Panamax & Post-Pmx Market Outlook

Panamax & Post-Pmx Market Outlook (an analysis of the fleet profile, trade prospects, and rates) Aug 2018 bancosta blue studies volume DRY 2018/#10 research www.bancosta.com ; research@bancosta.com Aug 2018 Panamax & Post-Panamax Market Outlook 1

Index 1. Fleet Development page 3 2. Shipbuilding Trends page 18 3. Detailed Age Profiles page 26 4. The Demand Side page 31 5. The Charter and S&P Markets page 43 6. Final Words page 49 Aug 2018 Panamax & Post-Panamax Market Outlook 2

Fleet Development (deliveries, demolitions, fleet growth) Aug 2018 Panamax & Post-Panamax Market Outlook 3

Over the next few slides we will illustrate the current situation of the Panamax & Post-Panamax dry bulk fleet, in terms of trading fleet size, deliveries, demolitions, orderbook, and projected fleet growth. We have broken down the Panamax & Post-Panamax dry bulk fleet into four segments, clearly shown on the next slide (page 5). In this study we consider only general bulk carriers, intentionally omitting all specialized units such as woodchip carriers, self-unloaders etc. According to our calculations, the current trading fleet (including units in lay-up and under repair) of Panamax & Post- Panamax bulkers between 65,000-119,999 dwt consists of 2,630 units equivalent to about 216.0 million dwt, as of August 2018. The orderbook of Panamax & Post-Panamax bulkers between 65,000-119,999 dwt consists of 261 units equivalent to about 21.6 million dwt, around 9.9 percent of the trading fleet in unit terms. In the first 7 months of 2018, we recorded the delivery of 49 units sized between 65,000-119,999 dwt, totaling 4.0 mln dwt. This compares to 94 units equivalent to 7.7 mln dwt delivered during the same period a year ago. Total deliveries in 2018, assuming 30 percent delivery slippage, could fall to around 7 mln dwt compared to 9.3 mln dwt in 2017. Of these units, around 73 percent would be sized between 80,000-84,999 dwt, a large majority of which are of Kamsarmax design, traditionally between 80,000-83,000 dwt. In the first 7 months of 2018, only 4 units equivalent to 0.29 mln dwt were reported demolished, all between 65,000-79,999 dwt. This compares to 32 units totaling 2.34 mln dwt scrapped a year ago. Traditional Panamax vessels continue to be displaced by Ultramax vessels of up to 67,000 dwt, and Kamsarmax vessels between 80,000-83,000 dwt. However, improved market sentiments are expected to exert pressure on scrapping levels this year, although this could increase in future years with implementation of the ballast water and sulphur regulations. Orders picked up from 2H 2017, with 42 orders placed during this period out of a total 48 orders reported in 2017, mostly in the 80,000-84,999 dwt range. In the first 7 months of 2018, 28 orders amounting to 2.3 mln dwt were placed. Aug 2018 Panamax & Post-Panamax Market Outlook 4

Our size breakdown for Panamax & Post-Panamax bulkers: 100,000-119,999 dwt 85,000-99,999 dwt 80,000-84,999dwt 65,000-79,999 dwt Baby-Cape Post-Panamax Kamsarmax Traditional Panamax (note: for all sizes, includes general purpose bulk carriers, excludes specialist vessels such as cement carriers, con-bulkers, woodchip carriers and self-unloaders) Aug 2018 Panamax & Post-Panamax Market Outlook 5

Pmx & Post-Pmx Fleet By Size Sector - by No. of Units (August 2018 ; only units between 65,000-119,999 ; in number of units) 85,000-99,999 dwt 427 16% 100,000-119,999 dwt 130 5% 65,000-79,999 dwt 1,135 43% 80,000-84,999 dwt 938 36% The dry bulk fleet between 65,000-119,999 dwt currently totals 2,630 units. 1,135 units are between 65,000-79,999 dwt, 938 units between 80,000-84,999 dwt, 427 units between 85,000-99,999 dwt and 130 units between 100,000-119,999 dwt. Aug 2018 Panamax & Post-Panamax Market Outlook 6

