Dr Martin Stopford,

President, Clarkson Research, London

The New Dynamic Face of Greek

Shipping4th Hydra Shipping Conference

15th September 2012

Man

y Fa

ces, M

an

y Fu

ture

s

1. The 7 Faces of Shipping2. Dynamics of Globalization3. Greek Shipping Evolution4. Six Challenges5. Conclusions

How do you play this hand?

4. PRIVATEPARTNERSHIP

KG etc

3. PUBLICCOMPANY

2. PRIVATECOMPANY

5. SHIP OPERATOR

6. MANAGEMENT

COMPANY

7. LEASING COMPANY

1. Shipowner

US Treasury Secretary Henry US Treasury Secretary Henry Morgenthau at Bretton Woods in 1944Morgenthau at Bretton Woods in 1944

We must build a dynamic

world economy

• Before the 2nd World War the world the world (and shipping) was dominated by European Empires

• In 1944 at the Bretton Woods conference in USA set the scene to change the system

• The aim was to “globalize” of the world economy

21/04/23

2nd April 2008

5

1944 Global Free Trade Policy

• At Bretton Woods in 1944 US Treasury Secretary Henry Morgenthau outlined the objective of creating "a dynamic world economy ".

• The method was to establish a new, liberalized trade regime

• To assist in achieving this aim the World Bank, the IMF and GATT were founded.

Delegates at the Bretton Woods Delegates at the Bretton Woods Conference in 1944Conference in 1944

“The objective, gentlemen, is to create a dynamic world economy”

MEETING AT BRETTON WOODS IN USA

The Result – A “Flood” of Trade 1950-2011

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Sea Trade World GDPIndex 1950=100

2012Sea trade

16 times as big as in

1950

Sea trade grew at 4.3% per annum

World GDPGrew at average of

3.6% per annum

2012World GDP 8 times as big as in 1950

FORECAST

The Shipbuilding Cycle

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Deliveries Scrapping

Deliveries 61 m dwt in 1976

Deliveries 162.5 m dwt in 2012

Last phase of 1970s

scrapping!

Million Dwt

Shipyards expand to replace the ships built in the 1970s boom

0.20

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3.80

6.30

7.50

0 1 2 3 4 5 6 7 8 9 10 11 12

Tonnes of sea imports per person a year

Japan

Europe

N. America

China

S America

Africa

2000-20506 billion Non-OECD population want to

consume at OECD levels

1950-2000OECD’s 1.3 billion

population

Globalization Part 1

Bulk Liquids ManufacturesRefrigerated

Container Shipping

Unitized cargoes

Bulk Shipping

Homogeneous cargoes

Bulk carrier, tanker Specialised ship

Specialised Shipping

Specialized cargoes

Unit Load

Container ship

Air Freight

Urgent cargo

Air freighter

The mechanization of sea transport lies at the heart of globalisation – adding value takes place by inter-segment competition

Sea Transport was mechanized:-A new Shipping Model developed in the 1950s

Business Model Maturing

• Low returns, chasing size

• High investment requirement

• Finance problems• Increased energy

costs• Complexities of

globalization

Low High

Lo

w

Hig

h

3. Spec

ialise

d

Transp

ort

Volume tonnes per year

Valu

e $ per to

nn

e

Figure 3 The Potential Cargo Matrix (PCM)

2. Air Freight

4. Bulk Transport

1. Liner

Transport

A B

C

• Globalization provided a massive opportunity for independents

• Control of the fleet moved from imperial owners to independents

• Greece led the way

Greek Owned Fleet & Globalization

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16019

50

1960

1970

1980

1990

2000

2010

Shows Gross tonnage and growth rateMillion GRT

1950s18% pa

1960s6% pa

1970s7% pa

1980s-1.4% pa

1990s7% pa

2000s5% pa

Greek owners used charter back $ loans to build the fleet in the 1960

Greek Finance1949 to 2012

0%2%4%6%8%

10%12%14%16%18%20%

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1953

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1986

1990

1996

2000

2004

2008

2012

Greece’s share of the fleet grew from 3% in 1949 to 18% in 2008% World Fleet

Euro$ market starts 1958

1974-19905% cut back

during 1970s/80s recession

1996-2012Steady at 15-17%

1949-1973Rapid growth based on time charters &

Euro$ loans

Equity Markets

Bond Markets

Charter backed finance

No GRT % Fleet1 Niarchos (London) Ltd 74 1,398 5%2 Onassis 77 1,300 5%3 Triton (Costas Lemos) 55 886 3%4 S. Livanos Shipbrokers Ltd 47 860 3%5 Capeside Steamship/Global 55 851 3%6 N.J.Goulandris 36 659 2%7 London & Overseas Freighters 41 532 2%8 Chandris 44 455 2%9 J.M. Carras 44 360 1%10 Rethymnis & Kulukundis 29 332 1%

