No 2

Tuesday, 03 January 2012

bmti daily and independent

BMTI OUTLOOK 2012

FOR BMTI-SUBSCRIBER .

Introduction: Peering into the Future with Hope and Caution Shipping has proved as both dependable and be- tude of that demand is now in question. Verbs used guiling as ever in the past year. Overcooked notions to describe the experience of 2011 were more likely about an expanding fleet causing an all-out crash to contain 'survived' rather than 'enjoyed' (as they were called into doubt with several rounds of market might have circa 2007). But along with the pessistrength seen over the year. But the fact remains that mists, optimists remain in full force among our conthe fleet is a looming, bearish factor on earnings and tributors, too, many seeing opportunities in 2012 one that could continue to weigh heavily in 2012 a variation of the half empty/half full dichotomy as in 2011 and as many of our contributors wrote for perhaps. This, the "Outlook 2012" report, has conOutlook 2011 exactly one year ago. Now at the start tributions roughly divided into four parts covering of 2012, it is clear that some things have stayed the large bulk carriers (starting immediately after this introduction, page 1), several economic viewpoints same while other factors are only now emerging. from Brazil correspondents (page 4), a large number Today, concerns about the European economies are of entries from the European short sea markets (page high in the headlines. Not surprisingly, they are also 6) and several contributions from the containership in the forefront of considerations about shipping in project and heavy lift shipping markets (page 9). 2012 and on the minds of many of the contributors Once again, we at BMTI find ourselves very grateful to "Outlook 2012" as you will see below. Cargo de- for and dazzled by the variety of market opinion mand depends on economic demand and the magni- from the contributors herein. Please enjoy. Prospects for 2012 from BMTI's London Correspondent While the market will still be suffering from the end of the year, doldrums of falling indices and a dearth of orders; we do foresee a slow start to the year up to the beginning of the second quarter (Q2) at least. However, owners will be fighting hard to buck this current trend of reducing freight levelsbut it is going to be hard to keep a brave face on display. There will continue to be downward pressure on financial markets as a direct result of the poor eurozone economy. Owners will look to book forward cover as an insurance policy. Period TC rates should improve, but so many newbuildings already hit the oceans in 2011 that competition will be very fierce. Charterers with long term strategies and contracts may see some benefit from low rates but this general sentiment will stifle spring growth by new players. There may well be some improvement in global markets which would be led by the Chinese after Q2, but we can't see much improvement in market sentiment until then, unless it comes on the back of some sudden rate spikes due to specific positional fixtures (right place right time). These hikes are generally not sustainable but they do improve sentiment, which is what really drives the market.

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Thoughts on 2012 from a London Broker (aka 'Prophet of Doom') 2012 is a difficult year to predict with any confidence. As was recently said by an eminent financial journalist about the world economy, "It is difficult to understand what is going on now let alone predict the future." In many ways the same can be said about dry cargo shipping. Capesizes, after a difficult first eight months of 2011, made a comeback during the balance of the year. The smaller sizes plodded along with rates fluctuating within a small range. However if you analyse the Baltic indices the overall trend seems to be negative as we approach the turn of the year. This may just be seasonal but it is difficult to see what will underpin what is fast becoming an In theory we should be looking at a softer Pacific market over 2012. In simple terms there will be fairly large numbers of newbuildings delivering into the East as the last of the 'noughties' ordering binge; however not so many as 201it will be an expected 10% tonnage growth as opposed to the approximate 14% we will see in 2011. This decline in deliveries is matched by a decline in cargo demand which is set to grow at 3% as against the 5% for this year. So there's little or no obvious help in improving rates there. In the East, all seems to hang on Chinese industry. Their inflation figures improved in the last quarter and anecdotal evidence indicates a loosening of creover-tonnaged market. It is perhaps foolish to expect the BRICs and smaller emerging economies to support the whole market. They themselves may soon feel the effect of the so-called financial meltdown of many western economies. In my humble opinion at best we will have a repeat of 2011. However, without evidence where any appreciable upside will come from, I fear 2012 may prove an even more difficult year for owners. But then shipping, as we all know, is a law unto itself and has proved many pundits wrong in the past and no doubt will continue to do so in the future. I hope to join their ranks!

2012 Predictions from BMTI's Far East Dry Bulk Chartering Correspondent
dit restrictions. Japan, China's largest export market, is showing some growth after their disastrous earthquake but this is counterbalanced by a great deal of economic uncertainty in Europe and a wobbly industrial outlook in the US: without those two markets functioning normally, the Chinese are unlikely to be working at full capacity. If the Chinese can improve upon their lowered steel output during 2011, whether for internal or external use, then the omens are certainly brighter, but even then it's unlikely that it will be enough to create the demand needed to absorb the total expected tonnage growth and reverse the trend established in the latter part of 2011. It's our belief that rates will drift within a low band.