Pmx & Post-Pmx Fleet By Size Sector - by DWT (August 2018 ; only units between 65,000-119,999 dwt ; in million dwt) 85,000-99,999 dwt 39.2 18% 100,000-119,999 dwt 14.6 7% 65,000-79,999 dwt 85.3 39% 80,000-84,999 dwt 76.8 36% The fleet between 65,000-119,999 dwt totals 216.0 mln dwt. In terms of capacity, the fleet between 65,000-79,999 dwt represents around 39 percent, the fleet between 80,000-84,999 dwt 36 percent, the fleet between 85,000-99,999 dwt 18 percent, and the fleet between 100,000-119,999 dwt only 7 percent. Aug 2018 Panamax & Post-Panamax Market Outlook 7

mln DWT Pmx & Post-Pmx Deliveries + Orderbook in DWT - Annual (August 2018 ; only units between 65,000-119,999 dwt ; after accounting for 30% slippage) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt In 2017, 113 units totaling 9.3 mln dwt were delivered between 65,000-119,999 dwt, dominated by vessels between 80,000-84,999 dwt which represented 80 percent of deliveries in deadweight terms. This is compared to 116 units amounting to 9.6 mln dwt delivered in 2016. In 2018, after assuming some delivery slippage, deliveries are expected to fall to around 7 mln dwt. Aug 2018 Panamax & Post-Panamax Market Outlook 8

mln DWT 3.0 Pmx & Post-Pmx Deliveries in DWT - Monthly (August 2018 ; only units between 65,000-119,999 dwt ; in million dwt) 2.5 2.0 1.5 1.0 0.5 0.0 07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt In the first 7 months of 2018, we recorded the delivery of 49 units sized between 65,000-119,999 dwt, totaling 4.0 mln dwt. This compares to 94 units equivalent to 7.7 mln dwt delivered during the same period a year ago. Of the units delivered this year, 35 units were sized between 80,000-84,999 dwt, 8 were between 85,000-99,999 dwt, 5 were between 65,000-79,999 dwt, and 1 was a 100,000 dwt vessel. Aug 2018 Panamax & Post-Panamax Market Outlook 9

mln DWT Pmx & Post-Pmx Demolitions in DWT - Annual (August 2018 ; only units between 65,000-119,999 dwt ; in million dwt) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt Demolition activity of the dry bulk fleet between 65,000-119,999 dwt in 2017 fell sharply by 60 percent year-on-year, with a total of 3.4 mln dwt sent for scrap. Demolition was dominated by units between 65,000-79,999 dwt, accounting for 92 percent of demolitions in terms of deadweight. Improved market sentiments are expected to exert pressure on scrapping levels, although this could increase in future with implementation of the ballast water and sulphur regulations. Aug 2018 Panamax & Post-Panamax Market Outlook 10

mln DWT Pmx & Post-Pmx Demolitions in DWT - Monthly (August 2018 ; only units between 65,000-119,999 dwt ; in million dwt) 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt In the first 7 months of 2018, only 4 units equivalent to 0.29 mln dwt were reported demolished, all between 65,000-79,999 dwt. This compares to 32 units totaling 2.34 mln dwt scrapped a year ago. Aug 2018 Panamax & Post-Panamax Market Outlook 11

mln DWT Deliveries and Demolitions in DWT - Jan-Jul 2018 (August 2018; only units between 65,000-119,999 dwt ; in million dwt) 3.5 3.0 2.9 2.5 2.0 1.5 1.0 0.5 0.0 0.7 0.4 0.3 0.1 0.0 0.0 0.0 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt Deliveries Demolitions In the first 7 months of 2018, there was a net addition across all segments of the fleet between 65,000-119,999 dwt, with demolition activity only seen in the fleet between 65,000-79,999 dwt. There continues to be strong addition in the fleet between 80,000-84,999 dwt due to the popularity of Kamsarmaxes. Aug 2018 Panamax & Post-Panamax Market Outlook 12

mln DWT 260.0 240.0 220.0 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Projected Total 65,000-119,999 dwt Bulk Fleet Growth (only units between 65,000-119,999 ; in mln dwt ; assuming 30% slippage) +18% +17% +10% +5% +2% +0% +3% +3% +3% +2% 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 65,000-119,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for 2018-2020 is based on the current orderbook after assuming delivery slippage, and assumes lower demolition activity compared to 2015-2016 as the market rebalances from fewer orders and deliveries. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Panamax & Post-Panamax Market Outlook 13

mln DWT Projected 100,000-119,999 dwt Bulk Fleet Growth (only units between 100,000-119,999 ; in mln dwt ; assuming 30% slippage) 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 +108% +54% +9% +6% +5% +2% +1% +0% +2% +0% 0.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 100,000-119,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for 2018-2020 is based on the current orderbook after assuming delivery slippage, and assumes lower demolition activity compared to 2015-2016 as the market rebalances from fewer orders and deliveries. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Panamax & Post-Panamax Market Outlook 14