Total Top 10 Fleets 502 7,633 28%Total Greek owned fleet 26,932 72%

Greek Owned Fleet - Top 10 Owners in 1969

• In 1969 the ten biggest international Greek companies owned 502 ships, accounting for 28% of Greek owned GRT

Greek Owned Fleet - Top 10 Owners in 2012

Major Group No. GT %1 Angelicoussis Group 80 8,144 5%2 Dynacom Tankers Mngt 68 5,219 3%3 General Maritime 95 5,185 3%7 Enterprises Shpg. 94 4,464 3%5 Tsakos Group 75 4,179 3%6 Cardiff Marine Inc. 54 4,089 3%8 Navios Group 58 3,878 3%4 Danaos Shpg. 60 3,310 2%9 Minerva Marine Inc. 45 2,910 2%

10 Marmaras Nav. Ltd. 43 2,819 2%Total top 10 Fleet 672 44,197 29%

Total Fleet 151,011 71%

• In 2012 the ten biggest international Greek companies owned 672 (much bigger) ships, accounting for 29% of Greek owned GRT.

Greek Owned Fleet 2012

• Top 10 own 672 ships

• The core are the medium sized companies with 3-15 ships

246

149

73

35

11

8

14

6

4

0 50 100 150 200 250 300

1-2 ships

3 to 5

6 to 10

11 to 15

16-20

21-25

26-35

36-50

50-70

Number of companies

Top 10 Owners

Big Owners

Medium

Small

Number of ships owned

546 Greek companies owning ships over 5000 dwt

Greek Owned Fleet: Ship Value

• Greek companies owned ships worth $70.6 billion

• $14.8 billion owned by listed companies

• Medium companies have assets worth $32 billion (funding requirement of, say, $20 billion??)

4

10

12

10

6

5

8

8

8

0 5 10 15

1-2 ships

3 to 5

6 to 10

11 to 15

16-20

21-25

26-35

36-50

50-70

Fleet value $ billion

Top 10 Owners(23% value)

Big Owners (27% value)

Medium (45% value)

Small(5% value)

Values at 1st May 2012 (over 5000 dwt)

Greek Owned Fleet By Type

• Broad portfolio, 80% tankers and bulkers

• Containers only 10% which is low for the third biggest world fleet segment (5,100 ships worth $100 billion).

56

41

108

467

32

40

72

0

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VLCCSuezmaxAframax

PanamaxProductsCapesize

Kamsar maxPanamax

SupermaxHandymax

HandyGasMPP

ContainerCruise & Ferry

Reefer

Fleet value $ billion

Ta

nk

ers

3

7%B

ulkers

42%O

ther

20%

1. Over-capacity2. Energy costs3. Regulatory focus4. Globalization part 25. IT & Comms revolution6. Container model

How do you play this hand?

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13

M. Dwt

-13%

-3%

7%

17%

27%

37%

47%% Surplus

World Cargo Fleet 1963-2013World Cargo Fleet 1963-2013

Demand for sea transport runs

ahead of supply

Surplus shipping capacity (% right axis)

From 2009 world fleet surges ahead of demand

Challenge 1: Shipping Over-Capacity

Challenge 2: Energy Costs

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$/day cost

Bunker cost 1 Year TC Rate

THE SHIP USED TO COST MUCH MORE THAN BUNKERS BUT. TODAY BUNKERS COST MORE THAN THE SHIP.

2005Ship costs

3x fuel

2012Ship costs

half fuel

Based on Aframax tanker, 1 year TC rate and Rotterdam bunker price

Challenge 3: Regulation

• Requirement that new ships must comply with the EEDI, a clear attempt to drive efficiency improvements

• The focus on air emissions; ballast water; recycling; energy efficiency and the carbon footprint.

• The dilemma of gas oil versus scrubbers and the uncertainty over of which ballast water system.

• Many shipyards, after a decade when they were able to sell standard ships, are struggling to respond.

