CIMB - Shipping Sector Report

September 3, 2012
REGIONAL MALAYSIA SINGAPORE INDONESIA THAILAND PHILIPPINES CHINA, HONG KONG
SHIPPING MONITOR
SHORT TERM (3 MTH)
LONG TERM
WEEKLY REVIEW
CIMB Analyst
Lacking strong demand drivers

In addition to an oversupply of ships, demand factors seem to be flagging, resulting in the recent decline in rates across all shipping segments. Slower growth in China, problems in Europe, declining oil imports and consumption in the US have taken a toll on shipping rates.
Raymond Yap Kok Hoe CFA

T (60) 3 20849769 E [email protected]
Figure 1: There were major improvements in container shipping operating profits (US$ m) in 2Q12, but can carriers hold on to their gains?
300 1Q12 200 100 0 -100 2Q12
Highlighted Companies Orient Overseas (International) Ltd

Outperform, target: HK$51.20 (0.9x P/BV). OOIL has one of the lowest gearing levels among long-haul carriers and does not swing between profits and losses as frequently as its peers. The carrier exercises cargo selection to maximise yields.
-200 -300 -400 -500 -600 SITC CSCL STXPO NOL MISC Maersk Hapag-Lloyd HMM Hanjin
Neptune Orient Lines Ltd

Neutral, target: S$1.30 (1x P/BV). NOL is finally joining the league of 10,000+ teu ship operators on the AE trade that will help it lower unit costs over the next three years. Its heavy exposure to the US trade will help it benefit from strong TP volumes.
SOURCES: CIMB, COMPANY REPORTS
China Shipping Container Lines Ltd

Neutral, target: HK$1.67 (0.6x P/BV). CSCL has the highest operating leverage in our universe and its stock has a high beta. Exposure to the spot market is large, at up to 90% of its Asia-Europe volumes.
SITC International Holdings Company Ltd

Outperform, target: HK$2.35 (0.9x P/BV shipping, 7x P/E land logistics). SITC benefits from the relative rate stability of its intra-Asia exposure, and should benefit from structural cost reduction when it takes delivery of its newbuildings in 2H12.
We remain Neutral on the sector as valuations are cheap, likely reflecting the current tough market conditions. We have Outperform calls on OOIL and SITC, and also like other quality names such as Pacific Basin and MISC. We recently upgraded CSCL from a Trading Sell to Neutral following the decline in its share price.
have managed to hold on to the majority of the rate hikes over the past several months. Capesize rates improved slightly from the previous week, likely on speculation that Chinese steel mills may start to restock on iron ore. Import prices for the raw commodity have fallen below US$100/tonne, taking the market by surprise. VLCC rates remain under pressure, with current earnings unable to cover cash operating costs. Poten highlighted the need for a strong drive in demand to push rates higher as global utilisation for crude tankers is at a 12-year low of around 80%.
Market review
Asia-Europe container rates declined further, with rates now below levels post-1 March rate hikes. Despite the current peak shipping period, it appears that demand is weak and capacity additions by Evergreen and Hanjin have caused rates to fall dramatically over the past two weeks. AE rates could remain depressed at least until mid-October, when the CYKH/G6 alliances plan to remove some capacity. Rates on the transpacific trade seem to be faring better, with a smaller decline. Carriers on the TP route
Pacific Basin Shipping Ltd

Neutral, target: HK$3.43 (30% SOP discount). Pacific Basin is well positioned to buy more secondhand ships as prices are now considered low. But it cannot escape the negative earnings impact of a weaker-than-expected spot market.
STX Pan Ocean Ltd

Underperform, target: S$1.45 (20% SOP discount). STXPO is the most heavily geared with a substantial portfolio of vessels acquired at high pre-GFC prices. We expect losses for its dry bulk, container and tanker shipping divisions.
Our take
We remain Neutral on the shipping sector. Slower global growth seems to be exacerbating the fall in shipping rates, on top of the oversupply problems. The structural overcapacity could persist for several years and only companies with strong balance sheets will survive.
MISC Bhd
Neutral, TP: RM4.60 (30% SOP discount). MISCs exit from container shipping will eliminate a major source of losses, but will be partly negated by rising losses for its tanker/chemical divisions. The bright spot is its LNG business with Petronas.
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
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SHIPPING MONITOR
September 3, 2012
Figure 2: Sector Comparisons

Company Malaysian Bulk Carriers Pacific Basin Shipping Precious Shipping STX Pan Ocean Thoresen Thai China COSCO China Shipping Devt Sinotrans Shipping Sincere Navigation U-Ming Marine Dry bulk group China Shipping Container Neptune Orient Lines Orient Overseas Intl Ltd SITC International Evergreen Wan Hai Yang Ming AP Moller-Maersk Container group MISC Bhd Teekay Corp Frontline Tsakos Energy Overseas Shipholding Teekay Tankers Odfjell Stolt-Nielsen Teekay LNG Golar LNG Tanker group Kawasaki Kisen Kaisha Mitsui OSK Lines Nippon Yusen KK Hyundai Merchant Marine Diversified group Average (all) Bloomberg Ticker MBC MK 2343 HK PSL TB STX SP TTA TB 1919 HK 1138 HK 368 HK 2605 TT 2606 TT Recom. Neutral Neutral Underperform Underperform Not Rated Not Rated Not Rated Not Rated Not Rated Not Rated Price Target Price (local curr) (local curr) RM1.47 RM1.57 HK$3.23 HK$3.43 THB13.30 THB14.30 S$4.02 S$1.45 THB15.50 HK$2.90 HK$2.93 HK$1.55 TWD25.55 TWD45.00 Market Cap (US$ m) 471 807 441 663 351 5,625 1,926 798 486 1,292 Core P/E (x) CY2012 CY2013 59.4 44.8 49.8 31.3 219.7 53.6 na na na 31.9 na -93.5 na 18.0 10.4 9.2 7.9 9.1 19.7 22.2 na 19.5 37.1 23.5 10.1 7.6 25.5 32.8 na 8.4 6.0 26.4 na na na na 99.8 na 12.7 18.4 18.9 95.8 na na na na na 31.0 na na 9.0 6.1 11.6 13.3 16.2 7.7 6.5 14.7 132.0 na 77.5 na 30.5 33.1 8.9 17.1 13.1 21.8 24.0 51.9 12.7 73.6 26.1 10.5 3-year EPS CAGR (%) -7.7% -37.0% 12.6% na -0.1% na -31.7% -9.9% -17.7% -17.8% na na na 66.7% 17.4% na 45.3% na -6.1% 51.3% 52.4% na na na na na -35.5% 22.2% 17.7% 81.1% na -26.3% -28.3% -18.9% na -14.0% 52.0% P/BV (x) CY2012 CY2013 0.84 0.84 0.62 0.61 0.90 0.89 0.38 0.45 0.39 0.37 0.8 0.8 0.4 0.3 0.36 0.35 0.88 0.85 1.57 1.61 0.71 0.71 0.53 0.85 0.74 0.92 0.94 1.16 1.15 0.8 0.74 0.89 1.67 0.80 0.35 0.13 0.5 0.4 0.73 2.5 3.88 1.16 0.39 0.37 0.51 2.86 0.58 0.77 0.54 0.89 0.69 0.83 0.87 1.12 1.03 0.7 0.69 0.86 1.70 4.56 0.34 0.15 0.5 0.4 0.71 2.8 3.42 1.19 0.34 0.35 0.44 2.70 0.53 0.73 Recurring ROE (%) CY2012 CY2013 CY2014 1.4% 1.9% 3.6% 1.2% 2.0% 3.5% 0.4% 1.7% 4.4% -18.4% -15.0% -12.2% -4.1% 1.2% 1.9% -6.8% 3.2% 9.0% 1.4% 4.1% 4.2% 3.5% 3.8% 4.0% 12.2% 9.5% 6.0% 7.4% 7.2% 5.7% -3.1% 1.9% 4.5% 1.4% 3.7% 7.5% 12.5% 3.6% 3.5% -4.4% 10.8% 8.7% 3.3% -3.6% -13.2% -3.2% -11.4% 0.6% -4.4% 5.7% 14.1% 21.4% 1.2% -18.0% -4.6% -11.9% -15.5% -10.3% 1.8% -2.2% -5.0% 7.9% 14.2% 7.8% 8.6% 6.7% 9.3% 7.5% 5.9% 1.3% -27.8% 0.4% -6.2% 2.1% 3.0% 8.1% 15.2% 27.6% 5.4% 1.5% 0.7% 3.7% 3.8% 2.1% 5.3% 3.1% 16.3% 11.8% 14.8% 9.2% 10.9% 14.6% 10.7% 10.6% 7.2% na -48.6% 4.4% -0.7% 8.6% 9.7% 10.8% 18.7% 39.8% 9.9% 5.1% 2.9% 5.9% 9.6% 4.9% 8.4% EV/EBITDA (x) Dividend Yield (%) CY2012 CY2013 CY2012 CY2013 16.9 15.6 2.0% 2.0% 8.0 7.3 1.0% 1.6% 13.1 11.1 1.7% 0.8% na 1139.2 1.3% 1.3% 7.5 6.2 2.2% 2.4% na 18.1 0.0% 0.5% 30.3 17.2 0.8% 2.4% -1.5 -1.8 2.5% 2.5% 5.3 5.1 5.6% 5.1% 13.4 15.8 5.1% 3.0% 46.1 16.8 1.2% 1.1% 10.5 8.4 5.4 3.6 11.5 6.2 14.7 3.2 4.0 33.3 9.5 10.4 13.2 23.2 12.3 10.8 8.3 15.2 13.0 13.4 85.9 16.6 13.6 34.7 19.7 8.0 18.7 13.6 5.4 2.4 8.2 4.2 9.0 3.0 3.9 25.4 8.9 10.2 10.0 12.5 8.8 7.7 6.6 14.6 11.8 11.4 6.8 10.0 8.2 16.8 9.3 6.6 0.0% 0.8% 2.5% 4.6% 0.7% 0.8% 0.0% 0.0% 0.4% 2.3% 4.3% 0.0% 9.4% 0.0% 11.3% 1.9% 5.4% 6.8% 3.8% 4.4% 0.0% 2.1% 2.2% 0.0% 1.2% 1.3% 0.0% 0.0% 2.8% 5.7% 1.3% 1.3% 1.2% 0.0% 0.5% 2.4% 4.3% 0.0% 10.4% 0.0% 14.2% 2.1% 6.0% 7.0% 4.4% 4.7% 1.6% 1.8% 2.4% 1.8% 2.0% 1.5%
2866 HK NOL SP 316 HK 1308 HK 2603 TT 2615 TT 2609 TT MAERSKA DC
Neutral Neutral Outperform Outperform Not Rated Not Rated Not Rated Not Rated
HK$1.46 S$1.10 HK$41.85 HK$1.90 TWD16.50 TWD15.65 TWD12.20 DKK37,200
HK$1.67 S$1.30 HK$51.20 HK$2.35 -
3,333 2,268 3,377 633 1,918 1,161 1,150 28,288
MISC MK TK US FRO US TNP US OSG US TNK US ODF NO SNI NO TGP US GLNG US
Neutral Not Rated Not Rated Not Rated Not Rated Not Rated Not Rated Not Rated Not Rated Not Rated
RM4.26 US$29.58 US$3.13 US$5.38 US$6.01 US$3.99 Nok26.00 Nok108.50 US$39.72 US$39.12
RM4.60 -
6,096 2,125 244 302 186 316 383 1,197 2,869 3,141
9107 JP 9104 JP 9101 JP 011200 KS
Not Not Not Not
Rated Rated Rated Rated
100 192 157 Won27,500
1,200 2,958 3,410 3,484
SOURCES: CIMB, COMPANY REPORTS
Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends
SHIPPING MONITOR
September 3, 2012
Share price performance