mln DWT Projected 85,000-99,999 dwt Bulk Fleet Growth (only units between 85,000-99,999 ; in mln dwt ; assuming 30% slippage) 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 +39% +21% +9% +4% +1% +2% +2% +2% +1% +0% 0.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 85,000-99,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for 2018-2020 is based on the current orderbook after assuming delivery slippage, and assumes lower demolition activity compared to 2015-2016 as the market rebalances from fewer orders and deliveries. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Panamax & Post-Panamax Market Outlook 15

mln DWT Projected 80,000-84,999 dwt Bulk Fleet Growth (only units between 80,000-84,999 ; in mln dwt ; assuming 30% slippage) 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 +50% +62% +31% +15% +13% +13% +11% +6% +10% +7% 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 80,000-84,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for 2018-2020 is based on the current orderbook after assuming delivery slippage, and assumes lower demolition activity compared to 2015-2016 as the market rebalances from fewer orders and deliveries. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Panamax & Post-Panamax Market Outlook 16

mln DWT Projected 65,000-79,999 dwt Bulk Fleet Growth (only units between 65,000-79,999 ; in mln dwt ; assuming 30% slippage) 120.0 100.0 80.0 60.0 40.0 20.0 +5% +3% +2% +1% -3% -8% -3% -0% -1% -3% 0.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 65,000-79,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth Our growth forecast for 2018-2020 is based on the current orderbook after assuming delivery slippage, and assumes lower demolition activity compared to 2015-2016 as the market rebalances from fewer orders and deliveries. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations. Aug 2018 Panamax & Post-Panamax Market Outlook 17

Shipbuilding Trends (newbuilding orders, major builders) Aug 2018 Panamax & Post-Panamax Market Outlook 18

mln DWT Pmx & Post-Pmx Newbuilding Orders in DWT - Monthly (August 2018 ; only units between 65,000-119,999 dwt ; in million dwt) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt Ordering activity for units between 65,000-119,999 dwt rose dramatically in the second half of 2013 and into 2015, before dropping to more subdued levels with only 2 orders for 81,000 dwt units placed in 2016. Orders picked up again in the second half of 2017 with with 46 orders placed during this period, mostly in the 80,000-84,999 dwt range. In the first 7 months of 2018, 28 orders amounting to 2.3 mln dwt were placed. Aug 2018 Panamax & Post-Panamax Market Outlook 19

units Pmx & Post-Pmx Newbuilding Orders by Ship Size - Annual (August 2018 ; only units between 65,000-119,999 dwt ; in number of units) 250 200 201 150 100 50 26 44 26 0 7 4 1 1 0 0 0 0 4 0 2 2015 2016 2017 2018 (1-7) 0 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt Contracting of units between 65,000-119,999 dwt in previous years were dominated by units between 80,000-84,999 dwt, with 201 units of this size ordered in 2015. New orders seen in 2017-2018 have largely been within the same size category as well. Aug 2018 Panamax & Post-Panamax Market Outlook 20

Orderbook / Trading Fleet 30% Pmx & Post-Pmx Orderbook as Proportion of Trading Fleet (August 2018 ; only units between 65,000-119,999 dwt ; in number of units) 25% 25% 20% 15% 10% 10% 5% 4% 5% 0% 1% 65,000-79,999 80,000-84,999 85,000-99,999 100,000-119,999 Tot Orders Due to the very low number of new orders registered in 2016, the proportion between orderbook and trading fleet had been trending towards moderate levels. However, the recent increase in new orders in particularly the 80,000-84,999 dwt category now appears to be increasing the ratio yet again. Aug 2018 Panamax & Post-Panamax Market Outlook 21

deadweight Pmx & Post-Pmx Delivered Units Size Distribution (only units 65,000-119,999 dwt ; delivered as year of built/capacity matrix) 120,000 115,000 110,000 105,000 100,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 1983 1988 1993 1998 2003 2008 2013 2018 Year of delivery The traditional Panamax vessel has grown from between 65,000-70,000 dwt to between 75,000-85,000 dwt in recent years. Aug 2018 Panamax & Post-Panamax Market Outlook 22