Bullet Points for the Coming Year by a Continental Panamax Shipbroker -And then everything is connected with the lending -Tankers: absolute catastrophe, never been worse. banks. They must raise their equity position to 9% as -Containerships will have another difficult year. Too required by the Basel 3 agreement. many newbuildings and large ships are coming to meet the given cargo loading demand. Regular TEU -This clearly worsens the availability of investment container rates fell from US$ 2,000 to US$ 600. capital. Even if the banks would like to they are not There is fierce competition between the lines. No in a position to grant any money! And who would one is willing to lay up ships, instead opting to hold like to channel funds into a shipping business which has such a gloomy view at the moment. their market share and to win some of the others'. -Rates, regardless of size from feeders to 6,000 TEU vessels, will trade at levels between US$ 4,000 and US$ 12,000, regardless of TCT basis or period basis. -Bulk carriers are looking comparatively better. For a period of 12 months, Capes should get US$ 18,000, Panamaxes US$ 13,000 and Supras US$ 11,000. This is barely adequate (depending on the purchase price of each ship), but it might be enough to survive for another round. -Also, there are many newbuilding ships of all sizes coming on stream in 2012 and 2013. -It's going to be tough and people say that every day another one-man vessel company is due to die if the financiers would be able to act as they should! How much money can you lend me? I would need about EUR 24.7m with a 1%, 30-year interest rate. As security, I could offer my wife and my dog, a pure-breed terrier with a fantastic pedigree!

Supramax Outlook from BMTI's Continental Correspondent Who can look into future? You just can expect have spoiled our "visions" in the past that I fear the something or assume, but so many outer influences same goes for 2012. In general I do think that:

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-Far East market to see slight improvement in spring -Atlantic markets will feel the burden from too many ships exiting "odd" places, mainly in ballast -Indian Oceanbetween Africa and WC India pirate infestedwill remain a hot spot since too many owners refuse to go there and the insurance industry and bodyguard companies enjoy the proper market. -Politics will have major influence on import-export policies, yes/no price politics and taxation. -New rules will be set upand you can scarcely know them all by heart. I take it for granted that the security-mad organisations will set up more new rules, perhaps CO2 for coal transports?

-Madness will carry on by governmental divisions in many (corrupt) places such as "you may not pump out washing water in our territories but you also cannot deliver same ashore and similar other b.s. (You want more examples? Call me and I'll tell you). The overall situation will see markets, east and west, moving closer together (money-wise, no huge differences in rates anymore), the East will stay weaker and the West more stable. Thus, to fix Atlantic to Far East won't wash a lot of money into your wallet, but being in the East you may get better, thus adequate, rates. So, may 2012 be adequate for all of us.

View on 2012 from a North Pacific-Based Operator 2012 will see a lot of companies go bust, perhaps day expectations on denial or politicians telling them some banks with heavy shipping portfolios too. All that the problem will be solved eventually by printin line with the macro economy: the US bust, Eur- ing money or taking more debt or punishing the ope bust and China's hard landing. The few that stay people who have savings (and declaring them) or a alive will benefit and pick up the pieces/bargains. I salary. I will be optimistic once I see some politicians do not believe that [BMTI] readers wish to see these and bankers in jailextremely unlikely, since they kind of comments, since most justify their day to are running the casino, which we call the markets. European Bulk Broker Sees Steady Sailing in 2012 We maintain an optimistic view for the year ahead The political world instability and same regional in line with 2011. I do not see reasons to justify crises will fuel the difficulties of the shipping world. growing freights (except for mini bulk carriers) due The BDI average will remain at 1,800 points (with to a scarcity of good vessels in the market (the world variation between 1,500 minimum and 2,200 maxifleet is too old and in bad condition and the demand mum). I believe in a recovery of freight rates of for transport in this size is growing, slowly, but Handysize and Handymax vessels, stable Supramax growing). The imbalance in the dry bulk sector be- freights and a decline in Capesize and Panamax tween the growing world fleet and transportation freights from present levels. As I see it, the freight demand will be large (about 10%) and this condition market can only start a recovery after 2013. will not allow freights to rise beyond current levels. A Continental Charterer Looks at the 'Year of the Dragon' The shipping industry is leaving behind a dis- and the general economic conditions worldwide. As appointing year in every respect, starting with de- an outsider one should expect economic growth will creasing freight levels in general over the year, high be achieved in the Far East-Indian Ocean area, which bunker prices, a constant flow of newbuildings will lead to stabilizing of the freight/hire rate levels entering the market and one can go on in this pes- and bottoming out during the coming year in simistic review with more non-positive aspects conjunction with a number of vessels that will try to find employment in the direction of Atlantic waters. like a rabbit on the run unable to find a way out. Take the symbol of the new Chinese year, the dragon, as the role model for the approach to the 2012 market. Lead by courage and trust in the new year with a positive attitude for new possibilities and opportunities that lie ahead of the shipping community, though one should be realistic taking into consideration the ongoing newbuilding programme Europe will have to solve their economic/currency problems prior being able to resume a leading role in the world economy and the same applies, though in a lesser form, for the US. Expectations for Atlantic markets are to remain at about a similar level as the present condition with a tendency of decrease due to supply of additional tonnage coming from the East.