Figure 3: Share price performance
Bloomberg ticker Diversified group Mitsui OSK Lines Nippon Yusen KK Kawasaki Kisen Kaisha Hyundai Merchant Marine Tanker group MISC Teekay Corp Frontline Tsakos Energy Overseas Shipholding Teekay Tankers Berlian Laju Tanker Odfjell Stolt-Nielsen Eitzen Chemical Teekay LNG Golar LNG Teekay Offshore Dry bulk group STX Pan Ocean Pacific Basin Thoresen Thai Precious Shipping Malaysian Bulk China COSCO China Shipping Devt Sinotrans Shipping Sincere Navigation U-Ming Marine Container group NOL OOIL CSCL Evergreen Wan Hai Yang Ming Hanjin Shipping AP Moller-Maersk Shipbuilding group Cosco Corp Yangzijiang Daewoo Shipbuilding Hanjin Heavy Industries Hyundai Mipo Dockyard Kawasaki Heavy Industries Mitsubishi Heavy Industries Keppel Corp SembCorp Marine Shipowners group Rickmers Maritime Trust Pacific Shipping Trust First Ship Lease Trust Danaos Corp Seaspan Corp 9104 JP 9101 JP 9107 JP 011200 KS 31-Aug-12 24-Aug-12 WoW chg % 207 169 107 Won28,250 -5.3% -6.5% -1.9% -3.0% 1-Aug-12 1-mth chg % 229 169 115 Won25,300 -14.4% -6.5% -8.7% 8.3% 1-Mar-12 6-mth chg % 364 237 171 Won31,300 -46.2% -33.3% -38.6% -12.5% 1-Sep-11 1-year chg % 322 228 197 Won27,000 -39.1% -30.7% -46.7% 1.5%
196 158 105 Won27,400
MISC MK TK US FRO US TNP US OSG US TNK US BLTA IJ ODF NO SNI NO ECHEM NO TGP US GLNG US TOO US
RM4.26 US$29.58 US$3.13 US$5.38 US$6.01 US$3.99 Rp196.00 Nok25.00 Nok107.00 Nok0.06 US$39.72 US$39.12 US$28.39
-3.2% -4.3% -20.4% -5.9% -8.0% -1.5% 0.0% 0.0% 0.0% -25.0% -2.9% -4.9% -1.6%
-4.9% -1.7% -14.0% 12.8% 4.5% 7.7% 0.0% -16.7% 1.9% 20.0% 0.3% 2.1% 1.0%
-23.9% 3.8% -42.7% -15.5% -33.7% -4.8% 0.0% -35.1% -15.3% -53.8% 2.8% -8.0% -0.7%
-37.9% 16.5% -56.1% -7.8% -64.6% -27.5% -21.6% -30.5% -8.4% -77.8% 27.6% 24.7% 14.4%
STX SP 2343 HK TTA TB PSL TB MBC MK 1919 HK 1138 HK 368 HK 2605 TT 2606 TT
S$4.02 HK$3.23 THB15.50 THB13.30 RM1.46 HK$2.94 HK$3.14 HK$1.57 TWD25.50 TWD45.00
-4.7% -6.6% -0.6% -5.0% -5.2% -10.6% -3.4% -6.0% -0.8% -1.0%
-14.5% -5.8% 1.3% -7.7% -8.8% -10.9% -6.3% -4.8% 0.0% -3.5%
-54.7% -19.1% -22.5% -16.4% -14.5% -42.1% -43.6% -23.5% -10.0% -6.3%
-54.9% -15.1% -19.7% -21.3% -21.7% -32.6% -43.4% -20.4% -9.1% 1.5%
NOL SP 316 HK 2866 HK 2603 TT 2615 TT 2609 TT 000700 KS MAERSKA DC
S$1.09 HK$41.40 HK$1.48 TWD16.00 TWD15.20 TWD11.95 Won6,180 DKK36,620
-4.8% -9.3% -19.6% -4.8% -7.9% -6.6% 2.0% -4.2%
-6.0% -5.6% -24.5% -5.9% 0.3% -5.2% 16.2% -6.8%
-21.9% -23.8% -43.5% -25.2% -12.9% -33.2% -31.7% -15.5%
-3.5% 9.1% -19.6% -2.1% -5.6% -11.4% -44.8% 8.4%
COS SP S$0.97 S$1.00 YZJ SP S$0.99 S$1.01 042660 KS Won24,350 Won26,000 097230 KS Won12,050 Won13,200 010620 KS Won122,500 Won129,000 7012 JP 166 177 7011 JP 324 335 KEP SP S$11.19 S$11.39 SMM SP S$5.00 S$5.03
-2.5% -2.5% -6.3% -8.7% -5.0% -6.2% -3.3% -1.8% -0.6%
S$0.97 S$1.00 Won25,500 Won12,200 Won118,500 184 321 S$11.25 S$4.86
0.5% -1.0% -4.5% -1.2% 3.4% -9.8% 0.9% -0.5% 2.8%
S$1.14 S$1.25 Won35,950 Won21,000 Won156,000 241 377 S$10.61 S$5.10
-14.7% -21.3% -32.3% -42.6% -21.5% -31.1% -14.1% 5.5% -2.0%
S$1.05 S$1.06 Won28,416 Won22,650 Won133,112 230 321 S$8.81 S$3.81
-8.0% -7.2% -14.3% -46.8% -8.0% -27.8% 0.9% 27.0% 31.3%
RMT SP PST SP FSLT SP DAC US SSW US
S$0.32 US$0.42 S$0.12 US$3.65 US$15.87
S$0.32 US$0.42 S$0.14 US$4.09 US$16.00
-1.6% 0.0% -11.6% -10.8% -0.8%
S$0.31 US$0.42 S$0.15 US$4.06 US$15.34
0.8% 0.0% -18.7% -10.1% 3.4%
S$0.29 US$0.42 S$0.20 US$4.30 US$17.95
10.0% 0.0% -38.6% -15.1% -11.6%
S$0.32 US$0.34 S$0.28 US$3.86 US$12.98
-1.0% 23.9% -55.7% -5.4% 22.2%
SOURCES: CIMB, BLOOMBERG
SHIPPING MONITOR
September 3, 2012
Figure 4: Share price performance
Hanjin Shipping Pacific Shipping Trust Stolt-Nielsen Odfjell Berlian Laju Tanker SembCorp Marine Thoresen Thai Sincere Navigation Seaspan Corp U-Ming Marine Teekay Tankers Rickmers Maritime Trust Teekay Offshore Keppel Corp Kawasaki Kisen Kaisha Yangzijiang Cosco Corp Teekay LNG Hyundai Merchant Marine MISC Mitsubishi Heavy Industries China Shipping Devt AP Moller-Maersk Teekay Corp STX Pan Ocean Evergreen NOL Golar LNG Precious Shipping Hyundai Mipo Dockyard Malaysian Bulk Mitsui OSK Lines Tsakos Energy Sinotrans Shipping Kawasaki Heavy Industries Daewoo Shipbuilding Nippon Yusen KK Yang Ming Pacific Basin Wan Hai Overseas Shipholding Hanjin Heavy Industries OOIL China COSCO Danaos Corp First Ship Lease Trust CSCL Frontline Eitzen Chemical -28% -26% -24% -22% -20% -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4%
SHIPPING MONITOR
September 3, 2012
Container shipping
SCFI rates from Asia to North Europe fell another 7.7% wow or US$110/teu, falling a combined US$404/teu since the 1 August rate hike. Rates have now returned back to levels just after the 1 March hike. The recent sharp fall is likely due to additional capacity deployed on the Asia-Europe (AE) trade lane as Evergreen and Hanjin Shipping started a new 9-ship loop since mid-August, with an average weekly capacity of about 9,160 teus. Unfortunately, although the CKYH alliance had announced the suspension of one of their five AE loops, the removal of approximately 8,000 teus in weekly capacity will only be implemented from mid-October onwards. Similarly, the G6 Alliance will suspend Loop 3 temporarily, with its last sailing from Shanghai on 6 October. This leaves a two-month gap between the Evergreen/Hanjin capacity addition and the CKYH/G6 capacity deletion. Despite the current "peak shipping season", rates have faltered over the past two weeks and we could see rates stay under pressure until at least mid-October. More service suspensions need to happen before AE rates can stabilise, as the winter lull is coming quickly. Alphaliner estimates that at least five more AE loops (to North Europe and the Mediterranean) will have to withdrawn to bring slot utilisation rates to viable levels. Over the past few months, slot utilisation for Asia-North Europe (A/NE) has hovered at 80-85% only. Nevertheless, the transpacific (TP) trade seems to be holding up better, although rates to the US West Coast (USWC) declined 3.2% wow or US$83/feu. Higher slot utilisation was probably the key, averaging about 90% over the past several months. It was reported that ports along the US East Coast and Gulf of Mexico could face a possible shutdown on 1 October due to the deadlock in negotiations between port employers and the unions. With no sign that the matter will be resolved anytime soon, carriers serving these regions could experience disruption to their services that could affect their financial performance. During last weeks analysts briefing, CSCL said that its clients were making inquiries about possible contingency plans, but were not yet pressing the panic button. CSCL does not believe that the disruption, if it happens, will drag out over an extended period.
Figure 5: Container freight rates
Last week 31-Aug-12 Overall indices Composite CCFI Index Comprehensive SCFI Index Asia-Europe SCFI: North Europe (US$/TEU) SCFI: Mediterranean (US$/TEU) CCFI: North Europe CCFI: Mediterranean Transpacific SCFI: West Coast USA (US$/FEU) SCFI: East Coast USA (US$/FEU) CCFI: West Coast USA CCFI: East Coast USA North-South trades (US$/TEU) SCFI: Australia SCFI: East Coast South Am. SCFI: South Africa Intra-Asia (US$/TEU) SCFI: Middle East SCFI: East Japan SCFI: Singapore SCFI: Hong Kong SCFI: Pusan, Korea SCFI: Kaohsiung, Taiwan 1,242 1,294 24-Aug-12 1,257 1,334 WoW (%) -1.2% -2.9% Qtr-to-date 3Q12 1,282 1,353 2Q12 1,283 1,434 1Q12 972 1,071 4Q11 930 904 Yr-to-date 2012 1,168 1,278 2011 993 1,008 2010 1,132 1,373
1,324 1,371 1,707 1,766
1,434 1,426 1,781 1,817
-7.7% -3.9% -4.1% -2.8%
1,617 1,587 1,815 1,909
1,741 1,833 1,790 1,953
1,010 1,034 1,072 1,186
594 794 962 1,176
1,438 1,473 1,530 1,657
875 969 1,174 1,294
1,784 1,736 1,731 1,822
2,485 3,741 1,133 1,329
2,568 3,855 1,116 1,328
-3.2% -3.0% +1.5% +0.1%
2,554 3,785 1,116 1,331
2,429 3,580 1,041 1,280
1,850 2,998 925 1,131
1,484 2,733 862 1,116
2,246 3,416 1,018 1,238
1,664 3,010 939 1,172
2,335 3,536 1,060 1,279
973 1,881 1,013
766 1,891 990
+27.0% -0.5% +2.3%
835 1,941 1,030
934 1,666 1,119
836 1,468 1,028
752 1,440 1,052
872 1,663 1,062
769 1,490 992
1,165 2,216 1,474
1,115 347 262 125 187 229
1,221 343 258 125 187 232
-8.7% 1.2% 1.6% +0.0% +0.0% -1.3%
989 343 263 126 189 242
1,434 351 271 139 167 263
843 334 231 153 170 263
707 333 227 158 194 193
1,100 343 254 141 174 257
837 338 211 155 199 195
933 316 318 119 191 257
SOURCES: CIMB, SHANGHAI SHIPPING EXCHANGE
SHIPPING MONITOR
September 3, 2012
Figure 6: SCFI: Shanghai-USWC (US$/feu)

