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FREIGHT MARKET FORECAST A Challenge Simplified 29 th November, 2012. Mr. ASHOK JAIN

FREIGHT MARKET FORECAST A Challenge Simplified 29 th November, 2012. Mr. ASHOK JAIN MANAGING DIRECTOR DIAMOND SHIPBROKERS PVT. LTD . INDEX. BASIC SHIPPING CYCLE PILLARS DEFINING THE FREIGHT CYCLE CYCLICAL NATURE BALTIC INDEX RELATED INDUSTRIES AFFECTING FREIGHT

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FREIGHT MARKET FORECAST A Challenge Simplified 29 th November, 2012. Mr. ASHOK JAIN

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  1. FREIGHT MARKET FORECAST A Challenge Simplified 29thNovember, 2012. Mr. ASHOK JAIN MANAGING DIRECTOR DIAMOND SHIPBROKERS PVT. LTD.

  2. INDEX BASIC SHIPPING CYCLE PILLARS DEFINING THE FREIGHT CYCLE CYCLICAL NATURE BALTIC INDEX RELATED INDUSTRIES AFFECTING FREIGHT SUPPLY SIDE : DEFINING FUNDAMENTALS DEMAND SIDE : DEFINING FUNDAMENTALS CURRENT MARKET.

  3. BASIC SHIPPING FREIGHT CYCLE

  4. DYNAMIC PILLARS OF THE FREIGHT CYCLE • FREIGHT MARKETS • RATES VS OPERATING COSTS • SALE & PURCHASE MARKET • SECOND HAND PRICES • COMPARISON WITH NEW BUILDING RATES • LAY UP ACTIVITY • NEW BUILDING • PRICES (DETERMINED BY EXISTING FREIGHT RATES IN THE MARKET) • EXISTING ORDERBOOK • DEMOLITION • SCRAP PRICES • LEVEL OF ACTIVITY (BREAKING YARD AVAILABILITY, LABOUR RATES, ETC) • FINANCING • DEFAULTS • LENDING ACTIVITIES

  5. WHY IS SHIPPING CYCLICAL ??? • Shipping is Cyclical in Nature – Inflexible supply side Vs Dynamic Demand Side. • Time Lag makes supply side less elastic • Volatility in Operating costs • Bunkers • Inflation (Wages, DD, etc) WE ARE CLEARLY FACING THE CHARTERER’ S SURPLUS IN THE CURRENT MARKET…. WHERE SHIPOWNERS WILL CONTINUE TO BLEED UNLESS WE REACH AN EQUILIBRIUM BETWEEN SUPPLY AND DEMAND…

  6. HISTORIC TREND IN BALTIC INDICES Numerous Short Cycles within Shipping History

  7. BALTIC INDEX IN LAST 10 YEARS World Financial Crisis Stimulus Packages CHINA EFFECT Robust New Deliveries Hit the Market.

  8. RELATED INDUSTRIES AFFECTING FREIGHT: BUNKERS • Operating Costs. • Going Higher than the TC rates itself in last 3-4 yrs. • Silver Lining – Eco Engines • Up by more than 4 times in the last 10 years. • All forecasts continue to point towards high volatility

  9. BALTIC DRY INDEX – SHIP FINANCERS PERSPECTIVE • Introduction of New Lenders post 2008 – EG: Chinese Shipyards / Governments • Interest Rates Globally • Lack of Lenders since 2008

  10. Supply Side : Defining Fundamentals. Existing World Fleet Shipbuilding Demolition Fleet Productivity Freight Rates.

  11. Supply Side Changes . Time lag is the major hindrance in supply side . Lack of flexibility in supply side.

  12. CURRENT DRY FLEET BREAKDOWN. Total Current fleet: 9,462 vessels; (676m dwt) Majority of these New Buildings are the bigger vessels which were ordered on the back of the Chinese Boom in the last decade.

  13. DRY FLEET DELIVERIES On order: 1,880 vessels (149m DWT)

  14. DRY FLEET SCRAPING

  15. DEMAND SIDE : DEFINING FUNDAMENTALS. World Economic Cycle Seaborne Commodity Trade Average Haul (Calculated in Ton Miles) Political Events Alternate Transportation Costs

  16. WORLD ECONOMIC CYCLE

  17. DEMAND FOR DRY BULK SEABORNE TRADE • 4% Demand in 2013 will to a large extent depend on the Container Markets • Record number of Deliveries expected in the Container Market. • Smaller bulk parcels may start moving in containers if freight rates drop in the box trade

  18. SHORT TERM SUPPLY DEMAND AFFECTING FREIGHT MARKET ADJUSTMENTS.

  19. LONG RUN SUPPLY DEMAND AFFECTING FREIGHT MARKET ADJUSTMENTS.

  20. SUPPLY DEMAND INTERPLAY • Demand Continues to grow. • Fleet Growing at faster pace than demand. • Demolitions unable to bridge the gap created by oversupply

  21. CURRENT MARKETS How do we see the market today ??? & What does commercial shipping require ??? Increase Demand FREIGHT Shrink Fleet DEMAND (TON MILES) / SUPPLY (DWT) INCREASE DEMAND Political Will and Actions Globally. Financial Stability across Europe. SHRINK FLEET Reduction in order book. More Lay up Activity Demolition of old and obsolete fleet

  22. TOOL TO FORECAST THE FREIGHT MARKET 4. DEMOLITION MARKET 1. FREIGHT CYCLE Demand Scrapyards LOW LOW FREIGHT RATES Scrap Sales by Ship owners SCRAP RATES Supply HIGH HIGH SCRAP REVENUE EARNINGS Industry Cash Flow 3. NEW BUILDING MARKET 2. SALE & PURCHASE MARKET (2ND HAND) PAY SHIP YARDS CASH FROM BUYER Ship owner Buyer SECOND HAND RATES Ship owners Orders LOW LOW NEW BUILDING RATES CASH TO SELLER Shipyards Ship owner Seller HIGH HIGH

  23. CONCLUSIONS

  24. Contact Details MUMBAI OFFICE C-319, 3RD FLOOR, 215 ATRIUM,ANDHERI-KURLA ROAD, ANDHERI (E),MUMBAI 400 059.(INDIA)Ashok Jain, Managing Director TEL. : +91-22-6149 0000DIR : +91-22-6149 0001FAX : +91-22-6149 0002CELL : +91-98202 89413jain@diamondshipbrokers.comdrychart@diamondshipbrokers.com DELHI OFFICE 5-J & 5-K, UPPAL'S PLAZA, M-6, JASOLA DISTRICT CENTRE, NEW DELHI- 110 025 (INDIA) Tilak Narang, General ManagerTEL: 011-46109000 FAX: 011- 46109031/46109032 drychart@diamondshipbrokers.com

  25. THANK YOU !!! Diamond Shipbrokers Pvt. Ltd. is a part of the Sharaf Group, UAE, one of the UAE’s largest and most respected business conglomerates with diverse and highly successful business interests in about 20 countries. Sharaf Group is one of the largest shipping agency houses in the Middle East and India In India, the shipping agency is conducted under the name of Samsara Group with 54 offices at 44 different locations covering all Indian ports and inland locations.

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