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Market Outlook from an American Broker Friend As far as shipping is concerned, well that's another management have further increased owners' runstory. I think that this year will be as passionate as ning costs to unsustainable levels for most, especimany pessimistic predictions are supposed to be- ally for those who purchased tonnage up to 2008 for come reality. The massive influx of new tonnage will delivery from 2009 onwards. There is not one item flood the market, especially on Supramaxes where in the shipowners' lists of costs that has gone down over 100 units are poised for delivery. The EU over the past years, despite the severe recession in countries are almost all in recession and that cannot the industryespecially crew costs! On the larger but bring further trial and tribulation to shipping, sizes, I deem levels will equally slacken further as the especially on the smaller sizes. A hurting Europe can new tonnage influx outweighs exiting demolition tonnage. I guess I've been pessimistic enough but on only offer uncertainty to eastern or westerners alike. the lighter side, I cannot ignore that this industry has A European population that grinds consumption constantly and repeatedly proven to forecasters big down significantly does good to no one, especially to and small that it cannot be accurately predicted, the shipping sector. The past three years have seen a therefore to all those do-it-yourself Nostradamuses harvest of small and large operators and owners alike of shipping, I declare ''BEWARE'' that shipping does throw in the towel. Severely strict, continuous im- not ever show its colours easily. plementation of new rules and regulations of ship Demand Forecast from the Brazilian Steel Industry "Brazil is facing a process of deindustrialization in "Long steel plans" of ArcelorMittal produce mainly the metal-mechanics chain, the exchange rate re- wire rod for steel cord used in the production of tires mains volatile, supply costs remain high and still and wires for agricultural and industrial use. In the find a fiscal war among the different states that has area of mining, ArcelorMittal is investing US$ 75m reduced the competitiveness of the sector. There is in doubling the Andrade mine in the municipality of still a surplus of capacity of the world steel output. Bela Vista de Minas (MG). To do this, it is building a The internal market must be preserved with the new processing plant for iron ore that will enable correction of competitive asymmetries." Through expansion of production capacity of 1.5 Mt per year this note of advice, ArcelorMittal Brazil, a major steel to 3.5 Mt per year of sinter feed. The plant is producer in Latin America, provides the tone for scheduled to start operating in September 2012. 2012. The company said, however, it is reviewing its With production capacity of 15 Mt of steel per year schedule of doubling production capacity of long and 29 plants in Brazil, Argentina (Acindar) and steel Monlevade (MG), from 1.2 Mt to 2.4 Mt, valued Costa Rica, Overall, the ArcelorMittal Group at US$ 1.2 billion, "due to the scenario of global eco- produced 70.2 Mt of crude steel in the first nine nomic slowdown and the weakness of the markets months of 2011 and 39 Mt of iron ore, information of Europe and the US, besides the growth in steel released on November 3. demand in Brazil, less than originally planned." Thoughts on 2012 by a Charterer in Brazil View from a South American Perspective Basically we reckon China is going to (and continue Brazil produces in one year makes it pretty clear just to) call the shots. When the Chinese sneeze we all who is calling the shots in this relationship. catch a cold and when they go for 10% plus growth we all catch a ride. Although Brazil is an emerging There are more and more Chinese companies comeconomy and has a GDP that has just passed that of ing to South America investing heavily in land, England, it still depends to a large degree on China mineral resources and vehicle distribution. The exfor buying its raw materials and for supplying it with pectation is that companies such as Chery, JAC and a million and one products. These are products that Lifan will establish assembly plants in the coming Brazil should be able to produce cheaper but, for year. We believe the Chinese will continue to exreasons of excessive government intervention and pand their presence in South America much in the way they have been doing in Africa the last ten years. heavy taxation, is unable to do. Take steel for example. It is ironic (no pun intended) that the Chinese buy iron ore in Brazil, ship it 30 days across the ocean, process it into steel, and then ship the semi-finished product 30 days back to Brazil. The fact that they produce in one month what Back to steel, the domestic market in Brazil is easing up in spite of all the talk about how the World Cup in 2014 and the Olympics in 2016 are giving a boost to the economy. When the domestic market slackens, exports increasewhich is good news for owners and brokers. Consolidation will continue but not
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necessarily along nationalistic linesTernium of Argentina recently gained control of Usiminas in spite of great interest from both CSN and Gerdau. As eternal optimists we believe the dry bulk market may well take off in the second half of the year. After

all, it was in 2001 that Vale took the 'strategic' decision to sell their entire fleet of Capes and Panamaxes and six months later the market went through the roof. They just announced they will sell their fleet of 400,000 dwt newbuildingscould that be a sign?