deadweight 120,000 115,000 110,000 105,000 100,000 95,000 90,000 85,000 80,000 75,000 70,000 Pmx & Post-Pmx Orderbook Size Distribution (only units 65,000-119,999 dwt ; as date of delivery/capacity matrix) 65,000 07-2018 12-2018 07-2019 01-2020 07-2020 01-2021 07-2021 Year of delivery The Panamax and Post-Panamax orderbook is focused on vessels between 80,000-85,000 dwt, with a few larger vessels also scheduled for delivery. Aug 2018 Panamax & Post-Panamax Market Outlook 23

units Pmx & Post-Pmx Orders by Country of Build - Annual (only units between 65,000-119,999 dwt; in number of units) 140 120 114 119 100 80 60 40 20 0 23 20 19 5 5 7 0 1 0 1 0 0 0 2015 2016 2017 2018 (1-7) Japan Korea China Other 2 Chinese shipyards accounted for 50 percent of dry bulk orders between 65,000-119,999 dwt in 2015, while Japanese shipyards accounted for another 48 percent. In 2017, there was a resurgence in Chinese orders, and a spate of Kamsarmax orders placed at Tsuneishi Heavy Industries (Cebu) in the Philippines. In the first 7 months of 2018, Japanese shipyards now account for the majority of orders, mostly between 80,000-84,999 dwt. Aug 2018 Panamax & Post-Panamax Market Outlook 24

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 units 400 Pmx & Post-Pmx Age Profile By Country of Build (only units between 65,000-119,999 dwt ; in number of units) 350 300 250 200 150 100 50 0 Japan Korea China Europe Others Output from Japanese shipyards has remained relatively consistent over the last two decades, although they are expected to lose out in the coming years as the competitiveness of Chinese yards improve. China has shown extreme elasticity in absorbing excess demand in recent years. Aug 2018 Panamax & Post-Panamax Market Outlook 25

Detailed Age Profiles (for individual sizes) Aug 2018 Panamax & Post-Panamax Market Outlook 26

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 units Baby-Cape (100,000-119,999 dwt) Age Profile (in units) 45 40 35 30 25 20 15 10 5 0 (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs No of units 0 0 0 3 5 103 19 % of fleet 0% 0% 0% 2% 4% 79% 15% Aug 2018 Panamax & Post-Panamax Market Outlook 27

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 units Post-Panamax (85,000-99,999 dwt) Age Profile (in units) 100 90 80 70 60 50 40 30 20 10 0 (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs No of units 1 4 5 16 56 288 57 % of fleet 0% 1% 1% 4% 13% 67% 13% Aug 2018 Panamax & Post-Panamax Market Outlook 28

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 units Kamsarmax (80,000-84,999 dwt) Age Profile (in units) 180 160 140 120 100 80 60 40 20 0 (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs No of units 0 0 0 5 82 462 389 % of fleet 0% 0% 0% 1% 9% 49% 41% Aug 2018 Panamax & Post-Panamax Market Outlook 29

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 units Traditional Panamax (65,000-79,999 dwt) Age Profile (in units) 120 100 80 60 40 20 0 (updated in August 2018) Scrapped or Total Loss Trading Orderbook Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs No of units 4 17 135 260 294 318 107 % of fleet 0% 1% 12% 23% 26% 28% 9% Aug 2018 Panamax & Post-Panamax Market Outlook 30

The Demand Side (coal, iron ore, grains) Aug 2018 Panamax & Post-Panamax Market Outlook 31

Panamax & Post-Panamax (65,000-119,999 dwt) vessels are primarily employed in the transportation of coal estimated to account for around 50 percent of the Panamax & Post-Panamax trade. Grain and soybean also play a large part in the Panamax & Post-Panamax business, estimated to account for around 30 percent of their cargoes. The most popular grain routes are from the U.S. Gulf and Latin America to China and from the Black Sea to the Middle East. They are also involved in the iron ore trade, especially in the shorter distance routes. Coal In 2017, China s coal and lignite imports grew a relatively strong 6.1 percent year-on-year to 271.1 mln tonnes, estimated to account for around 20 percent of global coal imports. This came from a combination of factors, including strengthening thermal electricity output, strong demand from domestic steel mills, and improvements in the construction and industrial sectors. However, Chinese coal imports could be threatened by government policies to control domestic coal prices and increase local production this year. According to China s National Energy Administration (NEA), China aims to increase domestic coal production by 7.3 percent to 3.7 billion tonnes in 2018. Media outlets also reported restrictions on coal imports from April 2018 in some eastern provinces, as the government intervened to cool surging coal prices. In spite of these factors, coal imports are still expected to pick up from June to August during the peak demand season. In the first half of 2018, Reuters reported that Chinese seaborne coal imports are estimated to have surged around 14 percent, largely due to an increase in Indonesian imports due to their lower sulphur content and substantial discount to higher-quality thermal coal from Australia. As the U.S.-China trade war escalates, China has proposed coal to be included in the list of U.S. imports that could soon face import duties. However, this is not expected to have a large impact as China is not a major buyer of U.S. coal. In 2017, China imported 3.2 million tonnes of U.S. coal, equivalent to only 1 percent of total Chinese coal imports. Aug 2018 Panamax & Post-Panamax Market Outlook 32

