedcarriers of chemicals or liquefiedgases. With 0.18 million TEU ofcontainer ships also completed,these 3 main ship types havetogether accounted in gt termsfor 93.8% of the tonnage built byChinese yards so far this year.

In contrast to the above, offshore

vessel completions have totalled0.19mgt in 2013 to date, therebyrepresenting just 1.1% of grosstonnage built in China so far this

year. Nor is there much prospectof this situation changing greatlyin the short term, given Chinese

yards current orderbooks. Asseen in the lower graph, bulkerscontinue to dominate what is dueto be built in the next few years,with 60.0mdwt (33.4mgt) of suchships now on order. In contrast,at a total 2.43mgt, offshore unitsequate in gross tonnage terms tojust 3.8% of Chinas collectiveorderbook. Meanwhile, contractsfor liquefied gas carriers andchemical tankers amount to only1.96mgt, thereby accounting for

just 3.0% of tonnage currently onorder at Chinese yards.

0 2 4 6 8 10 12

Bulker

Tanker

Container

Dry Cargo

Offshore

Miscellaneous

Ro-ro

Passenger/Ferry

million gross tons

mainvesseltype

China: Ship Completions by Vessel Type, 2013 to date

Figures as at August 2013

SOURCE: IHS-Fairplay

0 5 10 15 20 25 30 35

Bulker

Tanker

Container

Offshore

Dry Cargo

Ro-ro

Miscellaneous

Passenger/Ferry

Reefer

million gross tons

mainvesseltype

China: Ships on Order by Vessel Type

Figures as atAugust 2013

SOURCE: IHS-Fairplay


11/24

merge or acquire othercompanies are encouraged toraise funds by issuing corporatebonds.

Arguably the next mostinfluential FAI component is realestate (which makes up anestimated 25% of all FAI).Accelerating growth in real

estate capital spending in Jan-July to 21% from 15% in thesame period last year is positivefor raw material demand.

The second chart (below)contrasts growth rates for project-related activities. Oil and gasextraction has experienced amassive jump in spending: up26% in the first seven months of2013 in complete contrast to the5% recorded in the 1h12.

Finally, it is worth rememberingthat Chinas annual GDP growthtarget has been exceeded everyyear since 1998 (the year of theAsian financial crisis). Thisyears target of 7.5% was set bythe National Peoples Congressin March, although FinanceMinister Lou Jiwei causedinterest in June when he briefedthe US media that thegovernments GDP growth target

for 2013 was 7% (a statementlater amended in official reports).Growth reached 7.7% in the1q13 followed by 7.5% in the 2q.


Economy

Chinas InvestmentPicture By Sector

In recent months there hasbeen a multitude ofdevelopments in the Chineseeconomy earning mediaattention, such as confusion overgovernment GDP growth targets,Junes so-called Shiborshock (when interbankborrowing rates briefly shot up torecord levels) and the ensuingshort-lived drop in the ShanghaiComposite Index. These havebeen accompanied by scrutiny of

the various monthly PurchasingManagers Indices throughout2013.

Fixed asset investment (FAI)also deserves mention. At facevalue, this years growth rate hasshown very little change intempo compared with 2012: inthe first seven months of bothyears spending on physicalassets grew by fractionally over20% (see chart right). However,

a breakdown of capital spendingby sector provides more insight.

According to estimates quotedby the International MonetaryFund, manufacturing accountsfor an estimated 34% of ChinasFAI. Investment growth insecondary industry, thecountrys manufacturing sector,

slowed to 16% in Jan-July from23% in the same period lastyear. Indications from the HSBCChina Manufacturing PurchasingManagers Index this year havebeen disappointing at times, withthe index slipping to an 11-month low in July. Moreover, in abid to tackle oversupply in keyindustrial sectors, such as

shipbuilding, the government isseeking to deter investment. Athree-year plan drafted by theState Council aims to restructureChinas shipbuilding sector byceasing approvals for newfacilities as well as calling forlending to companies buildingnew facilities to be stopped.Yards wishing to restructure,

0

5

10

15

20

25

30

35

FAI Pr imary industry Secondary i ndustry Tertiary i ndustry Real esta te

annualchange(%)

