Market Outlook Dry Bulk CommoditiesMarket Outlook Dry Bulk Commodities

Dry Bulk Shipping China

International dry bulk trade

Dry Bulk ShippingTrends and forecasts

Steel products

Coking coal

China

Iron ore

ICrude steel production

Global economic growth Economic indicatorsOutlook dry bulk

Iron ore resources

Casper Burgering | Senior Sector EconomistCasper Burgering | Senior Sector Economist

ABN AMRO Group Economics | Sector Research

23rd February 2010, Greek Shipping Forum, Athens

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

2

ab a o / / a e j /se ce/pub cat es/eco o sc _bu eau t

Source: ABN AMRO

Global crude steel production Crude steel production decreased -8.2% in 2009 y.o.y.

On average, crude steel production has grown 4.5%/y (period 1900-2009)

1.200

1.400

2003: Golf War 2

1946-1975: +4.2% /y

1976-1996: +3.3% /y

1997-2008: +5.0% /y

1900-1945: +5.3% /y

800

1.000Asian Financial crisis 1997

Early 1980s recession

Beginning of Modern Steel Industry: 1850

400

600

Great Depression

1929

World War II

Oil crisis

Oil crisis 1979

2001: IOC announce-ment

0

200

Mt

1989: fall Berlin wall1990: Golf War 1

Cold War Era (1946-1990)28 Mt

World War I

19291973

3

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

Sources: IISI, ABN AMRO

Ferrous industry value chain

by road, rail & water

by road, rail & water

by road, rail & water

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

Transport Transport Transport

water waterwater

Crude steel industry

coking coal

Finished steel

End customers

Raw materials

automotiveflat steel pipes

iron ore

scrap engineering

constructionlong steel

HRC/CRC

tubes

wire rod

Semi finished products

Metal traders and steel service centers

50%

4

products

slabsbloombillets

Source: ABN AMRO

Worldwide dry bulk trade 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)Steel Scrap

Iron ore

Coke 1%

Pig iron 1%products 8%

p3%

30%

Other products

Phosphate1%

p17%

Thermal coal20%

1%

Bauxite2% Grains

10%Coking coal

7%

5Source: Clarkson Research Services

Dry bulk trade 2000-2010 Growth in all dry bulk commodities, especially in steel raw materials

Iron ore240

Growth 2000-2009: Iron ore

200

220 1. iron ore: +102.5%2. steam coal: +71.3%3. coking coal: +20.1%4. grains: +18.3%

Steam coal

160

180g

5. bauxite: +3.6%

Grains

Minor bulks

120

140

2001

=100

)

Coking coal Bauxite and phosphate

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

inde

x (2

6Source: Clarkson Research Services

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

Iron ore major players Production China very high, but Fe content extremely poor

1

Fe

Fe content

33%

23

content 56% Fe

content 65%

Major importers:

1) China

2) Japan

3) S. Korea + Germany

Major exporters:

1) Brazil

2) Australia

3) India

Major consumers:

1) China

2) Russia

3) Japan

7

) y ) ) p

Sources: USGS, ABARE, AME

Baltic dry and iron ore price Higher iron ore demand from China and increasing BDI

14.000 250CORRELATION = 0.86

10.000

12.000200

6.000

8.000

100

150

2 000

4.000

50

100

Mt

0

2.000

12/16/2005 12/15/2006 12/14/2007 12/12/2008 12/11/2009

US

D

0 US

D/M

8

BALTIC Dry Iron Ore Spot price (China)

Source: Thomson Financial Datastream

International iron ore trade China iron ore imports keep rising, at the cost of domestic production

70

50

60

30

40

10

20

Mt

0

2007

-01

2007

-03

2007

-05

2007

-07

2007

-09

2007

-11

2008

-01

2008

-03

2008

-05

2008

-07

2008

-09

2008

-11

2009

-01

2009

-03

2009

-05

2009

-07

2009

-09

2009

-11

9

China iron ore imports Australia iron ore exports Brazil iron ore exports

Source: Clarkson Research Services

Coking coal major players

3

China has abundant resources of coking coal, but also many mine accidents

1

3

2Major importers:

1) Japan

2) South Korea

3) India

Major exporters:

1) Australia

2) Indonesia

3) United States

Major consumers:

1) China

2) Japan

3) India + Russia

10

) ) )

Sources: USGS, ABARE, AME, IEA

International coal trade China domestic coal of poor quality, difficult to mine and many small companies

1.680 Importvolumes China:

1 080

1.280

1.480p

- 2008-12: 2.8 Mt- 2009-12: 16.4 Mt- equals: +485.7%

680

880

1.080

80

280

480

2002

-01

2002

-04

2002

-07

2002

-10

2003

-01

2003

-04

2003

-07

2003

-10

2004

-01

2004

-04

2004

-07

2004

-10

2005

-01

2005

-04

2005

-07

2005

-10

2006

-01

2006

-04

2006

-07

2006

-10

2007

-01

2007

-04

2007

-07

2007

-10

2008

-01

2008

-04

2008

-07

2008

-10

2009

-01

2009

-04

2009

-07

2009

-10

2010

-01

11Source: Clarkson Research Services

Coal exports-USA Coal exports-Australia China importvolume

International steel trade

160170140

Extra-regional: China was biggest exporter of steel in 2006, 2007 and 2008; in 2009 Chinese steel exports dropped strongly (position 6)