Japan s coal imports increased 1.6 percent to 192.8 million tonnes in 2017, as the country continues to rely heavily on coal for power generation while the majority of the country's nuclear reactors remain shut following the Fukushima disaster nearly seven years ago. Court orders and public opposition have held up the return of nuclear plants, with only 8 out of 42 operable reactors currently approved to restart. However, further restarts of nuclear power plants from next year could reduce coal purchases. In the first half of 2018, Japanese coal imports fell 2.6 percent to 91.8 million tonnes. South Korea s coal imports also increased by a strong 10.2 percent to 148.3 mln tonnes in 2017, as nuclear reactor outages impacted energy supply, and new coal-fired power stations came online. This benefited tonne-mile demand as coal imports increased from Indonesia and longer haul destinations such as Canada, South Africa, Colombia, and the U.S.. However, South Korea s demand profile for thermal coal is expected to change with the adoption of a new 0.4% sulphur limit for thermal coal used in their coal power plants, and a consumption tax for imported thermal coal that favors higher calorific thermal coal. These factors could favor increased imports from Colombia, South Africa, and Russia, with the longer haul supplies likely to utilize more Capesizes for transport. In the first half of 2018, South Korea s coal imports increased by 0.9 percent to 73.9 million tonnes. India appears set to be a bright spot for coal trade this year, as domestic logistical bottlenecks due to a shortage of trains, regulatory changes targeting pollution cuts, and surging power demand from household electrification all fuel higher imports. State-run Coal India Ltd. (CIL), which meets around 84 percent of India s coal demand, has also been failing to meet production and shipment targets, creating a demand gap that needs to be met through imports. These factors thus encouraged increased shipments from suppliers such as Indonesia, South Africa, and the U.S.. Iron Ore China remains very much at the centre of the action, estimated to account for around 70 percent of global iron ore imports. In comparison, iron ore imports by both Japan and Europe combined are estimated at around 15 percent of the global trade. Aug 2018 Panamax & Post-Panamax Market Outlook 33

Chinese iron ore imports grew 4.9 percent in 2017 to 1.075 billion tonnes, supported by strong demand from steel mills over the year. Chinese crude steel output increased 4.6 percent to reach 845 mln tonnes in 2017, as steel prices strengthened due to capacity cuts targeting low quality furnaces, increased stockpiling ahead of winter production cuts, and improved demand from construction and manufacturing. However, growth in China s iron ore imports has slowed in the first half of 2018, decreasing 1.6 percent year-on-year to 531 million tonnes, even as domestic steel production increased by 7.1 percent year-on-year over the same period. China s steel consumption is generally expected to slow this year, as the country s property sector faces challenges from policy and a clampdown on credit growth. Emphasis on addressing air pollution has also been increasing, with cities like Tangshan, Handan, and Cangzhou extending winter output cuts after the restrictions ended in mid Mar 2018, and another round of winter output cuts expected in China this year end factors which are expected to cap Chinese steel production growth this year. However, as China clamps down on environmental pollution, there has also been increasing emphasis on the quality of raw materials used, resulting in greater popularity of higher quality iron ore imports from especially Australia and Brazil. Long haul imports from Brazil in particular could become an important driver of dry bulk freight rates due to their higher quality. Ample iron ore export capacity in Australia and Brazil also mean imports continue to be more cost competitive compared to inefficient domestic miners in China. Furthermore, in line with stricter environmental policies, Chinese authorities revoked about a third of domestic iron ore mining licenses in 2017, further capping domestic iron ore output: In the first half of 2018, Chinese crude iron ore production fell by a sharp 39 percent. Tangshan, the country s top steelmaking city in Hebei province, has also said it will close 226 mining firms - half of which are iron ore miners - that do not have legitimate licenses as part of efforts to curb illegal mining and cut pollution. These factors are expected to help provide some support for Chinese iron ore import volumes this year. Aug 2018 Panamax & Post-Panamax Market Outlook 34

