Shipping industry- Steven Tsai

1
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Shipping 2017.05.01
Taiwan: Shipping
Still Not the Right Time
Research Analyst
 Steven Tsai
 mengchen.t@gmail.com
Conclusion
 Dry bulk shipping will be
profitable in 2018.
 Supply and demand in
container shipping are not
likely to balance in next 2
years.
 New environmental rules and
consolidations could help
balancing the over-supply in
shipping industry. .
We hold a neutral view on the Shipping industry with three
reasons as follow:
 Dry Bulk shipping will be profitable in 18’H2 or 19’H1 as
Chinese government maintains infrastructure spending
while at the same time the private sector’s FAI starts moving
up from the trough and ship supply begin to fall from 2018.
 We think container shipping will stay loss-making in the next
2 years despite less newbuilding orders. The main reason is
that growths of major economies in short term are expected
to be lower than that in fleet capacity. The prospect of tanker
shipping is unclear since demand is volatile due to oil
production cuts by OPEC, but demand for LNG shipping
seems to be strengthening.
 We identify 3 trends in shipping industry: 1) New
environmental regulations put out by IMO could boost ship
scrapping activity before 2022. 2) Consolidation in container
shipping could help balance the demand-supply and reduce
operating cost of players. 3) The share of bigger vessel in
order book is increasing, which could reduce unit cost of
ship-owners.
 A.P. Maersk
 Evergreen
 U-Ming
(MAERSKB DC)…………………..P.13
(2603 TT)…………………………..P.15
(2606 TT)…………………………..P.17
Related Company:
Analysis and Comments

2
Introduction
Shipping industry is in essence, derived from international trade;
over 85% of global trade is done by shipping. It is the physical
process of transporting commodities and merchandise goods
and cargo. We can break the industry into Dry Bulk Shipping,
Container Shipping and Tanker Shipping by types of cargo, along
with their subsidiary industries, shipbuilders and ship-breakers.
Exhibit 1: World GDP vs. World
Seaborne Trade
Source: World Bank, UNCTAD
The world seaborne trade is
positively correlated to world GDP.
Dry Bulk Shipping is generally referred to the transport of dry bulk
(or bulk cargo). Dry bulk is commodity cargo that is transported
unpackaged in large quantities. The cargo could be
agricultural products (e.g. wheat, soybeans, etc.), minerals (e.g.
sand, salt, etc.), coals, and so forth. The main cargos of dry bulk
shipping are iron ore and coal. The size of bulker by deadweight
tonnage (dwt) range from less than 40k to over 100k. Currently,
about 20,559 bulkers (incl. general cargo) or 824.9mn dwt are in
service; about 40% of the capacity came from Capesize, the
largest type of bulker.
Exhibit 2: Shipping Industry Structure
Source: Bloomberg, Company data, Collaborator Research
-10%
-5%
0%
5%
10%
15%
20%
1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
World GDP(YoY) World Seaborn Trade (YoY)*
Dry Bulk Shipping
International Trade
Dry Bulk
Shipping
Container
Shipping
Tankers
Shipbuilders
Ship
breakers
Evergreen Marine (2603 TT)
Yang Ming Marine (2609 TT)
COSCO (1919 HK)
(601919 CH)
AP Moller - Maersk A/S
(MAERSKB DC)
Nippon Yusen KK (9101 JP)
Kawasaki Kisen Kaisha (9101 JP)
Mitsui OSK Lines Ltd (9104 JP)COSCO (1919 HK), (601919 CH)
National Shipping Co of
Saudi Arabia/The (NSCSA
AB)
MISC Bhd (MISC MK)
Nippon Yusen KK (9101 JP)

3
Container Shipping, not like dry bulk shipping, transports load in
truck-size intermodal containers, in a technique called
containerization. Its cargo consists mainly of manufactured
goods. Containership capacity is normally expressed in Twenty-
foot Equivalent Units (TEU), which is defined as the number of
20' x 8' x 8'6" (or 6.1m x 2.44m x 2.59m) containers it can carry;
Typical loads are a mix of 20-foot and 40-foot (2-TEU) ISO-
standard containers, with the latter predominant.
Containerships vary considerably in size. Some of those serving
major ports have capacities exceeding 5,000 TEU, while some
recently built for feeder service (i.e., serving small outports from
a major port) have capacities of 400 TEU or less. About 5,087
containerships or 19.5mn TEU are in service now.
Name Size in TEU Current Fleet Orderbook Main Cargo
Small Feeder <1k 1189 (662k TEU) 14 (3.5k TEU)
Manufactured
Goods
Feeder 1k - 2k 1132 (1631k TEU) 143 (87.3k TEU)
Feedermax 2k - 3k 613 (1558k TEU) 60 (70.8k TEU)
Panamax 3k - 5.1k 732 (3095k TEU) 19 (49.4k TEU)
Post-Panamax 5.1k - 10k 596 (3584k TEU) 10 (34.7k TEU)
New-Panamax 10k - 14.5k
825 (8960k TEU) 179 (940k TEU)Ultra Large Container
Vessel (ULCV)
>14.5k
Name
Size in
DWT
Current Fleet Orderbook Main Cargo
Mini Bulk <10k 661 (3mn dwt) 16 (0.1mn dwt)
Minor Bulks
Handysize 10k - 35k 1912 (52mn dwt) 46 (2mn dwt)
Handymax / Supramax 35k - 60k 3161 (159mn dwt) 230 (9mn dwt) Minor Bulks & Grain
Panamax 60k - 90k 2696 (198mn dwt) 59 (24mn dwt) Thermal Coal & Grain
Capesize 90k - 150k 454 (45.5mn dwt) 4 (0.4mn dwt)
Iron OreLarge Capesize 150k - 350k 1438 (278mn dwt) 174 (36mn dwt)
Very Large Ore Carrier (VLOC) >350k 36 (14mn dwt) 29 (12mn dwt)
Container Shipping
Table 1: Dry Bulker Fleet Status
Source: Wikipedia, Reuters Eikon
Table 2: Containership Fleet Status
Source: Reuters Eikon

