Commodity and Dry Bulk Outlook

7/31/2019 Commodity and Dry Bulk Outlook

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Commodity & Dry Bulk Outlook

Maaike Steinebach Managing Director Energy, Commodities & Transportation Asia

Marine Money Conference Busan

Crude steel production

Economic indicators

Dry Bulk Shipping

Outlook dry bulk Trends and forecasts

Coking coal

China & Global economy

Iron ore

Iron ore resources

Import & Export Two year outlook


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Disclaimer and further information

This material is provided to you for information purposes only. Before investing in any product of ABNAMRO Bank NV, you should inform yourself about various consequences that you may encounter underthe laws of your country. ABN AMRO Bank NV has taken all reasonable care to ensure that theinformation contained in this document is correct but does not accept liability for any misprints. ABNAMRO Bank NV reserves the right to make amendments to this material.

This material which is subject to change without notice is provided for informational purposes and shouldnot be construed as a solicitation or offer to buy or sell any securities or related financial instruments.

While ABN AMRO makes reasonable efforts to obtain information from sources, which it believes to bereliable, ABN AMRO makes no representation or warranty of any kind, either express or implied as to theaccuracy, reliability, up-to-dateness or completeness of the information contained herein. Nothing hereinconstitutes an investment, legal, tax or other advice nor is it to be relied on in any investment or decision.Certain services and products are subject to legal restrictions and therefore may not be available forresidents of certain countries. You should obtain relevant and specific professional advice before makingany investment decision. The past performance is not necessarily a guide to the future result of an

investment. The value of investments may go up or down due to various factors including but not limitedto changes in rates of foreign exchange and investors may not get back the amount invested. ABNAMRO disclaims any responsibility and liability whatsoever in this respect.

ABN AMRO Group Economics on the internetwww.abnamro.nl/nl/zakelijk/service/publicaties/economisch_bureau.html

Source: ABN AMRO


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3

Global crude steel production

Crude steel production decreased -8.2% in 2009 (yoy)

For 2010, ABN AMRO expects steel production to increase by 14% (yoy), to 1,390 Mt

Sources: IISI, Eurofer, ABN AMRO

0

200

400

600

800

1,000

1,200

1,400

1850

1870

1890

1902

1906

1910

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

Mt

1989: fall Berlin wall

1990: Golf War 1Cold War Era (1946-1990)

2003: Golf War 2

Asian Financialcrisis 1997

Early 1980s

recession

2009:

-8.2

1946-1975:

+4.2% /y

1976-1996:

+3.3% /y

28 Mt

1997-2008:

+5.0% /y

World

War I

Great

Depression

1929

World

War II

Oil crisis

1973

Oil crisis

1979

2001: IOC

announce-

ment Beijing

2008; China

member WTO

1900-1945:

+5.3% /y

Beginning of Modern

Steel Industry: 1850


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4

Ferrous industry value chain

Crude steelindustry

iron ore

coking coal

scrap

Finishedsteel EndcustomersRawmaterials

engineering

construction

automotive

Transport Transport Transport

flat steel

long steel

pipes

tubes

Semifinishedproducts

slabsbloombillets

by road, rail &water

Metal traders and steelservice centers

50%



Source: ABN AMRO

Nearly all steel industry related materials are relevant for the shipping industry

wire rod


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Worldwide dry bulk trade

Source: Clarkson Research Services

50% of total dry bulk trade is ferrous industry related (coal, steel, iron ore, scrap)

21% of total dry bulk trade is agri business related (grains, sugar, forest products)

- Major Coal trade flows:

Aus Japan

S. Africa W.EU

China S.Korea

Colombia W.EU

China Japan

- Major Grain trade flows:

US Gulf Lat. Am

US Gulf Japan

US Gulf Asia

Argentina Brazil

- Major Iron ore trade flows:

Aus China

Aus Japan

Brazil China

Brazil W.EU


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-30%

-20%

-10%

0%

10%

20%

30%

40%

2001-1

2001-7

2002-1

2002-7

2003-1

2003-7

2004-1

2004-7

2005-1

2005-7

2006-1

2006-7

2007-1

2007-7

2008-1

2008-7

2009-1

2009-7

2010-1

2010-7

%-changey-o-y

-300%

-200%

-100%

0%

100%

200%

300%

400%

%-changey-o-y

Volume index world trade

World steel production

Baltic Dry (r.axis)