100% 80% 60% 2,000 40% Yoy (%) - LHS SCFI: Shanghai-USWC (US$/feu) 2,500 3,000
Figure 7: SCFI: Shanghai-USEC (US$/feu)

40%
Title: Source:
Yoy (%) - LHS SCFI: Shanghai-USEC (US$/feu)
4,500 4,000
30%
Please fill in the values above to have them entered in your report
3,500 3,000
20%
10% 20% 0% -20% 500 -40% -60% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 0 -20% 1,500 0% 1,000 -10%
2,500 2,000 1,500 1,000 500 0 JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12
-30%
SOURCES: SHANGHAI SHIPPING EXCHANGE
Figure 8: SCFI: Shanghai-North Europe (US$/teu)

150% Yoy (%) - LHS SCFI: Shanghai-North Europe (US$/teu) 2,500
Figure 9: SCFI: Shanghai-Mediterranean (US$/teu)

140% 120% 2,000 100% 80%
Title: Source: Yoy (%) - LHS
2,500
SCFI: Shanghai-Mediterranean (US$/teu)
100%
Please fill in the values above to have them entered in your report 2,000
50%
1,500
60% 40%
1,500
0%
1,000
20% 0%
1,000
-50%
500
-20% -40%
500
-100% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12
-60% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12
Figure 10: SCFI: Shanghai-East Japan (US$/teu)

25% 20% 15% 10% 250 5% 200 0% -5% -10% -15% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 150 100 50 0 Yoy (%) - LHS SCFI: Shanghai-East Japan (US$/teu) 450 400 350 300
Figure 11: SCFI: Shanghai-South Korea (US$/teu)

40% 30% Yoy Title: (%) - LHS SCFI: Shanghai-South Korea (US$/teu) Source: 250
Please fill in the values above to have them entered 200your report in
20% 10% 0% -10% -20% 50 -30% -40% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 0 100 150
SHIPPING MONITOR
September 3, 2012
Figure 12: SCFI: Shanghai-Southeast Asia (US$/teu)

60% Yoy (%) - LHS SCFI: Shanghai-Southeast Asia (US$/teu) 500 450 40% 400 350 300 0% 250 200 -20% 150 100 50 -60% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 0
Figure 13: SCFI: Shanghai-ANZ (US$/teu)

60%
Title:
Yoy (%) - LHS Source: SCFI: Shanghai-ANZ (US$/teu)
1,800 1,600 1,400 1,200 1,000
40%
20%
20%
0% 800 -20% 600 400 -40% 200 -60% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 0
-40%
Figure 14: SCFI: Shanghai-Mid East (US$/teu)

120% 100% 80% 60% 1,000 40% 800 20% 0% -20% -40% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 600 400 Yoy (%) - LHS SCFI: Shanghai-Mid East (US$/teu) 1,800 1,600 1,400 1,200
Figure 15: SCFI: Shanghai-South Africa (US$/teu)

50% 40% 30% 20% 10% 0% -10% -20% -30% 400 -40% 200 0 -50% -60% JF M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A 10 11 12 200 0 1,200 1,000 800 600
Title: Yoy Source: (%) - LHS

SCFI: Shanghai-South Africa (US$/teu)
1,800 1,600 1,400
Figure 16: Slot utilisation rate on transpacific (%)

Slot utilisation rate on transpacific (%) 100% 95% 90% 85% 80% 75% 70% 65% 60% S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F M A M J J A 08 09 10 11 12 4 per. Mov. Avg. (Slot utilisation rate on transpacific (%))
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September 3, 2012
Figure 17: Slot utilisation rate on Asia-North Europe (%)

100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F M A M J J A 08 09 10 11 12 Slot utilisation rate on Asia-North Europe (%) 4 per. Mov. Avg. (Slot utilisation rate on Asia-North Europe (%))
Figure 18: Idle capacity