110120130140150160

0=10

0)

40

60

80

100

120

8090

100110

2000

-01

2001

-01

2002

-01

2003

-01

2004

-01

2005

-01

2006

-01

2007

-01

2008

-01

2009

-01

2010

-01

inde

x (2

000

0

20

40

1992

-01

1993

-01

1994

-01

1995

-01

1996

-01

1997

-01

1998

-01

1999

-01

2000

-01

2001

-01

2002

-01

2003

-01

2004

-01

2005

-01

2006

-01

2007

-01

2008

-01

2009

-01

2 2 2 2 2 2 2 2 2 2 2

Steel Trade Weighted IndexChinese steel production EU-12 steel production World steel production

2009 %-change 2008 2009 %-change 2008

World steel exporters World steel importersJan-Sep (2009 in Mt) Jan-Sep (2009 in Mt)

1. Japan 22.8 -22.0% 1. China 17.1 40.0%2. EU 27 21.7 -17.0% 2. EU 27 15.4 -51.0%3. Russia 20.0 -11.0% 3. S. Korea 13.7 -41.0%4. Ukraine 17.6 -24.0% 4. USA 10.4 -52.0%

12Sources: IISI, ISSB, Clarkson Research Services

5. S. Korea 14.3 -6.0% 5. Turkey 7.4 -33.0%

So, the question is …

What about China?What about China?

13

China’s economic indicators

13.014.2

1012

14CHINA: GDP

6

8

10CHINA: INFLATION

3.8

8.6

2

4

6

8

10

0

2

4

6

02

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

CHINA: IMPORT & EXPORT CHINA: INDUSTRIAL PRODUCTION

y.o.y. %-change-4

-2

2003 2004 2005 2006 2007 2008 2009

y.o.y. %-change

20

40

60

80

15

20

25

-60

-40

-20

0

98 99 00 01 02 03 04 05 06 07 08 090

5

10

y.o.y. %-change y.o.y. %-change

14

98 99 00 01 02 03 04 05 06 07 08 09Export Import 2003 2004 2005 2006 2007 2008 2009

Source: Bloomberg

Investments in China

120

Property construction and investments are likely to remain strong in 2010, judging from newly started projects in recent months

I t t i t ti

80

100

120 Investments in construction, y.o.y. % change

40

60

-20

0

20

-60

-40

20

15Source: NBS, Bloomberg

1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009

What does ABN AMRO expect?

The road aheadThe road aheadviews ABN AMRO until 2011

16

Our view on Global Economy

60 15

► Recovery global economy continues, with China leading the way forward- in our base case, inflation remains moderate, on condition that prices for e.g. dry bulk commodities, property and oil do not increase strongly on the medium term

50

60

5

10

15

hang

e

30

40

2006 2007 2008 2009 2010

-5

0

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

010e

011e

y.o.

y. %

-ch

2006 2007 2008 2009 2010VS ISM China PMI Eurozone PMI

2 2

US GDP World GDP Eurozone GDP China GDP

2009 2010 2011 2009 2010 2011GDP Growth (% y.o.y.) Inflation (CPI, % y.o.y. avg)

009 0 0 0 009 0 0 0US -2.4% 3.4% 2.3% -0.3% 1.9% 1.9%China 8.6% 9.4% 9.9% -0.7% 3.0% 3.4%EU -3.8% 1.7% 1.5% 0.3% 1.2% 1.6%W ld

17Sources: Thomson Financial Datastream, Bloomberg, ABN AMRO (forecasts)

World -0.7% 4.0% 4.0% 2.3% 3.4% 0.8%

Our view on China► There are some signs of trouble ahead: e.g. new bubbles (e.g. real estate, stock market) and overheating Chinese economy- however, China is still a developing country and it is far from done growing

South Korea

1.1001.2001.300

a (k

g)

, p g y g g

Taiwan700800900

1.000

n pe

r cap

ita

China

Japan

US

GermanyItaly

France

Canada

300400500600700

onsu

mpt

ion

IndiaBrazil

RussiaUS

Ukraine

France

UK Netherlands

0100200300

stee

l co

18

0 10.000 20.000 30.000 40.000 50.000GDP per capita (USD)

Sources: Worldbank, IISI, ABN AMRO

Our view on Dry bulk► Long term iron ore contracts end in April 2010:- because of high demand, iron ore benchmark price may increase again,

► L t ki l t t h t t

- however, higher contract price iron ore means less (Chinese) demand, which could be some bad news news for capesizers and panamaxen.

► Long term coking coal contracts have yet to start:- expectations on hefty price increase are mounting.

► Market conditions for shipping should improve:pp g p- robust global and Chinese economic growth in 2010/’11

- higher demand for steel (and metal) scrap,

- ongoing urbanization emerging markets,

- recovery real estate markets worldwide,

- strong growth expected in Chinese auto market,

- crude steel utilization ratio still at low levels.

19Sources: Clarkson Research Service, CRU, ABN AMRO

E d f t tiEnd of presentation

F ti d f th i f ti l t tFor question and further information, please contact:Casper BurgeringSenior sector economist Metals & MiningSenior sector economist Metals & Mining

ABN AMRO Group Economics | Sector Researchtel: +31 20 383 26 93e mail casper b rgering@nl abnamro come-mail: casper.burgering@nl.abnamro.com