The presentation was made by Joe Tobin, Freight Analyst, SwissMarine during the last Marine Money event in Genève. I don't dismiss that there is a recovery but have some remarks. First, to get a really good picture of expectations vs reality (realized spot vs forward), please look at slide 5: Higher expectations are confirmed but the Cape 4tc spot rates don't acknowledge higher expectations... This is the story of Capesize and Dry-Bulk market since 2010. The quasi "known" factors: Fleet growth. Fleet size. Ore & Coal exports growth. Scrapping. A balanced cape market and the unknowns I assume numbers come from Clarksons. Key is slide 13.: The cape market has fallen into a dark utilisation hole => some supply is overhanging (putting a stop on supply and a floor on short-term rates). In the long-term, it's an indication that older cape can't break-even. To a minor extent the ECA (emission control area*) ­­> higher fuel costs paid by Charterers are likely to compress T/Cs rates, but will not necessarily send more vessels to the breaker as predicted by Eco-ships believers because inflicted pain will be still limited just to N.Am and NWE... Slide 7 provides more details about slide 13 and on very slow steaming. Speed is 11.5 kts for 2014 down from 12.5 in 2011 ( Clarksons??) , (most Cape are built for 14kts and more). This 1 kts represents a "supply dark pool" of approximately 150 Million DWT in the total Dry Market (handy, handymax, supra, panamax and cape). i.e pshould all the existing bulkers speed up, the market tightness will go away. (Cape rates are "capped" ?) This is what it's all about: recovery phase in the dry-market hasn't only one way up, expectations are high and the curve has to do some catch-up work with the reality. The outlook for dry bulk shipping rates has been grim because ship supply has outpaced cargo demand. For rates to go up, I will look for short-term physical or prices imbalances in the commodity markets and more supportive long-term fundamentals in shipping. Since 2010, fireworks are short-lived because fundamentals (supply) are not there. The market structure (ownership) in shipping is not very consolidated so balancing the supply with the demand is a longer process. If you operate in a industry who can't control its supply, the catalyser for higher rates must come from demand-led growth imbalances... jacquessimon506.wordpress.com The Trade Shipping and Finance Wizard © 2014

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Dry Bulk Shipping: the only way is up?
Joe Tobin, SwissMarine

2. The bottom of the cycle
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The fleet has recently been through a period of extreme growth (2008-2012). That growth significantly
outpaced growth in demand from mining expansions. The result was a period of extremely low prices.

3. Capesize Fleet Growth
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Fleet growth slowed considerably last year and this should continue….

4. Cargo demand now growing
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Large expansion projects are finally coming on line: 2013 saw +130Mt iron ore and +80Mt of coal, and more
to come.

5. So is this the turning point in the market?
 How efficient is the fleet?
 How much more iron ore and coal is there to come online?
 How will the Cape fleet develop? Newbuild vs Scrapping
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6. Fleet efficiency – more ballasting
Pre 2008 coal from South Africa to Europe allowed the fleet to be used more efficiently. Now that coal
demand has shifted from Europe to Asia there are less backhaul cargoes and an increasing number of
vessels ballasting straight to Brazil. This has increased fleet utilisation by ~3%.
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7. Fleet efficiency – lower speed saves money
The fleet has slowed down considerably in the last few years as more owners adjust their behaviour to the
price environment. This has made a significant impact on the utilisation of the fleet, up 8% since 2008.
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8. Iron Ore Expansion
The huge growth in iron ore volume seen last year is continuing this year, as expansions in West Australia
complete and next year as Vale ramps up new projects. The additional demand is equivalent of around 80
additional Capes per year 2013-2015.
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9. Coal Expansion
Coal has also expanded significantly in the last few years. The majority of this expansion is behind us, but
nonetheless I still expect coal to require an additional 9 Capes a year 2013-15.
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10. Capesize Orderbook
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Historically cheap asset prices, a more positive price outlook and new eco designs spurred a flurry of
ordering last year. There are now 300 orders for delivery before 2017.

11. Capesize Fleet Growth
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After adjusting for slippage and demolition this increase in ordering is likely to push fleet growth back up to
7% in 2016, which is just when demand growth will start to slow.

12. Significant scrapping potential
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But there is upside to my demolition assumptions. As new efficient vessels are delivered, performing ~15%
better than average, the older less efficient vessels (some performing 20% below average) will start to feel
the pressure.
~300 vessels

13. The only way is up
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In conclusion, the next 3 years will be significantly tighter than the last two. W expect strong growth in fleet
utilisation for the next few years, and expect the recovery in prices to continue.