Black Sea, Mediterranean & EuropeanCoaster Markets

Black Sea Shipowners’ Club30 July 2015

Bahadır TONGUÇ, FICS, CMILT

General Status

Since the beginning of 2015 ISTFIX fell sharply from 720 points level toward 585 points by the end of July.

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan-14

Mar-14

May-14

Jun-14

Aug-14

Oct-14

Dec-14

Feb-15

Apr-15

Jun-15

550

600

650

700

750

800

General Status

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

$10,000$11,000$12,000$13,000$14,000

8-12k dwt6-8k dwt4-6k dwt2-4k dwt

Daily vessel returns across all segments roughly cover daily running expenses and have been trending lower since the beginning of the year.

General Status – River Type

Freight rates plunged steeply following the grain export duties and have recently been recovering with the new harvest.

General Fleet Status

2009 2010 2011 2012 2013

12.31 mln

11.45 mln

11.01 mln10.84 mln

9.96 mln

2,522

2,358

2,2352,176

1,980

• Regional fleet consisted of 2.500 units totalling 12,3 mln dwt in 2009.

• At the end of 2013, fleet shrank to 10 mln tonnes and 2.000 units.

• This correspond to 20 percent decline in 5 years.

• About 550 vessels have been removed.• Over 60 coasters are arrested or otherwise

suspended from activity.• Average age profile of the active fleet is

21,6 years.

Fleet Age Status

0.00

500000.00

1000000.00

1500000.00

2000000.00

2500000.00

3000000.00

3500000.00

4000000.00

4,416.00

2,383,569.00

1,023,157.001,199,865.00

1,101,630.00

1,369,006.00

2,015,523.00

3,212,111.00

86,095.00

1,843,605.00

1,489,791.00

895,808.001,014,035.00 986,513.00

1,307,876.00

2,340,712.00

2009 2010 2011 2012 2013

Newbuilt1 to 5 yrs 6 to 10 yrs 11 to 15 yrs 16 to 20 yrs 21 to 25 yrs 26 to 30 yrs 30+ yrs

Mill

ion

DW

T

General Status• Reasons for the rapid decline:

– 1 January 2015 implementation of Emission Control Areas (ECA) and subsequent flocking of older vessels into the Mediterranean,

– Russian grain export duties,– Rapid declines in commodity prices caused by U.S. Federal

Reserve interest rate hike expectations, combined with sharp fall in oil prices and charterers’ eventual downgrade of freight ideas,

– Weakened European demand for CIS products due to falling EUR/USD parity, wait&see approach.

Baltic & Continent• Whilst Bl. Sea & Med. trade

plummeted Baltic trade surged during winter & spring.

• ECA reduced the number of trading units.

• During March rates were unusually high.

• By the end of Spring seasonal corrections came.Baltic-ARA 3.000 mt coaster rates €/tonne

Economic Situation• Although the European Central Bank (ECB) started 1,1 trillion EURO monetary

expansion move, renewed Greek crisis reduces the intended effect thereof.• Meanwhile, Euro continues to lose strength. Fed is still expected to raise

interest rates by the end of the year, which creates additional pressure on commodity prices. In light of these circumstances, commodity buyers are likely to remain cautious.

• Russia vs West tension impacted the oil prices “positively” for owners while it affected Black Sea trade adversely. Turkish-Russian trade contracted by 37 percent during the first 6 months of the year.

• As Russian ruble weakens, Russian commodities “gain” in competitiveness.• The Baltic Dry Index plunged to 2008 post-crisis levels this fall but started to

recover.

Commodities & Trade• Due to EU sanctions to Russia (and vice versa) Russian grain exports slowed down

in 2015, after registering a record during the second half of 2014. Following grain export taxes imposed by Russia, the trade came to a halt in February.

• However, Russia exported 30,5 million tonnes of grains during the 2014/2015 harvest year. (25,4 million tonnes in 2013/2014)

• Ukraine exported 34,8 million tonnes of grains during the 2014/2015 harvest year, despite crisis. (32,4 million tonnes in 2013/2014)

• Romanian grain exports rose by 21 percent in 2014 compared to 2013 possibly due to tension.

• EU and France wheat exports also registered a record and rose to 32 million tonnes, possibly as Black Sea exports paused briefly during crisis.

• Black Sea steel trade was also directly affected by the conflict.• Ukraine exported 3,7 million tonnes of steel between January-June 2015, 32 percent

less than same period last year. 75 percent of Ukrainian steel exports go to Egypt, Turkey and Italy.

• Ukrainian steel production fell 30 percent. According to experts, Ukraine’s pre-crisis production capacity of 33 million tonnes will fall to 22 million tonnes as of end 2015. Nearly half of Ukrainian total steel production (about 23 million tonnes) is located in Lugansk & Donetsk.

• As Ukrainian steel production fell, country’s scrap exports predictably increased. Ukraine is expected to export 1,3 million tonnes of scraps in 2015 up from effectively “0” in 2013. Most, if not all, of steel is exported to Turkey.

• Russian steel exports on the other hand received a 11 percent boost, owing to weakening Ruble.

Commodities & Trade

• Semi-product purchases from Russia during the first 5 months rose 88 percent to 750.000 tonnes. Nearly the same amount has been imported from Ukraine.

• Turkey's crude steel production for the January-March period was down 8.8 percent to 7.73 million tons, but Turkey retained its position as the world's eighth-largest crude steel producer.

• Imports from China have surged by a sharp 284 per cent during the January-March period of the year to over half a million tons (567,000 tons)

• China accounts for about half of global steel production and Turkey's economy cannot tolerate rising steel imports from China

Commodities & Trade

Commodities & Trade

• China’s slowing economy triggered significant declines in coal prices.• Offers in Black Sea follow global prices based on quality.