Global economy and dry bulk commodities

30

35

40

45

50

55

60

65

70

2005-8

2005-12

2006-4

2006-8

2006-12

2007-4

2007-8

2007-12

2008-4

2008-8

2008-12

2009-4

2009-8

2009-12

2010-4

2010-8

PMI(index>

50moreactivity)

80,000

85,000

90,000

95,000

100,000

105,000

110,000

115,000

120,000

125,000

130,000

steelproduc

tion(Mt)

PMI US Eurozone PMI

China PMI World steel production (r.axis)

Leading indicators and world steel production:

Sources: Thompson Financial Datastream, Worldbank, CPB, ABN AMRO

World steel, world trade and Baltic dry

World steel and regional PMIs

Correlation:

- Steel production and trade volume = 0.83

- Steel production and Baltic Dry = 0.60

Correlation:

- PMI US and steel production = 0.57

- PMI EU and steel production = 0.60

- PMI China and steel production = 0.43


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30%

56%

33%

65%

56%

40%

64%

30%

0

5,000

10,000

15,000

20,000

25,000

30,00035,000

Ukrain

e

Russia

Chin

a

Austra

lia

Bra

zil

Kazakhst

an

India

US

MillionM

0%

10%

20%

30%

40%

50%

60%70%

Fecontent

Crude ore reserves Fe content

Iron ore & major trade flows

Sources: USGS, ABARE, AME, IEA

1

2

3

4

5

> 200 Mt

100-200 Mt

20-100 Mt

10-20 Mt


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Coal & major trade flows (both thermal and coking)

Sources: USGS, ABARE, AME, IEA

1

4

2

5

>100 Mt

40-100 Mt

10-40 Mt

Major importers 2009:

1) Japan

2) China

3) South Korea

4) India

5) Chinese Tapei

Major exporters 2009:

1) Australia

2) Indonesia

3) Russia

4) Colombia

5) South Africa

Major consumers 2009:

1) China

2) US

3) India

4) Russia

5) Germany

3


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An important question is

What about China?


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ABN AMRO view on China (1)

Sources: Thompson Financial Datastream, CEIC

35

40

45

50

55

60

65

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

inde

x

5%

10%

15%

20%

25%

30%

35%

%-ch

angey-o-y

China PMI (index) China GDP (%, r.axis) China loans (%, r.axis)

Stimulus packages ended and Chinese government is taking serious measures

to cool down the economy in an orderly fashion


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Sources: Thompson Financial Datastream, CEIC

The central economic goal of the Chinese government this year is to get a grip on

the economy, especially through the level of fixed investments in construction

-20

-10

0

10

20

30

40

50

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

%-changey-o-

Newly started projects Fixed asset investment


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Sources: Thompson Financial Datastream

China's trade surplus narrowed as imports increased slightly, while exports

slowed somewhat in August 2010

-20

0

20

40

60

80

100

120

140

160

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

b

lnUSD

China export value China import value China trade balance


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China & Dry bulk trade 2000-2012

Source: Clarkson Research Services, ABN AMRO (2011/12 estimates)

Shut down of many small coal mines in China makes steel producers more

dependent on foreign coking coal

Import iron ore

(l.axis)

Import

coking

coal

Import

thermalcoal

Import grain

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Milliontonn

es(ironore)

0

10

20

30

40

50

60

70

80

Milliontonnes


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Expectations ABN AMRO

The road aheadview ABN AMRO on global dry bulk market until 2012


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ABN AMRO view on global economy

Sources: Thomson Financial Datastream, Bloomberg, ABN AMRO (forecasts)

Recovery global economy continues, with China leading the way forward

- while the Eurozone recovers slowly, in China and the US the leading economicindicators suggest further recovery

GDP growth (% yoy) Inflation (CPI, % yoy avg) GDP EUR bn2008 2009 2010 2011 2008 2009 2010 2011 2009

US 0.5% -2.4% 2.8% 2.8% 3.8% -0.3% 1.5% 1.5% 10,223

China 9.0% 8.7% 10.5% 9.4% 5.9% -0.7% 3.2% 3.0% 3,521

EU 0.6% -4.1% 1.6% 1.5% 3.3% 0.3% 1.7% 1.8% 9,266

World 3.0% -0.6% 4.6% 4.1% 5.7% 2.3% 3.5% 3.3% 48,180


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Development of emerging countries

Brazil

Russia

India

China

Japan

US

South Korea

Germany

Italy

Taiwan

FranceUK

Canada

Netherlands

0100200300400500600700800900

1,0001,1001,2001,300

1,400

0 10,000 20,000 30,000 40,000 50,000

GDP per capita (USD)

steelconsumptionpercapita(kg)

1999

Source: Worldbank, IISI

China and other emerging countries (e.g. BRIC) are far from done growing!