Chinese Fixed Asset Investment:Annual Change By Industry

Jan-July 2012

Jan-July 2013

0

5

10

15

20

25

30

FAI Projects underway New pro jects Oil & gas ex trac tion Ferrous metalmining

annualchange(%)

Chinese Fixed Asset Investment:Annual Change By Projects

Jan-July 2012

Jan-July 2013


12/24

Oil Markets


Energy East alters

crude tanker trade

T ransCanada intends toproceed with its Energy Eastpipeline that will transportwestern Canadian tar sandscrude to the countrys east coastrefineries. Such was the shipperinterest in the project, that thelines proposed capacity hasbeen lifted from 850 kb/d to 1.1mb/d. This would be more thansufficient to meet the needs ofthe EC Canada refineries servedby the pipeline, something that

has prompted TransCanada toextend the line to Canaport inSaint John, New Brunswickwhere, in tandem with Irving, itwill construct a deep-watermarine terminal. This will allowcrude shipped along EnergyEast to be exported on thelargest crude tankers. Pendingregulatory approval, the line isscheduled to begin deliveries torefineries in 2017, withshipments to Canaport set to

start in 2018.

Around the same time as itrevealed these plans,TransCanada pushed back theexpected start date of the 830kb/d Alberta - US Midwestportion of its Keystone XLpipeline to 2016 at the earliest asit continues its long wait for USgovernment approval for theproject. Meanwhile, nascentpipeline projects from Enbridge

and Kinder Morgan to deliver oilsands to Canadas Pacific coastcontinue to face strongopposition from environmentaland indigenous groups.Persistent doubts as to theviability of these projects has nodoubt led TransCanada to lookto the East Coast as anotherway to bring rising crude outputfrom Canadas tar sands todomestic and internationalmarkets.

Opposition exists to Energy Eastand it will require regulatoryapproval, but these hurdles are

deemed to be more easilysurmountable than those facingKeystone XL and West Coastprojects. Much of the proposedline is already in place in theform of an existing, largelyredundant, gas pipeline thatTransCanada intends to convert.If indeed Energy East is broughtto fruition, it is likely to have asignificant impact on crudetanker trade.

The first stage of the projecttaking crude to Canadas easternrefineries is likely to reduce theregions crude imports, which in1q13 averaged just short of 750kb/d, according to NationalEnergy Board data. Analysis ofreported spot fixtures show thatso far this year, seaborne crudeshipments to EC Canada weresourced from the Mid East Gulf(3.64 million MT), West Africa(0.78), the North Sea (0.27) and

the Caribbean (0.21). Thedisplacement of these volumesby domestic crude supply islikely to reduce demand acrossthe crude tanker sectors, butimpacting most upon westboundVLCC demand from the MidEast.

However, this negative impacton crude tanker demand couldbe offset when the second stageof the project comes online.

Crude exported from the newterminal at Canaport is likely toappeal to US Gulf refiners withtheir predominantly heavy crude

slates, particularly if overlandaccess to Canadian crude hasbeen limited by further delays toor the cancellation of the cross-border portion of the KeystoneXL pipeline. This would provideemployment for crude tankers allthe way up to VLCCs.

If Keystone XL is built andresults in limited US Gulfdemand for seaborne shipmentsfrom EC Canada, analysts

predict that the crude exportedfrom Canaport would attractIndian refiners with theirincreasing thirst for heavy crude.This could provide a source oflong-haul demand for largercrude tankers, similar to thatderived from Indias increasedpurchases of Caribbean crude.

In fact, shipments of Caribbeanand Latin American crude toAsia could themselves rise as a

result of Energy East. Canadiancompetition for US Gulf customcould prompt Venezuela andother crude exporters in theCaribbean and Latin America toincrease their sales to Asianrefiners. This would add to long-haul, tonne-mile rich voyages forlarge crude-tankers.

If it is US Gulf imports of MidEast crude that are displaced byEnergy Easts heavy Canadian

crude, then again it is likely to bewestbound VLCC demand fromthe MEG that suffers, adding tothe bearish outlook for thisparticular market.