Macroeconomic View from a Brazil-Based Shipbroker The world economy is ailing and suffering from power would earn step by step more money, opendiverse effects from multiple crisis hot spots, be it ing for Brazilian manufacturers a new class of client the euro, the weak US economy, China's attitude which in the past never would have been under the towards its currency, the situation in the Persian regular purchasers. This explains in a certain part why Brazil is able to survive reasonably stable in the Gulf and its neighbours like Iran, just to name a few. turmoil of uncertainty in the rest of the world. Within these nervous seas, Brazil has managed to continue to stay somewhat stable and as a solid rock, Besides this, the government succeeded to obtain increasingly becoming a reference point to other the nomination for the Olympic Games in 2016 and countries and a case to be closely considered by the World Cup in 2014, both resulting in heavy economists in the future, because the world econo- investments in infrastructure and basics, resulting my can learn how to survive in bad times trying to again in more work to be done and more wealth among its population. This does not mean that we understand a bit better the Brazilian example. can shrug off the difficulties of living in a globalized One of the reasons is that Brazil is one of the so- world, but it means that we can surely survive much called BRICSBrazil, Russia, India and Chinaall more comfortable than a lot of other countries. nations which in spite of the world economic crisis continue to enjoy experienced solid growth rates of As a direct result, Brazil has now taken the sixth potheir gross national products, even if the reasons for sition among the world's leading economies, putting Great Britain in seventh place, and is on course to this might be different from country to country. reach fifth place before long. Finance minister Guido In Brazil, the reasons will be found in a certain part in Mantega calculates that Brazil will soon overtake the fact that as also per our national anthem we are France and then have Germany in view. Having all laid in a cradle full of splendour and wealth, or do this wealth and growth does necessarily mean also put it straight its enormous size with most of its area the need of efficient logistics in order to ensure that within climatically benevolent zones for agriculture all the export and imports can flow normally, and in a certain way warrants its wealth in an world this continues to be one of the many bottlenecks. getting increasingly overcrowded at least in certain New ports have been inaugurated this year, Itapoa in parts with billions of souls wanting to be fed. the South to name just one, and new piers and Brazil has not denied its natural vocation and has berths are being constructed all over Brazil. This, taken its chance taking leading positions in the however, does not help if the infrastructure to the supply of multiple agricultural commodities, not hinterland continues to be inefficient and partially in only those for which it is already long time known a deplorable state, not to mention the new ports like coffee or sugar, but more recently in soy, vege- created with private resources, but the government table oils, orange juice, meat and so many others. funded road connecting the port to the existing Besides this, we have under the earth more and more transport system is simply not being built within the natural resources being discovered and explored. promised time frames. But also here slowly, slowly The leading position in the iron ore sector is only the socialist Brazilian government is trying to find a one to be mentioned. More and more oil fields are mid term solution by privatizing roads, ports and getting discovered, and Brazil, since last year became, airports. Once the private entrepreneurs have taken at least theoretically, auto sufficient in its oil supplies over a fast improvement will be seen. and soon will be seen as a regular exporter of crude. Brazil took advantage from the daily price hikes of commodities but when the crisis began was very fast to take advantage of its other wealth often not accounted forits huge population of nearly 200m. The government made courageous steps to ensure that those people with traditionally less buying Brazil will continue to be a huge supplier of freights, be it for export commodities, be it for imports of basics like coal and clinker, it will continue to import and every day increasing volumes of merchandise in containers, which is for sure one of the points a lot of owners are looking very carefully to within their strategic considerations. It is simply a country which cannot be any longer discounted or neglected by any

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owner wishing to employ its tonnage. Also, the cabotage trade along its 8,000km long coast is getting more and more attention from international owners, teaming them up with local partners in order to participate in the ever growing cargo flow. Brazilwhich was at eighth place in the 1970s in terms of dwt ship construction and in the 80s and 90s lost this position by not delivering any sizable tonnageis waking up again. New mega ship yards

are being constructed at several sites along the coast, meaning more jobs, more activity, and more things to do, in addition to logistic bottlenecks to solve. This, in a very few words which by its nature must stay superficial, is not meant as an in-depth analysis is the actual situation of Brazil, which amongst much other attributes is also the only five time soccer world champion existing have access to credit lines.

