30 March Shipbuilding News. Boxships lead newbuild activity. Hanjin eyes value added vessels. Run for LNG carriers

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1 Korean Shipping messenger A collection of articles and daily news for the shipping industry with focus on the Korean shipping and shipbuilding markets. 30 March 2011 Shipbuilding News Boxships lead newbuild activity Orders for new super-large containerships are in the limelight in the newbuilding market during the past few weeks, as more and more owners are trying to prepare themselves for the expected rise of global container trade, especially from 2013 onwards. OOCL confirmed an order of $816 million with Samsung Heavy Industries for six ships of near 14,000 TEUs each, the largest ships the company has ever operated. According to the latest weekly report from Clarksons, the demand from the operators for the very large ships seems to remain firm - as the fight for market share and maximising economies of scale continues. It will be interesting to see if this spate of ordering continues and very interesting to see if the large Japanese Liner companies also join the ordering frenzy being witnessed at the moment. There have been a total of 17 firm container ships over 10,000 TEU ordered so far this month and if all options are declared for these firm orders, this will rise to 40 ships. With the liner companies seemingly focusing on the largest super post-panamax ships, it will be interesting to see how the newbuilding market continues to develop for the smaller feeders and new generation of post-panamax 3-7,000 TEU Vessels. We believe that the trend will continue, of non historical container owners entering the sector and becoming tonnage providers for the lines, servicing the very important inter-regional and feeding trade. One thing remains certain - with the giant ships on the long haul routes there will more than likely be a strong demand for shorter haul feeding off from the large container ports - and again this adds further strength to the broader container newbuilding story said the world s leading shipbroker. Run for LNG carriers South Korean shipbuilders are going at winning new LNG carrier orders since world's shipowners are increasingly placing newbuilding orders due to the sharp rise of oil prices and fear of a nuclear power plant caused by the recent shock in Japan. Overall nine new LNG ship orders have been placed worldwide so far this year while only five newbuilding orders were placed for a full-year China's Hudong-Zhonghua Shipbuilding and Japan's Mitsubishi Heavy Industries waltzed off with four and five new LNG ship orders of the nine respectively. Hereupon, Korean shipbuilders are to roll out very aggressive new order activities for future newbuild LNG orders. Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering and STX Offshore & Shipbuilding are in a very keen competition with Japan's Kawasaki Heavy Industries and Mitsubishi for the 14 LNG ships to be put into Nigeria's Brass LNG Project. Golar LNG Energy is also progressing newbuilding talks with some Korean shipyards through several ship brokers to order six LNG carriers. The shipowner will order two firm ships of 165,000 CBM and four options. The shipbuilding industry expects overall 40 LNG ships will be ordered over the next two years since demands for LNG are increasing thanks to the skyrocketing oil prices and the risk of a nuclear power plant. Hanjin eyes value added vessels South Korea's Hanjin Heavy Industries & Construction is seen to be able to secure high-priced ships for its orderbook considering the recovery of mid-size boxship market situations and advantage of profit management. Park Seung-hyun, researcher of Seoul-based IBK Investment & Securities, says, "Despite a decrease in freight, such as China Containerized Freight Index (CCFI), charter rates on small and medium boxships are continuously rebounding. As the world's strongest in the S&M boxship newbuilding market, Hanjin can revive its new order momentum through short-time delivery if its Youngdo yard is back to the normal." "Since the Youngdo yard has entered into the up-phase of steel prices without any order backlog, Hanjin can reserve relatively higher-priced ships through an increase in newbuilding prices when it resumes new order intake," he adds. Meanwhile, the securities company expects Hanjin's sales for the first quarter to decrease by 12% against the previous quarter to KRW 664bn ($598m), operating profit to increase by 31% to KRW 22bn and net profit to turn around to KRW 4bn.