Source: Argus, SSY

Source: Various

Source: Argus

Source: ArgusSource: Argus, EIA, Bloomberg

Source: SSY

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

EC Canada Crude Imports by SourceReported Spot Tanker Fixtures by Month of Fixing, million MT

WAFR UKC MEG MED ECC CARIB BSEA BALTC

Source: SSY


13/24


Oil Markets

SUMMARY OIL STATISTICS (million b/d)

Annual averages Year to Date: Percentage Latest

2009 2010 2011 2012 2013 Data to: Change** Month

WORLD OIL PRODUCTION (incl Non-OPEC NGLs)

Saudi Arabia 7.91 8.08 9.05 9.59 9.20 Jul 13 -5.19% 9.54Iran 3.73 3.70 3.58 3.00 2.68 Jul 13 -15.97% 2.65

Other MEG OPEC 8.03 8.03 8.79 9.39 9.59 Jul 13 3.44% 9.48

Non-MEG OPEC 9.00 9.35 8.44 9.38 9.14 Jul 13 -2.39% 8.75

FSU 13.17 13.57 13.62 13.71 13.77 Jul 13 0.56% 13.52

US 7.21 7.55 7.80 8.81 9.73 Jul 13 13.24% 9.95

Latin America (incl Mexico) 7.34 7.16 7.14 7.09 7.06 Jul 13 -0.78% 7.04

Europe 4.51 4.17 3.88 3.47 3.30 Jul 13 -10.33% 3.20

Sources: IEA

OIL PRODUCTS DEMAND

US 18.70 19.21 19.08 18.67 18.78 Jul 13 0.59% 19.58

Japan 4.33 4.45 4.43 4.70 4.59 Jul 13 -1.21% 4.23

EU (Main 4)* 7.53 7.39 7.37 7.08 6.92 Jul 13 -2.40% 7.23South Korea 2.22 2.27 2.26 2.24 2.27 Jul 13 3.91% 2.26

PRC 8.34 9.14 9.37 9.77 10.02 Jul 13 4.85% 9.91

FSU 3.96 4.07 4.62 4.67 4.65 Jul 13 1.16% 4.69

Latin America (excl Mexico) 6.18 6.48 6.59 6.53 6.39 Jul 13 -3.31% 6.55

Sources: Energy Intelligence (Oil Market Report)

CRUDE OIL & NGL EXPORTS

FSU (seaborne) 5.09 5.10 4.81 4.79 4.88 Jun 13 1.70% 4.68

FSU (Druzhba pipeline) 1.12 1.13 1.17 1.08 1.01 Jun 13 -14.35% 1.04

Mexico 1.23 1.36 1.34 1.26 1.17 Jun 13 -4.63% 1.09

UK 0.84 0.79 0.60 0.60 0.65 May 13 7.61% 0.67

Sources: IEA, Pemex, PRC Customs

CRUDE OIL IMPORTSUS 9.06 9.14 8.91 8.49 7.63 May 13 -12.10% 7.74

Japan 3.66 3.71 3.57 3.65 3.69 Jun 13 -2.63% 3.28

OECD Europe 8.91 9.08 9.02 9.34 9.13 May 13 0.61% 9.41

South Korea 2.32 2.39 2.54 2.58 2.53 Jun 13 -1.43% 2.55

India 2.91 3.25 3.30 3.68 3.78 Jun 13 1.84% 3.36

PRC 4.09 4.82 5.09 5.43 5.68 Jul 13 1.84% 6.17

Sources: US DoE, PAJ, IEA, KNSO, PRC customs

REFINED PRODUCTS IMPORTS

US 2.67 2.58 2.44 2.10 2.14 May 13 3.17% 2.32

Japan 0.47 0.56 0.63 0.65 0.65 May 13 1.79% 0.54

OECD Europe 3.59 3.21 3.50 3.40 3.51 May 13 3.70% 3.65

PRC 0.74 0.69 0.77 0.76 0.83 Jun 13 7.81% 0.77Sources: US DoE, PAJ, IEA, PRC customs

REFINERY THROUGHPUTS

US 14.31 14.72 14.83 15.00 14.90 Jun 13 0.37% 15.70

Japan 3.44 3.44 3.23 3.23 3.30 Jun 13 1.33% 3.14

OECD Europe 12.36 12.39 12.15 12.11 11.66 Jun 13 -2.29% 12.11

South Korea 2.31 2.40 2.55 2.60 2.51 Jun 13 -2.65% 2.59

Sources: IEA

CRUDE SPOT OIL PRICES (US$ per barrel)