Wheat, Coarse Grains, & Soybeans Global wheat and coarse grain exports are estimated to have grown 2.5 percent in the 2017/18 marketing year, mainly due to an increase in imports by the Middle East, North America, and the E.U.. The trade is forecast to grow another 1.7 percent in 2018/19, as imports by Southeast Asia, South America, and Sub-Saharan Africa increase. Asia remains the biggest importing region, estimated to have imported 118.9 mln tonnes in 2017/18. The largest global wheat exporters are Russia, the EU, U.S., Canada, Australia, and Ukraine, while the largest global exporters of corn (and coarse grains in general) are the U.S., Argentina, Brazil, and Ukraine. Russia has seen an increase in market share over the years, as ample supplies, low global prices, and their competitive prices improved their prospects with importing countries. The global soybean trade is estimated to have grown 3.3 percent in the 2017/18 marketing season, with China accounting for around 63 percent of global imports. The global soybean trade is expected to grow another 3.3 percent in 2018/19, as lower import demand from China due to the ongoing trade war is offset by higher demand from the E.U. and other destinations. The largest exporters of soybean are mainly Brazil and the U.S.. Aug 2018 Panamax & Post-Panamax Market Outlook 35

Thermal/Coking Coal Trade Coal is still the second most traded dry bulk commodity after iron ore 78% thermal, 22% coking Fast growth in 2009-2013 on Chinese demand; volumes declining over 2015-2016 China imports down 30% in 2015 but rally 25% in 2016 and 6% in 2017 EU s imports falling dramatically in past years India s imports stabilized after years of growth Brazil W. Europe Major Coal Exporters in 2017 (thermal & lignite + coking): Australia 200 + 172 mln tonnes Indonesia 323 + 47 mln tonnes Russia 151 + 15 mln tonnes Colombia 82 + 1 mln tonnes South Africa 81 + 3 mln tonnes USA 33 + 48 mln tonnes 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% Canada USA Colombia 1.4% 15.4% 7.4% 12.2% S. Africa Russia China S. Korea Japan Australia Major Coal Importers in 2017 (thermal & lignite + coking): EU28 India Japan China South Korea Taiwan 5.5% 2.9% India Indonesia 120 + 37 mln tonnes 152 + 49 mln tonnes 142 + 50 mln tonnes 201 + 70 mln tonnes 110 + 35 mln tonnes 69 + 1 mln tonnes -6.1% -0.3% 2.5% 2009 2010 2011 2012 2013 2014 2015 2016 2017(e) Aug 2018 Panamax & Post-Panamax Market Outlook 36

Iron Ore Trade The number one traded commodity Mostly carried on Capes and Panamaxes Trade restricted on very few routes, mostly Brazil- China and Australia-China 2015 was rather disappointing, 2016 much better, 2017 also good Demand supported by declining domestic mining in China, strong steel prices 30.0% 20.0% 10.0% 0.0% -10.0% Canada W. Europe Sweden CIS Ukraine Japan China S. Korea Brazil Australia S. Africa Major Iron Ore Exporters in 2017: Major Iron Ore Importers in 2017: Australia 828 mln tonnes China 1,075 mln tonnes Brazil 384 mln tonnes EU 144 mln tonnes South Africa 66 mln tonnes Japan 127 mln tonnes Canada 43 mln tonnes South Korea 72 mln tonnes Ukraine 29 mln tonnes Middle East 47 mln tonnes Sweden 23 mln tonnes Taiwan 24 mln tonnes 6.8% 10.4% 12.5% 6.2% 5.5% 7.1% 1.9% 3.5% 4.5% 2009 2010 2011 2012 2013 2014 2015 2016 2017(e) Aug 2018 Panamax & Post-Panamax Market Outlook 37

Wheat/Coarse Grains Trade Wheat and coarse grain trade increased in 2017 to over 350 mln t Trades are quite complex Production and trade is seasonal, and depends on weather patterns Main exporters are North and South America, Russia/Ukraine, and Australia Main importers are Middle Eastern countries as well as Japan and South Korea 40.0% 20.0% 0.0% -20.0% Canada USA Central/South America Argentina Brazil W. Europe Major Grain Exporters in 2017/18: USA Russia Argentina Ukraine EU Brazil 87 mln tonnes 50 mln tonnes 42 mln tonnes 42 mln tonnes 33 mln tonnes 29 mln tonnes N. Africa 0.8% 2.5% 3.7% 9.4% 2.9% Ukraine Russia Middle East Far East SE Asia Major Grain Importers in 2017/18: Japan EU Mexico Egypt China Saudi Arabia 23 mln tonnes 23 mln tonnes 23 mln tonnes 21 mln tonnes 21 mln tonnes 16 mln tonnes Australia 9.8% 4.8% 4.2% 4.7% 2009 2010 2011 2012 2013 2014 2015 2016 2017(e) Aug 2018 Panamax & Post-Panamax Market Outlook 38