1,600,000 Idle capacity (nominal teu) 1,400,000 1,200,000 1,000,000 8.0% 800,000 6.0% 600,000 400,000 200,000 0 J 09 F M A M J J A S O N D J 10 F M A M J J A S O N D J F M A 11 M J J A S O N D J F 12 M A M J J A 4.0% Idle capacity as a % of fleet - RHS 12.0% 14.0%
10.0%
2.0%
0.0%
SOURCES: ALPHALINER
Figure 19: Progression of China-North Europe SCFI spot rates (up to 24 Aug)
1,600 385 1,400 62 1,200 1,000 800 600 701 400 200 194 0 Late-Dec 2011 1 Mar 2012 1 Apr 2012 1 May 2012 1 Jul 2012 1 Aug 2012 19 399 41 226 339 404 61 221
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Figure 20: Progression of China-US West Coast SCFI spot rates (up to 20 July)
1,800 371 1,600 1,400 1,200 387 1,000 800 600 400 200 0 Late-Dec 2011 15 Mar 2012 15 Apr 2012 10 Jun 2012 1 Aug 2012 389 60 597 7 90 414 414 297
Container lines will need to pull a further 75,000 teu from their schedules during the Chinese holidays in October to avoid a collapse in freight rates. As lines ponder blanking off sailings due to the weak high season, SeaIntel has said announced reductions are going to be nowhere near enough. An analysis of 2011 and 2012 in the run up to the Chinese October holiday period has shown that the lines have yet to pull as much out of service as they did in 2011, says SeaIntel chief executive Lars Jensen. Our forecast is that carriers can not live with this many blanked off sailings, Mr Jensen told Lloyds List. He said lines would be forced to announce further cuts in sailings, and is advising shippers to double check schedules with lines. Failing to pull enough slots from the Asia-Europe trade could result in rates falling. If they do, it may be impossible for lines push rates up again once the holiday period is over, Mr Jensen said. (Lloyd's List) The G6 Alliance and Maersk will suspend a number of Asia-Europe services during Chinas national Golden week holidays in October, although one analyst claimed bearish demand could also be a factor in the service reductions. With demand so weak in Asia-Europe, lines are using this as an excuse to start their winter service program early, the analyst added. Four sailings from Asia will be suspended by the G6 Alliance on the Asia-Europe lane from October 3-13. Maersk Line will drop five Asia-Europe sailings from October 1-14. The services affected are its AE5, AE6, AE7 and AE9 loops. (JOC) The G6 Alliance of containership companies has temporarily suspended one of their Asia-Europe loops (Loop 3) due to forecasted lack of improvements in the trades. The last sailing for the service will be OOCL Hamburg departing from Shanghai on October 6. After the suspension, all the ports in the loop will be covered by other G6 services, the group said. The market environment will be closely monitored for the resumption of the Loop 3 service accordingly, the group said in joint press releases from each of its members, which include APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK and OOCL. (Lloyds List) Container volume through North European ports will remain sluggish this year as the continents economy struggles, Hackett Associates and the
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Bremen-based Institute of Shipping Economics said in their Port Tracker report. Containerized imports from European ports are projected to decline more than 2% this year, compared with a 3.8% increase last year. Exports are expected to rise 2.4% this year, compared with an increase of nearly 11% last year, the report said. The European economic data makes for depressing reading. A no-growth GDP in 2Q in Germany is interpreted as a major achievement. Austerity remains the policy, said economist Ben Hackett. He said virtually any economic gauge points to an economic downturn that will cause the eurozone to follow the U.K., Spain, Portugal and others into recession. Hackett and Michael Tasto of ISL said weak cargo volumes would affect terminals and pressure carriers to reduce rates. Hackett noted that carriers already are dropping voyages during what normally is the peak season. Carriers cannot expect to squeeze more out of slow-steaming. Hackett said carriers are likely to resume price-cutting, and that 2010 may turn out to be the carriers only profitable year in five years. They profess to avoid a price war this time around, but we doubt that the habit of a lifetime can be avoided, he said. (JOC) Sren Skou, head of the container-shipping Maersk said the Chinese market is facing fundamental changes. "It's pretty clear China is losing competitiveness in a number of industries. Maersk's customers who ship shoes, toys and other labor-intensive goods are increasingly located in countries like Vietnam and Bangladesh," he said. Weak European demand and other global economic concerns have crimped growth in China's port volumes this year, leading shipping companies to idle vessels. Looking at the key August period for shipping, Mr. Skou said his customers appear to be positioning for satisfactory holiday spending in the USbut not Europe. Mr. Skou joins others who say the slowdown also reflects how rising costs in China make it a less-competitive manufacturing base. They point to factors such as China's labor costs. Wage income for urban households rose 13% year-to-year in the first half, and average monthly income for migrant workers rose 14.9%, according to Chinese government data. Chinese industry is also attempting to move up the value chain to export more complex and more profitable products, which if successful would blunt the loss of labor-intensive industries such as apparel. Maersk is already seeing growth in exports from China of more sophisticated goods such as electronics, electrical goods and solar panels. As Chinese auto makers ramp up their international expansion, there was export growth potential for auto components. The chemical, pharmaceutical and aviation industries hold promise. Concerning the immediate slowdown, Mr. Skou said his confidence in global trade has deteriorated since June, mostly due to recessionary conditions in Europe, but he said volumes world-wide are likely to expand 4% for the full year compared with 2011, compared with about 7% last year. Other shipping companies concur. (WSJ) Ports up and down the Eastern and Gulf of Mexico coasts of the United States face a possible shutdown on Oct 1 as a result of a deadlock in negotiations between port employers and the main union, the International Longshoremen's Association (ILA). A shutdown would cripple ports including Houston, Savannah, Baltimore, New York and Boston and idle more than 14,000 longshoremen. The Retail Industry Leaders Association's president, Sandy Kennedy, said that it would force retailers to "redirect their supply chains during the crucial period before the holiday shopping season" and "seriously impede the flow of commerce".
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Negotiations between the ILA and the US Maritime Alliance (USMX) broke down last week and there are no plans for them to resume, according to people involved in the talks. The longshoremen's union is seeking to protect jobs threatened by automation. The maritime alliance, a collection of employers at 14 ports and 24 ocean carriers, is seeking to end or phase out work rules put in place a half-century ago that it said are making it hard for their ports to compete with West Coast ports, Canadian ports and railroads. (BT) Containership orders as a percentage of current fleet are expected to fall to 20% by year-end 2012 and 16% by December next year, according to the latest Macro Report. At one stage, the orderbook stood at 60% of the fleet, and is now around 22%, according to Clarksons Independent container shipping analyst Philippe Hoehlinger says that systemic oversupply remains in the box sector, but the trend is expected to remain favourable from now to the end of 2013, with some bumps in the road. Mr Hoehlinger said that container vessel capacity largely offset the demand side slowdown, with vessel layups and a relatively high pace of demolition combining to compensate for capacity delivery that was slightly above expectations. It is very difficult to say if that situation will continue in the near future. The figures indicate that effective supply growth should slow to 5.8% in 2012 and 8.3% in 2013. On the key Asia-Europe box trades, Mr Hoehlinger predicts that the market situation is expected to change dramatically early in 2013. Contract maturities are more flexible on the Europe-Asia trades than on the transpacific trades. This gives both sides greater scope to renegotiate terms throughout the year. He believes that the underlying supply/demand situation on Asia-Europe remains largely favourable in the third quarter of 2012 and relatively balanced in the final quarter of this year, should carrier efforts to reduce excess capacity continue. Freight rates are expected to decline but remain at high levels on the trade. (Lloyd's List) Zims newbuilding programme remains on hold as the Israeli line waits to see how market conditions unfold in the face of renewed uncertainty for the container trades. Zim has 13 ships on order, of which nine 12,600 teu ships are to be built by Samsung Heavy Industries. Hyundai Heavy Industries is due to complete an order for another four 10,000 teu vessels. Delivery times have already been postponed from the dates specified when contracts were signed and 2015 is now the provisional year of completion. However, Lloyds List understands the delivery schedule remains flexible, with further delays possible if cargo markets and ship finance availability remain subdued. Zim placed its order for 12,600 teu vessels in September 2007, with deliveries originally due in 2012. The price agreed then was US$170m apiece, but the same ships would cost nearer US$115m today. (Lloyd's List) OOCL said it is delaying the delivery date of the remaining six container ships out of eight with capacities of 8,888 teu units that it ordered from Hudong-Zhonghua Shipbuilding in Shanghai in October 2007. The Hong Kong-based shipping line said that delivery of the six vessels has been revised from the fourth quarter of 2013 to the fourth quarter of 2014, with all the other terms of the shipbuilding contracts remaining unchanged. (JOC) Maersk Line is considering whether to extend the Daily Maersk concept to other routes. No final decision has been taken yet, as Maersk is still analysing
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performance data that will be published to coincide with the initial 12 months of the service. But anecdotal evidence suggests the concept had proved very successful, said Maersk Line chief executive Sren Skou. We are extremely happy with the way it is working, with more than 97% on-time delivery in the Daily Maersk corridor, he told Lloyds List. It has gone better than probably anyone had expected. Maersk has actively promoted daily cut-off times and offered a branded product. Drewry has also ranked Maersk Line number one for global on-time delivery every quarter for the past year. In its latest survey, Maersk had an on-time delivery score of 91%. Reduced ship speeds have helped Maersk to achieve greater punctuality, said Mr Skou, building more buffer time into the schedule to compensate for unexpected delays. Slow steaming is making the network more reliable, he said. Most customers willingly accept slightly longer voyage transits in exchange for guaranteed door-to-door arrival times. (Lloyd's List) Tramp owners are reacting to the dire outlook for many vessels on the charter market by sending ships to the scrapyard or selling vessels for secondhand trading. The number of ships sold for demolition is increasing dramatically; this is in particular true for German-owned ships, a boxship broker said. Actitivity on the charter market continued to remain slow, although some brokers noticed a slight pick-up in inquiries compared to recent weeks. In the post-panamax segment, Mediterranean Shipping Co secured two 6,000 teu vessels at lower rates. MSC took K-Line s 2010-built, 6,350 teu San Diego Bridge for a period of six to eight months at US$22,500 per day. In addition, it has signed a 6,200 teu relet from Maersk Line for six months at a rate of US$21,000 per day. (Lloyd's List)
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Dry bulk shipping