Brent (dated) 61.51 79.47 111.27 111.58 107.57 Jul 13 -3.77% 107.91

WTI (Cushing) 61.69 79.39 95.04 94.15 95.74 Jul 13 -1.00% 104.69

Urals (del ivery Mediterranean) 61.04 78.27 109.22 110.74 107.11 Jul 13 -3.29% 108.74

Dubai Light 61.69 78.04 106.19 109.05 104.34 Jul 13 -4.73% 103.46Sources: IEA

* EU (Main 4) = Germany, France, Italy and the UK.

** % changes for 2013 figures (year to date) agains t same period of 2012, e.g. Jan-Nov '13 vs Jan-Nov '12


14/24

Tanker Market


Tanker marketsreceive a boost

Certain sectors of the tankermarket experienced some

significant periods of strengthduring July. The VLCC sectorwas boosted by a surge inChinese demand as the countryraised its imports in July over 1mb/d year-on-year to a record6.17 mb/d to replenish stocks thathave been drawn down by highcrude run growth. This hadfollowed imports of just 5.42 mb/din June, a 9-month low, as delays

hit ports in the country, withdeliveries likely being pushed intoJuly as result. Chinas refineryruns were up 638 kb/d on theyear in July at 9.53 mb/d. A risein US and European demand forWest African crude bolsteredSuezmax markets, while MRearnings in the Atlantic surged.

EAST: Eastbound VLCC ratesrose in early July to their highestlevels in two months due to an

increase in fixing by Chinesecharterers that put pressure ontonnage supply. Rates for 265KMEG-Japan rose from W36(US$10.6/t) at the start of July topeak at W48 (US$14.1/t) in thefirst half of the month. This tookearnings nearly $19,000/dayhigher to $28,800/day beforelevels dropped off as tonnagesupply began to build, with ratesending at W34.5 (US$10.1/t).

The West African market saw asimilar trend, supported byChinese and Indian demand earlyin the month. Productionproblems in Angola delayedcargoes mid-month, leaving fewstems to be fixed during thisperiod. Enquiries had fallen byend-July, thus rates for 260KWAFR-China dropped ten points

to W37 (US$16.6/t), up fromW33.5 (US$15.0/t) at the start ofthe month. A rise in the Brent-Dubai spread has made Atlantic-based crudes less attractive toAsian buyers for August loading,although China has booked totake 1 mb/d of W. African crude.Chinese demand for Angolancrude for September loadingshowever has been weak due to

Average Monthly TCEAssessments (US$/day)

DIRTY

265K MEG-Japan $17,890

280K MEG-USG -$3,779

130K WAFR-USAC $16,232

135K BSea-MED $7,182

70K Caribs-USG $9,079

80K Indo-Japan $12,567

CLEAN

37K UKC-USAC $9,573

30K SEAS-Japan $2,808



high crude stocks and low fuel oilcracks, according to Platts.

The MEG Suezmax market sawa rush of activity towards the endof July, with strong demand fromIndia pushing eastbound rates upsignificantly. Levels for 135KMEG-China rose from W55(US$15.2/t) mid-month to peak atW70 (US$19.3/t) before fallingback to W65 (US$17.9/t).

Asian and MEG Aframax ratescontinued to be boosted by short-term fuel oil storage demand inthe Singapore region. Thispushed rates for 80K Indo-Japanup another few points to peak atW85 (US$13.7/t), taking earningsto over $13,000/day - the highestsince early December 2012 -before slipping.

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VLCC Spot EarningsDaily TCE Rates, US$000s/day

280 MEG-USG

260 WAFR-China260 MEG-Japan

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Daily TCE Rates, US$000s/day

135 BS-Med

130 WAFR-USAC


15/24

Tanker Market


WEST: There was a rise in VLCCshipments to the US Gulf due to aswitch in pricing dynamics makingimported crude more attractive

over domestic volumes. Thusrates for 280K MEG-USG roseseven points to W28 (US$14.2/t)by mid-month before falling back.In turn, Caribbean rates fell as thearrival of these additional VLCCsboosted tonnage lists for LatinAmerican cargoes.