Short Sea Outlook from BMTI's Mediterranean Correspondent (Short Sea Broker) I expect 2012 to remain very volatile with highs and implement laws to reduce or wipe out debt burdens. lows as Europe enters a time of recession, austerity The same will also apply to household debt. The and high unemployment in a futile yet needed capitalist model of banks being the centre of the attempt to balance growth, austerity and budgetary economy will shift to governments and banks will discipline. For coaster shipping in the Mediterranean be held more accountable. The capitalist model will I don't expect major improvements and would change forever taking a more social friendly view. venture to say that we will see owners unable to meet financial commitments to banks resulting in In summary, I share the view that fundamentally we are going through a period of change within Europe more arrest and company closures. and 2012 will be the year that we see major changes The Med market will be tied to actions taken by the the likes of which we have never seen before. EU. Europe will go through a period of political Principally, I share the view that our only defence as unrest marked by regime changes, strikes, high un- individuals against hardship is hard work, dedication employment, volatility and, in some cases, famine. and returning back to grass root values that we have Major economies will be unable to mitigate damages lost touch with in this modern day and age. It will and a period of chaos will emerge as mass media will take no less than the same values that our parents no longer be able to disguise current events. The and grandparents instilled in us to prevail in the occupy movement will appear in Europe in a new uncertain times we are living. What's important at form with port stoppages and blockades. The EU as a the end of the day is that the changes that come forth whole will be obliged to make radical changes and I are lasting and we have addressed the root causes of expect a softening of the euro currency and adopting the problems without destroying the moral fiber of of the euro bond. EU states in an attempt to contain society. What greater value than to achieve in the businesses closing down, and hence job losses, will most trying of times. Happy New Year. Viewpoint from a Netherlands-Based Coaster Broker First off all, we would like to point out that we are impossible to predict accurately. Having said that, merely small brokers, dealing mainly with grains and there are of course indicators that lead one to believe grain by-products. Our vision is limited from many it might go a certain way, but there are no guarantees. sides. However we speak to many people, many If I had to gamble, I'd think the market will be back owners and many charterers. The person who will to "historic", meaning in the first nine months a tell you he knows what will happen is lying, that's it. charterers' market and September/October-DecemThere are so many factors (financial crises/world ber an owners' market. And that is talking about the economy) influencing the market, it is simply greater Europe coaster market (up to 10,000 dwt). Thoughts on 2012 from a Black Sea & Mediterranean Short Sea Charterer This year is much harder than any year in the last few years to forecast. Believe all of us were thinking that 2012 will be the break through but now a days we definitely know that 2012 and may be 2013 too are lost. If we remember the market felt on the middle end of 2008, a lot of us calculated that by 2011 all the new building will be minimized and, accordingly, the market would move forward. Unfortunately, in Q1-2010 the financial markets became optimistic and, as a result, a new boom of orders were placed which are causing again oversupply delivery of new ships. The banking system facing new regulations as of 1 January in addition to the unclear situation in the common markethave stopped finance to most of the shipping community. The non-availability of reasonably realistic finance is causing continuous reduction in ship prices, which
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cause the banks that gave the credit to be nervous and press owners to increase collateral and their interest rates. Owners facing an increase of running costs together with low freights stop maintaining the ships and more and more ships are arrested due to lack of maintenance and non-payment of bunkers. All those parameters together with oversupply of vessels go to push freights down, which does not allow owners to recover their costsnot to mention being impossible to pay regularly their loans, which will lead again to offering low freights. When we add all the above information we should expect another year of low freights and spots vessel which lead again to non profitable year for owners. Add to this the uncertainty of the European bonds market plus problem at Egypt, Syria, Lebanon and

other problematic ports will add fire to the freight market to decrease or luckily remain the same. We expect more arrests and more delays of ships due non payment of bunker and arrested by port state control. Charterers who do understand the market very well will press the markets looking for bargain voyages. As it looks now, we will likely face a very difficult 18 months, if not more, to the shipping community and an easier period for the charterers. Charterers, however, should be more careful when choosing the right owners as definitely more and more ships (especially in the Black Sea and Med) will not complete their voyages on time due lack of cash flow, which will cause various strikes of crew and bunker arrests on the way to discharging ports.

Considerations about 2012 from a Continental Coaster Broker For 2012 we are in terms of "expect the unexpected". Political attempts to rescue the different economies from the worst case doom scenario of 1930 are somehow underway with unpredictable success on account of globalization meets national interests. We expect a continuous consolidation in different sectors and are sure that conservative players with a long lasting shipping interest will meet bargain opportunities at unexpected conditions for the to be expected next upswing if the sentiment of trust will return to the financial market. Tonnage oversupply is a fact but different trades will offer different Restructuring of the maritime cluster Another year of the crisis has passed and it seems it will not be over in 2012. We still have a tonnage oversupply and now we will come to the critical time of the three-year period, whereafter the banks have no other choice but to name the credit of some owners as a total loss. Therefore, we will see a lot of blood in the next months as the banks have no other option but to decide on the companies which they want to secure or to continue working with. There is the fear in the market that about 50% of the owners will not exist in the near future as they will New Year Market Assessment by a Continental Bulker Broker Despite of the fact that shipping people are mostly currency cannot but have a negative impact on born optimists, we suspect the next year will be the maritime traffic. We believe that tonnage will be hit "Vale of Tears" and probably even a greater challenge hard the larger the harder, whereby problems being than the fading year. We do have economic doom aggravated by ongoing over-tonnaging due to exand gloom scenarios everywhere and we are afraid pected newbuilding deliveries and fresh orders this will be with us for some time. The dents in the regardless of the prevailing supply and demand Indian and Chinese economy, for example, and situation. The imbalance would have become even consequences because of the troubled European
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possibilities and we expect that with the right mix, it is to handle if the present demand remains in force. For the next 90 days we expect: the US dollar up / the euro down / oil down and further declining asset values. But after the Chinese New Year, restocking and lower prices might well pump up the demand. Furthermore, with a return of confidence and a detailed political solution for financial instability we might have an unexpectedly good 2012 for the shipping industry, which is, as a whole from our point of view, for a full year quite unpredictable.

