European crisis, global trade and the shipping sector

Dr. Demos PetropoulosManaging Director 

DPSS Global Consultants Limited

World Economy

The wheel of crisis turns slower

Economic and Sovereign crisis 2010‐2012

US and EU‐ High Unemployment Rates

European Sovereign Debt Crisis

Japan‐Natural DisasterChina‐ Increasing Inflation

Middle EastPolitical Unrest

4

Monetary policy will be extremely accommodative, but there is a risk that inflation remains relatively 

high.

Asia continues towards the pinnacle of power albeit at a lower speed.

Fiscal policy, financial sector regulation and the oil price poses the biggest risks to our growth 

forecasts.

Europe is experiencing a mild recession‐but with major regional 

differences.The US weathers the storm.

‐Real Economic Activity has weakened and Growth Rates= 

↓‐Trade growth to slow in 2012 after strong deceleration in 

2011.

5

Gross Domestic Product around the Globe

Source: Bloomberg 6

Source: Bloomberg

Source: Bloomberg8

European Economic Crisis

European Sovereign Debt Crisis

Weak credit owing to 

banks’ funding difficulties 

High Private Indebtedness

(Financial volatility and uncertainty)

Burst in asset pricesLost

CompetitivenessSevere Structural Unemployment

10

European Economic Sentiment Indicator

ESI persistent decline driven by falling confidence in all business sectors, especially in industry and retail trade

Source: EUROSTAT

11

Real GDP growth and trade of euro area economics, 2008‐11

Source: OECD Quarterly national accounts.12

Source: Morgan Stanley

The Effects of an intensified Euro Area crisis on various Regions

Effects on Shipping Industry

Source: Platou, DPSS

Source: Platou, DPSS

The Global Ship Finance Market

Source: Petrofin / DPSS Research  20

The Global Ship Finance Market

Source: Petrofin / DPSS Research 21

Total Merchandise Trade ‐ Exports

9.2210.50

12.1214.01

16.13

12.53

15.25

18.22

‐50.0%

‐40.0%

‐30.0%

‐20.0%

‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

2004 2005 2006 2007 2008 2009 2010 2011

Value in Trillio

ns US do

llars

Exports Annual IncreaseSource : World Trade Orginisation22

Seaborne Dry Bulk Volumes

0

100

200

300

400

500

600

700

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Mln DWTMln

Tons

Other

Soybean

Cement

Steel products

Grain

Steam coal

Met coal

Iron ore

Source: Clarksons, DPSS 23

Source: Platou, DPSS

5160 63

7467

45 48 

54 50  48 

90%

84% 83%

80%82%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012

Globa

l Yard utilisatio

n

Million cgt

Global Orderbook and Yard Utilisation 2008‐2012

Capacity Scheduled delivery Actual delivery Global yard utilisation

Source:  Clarksons, Danish Ship Finance 25

9.0%

3.0%2.0%

9.0%

7.0%8.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2007 2008 2009 2010 2011 2012

Annu

al growth

Dry Bulk Seaborne Trade Volume

Seaborne Dry Bulk trade growth

Source: IHS Global Insight, Danish Ship Finance 26

Source: Bloomberg27

11 1428

42 47357 8

9

1623

26

57

10

18

1915

7% 7%

10%

17%

14%

10%

‐6%

0%

6%

12%

18%

‐40

‐20

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012

Million dw

t

Dry Bulk Fleet Annual Growth

Capesize Panamax Handymax Handysize Scrapping Annual increase

Scrapp

ing                Deliveries

Source: Clarksons, Danish Ship Finance

28

Source: Platou, DPSS

Asian Economies

Rk Partners Million euro % Rk Partners Million euro % Rk Partners Million euro %Extra EU27 1,683,931.0     100.0% Extra EU27 1,531,122.00   100.0% Extra EU27 3,215,053.0     100.0%