Suezmax demand for WestAfrican crude was also boosted bythe rush of US demand whileNorth Sea oil field maintenance

prompted a rise in European-bound cargoes. Thus rates for130K WAFR-USAC rose twentypoints throughout the month toW67.5 (US$15.5/t), takingearnings over $21,000/day for thefirst time since early April. Exportsresumed from the Ceyhanterminal mid-July following apipeline attack, although a furtherattack later in the month shutflows again until early August.However, the brief revival of

volumes provided additional cargoopportunities in the Mediterraneanboosting rates for 135K BSea-Med, which peaked 30 pointshigher late in the month at W77.5(US$7.8/t). However, they fell toW60 (US$6.0/t) in early Augustbut have been firming again since.

In the Atlantic Basin Aframaxmarkets, rates spiked briefly late

in the month for both cross-UKCand cross-Med, with the formerup ten points at W90 (US$6.6/t)and the latter 25 points higher atW105 (US$12.0/t) before theycame off. Cargoes in the NorthSea and Baltic were lifted aheadof an anticipated reduction inAugust supply due to pipelinemaintenance at Primorsk and

higher Russian domestic demandwhich is reducing exports. Libyancrude output remains at reducedlevels due to protests at severalof its ports which is cutting thenumber of cargoes available inthe region. In the Caribbean,rates for 70K Caribs-USG jumped25 points towards the end of Julyto W105 (US$12.3/t), supportedby greater lightering demand and

rising US imports as refinersraised runs. Rates tumbled in thefirst week of August but havestrengthened again since.

The Caribbean Panamax marketexperienced a surge in rates inthe second half of July as USVGO demand increased on theback of higher refinery

throughputs amid the rise inregional Aframax rates. Fuel oiland VGO shipments rose fromthe MEG and Red Sea ascharterers switched to the smallerships following the spike in theAframax market. Levels for 50KCaribs-USAC rose from W105(US$10.6/t) to W135 (US$13.6/t)but have fallen back to W120(US$12.1/t) in early August. USrefiners have also been takingmore Ecuadorean crude,

supporting the sector, as the risein lighter, sweeter domesticcrudes have increased demandfor the heavier, sour crude.

CLEAN: MR rates rose on bothsides of the Atlantic. Rates for38K Caribs-USAC climbed 15points to W160 (US$16.1/t) earlyin the month taking earnings totheir highest since the start ofJanuary. Cargo volumes were updue to strong Latin American

demand and outages/maintenance at refineries inArgentina, Ecuador andVenezuela. US refiners were also

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Aframax Spot EarningsDaily TCE Rates, US$000s/day

80 UKC-UKC

70 Caribs-USG80 Indo-Japan

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50 Caribs-USG

55 UKC-USG


16/24


Tanker Market

boosting exports to takeadvantage of strong margins andto avoid the high renewable creditcosts for fuels sold domestically.

Rates fell to W150 (US$15.1/t) forthe latter half of the month astonnage in the region lengthenedas ships arrived from the UKC.The stronger rates in the USGand Caribbean meant there was alack of ballasters arriving in theUKC amid a brief gasoline arb tothe US and a rise in demand fromWest Africa and Argentina. Thusrates for 37K UKC-USAC jumpedfrom W110 (US$17.9/t) at thestart of July to W157.5

(US$25.7/t) at the start of August.Levels have since dropped toW120 (US$19.6/t) as activity hasslowed and tonnage lists havebuilt up. Earnings in Asianmarkets continued to slide in July,with rates for 30K Singapore-Japan down from W118(US$17.7/t) to W105 (US$15.1/t).Rising mogas demand fromVietnam and Indonesia failed tosupport the market due to longtonnage lists, with weak rates on

the MEG/WCI-Japan routeexacerbating the situation.

LR1 rates continued to come offin the first half of July as theexcess supply of tonnage forcedowners to lower expectations inorder to secure the limitedcargoes available. Levels for 55KMEG-Japan fell 15 points toW72.5 (US$21.1/t) before starting

to pick up in the second half ofthe month as long-haul fixtures inboth directions out of the MEGand WCI were concluded. Levelshave risen back to W87.5(US$25.5/t) in August due to arush of mainly naphtha cargoes.In contrast, LR2 rates fell for mostof July and into August due to alack of enquiry and long tonnage

lists. There has been minimalinterest from Asian charterers dueto weak naphtha demand amidregional oversupply. LR1s arecurrently stable but could bepressurised if charterers turn tothe cheaper LR2s.