2 Zhejiang Taitong pens 47K bulkers China's Zhejiang Taitong Shipbuilding has won two bulkers of 47,500 DWT from a compatriot shipowner, Zhejiang Wugang - the first newbuilding order the shipowner has placed. The newbuilding order worth CNY 400m ($61m), in total, is clinched for delivery in early 2013 with the construction launching between May and June. Daewoo bids for LNG carriers South Korea's Daewoo Shipbuilding & Marine Engineering believes a loss of nuclear capacity in Japan will further boost a nascent recovery in new LNG ship orders. "The LNG market has been slowly recovering from virtually zero orders from late 2008 to early and the nuclear crisis in Japan will obviously boost further growth," Hwang Tae-jin, executive vice president at Daewoo, told Reuters. Daewoo, the world's No.1 LNG vessel builder, is now participating in tenders to supply LNG ships to Russian and European firms, Hwang said, adding that overall LNG ship orders could grow to around 15 to 20 ships annually starting this year. "LNG demand is rising and charter rates are also going up," Hwang said. Although the LNG spot market is not huge because most LNG projects are based on long-term contracts, Hwang said, speculative orders for LNG vessels may start to emerge. Increasing LNG demand after Japan's nuclear crisis would lend support to rising ship supplies in the long term, easing a shortage of vessels sooner than expected, Hwang said. "But all shipbuilders are waiting to see when it might be good to enter into LNG vessel deals and waiting for a forecast that the LNG market is going in a positive direction," Hwang said. LNG traffic on the seas, which showed 6 percent average annual growth from , is forecast to rise by 7.7 percent annually by 2015 due to Japan's nuclear woes, according to Seoul-based KB Investment & Securities. Hwang said Daewoo had no plan to lift 2011 order target of $11bn due to capacity constraints at its shipyard. There are also pressures on the cost side due to rising prices for steel plates, which Hwang said, could only be partly passed on to customers. Drillship on track As Korea's large shipbuilders have won a series of new orders for drillships since the beginning of the year, drillship market situations seem to be recovering. For example, Hyundai Heavy Industries, which could not add any new drillship order into its orderbook last year, has already won five drillships with two options since this year. Daewoo Shipbuilding & Marine Engineering has also obtained three drillship orders plus two options, and Samsung Heavy Industries has just added two drillship orders into its orderbook, reserving other additional options. Those big three waltzed off with four drillship orders - Samsung for three and Daewoo for one - out of the total of six units ordered during last year, but have grabbed 10 firm new orders for drillships this year. This is driven by the development boom of offshore oil and gas fields on back of increasing oil prices. Therefore, the recovery in drillship market situations is cleary seen while Korean shipbuilders are rising as the biggest beneficiary from the drillship boom. Hyundai has launched designing the three drillships ordered from Noble Drilling. Slated for delivery in 2013, the new units are 229 meters long and 36 meters wide with drilling capacity of up to 12 kilometers. Besides them, Hyundai has won two more with one option respectively from America's Diamond Offshore Drilling. Daewoo has received two from Norway's Aker Drilling and one from America's Atwood Oceanics. All of the newbuilds Daewoo won are 238 meters long and 42 meters wide, clinched for delivery in Plus, Daewoo has made an agreement with Aker on two options. Samsung, which is currently leading the drillship newbuilding market, has also won two drillshp orders from Pacific Drilling, a subsidiary of America's Sammy Ofer Group, since the year, making an agreement on two options. If those options go into effect, Korea can score at least 16 new drillship orders, which exceeds the average newbuilding orders of 15 ships of a booming season. And additional new drillship orders are expected to be placed at Korean yards. As a result, the representative high value added drillships requiring large-scale shipbuilding facilities seem to be dominated by Korean shipbuilders for a time being. Hyundai doing good job in offshore South Korea's Hyundai Heavy Industries is said to have scored $2.393bn in the offshore sector during January and February this year, which is almost the same as the overall performance of the previous year. The yard won a large FPSO and two offshore units worth $1.528bn in total from British oil major, BP, in January, attaining around 50% of this year's target of the offshore sector. Meanwhile, Hyundai could not grab any new order for general commercial ships during February with the combined new orders for commercial ships during January and February coming to only $2.053bn.