Soybean Trade Volumes have grown very strongly in recent years, to about 150 mln t in 2017, without accounting for soymeal which is another 60 mln t Trade dominated by Chinese imports, accounting for twothirds of volumes Main exporters are USA and Brazil Imports last year affected by sales of government stocks in China and increased support to domestic farmers EU Japan USA China Mexico SE Asia Brazil Paraguay Argentina Major Soybean Exporters in 2017/18: Major Soybean Importers in 2017/18: Brazil 73 mln tonnes China 97 mln tonnes USA 56 mln tonnes EU 14 mln tonnes Paraguay 6 mln tonnes Mexico 4 mln tonnes Canada 6 mln tonnes Japan 3 mln tonnes Argentina 4 mln tonnes Thailand 3 mln tonnes 40.0% 20.2% 20.0% 12.0% 12.5% 6.3% 5.3% 4.8% 9.8% 4.1% 0.0% -20.0% -5.9% 2009 2010 2011 2012 2013 2014 2015 2016 2017(e) Aug 2018 Panamax & Post-Panamax Market Outlook 39

million tonnes 160 Far East - Coal Imports by Period (source: customs data ; in million tonnes) 140 120 100 80 60 40 20 0 China Japan Korea 2016 (1-6) 2017 (1-6) 2018 (1-6) In the first half of 2018, Chinese coal and lignite imports increased 9.2 percent to 145.5 million tonnes, mainly due to strong demand in Q1 from a colder than expected winter as well as gas supply shortages. On the other hand, Japanese coal imports fell 2.6 percent to 91.8 million tonnes over the same period, while South Korea s coal imports increased by 0.9 percent to 73.9 million tonnes Aug 2018 Panamax & Post-Panamax Market Outlook 40

mln tonnes Global Wheat and Coarse Grain Exports (source: USDA July 2018, in mln metric tonnes) 400 350 300 250 200 150 100 50 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 (f) Wheat, Flour and Products Corn Other Coarse Grains The largest global wheat exporters are Russia, the EU, U.S., Canada, Australia, and Ukraine, while the largest global exporters of corn (and coarse grains in general) are the U.S., Argentina, Brazil, and Ukraine. Global wheat and coarse grain exports are estimated to have grown 2.5 percent in the 2017/18 marketing year, and are forecast to grow another 1.7 percent in 2018/19. Aug 2018 Panamax & Post-Panamax Market Outlook 41

mln tonnes Global Soybean Exports (source: USDA July 2018, in mln metric tonnes) 180 160 140 120 100 80 60 40 20 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 (f) The global soybean trade is estimated to have grown 3.3 percent in the 2017/18 marketing season, with China accounting for around 63 percent of global imports. The global soybean trade is expected to grow another 3.3 percent in 2018/19, as lower import demand from China due to the ongoing trade war is offset by higher demand from the E.U. and other destinations. The largest exporters of soybean are mainly Brazil and the U.S.. Aug 2018 Panamax & Post-Panamax Market Outlook 42

Charter and S&P Markets (rates, values, sales volumes) Aug 2018 Panamax & Post-Panamax Market Outlook 43

USD/day Baltic Exchange Panamax TC Average - Seasonality (source: the baltic exchange ; daily data ; usd/day) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016 2017 2018 In the first 7 months of 2018, Panamax freight rates averaged around 11,200 usd/day, up 29 percent compared to the same period in 2017. Rates had been pressured over Apr-May, due to the US-China trade war which dampened US Gulf Coast-China soybean trade, a strike by Brazil s truck drivers which affected cargo flows to ports, and Chinese coal import restrictions. Rates have since picked up with the strong Cape market and as grain exports increased from Brazil. Aug 2018 Panamax & Post-Panamax Market Outlook 44