Expectations in 2012 from a Continental Shipowner be declared as bankrupt and/or insolvent and they will not be rescued by the banks any further. We will also see some changes in ship management. There will be cooperatives/mergers fm owns sides as otherwise a lot of owners and managing companies will not be able to compete. All parties have to save costs and this will be the major issue in the next year. It will be seen in the dry bulk, container and coaster sectors. So, in total it will be another tough year for operators, owners and banks.

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more apparent already in 2011 if we would not have experienced a remarkable scrapping activity. However, while we understand that nearly 10 Mt in deadweight has been scrapped, friends of ours in the demolition business do not believe that this level may be reached, let alone topped, in 2012. Even though not unaffected by world's economy we have different views for the small size segment of bulk carriers in the size of 15-20,000 dwt, at least in

terms of the Atlantic, Europe and Africa trades. There are several reasons, including a distinguished stockpiling policy of the manufacturing and processing industries due to a tight monetary situation, but foremost there is no serious over-tonnaging situation. Quite to the contrary, tonnage of this size tends to become aged while newbuilding orders are within a manageable range. We expect vital momentum in this segment and good opportunities to sail around the doldrums successfully.

Comments on 2012 from a Scandinavian Short Sea Self-Discharge Owner I don't see any big changes in 2012, especially with the eurozone crisis looming. There are always surprises, but there would have to be a big surprise for the euro crisis to be resolved and banks to reach an agreement to the extent that would satisfy the market. Until then, even in Norway where most fixtures are concluded in the euro, the currency will be uncertain and markets will be cautious. It will be another difficult year in 2012, as it was in 2011, to be a self-discharge owner. It will be challenging for everyone (except for maybe Wilson, since they're already listed on the stock exchange), but for the smaller owners, it will take creativity and perseverance to make it with the spot market as well as with 1. Outlook In former times it seemed easy to predict the development of any of the shipping markets as it was less volatile. Nowadays nobody dares to make predictions on a long term level as there are too many variables to take into consideration. However, I will try my best with the following personal thoughts. 2. Demand side The demand side greatly depends on fundamentals in the EU and also on the political environment in the Med and Black Sea countries. I do believe that the financial crisis in Europe will prevail and will have an effect on European growth/contraction and this will harm business. I expect more demand coming from North Africa (especially Libya) as the political situation has calmed down and will continue to do so. I also believe that if commodity prices fall further (as they have been doing in the past weeks) and remain on a low level this may be an incentive for traders to start buying again which would result in an extension of cargo volume. However if banks lose again their trust in each other (as it presently seems) when it comes to the issuance of Letter of credits this may also harm trade again. The market will be further influenced by seasonal factors like the next grain harvest which will add more cargoes after a traditionally low freight market during the summer period. I expect that, together with the declining long/short contracts. Competition is high with the self-discharge vessels versus the gearless vessels as the costs of running a self-discharge vessel are high but offset by the terminal not needing cranes or paying for stevedoring fees. This coming year will see this competition as high as ever. On the other side, owners of self-discharging ships have higher costs for running such a vessel than owners of gearless ships as the on-board equipment is much costlier to maintain. We see trends staying about the same in 2012, but if a big surprise does come from the eurozone, it will hopefully be one that benefits the market instead of the other way around.

A Shipbroker's Personal View on Prospects for European Short Sea Markets in 2012 commodity prices, the bunker price (MGO basis Rotterdam) will come down further as well and in my view will average at US$ 700/mt in 2012. This lower bunker price advantage may be offset by a stronger dollar which I personally see at 1/1.2 USD/EUR on average due to a stronger US economy. The deep sea market: during the first six months of 2011 we have seen Handysize vessels taking cargo volume from the short sea market which has usually been shipped in coasters as the freight market for that size was on a very low level and Handysize owners considered taking those cargos for comparatively short trips. I think risk prevails for 2012 as well with an ongoing over-tonnaged deep sea market with more ships ballasting to the Atlantic basin. 3. Tonnage supply side In 2011, we have seen a diminishing orderbook paired with a higher level of scrapping. The overall European coastal fleet between 2,000 and 12,000 dwt stood at around 2,000 ships by the end of the year with a nearly non-existent orderbook. A quarter of this fleet is older than 25 years so there will remain a high scrapping potential here. I believe that scrapping will further be an issue as owners of old tonnage will be forced to scrap due to a lack of liquidity for the necessary maintenance to trade their ships further. As the policy presently followed by all the major shipping banks is to reduce their credit

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portfolios rather than expand it, I do not expect any significant newbuilding orders in 2012. Indeed, I see a net reduction of the European coastal fleet in 2012. 4. Freight and secondhand market To what extent this will happen also depends on the development of the freight market. So, the most important question seems to be where is the freight

market heading? I personally believe that the average freight market will remain on the same level as it has been during the fourth quarter of 2011 with a traditional low summer market as it seems that trade might again be encouraged by low commodity prices and upcoming demand from North Africa. Therefore, I don't believe that asset prices will fluctuate a lot, but will remain rather stable throughout 2012.