Average capesize rates increased 13% wow, but coming from such a low base, this adds only a couple of hundred dollars daily to shipowners. Earnings at US$3,300/day is less than half the estimated US$7,500/day operating costs to run a capesize vessel. Rates improved because the Australian miners had to hire additional vessels as typhoons caused slight delays and also on speculation that Chinese steel mills could restock iron ore as prices have fallen below US$100/ton. The panamax market continues to remain lacklustre due to the lack of cargo flows which resulted in rates weakening further, and current earnings falling below cash break-even costs. Supramax and handysize rates seemed to have bottomed, after declining steadily over the past several weeks. Nevertheless, rates could remain range-bound due to the lack of demand drivers. Severe drought has curbed grain exports while the Indian iron ore market remained quiet due to the monsoon season and oversupply of ships. Indonesia's export restrictions are also limiting cargoes for exports, although activity has picked up and there are signs that trade could improve further in the coming months. However, the Indonesian government's plan to impose regulatory constraints over thermal coal exports could derail any possibility of rates recovery for the smaller vessels like supramax. Lloyd's List reported that taxes imposed will make rival exporters more competitive and countries like China and India could instead source coal from further away, benefiting the capesizes and panamaxes. While Indonesia has enacted a 20% tax on exports of unprocessed minerals, it excluded coal but is contemplating other measures to control coal exports.
Figure 21: Dry bulk freight rates

Last week Qtr-to-date 31-Aug-12 24-Aug-12 WoW (%) 3Q12 2Q12 703 717 -2.0% 898 1,019 1,172 1,124 +4.3% 1,230 1,422 735 828 -11.2% 963 1,197 857 853 +0.5% 1,045 1,067 459 474 -3.2% 584 614 3,308 14,455 -4,935 2,865 4,850 -4,362 5,840 4,726 -1,152 8,960 6,672 2,927 13,102 -5,316 522 4,766 -4,730 6,586 5,939 -1,177 8,918 6,858 +13.0% +10.3% -7.2% +448.9% +1.8% -7.8% -11.3% -20.4% -2.1% +0.5% -2.7% 4,585 16,385 -3,542 3,522 6,378 -98 7,624 6,525 -1,628 10,776 8,334 6,016 20,700 -1,075 4,972 12,431 1,053 9,530 8,632 -1,372 11,247 9,219 1Q12 881 1,618 1,010 833 465 6,554 19,998 -845 4,266 9,176 2,791 7,913 6,453 -1,772 8,658 6,958 4Q11 1,914 3,305 1,823 1,389 690 28,553 46,176 30,392 29,184 26,601 25,493 14,555 12,949 1,737 14,397 9,788 Yr-to-date 2012 937 1,443 1,067 976 551 5,848 19,330 -1,624 4,337 9,666 1,402 8,439 7,281 -1,586 10,165 8,152 2011 1,550 2,247 1,743 1,375 717 15,836 29,572 12,746 14,808 15,588 10,963 13,940 11,951 2,766 14,351 10,505 2010 2,753 3,473 3,108 2,145 1,124 32,875 47,932 32,667 29,611 28,070 26,584 24,858 23,686 13,330 22,359 16,384
Baltic Baltic Baltic Baltic Baltic
Dry Index Capesize Index Panamax Index Supramax Index Handysize Index
Capesize average TCE (US$/day) Iron ore Tubarao-Beilun, 165k dwt Tubarao-Rotterdam, 165k dwt Western Australia-Beilun, 165k dwt Goa-Beilun, 145k dwt Coal Queensland-Japan, 145k dwt Panamax average TCE (US$/day) Coal Newcastle-Japan, 70k dwt Richards Bay-Rotterdam, 70k dwt Supramax average TCE (US$/day) Handysize average TCE (US$/day) Capesize spot rates (US$/tonne) Iron ore Tubarao-Beilun, 165k dwt Tubarao-Rotterdam, 165k dwt Western Australia-Beilun, 165k dwt Goa-Beilun, 145k dwt Coal Queensland-Japan, 150k dwt Panamax spot rates (US$/tonne) Coal Newcastle-Japan, 70k dwt Richards Bay-Rotterdam, 70k dwt
17.50 7.30 7.00 8.40 7.25 13.50 12.50
17.15 7.30 6.60 8.40 7.15 14.10 12.60
+2.0% +0.0% +6.1% +0.0% +1.4% -4.3% -0.8%
17.75 7.34 6.89 8.59 7.88 14.04 11.69
19.56 8.10 7.35 10.64 8.34 15.48 12.25
20.41 8.87 7.78 10.27 9.35 15.76 13.17
28.69 15.09 11.93 15.05 13.62 17.90 14.33
19.41 8.19 7.39 9.97 8.59 15.21 12.45
22.53 11.15 9.06 11.49 10.38 17.12 14.62
26.19 13.66 10.35 13.69 11.87 20.68 17.72
SOURCES: CIMB, CLARKSON RESEARCH SERVICES
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Figure 22: Baltic capesize and panamax TCE/day (US$/day)

80,000 Baltic Capesize TCE/day 70,000 60,000 Baltic Panamax TCE/day
Figure 23: Baltic supramax and handysize TCE/day (US$/day)

30,000
Title: Source:
Baltic Supramax TCE/day Baltic Handysize TCE/day
25,000
20,000 50,000 40,000 30,000 10,000 20,000 5,000 10,000 0 J F MA M J J A SO NDJ F MA M J J A SO ND J F MA MJ J A S OND J FM A M J J A 09 10 11 12 0 J FMA MJ J A S O ND J F MA M J J A SO ND J F MA M J J A S O N D J FMA M J J A 09 10 11 12 15,000
Figure 24: Bulk vessel profit/loss (US$/day)