PERIOD: There was limitedperiod fixing in the large crudesegment during July. However,

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MR Tanker Sport EarningsDaily TCE Rates

37 UKC-USAC

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LRTanker Spot EarningsDaily TCE Rates, US$000s/day

75 MEG-Japan

55 MEG-Japan

there has been some interest inVLCC vessels for voyages withstorage options, mainly for fuel oil.A VLCC has been fixed as areplacement and it is thought thatit is initially at $18,000/day for thefirst year. The fixture is thought tobe for 2 years, with an option foranother year, replacing one of theowners existing ships that was

previously fixed to the samecharterers.

There has been a constant trickleof fixtures in the MR sector withthe 1-year rate around the$14,000/day mark. This as ever,depends on the ship, itsconsumptions and also where andwhen the vessel is available. Anumber of newbuilding MRtankers have been discussed fortime charter but at the moment it

seems that short trip deals out to6 months with delivery from theyard are the main fixtures beingconcluded. There has also beensome interest in the LR1 and LR2sectors but numbers started toslide which precluded fixingactivity.

Going forward, the view on periodis still focused on the MR vessels.It is however hard to find manyowners of MR ships willing to

charter out on period for less than$14,000/day, but on the otherhand charterers are looking forvessels below this basis 12months.


17/24


Chemicals

Many gaps to fill

T

he US market fared betterthan most other regions in

July. Freights tracked upwardson most routes, especially thoseinto the East. For almost all ofJuly space appeared to be tightand rates were threatening torise dramatically, but every timethey came close the arbs easedback and owners grew edgy tothe extent that freights somehowfell in mid-month with 10,000tcargoes Houston/MPFE fixed inthe low-mid $60s. By end-month,however, some cargoes werefetching low-mid $80s/t.

USG/India-MEG also registeredhigh levels of demand and ratesrose to mid-$80s/t for 5,000tparcels but with talk of $90/tbeing booked too. Transatlanticeastbound produced a string ofstyrene deals that kept numbersfirm for much of the month.Outsider space too was moreattracted to routes to the Eastand few outsiders troubled thescheduled transatlantic carriers.

US Gulf/EC.South Americaremained busy all month withcargoes of styrene, caustic, baseoils, glycol and base oils.Scheduled space soon fixedaway and spot rates remainedbuoyant through the month.Even USG/Caribs recordedimproved demand, especially for

small CPP cargoes and ratesinched upwards too.

Europe entered a quiet spell withsome coastal routes enduringmuch open tonnage. The NorthSea and Baltic were blighted inthis manner. Southbound into theMed managed to provide areasonable flow of cargoes andrates held, whereas northboundwas barren and rates slipped.Inter-Med markets somehowavoided a plethora of open ships,mainly because of healthydemand from cargoes associatedwith gasoline, such as MTBE,ETBE, ethanol and FAME.

Transatlantic westbound slowedsharply and rates fell. In earlyJuly, 5,000t parcels Rdam/USACwere going for mid-$40s/t, but byend-month struggled to make low

$40s/t. One notable fixture wasfor 30,000t caustic in oneshipment, collected from variousout-ports by coaster and put on amother-ship in Rdam, makingthis a unique cargo to date.

Europe/Asia appeared to have asurplus of July space and ownersquickly cut rates from low $90s/tto low $80s/t for 5,000t cargoesRdam/MPFE. Even so, someships ended sailing with space,but August looks to be tighter.Europe/India-MEG saw steadyprogress through July, with fewchanges, if any, to report.

In domestic Asia markets,owners could carve themselvessomething of a forwardprogramme, but rarely more thana week or two. Rates were weakfor most of July, whether intra-SE.Asia, north or southbound.Export demand was not fantasticbut rates stayed stable. Palm oildemand slowed with the IndianMonsoons and rates for long-haul palm oil back to Europe fellinto the low $60s/t, with somelarger shipments reportedly goingin the $50s/t.