European Coaster Outlook from a Baltic Sea Chartering Broker After such a year it's even harder to give any outlook The only upcoming problem for small vessels could as sometimes it feels that the sun will not rise in the be age limitations from cargo insurance as most such east the next day. The impact of Financial Crisis 2.0 vessels are older now and charterers might have to has hit the shipping industry very hard with many increase the age limits for the smaller ships if they consequences to unfold in 2012, especially for the want to keep trading such a size of vessel. former "sexy for investors" parts of our business, like Capesize vessels. A business mostly driven by specu- It cannot be excluded that companies involved in lation and less influenced by real market factors will coaster shipping will come into trouble in 2012 as sooner or later end up in a bubble and a crash. 2012 all parts our industry will be influenced by the conwill be a year of truth even for some big market tinued financial and economic crisis. All the same, it players, formerly seen as too big to fail. Before they must be noted that supply and demand in this segwent bust the same was said about Lehman Brothers. ment is way better balanced than in bigger sizes. For Handysizes and bigger ships the problem of over-tonnage and comparatively slow demand growth will keep rates under pressureeven a delay in delivery of newbuildings cannot be extended forever without any financial consequences for owners involved or shipyards not getting paid. For European coasters there is a much more positive outlook: nearly no newbuildings are ahead and increasing demand for smaller size vessels will lead to a stable market for this size, especially for the smaller coasters below 4,000mt. There has been very low building activity since many owners concentrated on bigger vessels like 6-7,000 tonners but demand for smaller vessels is still there due to limitations in some ports as well as requests by traders for such sizes. In other cases, storage capacity is limited and does not readily allow shipment of bigger quantities. Our expectations for 2012 are as follows: Coastal: Towards the end 2011, there was less and less activity in December and so a couple of spot/ prompt vessels around all over Europe. Guess this picture will not change a lot in January for 2012 see the market about 5-10% lower than 2011. As mainly working for charterers, personally a low market makes my life easier but owners who are unable to fulfil their obligations also cause problems for charterers and cargo owners when voyages will not be completed or vessels arrested or arriving is delayedcharterers are requested to pay bunkers or port fees since owners aren't able to pay themselves. In summary, volatility in all segments will increase, which is a logic effect in a misbalanced market and thus two things are sure: in 2012 the sun will rise in the east every day and it will be an exciting year. PS: Forget about this Maya calendar story. It is based on a misinterpretation. If there will be no outlook for 2013 from me at the same time next year, then they were right after all! Happy 2012 to all of you!

Thoughts on 2012 from a European Handy Bulk & Coaster Broker Handy/Supramax: At the end of the year, the Pacific still has less activity compared to the Atlantic. I guess this will stay up to the end of first quarter. In general we see the market in 2012 about 10-15% lower than 2011. There are still lots of newbuildings leaving the yards. There is just too much overcapacity on bulkers as well as container tonnage. Bunkers: we reckon an increase of 10-15% for 2012. View of 2012 from a Major Scandinavian Shipbroker About 80% of our trade is involved with Norway, so we represent a very specialized segment of the short sea market. Nonetheless, the European credit crisis has very real consequences for us and the Baltic markets at large. The first six months of 2011 were
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pretty poor for owners with most only achieving breakeven rates. The second six months were notably better, rate-wise, with freights climbing in the summer and increasing by some 20% over the year to date to their highest levels in the year so far.
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Whether business will stay firm in 2012 is a big question and honestly, given the current signals of uncertainty, optimism is in short supply. Economic uncertainty is also reflected in the actions of Scandinavian banks, which are also lowering interest rates in hopes of reviving interest. Credit availability will be tighter and smaller operations could come under increased pressure as earnings fail to fill previous losses. Indeed, in the first half of 2011 when many owners were taking rates at or below break-even, they only were able to do so with the knowledge (or hope) that the second half of 2011 would bring better earnings to pay off the losses incurred in the first half. That happened to some extent and cargo activity was higher in H22011, though the fact that so many aggregates cargoes were concluded via Norway and elsewhere in the Baltic suggests not only greater activity, but also fairly poor earnings as aggregates are known as a "low-value" cargo, one that saw freights in the EUR 5-7/mt range barely covering costs. On paper, the

Christmas period looks pretty good with activity rising just before the holidays, but even this year (2011) the pre-holiday activity was notably down from last year with our brokerage doing about 50% fewer fixtures than we did in the same period last year. Poor weather in December also increased delays for loading and discharging, which increased the time that vessels were occupied and thus tightened tonnagehowever, with the extra days spent being paid by the owner, it's hard to say whether bad weather is actually a net gain or not. Activity is simply more subdued and concerns about the recent suspension of operations by Elkem of three smelting ovens in Norway are also tempering expectations for ferro-product demand in Norway in 2012. Nonetheless, despite the challenges ahead, given the flexible nature of Baltic short sea shipping and the fact that a wide variety of cargoes are shipped in spurts and seasons unforeseen by usual market patterns, there should be sufficient cargo flows in 2012 to provide enough business for most of the better positioned brokerages.