Eco-Ship Design – Complex

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24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8

Fuel

cos

t sav

ing

, cha

rter c

ost i

ncre

ase

$000

Shows the effect on fuel cost (green lines) & ship cost (yellow line) of changing speed in 1 knot increments on 5000 mile voyage

best speed at $1500/tonne

bunkers

best speed at $200/tonne

bunkers

Speed of ship (knots)

80% saving

LNGwindNUCLEAR

Hull formEngineering

logistics

Note 1: Just difficult decisions

COATINGS

EEDIscrubbers

No ballast

Fuel Cells

Back haulShipping lanes

Regional imports 1950-2010

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07

Bill

ion

tons

of

impo

rts

• Over the last 50 years the OECD countries dominated growth

• Asia started to grow in 1970s & China in the 1990s.

• Non OECD trade overtook OECD in 2006

• The next phase of globalization will see more countries; more pressure on resources; and more geo-political tension (piracy a sign)

OECD56%

Non OECD44%

Fleet OwnershipNon OECD

OECD

Challenge 4: Globalization Part 2

Challenge 5: IT & Comms

Fibre optic cable network

Gordon Moore

Invented “Moore’s Law”

Challenge 6: Container Business Model

“Over the centuries technical developments in liner shipping has been not so much a continuous process as an occasional leap forward precipitated by a compelling call for change.

In between there have been long periods of conservatism".

Ronnie Swayne, Chairman OCL 1973

y = 6.5684e0.0888x

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Billion tons

This chart shows container cargo growing to 1.5 billion tonnes today. In 2009 the trade had its first serious “wobble”.

Will the exponential trend of 8.8% trend continue?

The container business will be at the heart of change

1. Lousy hand so aim 1 is to survive2. Major revolution in fuel costs,

technology, software and systems3. Challenging regulatory focus

which the industry is still struggling with

4. Globalization “Part 2” will change the pattern of trade & it’s geopolitics

5. IT Revolution will create “soft” opportunities

6. The container business is due for a “great leap forward”

“fuel costs and environmental regulations are the Wild

Cards”

Amarillo Slim’s Advice

1. “Play the players, not the cards.

2. Watch them from the minute you sit down.

3. Play fast in a slow game , slow in a fast game.

4. Never get out when you are winning.

5. Look for the sucker and, if you don’t see one , get up and leave because the sucker is you”

Oceanic Steam Navigation Company Ltd

• The company is better known as White Star Line which owned the Titanic

• 100 years ago the Chairman was Thomas Bruce Ismay

• In the film Titanic he is the arrogant man who ordered the Captain of the Titanic to go imprudently fast

• He looks bad, but he had a problem the film did not tell you about, which you will understand. Chairman Bruce Ismay

Chairman 1912

1.5

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18

£ pe

r Gro

ss T

on e

arni

ngs

Oceanic Steam Navigation Company Ltd7 year average earnings (in arrears)

Bruce Ismay, Chairman

Titanic loss 2012

Collapse of earnings

1900 to 2010

Cut throat competition between Cunard and White Star

Seaborne Trade – 9 billion Tonnes

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1019

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Billio

n to

nnes

of c

argo

..

Coal10%

Iron ore11%

Gas3%

Oil28%

Other bulk18%

Container15%

Other15%

Sea Trade in 2011

Seaborne Imports – 9 billion Tonnes

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1019

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Billio

n to

nnes

of c

argo

..

Coal10%

Iron ore11%

Gas3%

Oil28%

Other bulk18%

Container15%

Other15%

Sea Trade in 2011

Chin

aR

est of the w

orld

Greek Owned Fleet - Ship Type Prospects

Ship Number Ratio

Type of ships Orderbook Trade Growth Orderbook

in fleet % Fleet to 2023 % pa /Trade

VLCC 108 20% 5% 4 Suezmax 142 24% 5% 7 Aframax 155 8% 3% 3 Panamax Tanker 40 10% 2% 5 Products 512 12% 2% 6 Capesize 240 29% 5% 6

Kamsar max 144 38% 5% 8 Panamax 359 38% 4% 9 Handymax 286 25% 3% 8 Handy 275 21% -1% 21- Gas 90 18% 8% 2 MPP 53 16% 2% 8 Container 275 21% 8% 3

Cruise & Ferry 115 na 7%Grand Total 3139 20% 5% 4

Sdource: CRSL estimates

Prospects

The “Ratio” is “orderbook as a % fleet” ÷ trade growth trend