Ramadan kept the MEG regionpretty static. Eastbound demandfaltered in mid-July and ratesslipped slightly. Westbounddemand centred on methanol,MTBE, caustic, glycol andstyrene and rates stayedunchanged.

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18/24

LNG


Market conditions: Confirmedactivity in July was limited, amidcontinued tight tonnage supply inthe Atlantic, with the few open

ships in that region being warmand available for only very shortperiods. This situation was madeworse by the force majeure thathad been imposed on exportsfrom Nigeria staying in placeuntil 26 July. While greaterenquiry was initially seen in thePacific, this subsided as Julyprogressed, amid reports thatstorage tanks both in Japan andKorea were close to being full.Estimated spot rates for modern

155,000cbm ships held at someUS$105,000/day - unchangedfrom end-June levels.

Shipping Developments: Thefifth new LNGC delivery of 2013took place, with the handover ofthe Woodside Rogers(159,800cbm) to Maran Gas Maritime on1 July. She is the first of 7 suchvessels ordered by this ownerfrom DSME, with the last due fordelivery in 2015. The Woodside

Rogers will shortly start liftingcargoes from Australias 4.3mtpacapacity Pluto LNG project. Shewill be the fourth vessel to bedeployed on trades ex-Pluto.

Having taken delivery of theabove unit, Maran Gas Maritimeawarded a contract to DSME inearly July for two 173,400cbmvessels. These are believed tohave been contracted at aroundUS$205m apiece and are both

due for delivery in 2h16.Golar LNG obtained US$500mof finance from state-ownedKorean banks to help fund itsnewbuilding programme. KoreanExport-Import Bank is to provideGolar with US$450m to secureorders for 6 LNGCs and 2 LNGFSRUs to be built by SamsungHeavy Industries. Korea FinanceCorp will provide Golar with aUS$50m credit facility, thepurpose of which is yet unclear.

On 26 July, Nigeria LNG (NLNG)lifted the force majeure that hadbeen in place on LNG exports

from its 21.7mtpa capacity plantat Bonny since 28 June. Thishad been declared by NLNGafter the imposition of a blockadeby the Nigerian MaritimeAdministration & Safety Agencythat had halted free movement ofships into and out of BonnyChannel. The blockade hadarisen after a dispute regarding

non-payment by NLNG of amaritime levy on LNG cargoes.

Three LNGCs entered service inlate July: Greeces Dynagas tookdelivery of the ice-class sistersClean World and YeniseiRiver (both 154,880cbm) fromHyundai Heavy Industries. The154,948cbm GasLog Skagenwas handed over by Samsung toGasLog. This took to 8 ships of1.11 million cbm new deliveries

in 2013 to date. The CleanWorldwill evidently be renamedArctic Aurora before starting a5-year charter to Statoil. Reportsindicate that she has been fixedat around US$83,000/day.

Teekay LNG Partners declaredoptions on two 173,400cbmLNGCs to be built by DSME,with both due for 2016 delivery.No details emerged as to theprice of these ships. Teekay hasalso agreed options for up to 5further units of this specification.

Terminals: Russian governmentsources said that the countrys

LNG export policy may beliberalised as soon as 1 January2014, enabling companies otherthan Gazprom to engage in suchtrades. This move evidently haspresidential backing and Russianenergy producers Novatek andRosneft have recently signedprovisional sales deals withwould-be foreign buyers of

Russian-produced LNG, if suchliberalisation ensues. Gazpromcurrently has a monopoly bothon Russias exports of LNG andpipelined natural gas.

Frances Montoir de BretagneLNG terminal stated that it willsoon be able to offer ship-to-shiptransfers and that these could becompleted in 48 hours. This ispotentially significant, given thelikely commissioning of new LNG

plants in the Arctic Circle byaround 2017. This could createdemand for a safe Europeanlocation where cargoes could beswitched from ice-class LNGCsthat had loaded in the Arctic tostandard vessels for onwardvoyages to non-icebound ports.

The Port of Gothenburg mayreceive SEK305m (US$35.7m)of EU funding that, if approved,would help Sweden to establishits first LNG terminal. ImportedLNG would evidently be usedmainly as a marine bunker fuel.The port authorities are said to

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aug3SSY Monthly Shipping Review - Aug 13

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