Container Market Outlook 2012 from BMTI's Containership Correspondent 2011 ended with low freight rates and overcapacity on the major trade lanes and so the New Year will start. Amid easy credit conditions, ever-growing consumer demand and China's booming economy before 2008 many carriers ordered ships and more shipswhich now are entering the market. But the situation has changed drastically. Economies have slowed down, Europe is shaken by a debt crisis, consumers are spending but not in a manner to spur adequate growth to balance capacity and Chinathe admired new staris cutting down expectations of export and economic increase. If 2011 was tough, 2012 will become tougher for many shipping companies, especially for those without a solid financial background, as the capital market is rather weak and lending is extremely tight at the moment. As freight rates may stay low, at least during Q1-2012, loan payments will not come from earnings but from savingsgood for companies who can count with them. Trade volumes are expected to grow in 2012 on a modest pace on every route but an orderbook of 30% of the currently existing fleet is dampening any optimism even if scrapping of at least 115,000 TEU, as expected by Maersk in 2012, will take place. Cost saving issues will be the top theme of the year. For instance to cut down transport of empty boxes, which in 2008 counted for about US$ 22 billion, which means US$ 400/TEU, as was recently stated in a report by Drewry Shipping Consultants. In 2010 on the main trade lanes around one third of transport has been of empty boxes, as the export from Asia is mainly goods packed in container and the import to Asia are mainly cars or heavy machinery. Growing exports of containerized goods from the US and Europe is urgently needed to reduce unnecessary costs. New foldable boxes now developed may be another measure to be implemented. More and more index-linked container contracts enabling price adjustments in multi-yearagreements is also a development coming into vogue. But the highlight measure currently is the run to form alliances/co-operations/networks between the top 20 container liners of the world as well as mergers and acquisitions among smaller players. The fierce fight for market share on the most profitable main routes Asia-Europe/Med and Asia-trans-Pacific will continue in 2012some casualties included. Meanwhile, on the secondary trade lanes, emerging markets will continue their economic growth, offering chances for smaller carriers with special knowledge and adequate ships in these markets and regions. With a world population of about 7 billion people now and around 9 billion people expected by 2040. Europe then accounting for around 530m and North America about 400m, world trade routes will shift soon as China, India and Africa will account for more than 60% of the population. Maybe to start thinking in a wider picture is the challenge of 2012.

Forecasts for 2012 from a Project & Heavy Lift Broker Despite not being a soothsayer, one may still confess that we are sliding from the global financial crisis straight into a wider global recession which forces multipurpose/heavy lift owners and operators to

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seek for niches since the mainstream trades will surely suffer badly. The global MPP fleet from 5,00119,999 dwt accounts for some 1,700 units (about 17m dwt) with an average age of almost 16 years. Some 35-40% of these ships are considered to be overaged and have above 20 years on their back. In light of the present and further predictable severe crisis we will see quite a number of ships sorted out for scrap. Market know-how and technical competence will require modern and economic ships to be put into service. These ships will still find employment, albeit at well reduced economic conditions. In particular the North European owners market is in severe turbulences and in 2012-2013 we will see quite a number of shipowners being swiped off their market and business due to the adverse circumstances and as equivalent evil, an enormous lack of cash. Bankers are forcing smaller and less professional operating owners to step aside. Owners will be forced to merge with each other and form bigger units, quite a number of operators will have to give up and we will watch out for a long-range reorientation of owners and operators. One can anticipate more and more charterers asking for farreaching performance securities from owners which smaller business units can hardly meet. Some broker companies like some market-players in Hamburg who were seeking their salvation in converting from brokers to operators will likely have to retrace their steps how to survive the heavily accumulated losses from ship operations. One long-established Conti-

nental pool company will be led to bankruptcy after losing long term arbitrage contracts, to re-emerge with the same initials standing for a different company name. Acting that 'old fashioned' way in our modern and advanced internet information society is certainly not a confidence-building measure and as one of many consequences we will see quite a few shippers seeking to be closer shoulder to shoulder with owners and cut out operators or their hybrids. The industry's main six pillars however will remain to keep the MPPS fleet moderately alive: Infrastructure Projects, Renewable and Alternative Energies, Energy Projects, Mining, Oil & Gas, Rolling Stock and Auxiliary assistance to the off-shore industry. Some owners who searched and placed themselves into niches will have the edge. Transport pivots are changing rapidly. One of the examples may well be Africa. The Black Continent will enjoy a similar development as the Asian Tiger countries did in recent years. Some observers are talking about "lions on the move" and in fact the fast-growing middle class does overtake the equivalent class in India. All the aforementioned six pillars will drive the Africa trade. Thanks to lower interdependence with the world economy, fiscal countermeasures thanks to saved commodity revenues and re-focusing on high-growth emerging markets, Africa is in better economical shape than many of their 'old' colonies. With some US$ 71 billion in imports and US$ 66 billion in exports, Asia is today's equivalent important trading partner as Europe with some US$ 79 billion imports and US$ 62 billion exports.

2012 Predictions from a European Container Ship manager

Although there is a belief that it will be the end of the world, I will rather expect or at least hope that it will be the end of the recession and that, by the end of 2012, we will see some better prospects. In the mean time, I fear the year will be difficult for many ship owners and their humble servants, the brokers.

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