3 Taiwan s Shipbuilding market continues decline Taiwan's shipbuilding market is still depressed despite recent economic growth and might not show a strong rebound until 2012, Taiwan's leading ship manufacturer said Wednesday. Industry prices which have fallen sharply since the economic recession took hold in 2008, have only recovered to 80 percent of pre-crisis levels, said Tang Tayping, chairman of the state-owned shipbuilder, CSBC Corp. Taiwan has failed to provide better mortgage conditions for foreign companies and many buyers are still delaying taking delivery of new vessels to avoid having to make early payments, Tang said, adding that those factors are hampering the market growth. As a result, CSBC will increase its production capacity by 50 percent to meet the challenges of the sluggish market, Tang said. Although Japan has been sent reeling by the March 11 earthquake, tsunami and nuclear crisis, its shipbuilding industry has not been affected and remains one of the world's top three shipbuilders along with China and South Korea, Tang said, adding that his company's orders of raw materials and equipment from Japan have been unaffected. The annual revenue of CSBC Corp. decreased by 16 percent to NT$26.1 billion (US$870 million) before tax, while the price per share has decreased from last year's Shipping & Business News China Cosco Predicts 32% Bulk-Cargo Slump as Global Fleet Outpaces Demand China Cosco Holdings Co., Asia s largest shipping company by market value, forecast a 32 percent drop in dry-bulk traffic this year as expansion in the global fleet outpaces demand. Commodity shipments will slump to 959 billion ton- nautical miles this year from 1.42 trillion last year, the Tianjin, China-based shipping line said in a statement late yesterday. Container volumes will rise 9.4 percent to 6.8 million, it said. Global dry-bulk capacity will expand 14 percent this year, outpacing a 6 percent rise in demand, the shipping line said, after China financed orders for new vessels during the global recession to help prop up shipyards. The capacity increase has caused the Baltic Dry Index, a commodity- shipping rates benchmark, to drop 47 percent in the past year. There are simply too many bulk ships on order right now, said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. The Baltic Dry Index could remain at current levels for about four years unless there s a spike to demand. Traffic for the company s dry-bulk fleet last year was little changed, trailing a 19 percent jump in container volumes as rebounding consumer spending in the U.S. and Europe revived demand for shipments of Asian-made goods. The company s container-shipping revenue was 43 percent higher than its dry-bulk sales in 2010 after being almost the same a year earlier. Container Gains The container pick-up helped China Cosco, operator of the nation s largest cargo-box fleet, post a 2010 net income of 6.9 billion yuan, compared with a year-earlier loss of 7.5 billion yuan, according to the statement. The company was expected to post a profit of 6.8 billion yuan, according to the average of 14 analyst estimates compiled by Bloomberg. China Shipping Container Lines Ltd., the nation s secondbiggest cargo-box carrier, separately reported a profit of 4.2 billion yuan last year, compared with a loss 6.49 billion yuan a year earlier, in a Shanghai stock exchange statement. This year, the container-shipping market will maintain its equilibrium due to the increase of cargo volume and reasonable management of capacity industrywide, China Cosco said. Europe, Transpacific The company s container-shipping revenue surged 68 percent last year to 46.3 billion yuan, with sales on Asia- Europe and transpacific routes both almost doubling because of increased volumes and higher rates. The company, with 150 container ships at the end of last year, will receive six this year and 32 more in the next two years. China Cosco s dry-bulk fleet totaled 450 vessels at the end of last year. It has 18 ships on order through The company, controlled by China Ocean Shipping (Group) Co., dropped 0.5 percent to HK$8.05 as of 10:29 a.m. in Hong Kong. The stock has fallen 2.3 percent this year, while the benchmark Hang Seng Index climbed 1.3 percent. The Baltic Dry Index dropped 41 percent in 2010 to end the year 1,773. The index has fallen 11 percent this year because of an oversupply of vessels and slowing demand in China. Bulk Backlog The backlog of on-order bulk ships is equal to 43 percent of the current global fleet by deadweight tons compared with a 25 percent rate for container ships, according to data on the Bloomberg terminal. Iron ore imports by China, the world s biggest buyer, may also fall for a second year in 2011 as record high prices spur output from domestic mines, according to Mysteel Research Institute. Shipments into the country fell 1.4 percent last year, the first decline since 1998.

4 OceanFreight buys new Cape duo Anthony Kandylidis-led OceanFreight has taken on capesize newbuilding pair in a cash plus shares deal with an affiliate. Nasdaq-listed OceanFreight has picked up the 206,000- dwt bulkers on order at Chinese yard in a swoop worth around $120m, it told investors Tuesday. While the shipowner is keeping quiet about many of the details of the contract, it does reveal the newbuildings were bought from a company ultimately controlled by Kandylidis. There are presently only 13 ships of 206,000-dwt on order globally, 11 of which are at Shanghai Waigaoqiao Shipyard (SWS) where OceanFreight already has a trio of identical vessels, Clarksons says. OceanFreight will hand Kandylidis 35,657,142 shares to cover the $23.76m already paid on the newbuildings. It will also take on the remaining $95.64m slate at the yard. The first of the newbuildings will be rolled out in the second quarter of 2013 with the other following in the fourth quarter of the same year. Liner capacity reaches 15m TEU Global liner fleet has reached the 