This document discusses the past, present, and future of the dry bulk shipping market. It notes that historically the market boomed due to increased Chinese demand but then crashed in 2008 due to the global financial crisis. The market hit its lowest point ever in 2016 but has begun to recover recently. Going forward, the author predicts consolidation among ship owners and carriers. Large ship owners may develop long term contracts with major customers while smaller owners remain exposed to spot market volatility. Environmental regulations and China's economic transition may also impact future dry bulk trade volumes.

1. Future of DRY bulk Ship –
Owning
Capt Rahul Bhargava

2. Baltic Dry Index

3. Future of Dry Bulk Ship –owning
Historically what went wrong
Its impact
Year gone by 2016
Present market
Future of ship- owning
Game changer

4. Historical facts
Market started to pick up post 2002- China building
Less ships and more cargo – freight rally
China Olympic fuelled the freight market
New Ship yards – order books full for 5 years
Indian iron ore exports
 Private Steel Mills in India
Indian thermal power plants
World GDP growth

5. World GDP – 3.54(e) 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

6. Year 2008
China slowed down after Olympics
Lehman brothers – developed world economy
Less trade, negative cargo growth
Expensive ships in water
Supply/ Demand mismatch
Bloodbath on street

7. Year gone by 2016
 Lowest BDI in history.
 Vessels were idling, put on cold storage
Cancelation / deferment of future new builds.
3rd Highest level of demolition
Asset prices lowest level ( inflation adjusted)
Banks off loading distressed assets
Lowest contracting of new builds since 2001 ( in DWT)
2H saw surge in China stocking coal. Increasing the
freight rates.

8. Year gone by 2016
On world news
Brexit
Mr. Donald trump becoming President of USA ..
America first policy
Indian currency demonetisation
Opening of Panama Canal locks

9. Present status
Type of vessel 2013 2014 2015 2016
M.Dwt M.DWT M.DWT M. DWT No. M DWT 2017 2018 2019+ Number m.DWT % Fleet
Cape (100k+) 293.8 308.1 309.2 315.1 1663 317.3 15.8 14 6.5 144 36.3 11.40%
Panamax (65-100k) 184.3 192.3 195.2 196.3 2479 198.9 9.5 2.9 0.4 155 12.8 6.40%
Handymax (40-65k) 158.6 166.8 179.6 188.4 3493 191.5 12.5 2.4 0.6 256 15.5 8.10%
Handysize (10-40K) 90.2 91.4 92.7 94.1 3345 94.9 6.2 1.9 0.8 251 8.9 9.40%
Total 726.9 758.6 776.7 793.9 10980 802.5 44.1 21.1 8.2 806 73.5 9.20%
Total on order2017 Order Book & Delivery

10. Present status
 Fleet growth has been 2.6% y-o-
y.
 Expected fleet growth in 2017 is
1.6%
 Capes constitute 40% of total
fleet
 World trade is expected to grow
by 3% CAGR from 2017~2012
(Sources: Technavio research)

11. Dry BULK - Drivers
 Dry bulk market is driven by heavy industrial activity
and fossil fuel
60 % of cargo is moved for steel industry
China changing focus from infrastructure, housing and
heavy industry to consumer and service industry
Drop in use of fossil fuel for energy
Thermal coal import to UK dropped 80% y-o-y in 2016
Its reported that energy supply from coal hit zero for
half a day in UK
India is reducing imported thermal coal to domestic
coal.

12. Dry bulk Owner’s
Dry bulk shipping is extremely fragmented.
Owners have very little influence and bargaining
power with traders/end users.
Shipping is more profitable as asset play than a
logistic support to trade.
Conservative owners are comfortable running their
vessels on long term charter.

13. Game Changer
 Zero Supply side growth
Consolidation or evaporate
 Merger of NOL/APL within CMA CGM
Absorption of UASC into Hapag Lloyd
Maersk line acquired Hamburg Sud
Creation of J Line – merger of NYK, Mitsui OSK and K-
line.
 Loss of Hanjin Line

14. Game Changer
Ship owner’s strategy has to change from asset play to
logistic provider and focus on Return of Capitol.
 30 Valemax have been ordered for delivery in 2018 by three
Chinese Owners with b-t-b 25 years charter with Vale.
Vale max once all delivered will carry 50% of Brazilian iron ore.
Banks may not be the biggest support of ship acquisition.
Basel III norms will make less cash available with banks.
Non Banking finance like export credit agencies, bonds,
public and private equity will be investors.
Higher equity component and higher interest rate.

15. Game Changer
Large Ship Owners will develop long term relationship
with major customers. Banks will fund them making them
competitive over small owners.
Large owners will have resources to create, deliver a
flexible and value added logistic solution.
Likewise, major customers would like to work with fewer
shipowners
Vale signed long term CoA’s with Cosco, China Merchant Group
and ICBC.
Once the bulk of business is covered on long term
contracts, the intensity and frequency of cycles will
decrease.
Asset play will be less attractive

16. Game Changer
Small ship owners
Banks reluctant to finance
Higher equity infusion
Higher CAPEX
Unable to enter long term CoA due to fleet size
Mostly work on spot market, exposed to market vagaries

17. Road to Recovery
• One Belt one road initiative

18. Road to Recovery
 Iran has opened up for trade.
Bunker prices are lower.
BMW regulations
SOX and NOX regulations
Construction related seaborne trade
growth

19. Thanks