Brazil

Russia

India

China

Japan

US

South Korea

GermanyItaly

Taiwan

France

UK

Canada

Netherlands

0100200300400500600

700800900

1,0001,1001,2001,3001,400

0 10,000 20,000 30,000 40,000 50,000

GDP per capita (USD)

steelconsumption

percapita(kg)

2009


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Industrial

production

50%

Car

manufacturing

15%Construction

25%

Other

10%

Expectations in global steel end user marketsIndustrial production

80

85

90

95

100

105

110

2005 2006 2007 2008 2009 2010 2011 2012

index

0

100

200

300

400

500

600

index(China)

US (2002=100)Western Europe (2005=100)

Japan (2000=100)China (2000=100), r.axis

Construction IP (2005=100)

60

80

100

120

140

160

180

200

2005 2006 2007 2008 2009 2010 2011 2012

index

UK Germany France

US Japan China

Car output (m units)

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011 2012

m

units

US Western Europe Japan China

Sources: Brookhunt, IISI, Eurofer, CRU (forecasts)


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Global Dry bulk trade 2000-2012

Source: Clarkson Research Services, ABN AMRO (2011/12 estimates)

Growth in all dry bulk commodities, especially in steel raw materials

Iron ore

Steam coal

Coking coal

Grains

Bauxite and

phosphate

Minor bulks

70

90

110

130

150

170

190

210

230

250

270

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011e

2012e

index(2001=100)

Growth 2000-2010:

1. iron ore: +125%

2. steam coal: +75%

3. coking coal: +24%

4. grains: +18%

5. bauxite: +26%6. minor bulks: +29%

forecast ABN AMRO


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ABN AMRO view on Dry Bulk Market

China

64%

Other

6%W. EU

10%

Asia (ex.

China)

20%

Other

18%

OtherAsia

14%

CIS

15%

EU 15

26%

Japan9%

China

18%

Sources: Eurofer, Clarksons Research Services, ABN AMRO (forecasts)

Iron ore:

Coking coal:

Steel products:

Import into China

2011 2012

Import into EU

Import into China

Import into Japan

Export from Asia

Export from EU (15)

Share seaborne trade 2010:

positive5-10%

positive5-10%

positive5-10%

neutral -positive0-5%



(%-growth y-o-y)

positive5-10%

Other

13%

Japan

28%

W. EU

18%

OtherAsia

27%

China

14%

positive5-10%



positive5-10%

positive5-10%


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Principal Finance

Direct investment activities in ECTindustries

Portfolio of assets (ships, containers,windmills) in projects related to andcompanies active in these assets

Transportation

Deep sea shipping industry

Intermodal

Aviation

Energy

Oil & Gas exploration, production andservices (on- & offshore), pipeline and

storage

Renewable Energy & Utilities (wind

power, waste energy)

Carbon Banking and Groenbank

ABN AMRO Global ECT Activities

Commodities

Agri: cotton, cocoa, coffee, sugar,palmoil, paper and pulp and grains

Metals: steel and base metals

Energy: power, crude oil and other

oil products

Exploration &Production

Crops

Mining

Sourcing Storage &Transportation

Production Storage &Transportation

Distribution

Tanks / Silos

Ships

Rail

Pipeline

Refineries

Powergeneration

Factories

Tanks / Silos

Ships

Rail

Pipeline

Distribution

End users

Physical / Financial Trading


21/21

Q&A

Casper BurgeringSenior Sector Economist

ABN AMRO Group EconomicsT: +31 20 383 2693E: [email protected]

Maaike SteinebachManaging Director

Energy, Commodities, Transportation AsiaT: +852 3653 0888E: [email protected]

Documents

Commodity and Dry Bulk Outlook