USD/day Baltic Exchange Panamax Routes - last 12 months (source: the baltic exchange ; daily data ; usd/day) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 08/2017 10/2017 12/2017 02/2018 04/2018 06/2018 08/2018 P1A_03 (Skaw-Gib. transatlantic round) P3A_03 (Japan S.Korea transpacific round) In the first 7 months of 2018, the P1A_03 and P3A_03 average TC equivalent earnings averaged around 11,000 usd/day and 10,700 usd/day respectively, up 24 percent and 35 percent respectively compared to the same period a year ago. Aug 2018 Panamax & Post-Panamax Market Outlook 45

USD/day 90,000 Panamax Timecharter Rates (basis modern standard unit ; estimated monthly avg. ; in usd/day) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 07/2008 07/2010 07/2012 07/2014 07/2016 07/2018 1-Year Timecharter Rates 3-Year Timecharter Rates In the first 7 months of 2018, the 1-year and 3-year Panamax TC rates averaged around 12,300 usd/day and 12,400 usd/day respectively, up 27 percent and 16 percent respectively compared to the average rates in 2017. Aug 2018 Panamax & Post-Panamax Market Outlook 46

USD mln Panamax Newbuilding and 5 Yrs Old Secondhand Prices (indicative averages ; in USD mln) 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 07/2008 07/2010 07/2012 07/2014 07/2016 07/2018 Panamax Bulk NB Panamax Bulk 5 YO SH After a declining trend between 2014-2016, both newbuild and secondhand Panamax prices have since been picking up. In July 2018, secondhand prices were up 15 percent year-on-year at around 21.9 mln USD, while newbuild prices were up 18 percent at around 29.5 mln USD. Aug 2018 Panamax & Post-Panamax Market Outlook 47

mln DWT Pmx & Post-Pmx Bulk Reported Secondhand Sales in DWT (August 2018 ; only units between 65,000-119,999 dwt ; in million dwt) 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 07/2017 09/2017 11/2017 01/2018 03/2018 05/2018 07/2018 65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,000 dwt 100,000-119,999 dwt In the first 7 months of 2018, 97 vessels amounting to 7.8 mln dwt were reported sold in secondhand sales, compared to 115 vessels totalling 9.2 mln dwt sold during the same period in 2017. Sales were dominated by vessels between 65,000-79,999 dwt as well as 80,000-84,999 dwt. Aug 2018 Panamax & Post-Panamax Market Outlook 48

Final Words (summary and conclusions) Aug 2018 Panamax & Post-Panamax Market Outlook 49

In the first 7 months of 2018, Panamax freight rates averaged around 11,200 usd/day, up 29 percent compared to the same period in 2017. After a declining trend between 2014-2016, both newbuild and secondhand Panamax prices have since been picking up. Deliveries in 2018 are expected to fall to around 7 mln dwt, after assuming 30 percent delivery slippage, compared to 9.3 mln dwt of deliveries in 2017. Of these units, around 73 percent would be sized between 80,000-84,999 dwt, largely of Kamsarmax design. The new set of Panama Canal locks became operational in 2016, positively affect the trading pattern and popularity of Post-Panamax vessels. However, demolitions are expected to remain slow in 2018, with only 4 units equivalent to 0.29 mln dwt reported demolished in the first 7 months of 2018, all between 65,000-79,999 dwt. This compares to 32 units totaling 2.34 mln dwt scrapped a year ago, also mostly between 65,000-79,999 dwt, as small traditional Panamax vessels face increased competition from geared Ultramaxes and Kamsarmaxes. Ordering activity picked up from the second half of 2017, with 42 orders placed during this period out of a total 48 orders reported in 2017, mostly in the 80,000-84,999 dwt range. In the first 7 months of 2018, 28 orders amounting to 2.3 mln dwt were placed. The total orderbook now constitutes 9.9 percent of the current trading fleet in unit terms, although the ratio for the 80,000-84,999 dwt (Kamsarmax) category is as high as 24.5 percent. Seaborne trade growth for Panamaxes appears likely to slow this year, with global trade growth of wheat, coarse grains, & soybeans now downgraded to 1-3 percent this year due to U.S.-China trade war concerns, compared to 2-7 percent forecasted previously. Chinese coal imports could be threatened by government policies to control domestic coal prices and increase local production this year, although we still expect to see imports pick up Jun-Aug during the peak demand season. Nuclear power plant restarts in Japan are also expected to further reduce their coal imports going forward. India appears set to be a bright spot for coal trade this year, as domestic logistical bottlenecks, regulatory changes targeting pollution cuts, and surging power demand from household electrification all fuel higher imports. Aug 2018 Panamax & Post-Panamax Market Outlook 50

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