Ship type Current TCE Operating cost Cash earnings Interest cost Depreciation cost Daily profit/(loss) Breakeven TCE Capesize 3,308 -7,500 -4,192 -3,605 -4,636 -12,433 15,741 Panamax 5,840 -6,500 -660 -2,148 -2,762 -5,570 11,410 Handymax 8,960 -6,000 2,960 -1,956 -2,515 -1,511 10,471 Handysize 6,672 -5,000 1,672 -1,726 -2,219 -2,273 8,945
SOURCES: CIMB, MOORE STEPHENS, CLARKSON RESEARCH SERVICES
With a handful of supramaxes located in Africa and India remaining idle this week, most supramax bulk carrier markets worldwide bottomed out after falling ceaselessly for a month and a half. In the Atlantic basin, there was even some cautious talk of improvement in some regions, particularly South America. Activity in the basin increased, as charterers tried to fix ships before a substantial upswing materialised. In the US Gulf, in spite of reasonably strong demand for pet coke cargoes out of the US and coal out of Colombia, rates levelled off with brokers calling the market tricky. Charter earnings on trips bound to Asia remained low. European rates remained stable again this week, but brokers said more cargo demand was required for any sustained upward movement to materialise. However, with the harvest in the Black Sea states looking particularly poor, little is expected on the grains front. In the Pacific rates also bottomed out this week, but brokers were not at all certain the market was set for a rebound any time soon, with some describing the trade as lacking direction. Even though some of the ships idled last week had been able to pick up spot cargoes, rates out of India continued to trend downward slightly. Brokers reported a slight improvement in coal trades out of Indonesia this week, a trade that had fallen quiet recently. (Lloyd's List) Twin typhoons Bolaven and Tembin are wreaking havoc along the north Asia coastline, making life difficult for inhabitants and businesses in the region, including the capesize market. The storms caused the spot rates for the largest bulk carriers to stir at long last, rising and falling several times over
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the past week, but overall they look to be heading down again in the week ahead. Ships unable to unload or otherwise waiting out the storms in North China have missed scheduled dates, opening opportunities for owners with tonnage in position for prompt loading dates in Australia. The flurry of activity affected the Western Australia to China route, but left other routes in the Pacific and from South Africa to China unchanged. A significant oversupply of vessels in the Atlantic is helping to keep a lid on rates. (Lloyd's List) Indonesian governments plan to impose regulatory constraints over thermal coal exports remains uncertain. In early June, Indonesia announced that it was planning an export tax on coal exports to secure supply for domestic use. The government has imposed regulations aimed at gaining a higher share of state revenue from the mining industry, including cutting foreign ownership and placing a 20% tax on exports of unprocessed minerals. But the government held back from imposing similar restrictions on coal, which represented 13% of Indonesias total exports in 2011. Energy and minerals minister Jero Wacik said, Indonesias need for coal will increase strongly, so exports will need to be controlled." However, the minister gave no details of the scope of measures to curb coal exports, or to set a level for the proposed export tax. Interestingly, the parlous state of dry bulk market rates has added to Bumis and Adaros woes, because it has made rival exporters more competitive. In June, Chinese imports of thermal coal from South Africa and the US increased month on month, while imports from Indonesia fell. Meanwhile, Indonesias government continues to waffle on about the export tax. In late July, a government official told Platts, the energy publication, that Mr Wacik has already decided not to impose an export tax on coal. Estimates of the toll that a 20% tax would exact on Indonesias coal trade may have contributed to Mr Waciks about-turn. A new levy on exports may not be in the cards, but other controls certainly will be. Like India, Indonesia faces growing power demand and lagging supply. Indonesias government is under extreme pressure to ensure what has come to be called energy security. For shipping, a tapering off of Indonesian thermal coal exports wouldnt necessarily be a bad thing. China and India would have to source more coal from further away, even when freight rates eventually rebound. This could improve the eventual prospects for the two of the most beset dry bulk ship classes in the market; capesize and panamax vessels. These ships have more limited access to Indonesian coal ports than supramax and handysize vessels, but are highly competitive on trades from South Africa, Colombia and the US. (Lloyd's List) India's iron ore exports declined to 61.8m tonne in 2011-12, an estimated 36.7% fall. Compared to this, the country iron ore exports had touched 97.66m tonne in 2010-11. The fall in export volumes can be attributed to a government decision to raise export duty on iron ore from 20% ad valorem to 30% ad valorem on all grades of ore with effect from December 30, 2011. (Economic Times) Iron ore prices could bottom out soon, as levels drop to toward the average cost curve of Chinese mines, Jiao Yushu, a consultant for the China Metallurgical Mines Assn (MMAC) said. Prices of iron ore have fallen to US$95 per tonne, and the room to fall further is limited. Otherwise, many domestic mines will have to suspend production, Jiao said. The average domestic cost of iron ore was around US$98 per tonne in 2011, he added.
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Domestic iron ore miners need to cut production costs, so as to sustain production in the longer run. And of course, there are mines with lower costs in China as well, Jiao said. The MMAC has been lobbying the government for cuts in resource taxation, value-added tax and other additional charges the miners must bear. Jiao disagreed with the market estimate of 62% capacity utilisation at Chinese domestic mines, but said that the rate remains unclear.Chinas iron ore output this year will exceed the 1.3bn tonnes recorded in 2011, he said. (Metal Bulletin) International demand for seaborne iron ore will either remain unchanged or see a decline while supply continues to increase, Baosteel group's GM of raw material purchasing department Zhang Dianbo said. The supply of seaborne iron ore will increase by 50m tonnes in the second half of this year, he said. New iron ore capacities planned for the coming years include about 150m tpy from Brazil, 200m tpy from West Africa, 200m tpy from Australia, and 50m tpy from Canada, Zhang said. "Both global steel and iron ore markets are heading towards oversupply," he warned. (Metal Bulletin) Global iron ore demand could fall lower in the second half of 2012 than in the first six months, according to Baosteel head of purchasing Zhang Dianbo. The remainder of 2012 could bring a decrease in output as Chinese investment in infrastructure and industrial facilities continues to slow. Shipbroker Clarksons still predicts a 6% growth in global seaborne iron-ore trade this year. But that seems unlikely if Chinese steel output begins to contract, since the country accounts for approximately half the worlds steel imports. With iron ore demand waning and supply still undergoing a meteoric rise, the big question for shipowners is whether lower prices will drive Chinas relatively expensive domestic iron-ore mines underwater, forcing the country to import more cheaper ore from overseas. Most iron-ore traders thought the global iron ore price had a natural floor of US$100 per tonne, as below that level it would become impossible for Chinese domestic producers to meet demand in a cost-effective manner. However, the current market has proved them wrong, with the price of a tonne of imported iron ore in China falling below. Oddly, analysts say domestic iron ore in China continues to trade at a US$30 premium when taking other costs, including shipping, into account. Ironically, part of this spread stems from falling capesize rates. However, it raises the question why Chinas steel mills continue to buy locally, despite such a massive price disadvantage. Quicker delivery and better credit terms have been cited as reasons why steel mills prefer home-sourced raw materials to overseas imports. (Metal Bulletin) Of the 31 voyages carried out or under way by Vales 14-strong 400,000 dwt ore carrier fleet since the huge bulkers started to be delivered in 2011, a third have discharged in Oman and another third at the transhipment hub Vale created in the Philippines earlier this year. Despite not being able to berth and discharge at Chinese, the Brazilian iron ore major has managed to keep these huge vessels employed. In addition to Sohar and Oman, Vale is building a land-based transhipment hub in Malaysia. (Lloyd's List)
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Tanker shipping
VLCC rates were little changed from the previous week as excess tonnage continue to pressure rates and demand showing no signs of improvement. According to Weber, 70 September cargoes have already been covered with a further 40-50 remaining for the month. It is projecting that 73 VLCCs will be available, favouring the charterers as owners are unlikely to put up much resistance. Average suezmax rates stayed relatively flat, but rates on the West Africa-US trade route managed to inch up 6.6% wow. But overall, markets were stale and dull due to lack of cargoes and excess ships. Fearnleys is expecting rates to stagnate at low levels for some time. Aframax rates in the Caribbean improved 25% wow due to the uncertainty of vessel availability from Hurricane Isaac. However, the impact was minimal and rates could likely fall in the coming week. Over to the Mediterranean, rates fell due to excess tonnage with no disruptions from weather delays or strikes to help shipowners. Poten in its weekly reported painted a bleak outlook for the tanker market, expecting tankers to remain mired in low utilisation rates and weak earnings, unless the global economy rebounds. China which has seen growth slowed recently is a major concern as the country is a major source of tanker tonne-mile demand. European oil demand will also need to pick up strongly as many refiners are located in the region. Crude tanker utilisation is hovering near 80% with current earnings below cash operating expenses. At this low utilisation rate, a small improvement in demand is unlikely to make any meaningful positive impact to rates. Hence, we need to see a massive jump in demand to pull the tanker markets out of the doldrums. This seems unlikely as tanker supply continues to grow while tanker demand has been impacted negatively by weak global growth and rising domestic crude production in the US.
Figure 25: Tanker freight rates

Last week 31-Aug-12 627 581 7,273 3,356 -11,531 11,477 9,966 8,389 4,675 10,550 7,290 12,800 9,161 13,975 14,806 24-Aug-12 618 579 7,637 3,138 -12,185 10,754 10,044 9,998 4,385 10,052 5,833 12,687 10,381 13,723 8,705 WoW (%) +1.5% +0.3% -4.8% +6.9% -5.4% +6.7% -0.8% -16.1% +6.6% +5.0% +25.0% +0.9% -11.8% +1.8% +70.1% Qtr-to-date 3Q12 629 573 10,459 3,064 -8,938 15,497 14,100 16,123 8,462 12,652 8,904 11,328 13,964 16,434 12,748 2Q12 740 610 36,808 32,708 12,279 38,080 21,056 25,568 16,404 15,273 13,273 9,034 16,567 21,800 12,986 1Q12 814 688 36,114 31,916 3,959 42,176 25,113 32,305 20,329 15,180 15,672 7,941 15,430 19,334 14,130 4Q11 813 743 23,018 18,689 592 28,451 20,704 32,650 17,481 14,927 8,574 7,617 21,945 24,806 10,758 Yr-to-date 2012 738 629 29,775 24,791 3,733 33,794 20,774 25,641 15,820 14,564 13,041 9,218 15,475 19,504 13,350 2011 788 726 22,137 18,212 2,489 24,841 17,238 25,110 13,368 12,726 8,225 8,007 13,562 18,599 12,721 2010 898 731 42,638 41,615 20,944 43,466 29,593 36,301 26,217 18,155 17,032 14,652 19,820 24,220 15,711
Baltic Dirty Tanker Index Baltic Clean Tanker Index VLCC average TCE (US$/day) AG-FE Ras Tanura-Chiba AG-USG Ras Tanura-LOOP WA-USG Bonny-LOOP Suezmax average TCE (US$/day) MED-MED Sidi Kerir-Lavera WA-USAC Bonny-Philadelphia Aframax average TCE (US$/day) CARIB-USG Curacao-Texas SEA-FE Jakarta-Chiba MED-MED Sidi Kerir-Trieste UKC-UKC Sullum Voe-Wi'shaven AG-SEA Ras Tanura-Singapore Clean tanker average TCE (US$/day) LR1 tanker Ras Tanura-Chiba 75k Handysize Selected routes MR tanker Selected routes 25-55k
11,789 8,560 2,374
10,985 7,899 3,016
+7.3% +8.4% -21.3%
14,379 8,667 4,110
7,918 10,934 5,794
3,003 15,642 4,805
6,858 13,395 7,505
7,754 12,100 4,994
10,462 12,644 7,587
14,539 13,148 7,756
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Figure 26: Crude tanker TCE shipping rates (US$/day)

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F M A M J J A 09 10 11 12 VLCC TCE (US$/day) Suezmax TCE Aframax TCE
Figure 27: Product tanker TCE shipping rates (US$/day)

35,400 LR1: Ras Tanura-China (clean) TCE (US$/day) 30,400 Handysize (clean) TCE Medium range (clean) TCE 25,400
20,400
15,400
10,400
5,400
400 J F M A M J J A S O N D J F MA M J J A S O N D J F M A M J J A S O N D J F M A M J J A 09 10 11 12
Figure 28: Tanker vessel profit/loss (US$/day)