15m teu capacity mark for the first time, says Paris-based analyst Alphaliner. The figure is more than double compared to 7m teu as of April Altogether, some 5,965 vessels, totalling 197m dwt, are involved in the container liner trades. Of this month s total, 96.5%, or 5,756 vessels in the liner fleet is fully cellular, amounting to 14.5m teu, with the remaining 3.5% made up of non-cellular containerships, multipurpose vessels on liner services with container carrying capacity, and ro-ro vessels that commonly carry containers on their weather decks. The growth in the world s fleet has coincided with the growth in container ship sizes, and as a result the dwt per slot has dropped from 15.7 dwt per teu in July 2001, when the fleet amounted to 6m teu and 94m dwt, to the 13.1 dwt per teu now. The figures also include those vessels which are in lay-up, however Alphaliner research shows that the idle has now fallen to its lowest in over two years, since November There are now only 84 vessels left in lay-up, amounting to 185,000 teu, a decline of around 25% month-on-april from February, when 99 vessels were idle. Horizon fixes Samsung-built Suez pair Horizon Tankers has reportedly tied up one year contracts with OSG for two of its suezmax newbuildings. Horizon, a spin-off from Anthony Comninos Target Marine, has hired the 158,000-dwt pair Melita and Amarylis to the New York-listed giant, brokers say. A rate of $21,000 per day has been placed on both of the contracts. Brokers say the figure is in line with the present market level but below the $34,000 per day similar vessels are now fetching in the spot market. The Amarylis is expected to be delivered from Samsung Heavy Industries next month, with the Melita set to follow in July, Clarksons says. Norden resale deal cancelled The sale of six Norden handysize newbuildings to an unnamed Greek shipowner has not materialized. The Danish owner announced in January its intention to sell six vessels in its newbuilding programme to an unidentified owner, and subject to the buyer's final approval. The six vessels are all identical designs of 32,700 dwt and currently being constructed in China. Five of the vessels are due for delivery this year and the final one in The Copenhagen-listed company said the Greek buyer has not been able to submit final approval for the purchase and the sale is now terminated. Norden has a newbuilding programme that consists of about 22 handysize vessels, and will now operate these six vessels itself when they are delivered. STX Pan Ocean working at LNG ships Amid strong expectations that there will be increasing demands for LNG and coal in the wake of the recent nuclear power plant shock in Japan, one analysis shows that the LNG volume to be supplied from 2013 will increase dramatically to 89m tons by To transport the increasing volume of LNG, experts say, 100 new LNG ships need putting into service. One insider from STX Pan Ocean, which advanced to the international LNG transportation market in 2009 for the first time among Korean shipping companies, says, "There is a series of oil and gas field projects worldwide and investment in this sector due to the recent surge in demands for LNG, so we will actively attend Korea Gas Corporation's bid to be carried out this year as well as foreign projects through strategical cooperations" Gas Shipping Rates Seen Rising 67% After Quake: Freight Markets The cost of shipping liquefied natural gas may advance 67 percent to a five-year high as Japan replaces its crippled nuclear industry with power plants burning fossil fuels.

5 Ships Stick With Tokyo as Navy Says Radiation Easily Purged Five of the six biggest container shippers are maintaining routes to Tokyo and Yokohama after the U.S. Navy said radiation on vessels from the leaking Fukushima Dai-Ichi nuclear plant can be scrubbed off with soap and water. Genco Shipping & Trading Limited Completes Acquisition of 13 Supramax Vessels Genco Shipping & Trading Limited today announced that it has taken delivery of the Genco Rhone, a Supramax newbuilding. The Genco Rhone is the final vessel to be delivered to the Company under Genco's agreement previously announced on June 25, 2010 to acquire 13 Supramax vessels from Setaf SAS, a wholly owned subsidiary of Bourbon SA. The Company also announced that it has reached an agreement to enter into a spot-market related time charter for the Genco Rhone with AMN Bulkcarriers Inc. for 11 to 13.5 months at a rate based on 102% of the average of the daily rates of the Baltic Supramax Index, or BSI, as reflected in daily reports. Hire is paid every 15 days in arrears net of a 5% third party brokerage commission. Genco maintains the option to convert the balance of any period of this charter to a fixed rate based on the Baltic Supramax Index FFA values at 102%. The time charter for the Genco Rhone is expected to commence on or about March 30, 2011 and is subject to the completion of definitive documentation. The Company used its available cash to pay the remaining balance of approximately $32.13 million for the Genco Rhone. On August 20, 2010, the Company entered into its previously announced $253 million senior secured term loan facility and intends to use the credit facility to refund a total of $21.5 million associated with the purchase of this vessel to the Company. Korean Shipping Messenger Daily News Report is released and distributed freely by Mutualmar. The information in this report is derived from a variety of sources, public and private and Mutualmar explicitly does not claim it is the source of this information. While Mutualmar has used reasonable efforts to include accurate and up-to-date information in this report, makes no warranties or representations as to the accuracy of any information contained herein or accuracy or reasonableness of conclusions drawn there from. Mutualmar assumes no liabilities or responsibility for any errors or omissions in the content of this report.