1 China 292,070.9         17.3% 1 UnitedStates 260,566.8         17.0% 1 United States 444,708.0        13.8%2 Russia 198,178.2         11.8% 2 China 136,216.9         8.9% 2 China 428,287.8        13.3%3 United States 184,141.2         10.9% 3 Switzerland 121,690.6         7.9% 3 Russia 306,627.1        9.5%4 Norway 93,528.7           5.6% 4 Russia 108,448.9         7.1% 4 Switzerland 212,894.7        6.6%5 Switzerland 91,204.1           5.4% 5 Turkey 72,587.6           4.7% 5 Norway 140,059.6        4.4%6 Japan 67,444.8           4.0% 6 Japan 48,970.3           3.2% 6 Turkey 120,176.0        3.7%7 Turkey 47,588.4           2.8% 7 Norway 46,531.0           3.0% 7 Japan 116,415.1        3.6%8 India 39,256.9           2.3% 8 India 40,419.4           2.6% 8 India 79,676.2           2.5%9 Brazil 37,751.6           2.2% 9 Brazil 35,729.7           2.3% 9 Brazil 73,481.3           2.3%10 South Korea 36,057.0           2.1% 10 United Arab Emirate 32,614.2           2.1% 10 South Korea 68,475.6           2.1%11 Saudi Arabia 27,933.3           1.7% 11 South Korea 32,418.5           2.1% 11 Saudi Arabia 54,328.8           1.7%12 Algeria 27,534.4           1.6% 12 Australia 30,804.9           2.0% 12 Canada 52,459.6           1.6%13 Nigeria 24,190.0           1.4% 13 Hong Kong 30,189.6           2.0% 13 Singapore 46,068.8           1.4%14 Taiwan 23,917.1           1.4% 14 Canada 29,607.2           1.9% 14 Algeria 44,739.0           1.4%15 Canada 22,852.4           1.4% 15 Singapore 27,131.3           1.8% 15 South Africa 43,412.9           1.4%16 Kazakhstan 22,672.7           1.3% 16 Saudi Arabia 26,395.5           1.7% 16 Australia 42,559.7           1.3%17 Malaysia 20,988.0           1.2% 17 South Africa 25,639.0           1.7% 17 United Arab Emirate 41,384.3           1.3%18 Singapore 18,937.5           1.1% 18 Mexico 23,802.6           1.6% 18 Hong Kong 40,322.4           1.3%19 South Africa 17,774.0           1.1% 19 Ukraine 21,197.0           1.4% 19 Taiwan 40,124.2           1.2%20 Thailand 17,534.2           1.0% 20 Algeria 17,204.7           1.1% 20 Mexico 40,071.8           1.2%

Other 74.6%Source: DG Trade Statistics

The Major Exports Partners  The Major Trade PartnersThe Major Imports PartnersEU TRADE WITH MAIN PARTNERS (2011)

Source: DG Trade Statistics, DPSS Research

2,088

1,717

362217

356

1,949

393

184

735

81.2%

85.8% 98.0%

72.2%

165.3%

120.1%

65.2%

107.8%

68.5%

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

0

500

1000

1500

2000

2500

Germany France Belgium Austria Greece Italy TheNetherlands

Portugal Spain

Billion

 USD

EU Countries' Debt and % GDP

Debt % GDP

Source: EUROSTAT, Bloomberg, DPSS Research

• Despite the global slowdown Asia :– enjoys robust domestic demand– low unemployment – continued credit growth in the region.

Asia holding up

Japan• Recovery fueled by reconstruction

spending and private consumption• Long‐term challenges include tackling high

public debt, low growth• Financial sector has been resilient, but risks

remain

China • China’s economy expected to grow at 8

percent in 2012 as global demandslows

• Should downside risks emerge, Chinahas room for strong fiscal stimulus

• Chinese currency now assessed as"moderately undervalued"

37

China

Japan

Korea

ASEAN 

Singapore

• The EU is China’s biggesttrading partner and its largestforeign investor. It is also itsbiggest competitor in the EastAsian Markets.

• The Chinese market isbecoming a key-role playerfor intra-Asian and Asia-Southtrade.

• Originally characterised with astrong trade surplus in favourof Japan.

• The EU-Japan traderelationship has recentlybecome more balanced

• The EU is the biggest investorin South Korea.

• EU-South Korea Free tradeagreement pushed up tradevolume.

• The EU is thelargest investor inASEAN countriesbut FDI inflowsdeclined as aconsequence of theEuropean crisis.

• Singapore emerges as the EU’smain FDI partner among theASEAN countries.

Net Imports €202 bln

38

Combine Exports China, Korea, Taiwan

Source: Morgan Stanley, DPSS Research  39

Euro Leaders should: Diminish all uncertainty caused. Tighten monetary policy Strengthen fiscal position Maintain sustainability of healthy public finances. Manage economic and financial integration between

emerging and advanced Europe

Europe Dampens Outlook 

40

Key Economic Analysis

42

Price of Oil 2010‐2012

Who Has the Gas?

Data Sources: IEA 44

Stocks Performance

The MSCI All‐Country World Index (MXWD) of stocks dropped 7 percent since the beginning of May, tumbling to $305.6 last week. The index today climbed to $305.60, market volume of 33,31trillion dollars ‐ Bloomberg data show.

Source: Bloomberg

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