Ship type Current TCE Operating cost Cash earnings Interest cost Depreciation cost Daily profit/(loss) Breakeven TCE VLCC 7,273 -12,807 -5,534 -7,441 -9,567 -22,542 29,815 Suezmax 9,966 -11,436 -1,470 -4,526 -5,819 -11,815 21,781 Aframax 10,550 -10,245 305 -3,951 -5,079 -8,725 19,275 MR product 2,374 -8,185 -5,811 -2,570 -3,304 -11,685 14,059
SOURCES: CIMB, MOORE STEPHENS, CLARKSON RESEARCH SERVICES
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Figure 29: Dirty tanker fleet utilisation
Figure 30: Nominal dirty tanker earnings vs fleet utilisation
SOURCES: CIMB, POTEN
SOURCES: CIMB, POTEN
The number of tanker fixtures for discharge in South China has fallen in the last three months to levels last seen 18 months ago, as Chinas oil demand growth slows. In August to date, Clarksons records 46 fixtures for discharge in South China, with the monthly figure expected to reach Julys level of 55 bookings, above the 45 ships fixed in June. However, the number of fixtures to South China reached an all-time high in March of 82 and had hovered around the 70 mark in April and May. Chinas imports are now slowing as inventory restocking and filling of strategic petroleum reserves are moderated. Chinas apparent oil demand in July, which includes refinery output plus net product imports, is estimated at 9.2m barrels per day, up 1.7% year on year. In contrast, it reports that Chinas apparent oil demand has averaged 9.4m bpd in 2012. The recent weakness was partly due to heavy rain that boosted hydroelectric production, but also due to weaker economic activity that affected oil demand. Recently, Brent oil has been around US$4 per barrel more expensive than the Dubai benchmark, indicating that it is profitable to source relatively more oil from the Middle East rather than West Africa, hence reducing trading distances. This has weakened tonne-mile demand, particularly for the VLCC sector which hauls oil over long distances to the country. (Lloyd's List) The future does not look promising for the Middle East Gulf to US Gulf crude tanker route as US crude production continues to rise. The latest figures from the Energy Information Administration show total US crude production will average 6.3m barrels per day in 2012 an increase of 600,000 bpd from last year and the highest level since 1997. Projected US crude production will rise even higher, to 6.7m bpd in 2013. Highlighting this, US crude imports have dropped from 10.1m barrels per day in 2006 to 8.9m bpd in 2011. Oil experts have even said if the decline continues at the present rate, the US could become a net crude exporter by the end of the decade. It is already a net exporter of oil products. Such a dramatic development would open up a new trade pattern for tankers. (Lloyd's List)
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An increasing number of aframax cargoes are being fixed privately across the European spot market, with charterers circumventing brokers to deal with owners direct as rates continue to hover at extremely weak levels. The current market dynamics favour this type of trading, one broker said. There is not a lot of volatility. Everybody is doing the same rates so it is difficult for us to make a difference. Shipowners willingness to go along with this could also be seen as a sign of desperation on their part. Rates have continued to fall in severely overtonnaged markets to the point where lay-up becomes a realistic alternative for shipowners, providing the market with a natural floor. TCE earnings is estimated to be US$2,984 per day a number far removed from the average operating cost of an aframax vessel, which shipping accountant Moore Stephens said averaged well above US$8,000 per day in its last survey. The Caribbean and US Gulf market saw a number of cargoes disappear after a massive explosion ripped through storage vats units near a refinery in Venezuela. In addition, Hurricane Isaac arrived in the Caribbean over the weekend and is en route to the US, shutting down production at most offshore facilities. According to the US Bureau of Safety and Environmental Enforcement, domestic production had been cut by 1.1m barrels per day, equivalent to around two 80,000 tonne aframax cargoes per day. Some news from the European aframax market offered reason for hope of improvement, however. Loading programmes from Russias Primorsk and Ust-Luga ports showed the amount of cargo shipped from these ports was set to increase from 7.4m tonnes to 7.8m tonnes next month. Brokers reported that this was part of a long-term trend in which the Russian ports in the Baltic Sea were seeing increasing business, as more oil is pumped through the second tranche of the Baltic Pipeline System. (Lloyd's List) Equity analysts are calling foul over a misrepresentation of the market by the Baltic Exchange, arguing that tanker owners are earning thousands of dollars more than reported time charter equivalent figures suggest. Nearly half the crude tanker routes are reporting TCE earnings in the red. The Baltic Exchanges reported earnings misrepresent the market because of the way in which daily earnings are calculated. Shipbroker panellists submit Worldscale rates on a daily basis to the Baltic Exchange, which then calculates the equivalent daily earnings. To do this, it makes assumptions on variables such as transit time, port and bunker costs and most importantly vessel speed, assuming that vessels always sail at 14.5 knots on both the laden and ballast legs of a round voyage. In reality, however, slow steaming has become commonplace. Because shipowners consume less fuel, they retain a larger portion of the overall charterhire. (Lloyd's List) An explosion at a refinery in Venezuela has killed at least 41 people and halted production at the facility. The Amuay refinery is part of Paraguana Refining Centre, located in the western part of the country. With a total capacity of 955,000 barrels per day, Paraguana is the second-biggest refinery in the world. The part of the facility that had to be shut down on Saturday has a capacity of 645,000 barrels per day. However, Venezuelan government officials have said the effect on exports should be limited. The explosion destroyed several storage tanks, but according to the countrys energy minister, Rafael Ramirez, no refining facilities were damaged in the blast, meaning production could resume within two days. The docks at the refinerys loading terminal were closed after the explosion, leaving tankers moored at sea. This means crude exports from the country will also be hampered. Amuay Bay mainly handles aframax crude tankers and product tankers. (Lloyd's List)
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For the first time this year, slowing growth in oil demand is spurring analysts to cut estimates for earnings in the tanker industry's largest vessels. The International Energy Agency (IEA) reduced its oil-demand forecast and predicted slower growth in 2013. Stockpiles in the US, the biggest importer, are already near a 22-year high. Slower growth will worsen the glut in shipping, with the VLCC fleet projected to expand 6.9% in 2012, according to Clarkson. The world's biggest shipbroker anticipates demand for the vessels will rise 3.9%. IEA's forecast for slowing demand growth in 2013 may be partly offset by shifting trade patterns that are lengthening tanker journeys. About 700,000 bpd that used to be delivered within the Atlantic is now going to Asia. China will overtake the US next year as the largest customer for all sizes of crude tankers. (Bloomberg) Frontline chief executive Jens Martin Jensen has painted a depressing picture of the crude tanker market. With a global fleet of 610 VLCCs, including 587 double-hulled ships and 95 still on order, plus earnings below operating costs on all routes, reducing tonnage on the water remains the only way to bring about a recovery. Business and rates like this cannot go on for much longer, Mr Jensen said. It is safe to say that owners are starting to the feel the squeeze. The likelihood of tanker lay ups taking place in significant numbers is still in doubt due to the loss of oil major approvals. Investing in laying up a vessel for a set period can be costly, particularly so if it is difficult to regain oil company approvals when vessels are reactivated. Frontline is sticking to its strategy of disposing of older vessels from its non-core fleet, with a handful still to be offloaded before the end of the year. (Lloyd's List) Europe could be on the verge of mirroring Japan albeit on a less extreme level by shutting off some of its nuclear reactors and requiring more LNG to make up the energy shortfall. A Belgian nuclear reactor has been taken offline due to defects and experts have not ruled out permanent closure of the unit. As with Japan, though, nuclears loss will be LNGs gain. While Europe will not go as far as Japan and switch off all its reactors, other closures could follow the Belgian shutdown amid heightened safety fears and LNG would be the obvious choice to take up the slack. (Lloyd's List)
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Commodity prices and currencies

Crude oil prices inched up slightly from the previous week as investors continue to weigh in on the possibility of additional stimulus as hinted by Federal Reserve chairman Ben Bernanke, despite seemingly slower growth in China. The HSBC China manufacturing PMI for August fell to 47.6, the lowest reading since March 2009. Any reading below 50 signals a contraction in overall activity. The weak Chinese macro data has also negatively affected sentiment in the steel industry, with clearer signs that demand may stay stagnant. Steel prices declined 1-3% last week. Iron ore import prices fell sharply, declining 9.3% wow to US$98/ton, taking the market by surprise as many expected prices to hold.
Figure 31: Economics & Commodities

Last week 31-Aug-12 24-Aug-12 115.46 115.14 688.00 691.00 98.00 161.30 3,506 3,405 4,468 3,528 116.10 95.05 US$1.26 78.39 Rmb6.35 HK$7.76 RM3.12 S$1.25 THB31.30 Rp9,572 0.42% 108.00 161.20 3,549 3,511 4,526 3,566 116.10 94.95 US$1.25 78.67 Rmb6.35 HK$7.76 RM3.10 S$1.25 THB31.22 Rp9,519 0.42% WoW (%) +0.3% -0.4% -9.3% +0.1% -1.2% -3.0% -1.3% -1.1% +0.0% +0.1% +0.5% +0.4% +0.1% +0.0% -0.7% +0.3% -0.3% -0.6% -0.01% Qtr-to-date 3Q12 107.93 645.53 125.19 166.06 3,752 3,773 4,694 3,764 119.39 93.84 US$1.23 78.87 Rmb6.37 HK$7.76 RM3.14 S$1.25 THB31.54 Rp9,472 0.47% 2Q12 109.05 673.40 142.73 168.51 4,169 4,262 5,106 4,187 140.77 102.83 US$1.28 80.08 Rmb6.33 HK$7.76 RM3.11 S$1.26 THB31.28 Rp9,309 0.51% 1Q12 118.55 744.75 147.12 173.12 4,238 4,265 5,214 4,259 143.66 121.63 US$1.31 79.39 Rmb6.31 HK$7.76 RM3.06 S$1.26 THB30.98 Rp9,079 0.51% 4Q11 109.28 690.46 147.85 183.20 4,347 4,297 5,339 4,496 153.60 127.56 US$1.35 77.33 Rmb6.36 HK$7.78 RM3.15 S$1.29 THB31.00 Rp8,983 0.48% Yr-to-date 2012 111.84 687.89 138.34 169.23 4,053 4,100 5,005 4,070 134.61 106.10 US$1.28 79.45 Rmb6.34 HK$7.76 RM3.11 S$1.26 THB31.27 Rp9,286 0.48% 2011 112.64 672.87 172.46 195.98 4,738 4,658 5,491 4,783 148.03 129.61 US$1.39 79.72 Rmb6.46 HK$7.78 RM3.06 S$1.26 THB30.48 Rp8,772 0.34% 2010 79.90 474.87 151.92 154.95 4,167 4,241 5,600 4,244 115.09 110.70 US$1.33 87.79 Rmb6.77 HK$7.77 RM3.22 S$1.36 THB31.72 Rp9,086 0.34%
Brent crude (US$/barrel) Sing bunker (US$/ton) China: Iron ore spot cfr imports (US$/ton) China: Domestic iron ore (US$/ton) China: China: China: China: Rebar (Rmb/ton) HRC (Rmb/ton) CRC (Rmb/ton) Wire rod (Rmb/ton)
Qinhuangdao 6800 kc coal FOB (US$/ton) Newcastle 6700 kc coal CFR (US$/ton) Euro Yen Renminbi HK$ Ringgit S$ Baht Rupiah US$ LIBOR - 3m (%)
Oil traded near the lowest level in two weeks on speculation Tropical Storm Isaacs impact on output in the Gulf of Mexico will be limited. Gasoline was near a four- month high as a fire spread at Venezuelas biggest refinery. Isaac was near hurricane intensity as it headed for landfall south of New Orleans, according to the National Hurricane Center. (Bloomberg) A Chinese steel inventory overhang that has cut spot demand for iron ore and forced prices to their lowest levels since November 2009 may take as long as nine months to unwind, leaving it up to iron ore producers to cut output to shore up prices, ANZ Bank said Tuesday. (Platts) Vale expects iron ore prices to rebound this year because current prices arent profitable for producers in China and other countries. Iron-ore below US$120 a metric ton is a short-lived situation, the companys Investor Relations Director Roberto Castello Branco said. (Bloomberg) China's benchmark power-station coal price rose for the first time in four months as stockpiles declined at the nation's biggest port for shipping the fuel. (Bloomberg)
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Figure 32: Singapore bunker fuel (US$/MT) and Eur Brent Crude (US$/bbl)
800 140
700
120
600
100
500
80
400 Singapore Bunker Fuel (US$/MT) - LHS Eur Brent Crude (US$/bbl) - RHS 200 J FMAM J J A SONDJ FMAM J JA SO ND J FMAM J J A SOND J FMAM J J A SO NDJ FMA MJ J A SO NDJ FMAM J J A 07 08 09 10 11 12
60
300
40
20
Figure 33: China domestic iron ore prices versus spot prices in India
220 India imports 63.5% spot cfr (US$/MT) 200 180 160 140 120 100 80 60 40 J FMAM JJA SONDJ FMAM JJ ASONDJ FMAMJJ ASONDJ FMAMJJ ASONDJ FM MJ JASONDJ FM MJ J ASONDJ FMAMJ JA A A 06 07 08 09 10 11 12 China domestic 66% incl. 17% VAT
Figure 34: Domestic Chinese coal price vs. Newcastle price (US$/tonne)
200 Qinhuangdao 6800 kc coal spot FOB price (US$/MT) 175 150 125 100 75 ' 50 25 0 J FMAMJ J A SON DJ F MAM J JA SO NDJ FMAM J J A SO NDJ FMA MJ J A SO ND J FMA MJ J A S OND J F MA MJ JA 07 08 09 10 11 12 New castle 6700 kc steam coal spot CFR price (US$/MT)
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Figure 35: Domestic Chinese steel prices (Rmb/tonne)

8,000 China domestic rebar (Rmb/MT) 7,000 China domestic HR sheet China domestic CR sheet
6,000
5,000
4,000
3,000
2,000 J FMAMJ JASONDJ FMAMJ JASONDJ FMAMJ JA SONDJ FMAMJ JASONDJ FMAMJ JASONDJ FMAMJ JA SONDJ FMAMJ JA 06 07 08 09 10 11 12
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OUTPERFORM: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a benchmark's total return. UNDERPERFORM: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 3 months. relevant relevant relevant relevant relevant
Sector
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.
* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand an d Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
26
SHIPPING MONITOR
September 3, 2012
Recommendation Framework #2 **
Stock
OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 months.
Sector
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 3 months.
** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011.
ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCP - Excellent, BEC - Very Good, BECL Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH Very Good, ITD - Good, IVL - Very Good, JAS Very Good, KBANK - Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, SC Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good.
27

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September 3, 2012

REGIONAL MALAYSIA SINGAPORE INDONESIA THAILAND PHILIPPINES CHINA, HONG KONG

SHORT TERM (3 MTH)

Lacking strong demand drivers

Raymond Yap Kok Hoe CFA

Highlighted Companies Orient Overseas (International) Ltd

Neptune Orient Lines Ltd

SOURCES: CIMB, COMPANY REPORTS

China Shipping Container Lines Ltd

SITC International Holdings Company Ltd

Pacific Basin Shipping Ltd

STX Pan Ocean Ltd

Figure 2: Sector Comparisons

2866 HK NOL SP 316 HK 1308 HK 2603 TT 2615 TT 2609 TT MAERSKA DC

HK$1.46 S$1.10 HK$41.85 HK$1.90 TWD16.50 TWD15.65 TWD12.20 DKK37,200

HK$1.67 S$1.30 HK$51.20 HK$2.35 -

3,333 2,268 3,377 633 1,918 1,161 1,150 28,288

MISC MK TK US FRO US TNP US OSG US TNK US ODF NO SNI NO TGP US GLNG US

9107 JP 9104 JP 9101 JP 011200 KS

Not Not Not Not

Rated Rated Rated Rated

100 192 157 Won27,500

1,200 2,958 3,410 3,484

SOURCES: CIMB, COMPANY REPORTS

Share price performance

196 158 105 Won27,400

NOL SP 316 HK 2866 HK 2603 TT 2615 TT 2609 TT 000700 KS MAERSKA DC

S$1.09 HK$41.40 HK$1.48 TWD16.00 TWD15.20 TWD11.95 Won6,180 DKK36,620

S$1.15 HK$45.65 HK$1.84 TWD16.80 TWD16.50 TWD12.80 Won6,060 DKK38,240

-4.8% -9.3% -19.6% -4.8% -7.9% -6.6% 2.0% -4.2%

S$1.16 HK$43.85 HK$1.96 TWD17.00 TWD15.15 TWD12.60 Won5,320 DKK39,300

-6.0% -5.6% -24.5% -5.9% 0.3% -5.2% 16.2% -6.8%

S$1.40 HK$54.30 HK$2.62 TWD21.40 TWD17.45 TWD17.90 Won9,050 DKK43,340

-21.9% -23.8% -43.5% -25.2% -12.9% -33.2% -31.7% -15.5%

S$1.13 HK$37.95 HK$1.84 TWD16.35 TWD16.10 TWD13.48 Won11,200 DKK33,783

-3.5% 9.1% -19.6% -2.1% -5.6% -11.4% -44.8% 8.4%

-2.5% -2.5% -6.3% -8.7% -5.0% -6.2% -3.3% -1.8% -0.6%

S$0.97 S$1.00 Won25,500 Won12,200 Won118,500 184 321 S$11.25 S$4.86

0.5% -1.0% -4.5% -1.2% 3.4% -9.8% 0.9% -0.5% 2.8%

S$1.14 S$1.25 Won35,950 Won21,000 Won156,000 241 377 S$10.61 S$5.10

-14.7% -21.3% -32.3% -42.6% -21.5% -31.1% -14.1% 5.5% -2.0%

S$1.05 S$1.06 Won28,416 Won22,650 Won133,112 230 321 S$8.81 S$3.81

-8.0% -7.2% -14.3% -46.8% -8.0% -27.8% 0.9% 27.0% 31.3%

RMT SP PST SP FSLT SP DAC US SSW US

S$0.32 US$0.42 S$0.12 US$3.65 US$15.87

S$0.32 US$0.42 S$0.14 US$4.09 US$16.00

-1.6% 0.0% -11.6% -10.8% -0.8%

S$0.31 US$0.42 S$0.15 US$4.06 US$15.34

0.8% 0.0% -18.7% -10.1% 3.4%

S$0.29 US$0.42 S$0.20 US$4.30 US$17.95

10.0% 0.0% -38.6% -15.1% -11.6%

S$0.32 US$0.34 S$0.28 US$3.86 US$12.98

-1.0% 23.9% -55.7% -5.4% 22.2%

SOURCES: CIMB, BLOOMBERG

Figure 4: Share price performance

SOURCES: CIMB, BLOOMBERG

1,324 1,371 1,707 1,766

1,434 1,426 1,781 1,817

-7.7% -3.9% -4.1% -2.8%

1,617 1,587 1,815 1,909