4
Tanker Shipping is more diversified than dry bulk and
container shipping. Tanker is specialized in transporting
liquids or gases in bulk. We can further divided it into
crude oil (dirty), product (clean), liquefied petroleum gas
(LPG), liquefied natural gas (LNG) and chemical
shipping. Product tankers, usually much smaller than
dirty tankers, are made to ship refined products. Due to
characteristics of their cargo, tankers often are equipped
with pressurized, vapour-recovery and heating system to
keep the cargo under certain condition.
Name Size in DWT Current Fleet Orderbook Main Cargo
Coatal Tanker / Medium Range <75k 1,950 (86mn dwt) 143 (6mn dwt) Refined Products
Panamax / Large Range 1 60k - 80k 418 (30mn dwt) 51 (4mn dwt) Refined Products
or Crude OilAframax / Large Range 2 80k - 120k 941 (102mn dwt) 133 (16mn dwt)
Suez-Max 120k - 200k 463 (72mn dwt) 80 (13mn dwt)
Crude OilVLCC 200k - 320k
701 (216mn dwt) 95 (29mn dwt)
ULCC >320k
Tanker Shipping is more diversified than dry bulk and
container shipping. Tanker is specialized in transporting
liquids or gases in bulk. We can further divided it into
crude oil (dirty), product (clean), liquefied petroleum gas
(LPG), liquefied natural gas (LNG) and chemical
shipping. Product tankers, usually much smaller than
dirty tankers, are made to ship refined products. Due to
characteristics of their cargo, tankers often are equipped
with pressurized, vapour-recovery and heating system to
keep the cargo under certain condition.
Table 3: Tanker Fleet Status
Exhibit 3: The Length of Tanker
Source: Hofstra University, US
Source: Marine Time Insight, Robert Strauss Center of UT, Wikipedia, AFRA system, MAN Diesel & Turbo
*Excl. LPG / LNG tankers in fleet count
Tanker Shipping
Asia-North America
Asia-North Europe
Asia-Mediterranean
Asia-Middle East
North Europe-North America
Australia-Far East
Asia-East Coast South America
North Europe/Mediterranean-East Coast South America
North America-East Coast South America
Table 4: Major Shipping Routes
Source: World Shipping Council
Shipping Routes

5
From To Cargo
Arabian Gulf Far East Dirty Tanker
Mediterranean Mediterranean Dirty Tanker
Arabian Gulf S Asia Dirty Tanker
North Sea North Sea Dirty Tanker
W. Africa Far East Dirty Tanker
Arabian Gulf SE Asia Dirty Tanker
Mediterranean North Sea Dirty Tanker
Caribbean US Dirty Tanker
W Africa North Sea Dirty Tanker
Arabian Gulf US Dirty Tanker
W Africa S Asia Dirty Tanker
Far East US Clean Tanker
Far East S Asia Clean Tanker
Mediterranean US Clean Tanker
Mediterranean Europe Clean Tanker
From To Cargo
Australia China Coal
Australia Japan Coal
Australia Europe Coal
Indonesia China Coal
Indonesia India Coal
S. Africa Europe Coal
Colombia Europe Coal
US Europe Coal
US Asia Coal
US Gulf China Grain
US Gulf Japan Grain
US Gulf Europe Grain
US Gulf S. America Grain
S. America China Grain
S. America Japan Grain
S. America Europe Grain
Australia China Iron Ore
Australia Japan Iron Ore
Brazil China Iron Ore
Brazil W. Europe Iron Ore
Table 5: Dry Bulk Shipping Routes Table 6: Tanker Shipping Routes
Source: Potent and Partners, Collaborator
Research
Source: Collaborator Research
Source: Nicolas Rapp
Exhibit 4: World Shipping Map

6
Industry Overview
Shipping industry is concentrated, market share of the top three
companies (APM-Maersk, M.S.C and CMA CGM Group) added
along accounts for about 41% in terms of their fleet capacity,
which is higher than 5 years ago (37 %).
Due to the over-optimistic atmosphere before 2013, which
facilitated large shipping companies to place new orders to
expand their fleets in the hope of outmatching their peers, the
whole shipping industry has since caught up in a predicament
induced by the slowdown of infrastructure booms in EM
economies. Nowadays, shipping companies encounter
significant excess capacity, depressed pricing and tepid demand
growth. Whopping debts were stacked among the industry; the
total amount of debt now stands at around $200 billion, which is
twice the amount of 2008 (refer to Exhibit 30 in Appendix).
Fortunately, signs indicate supply-demand might balance in the
near future; first, the number of newbuilding order has
plummeted. Second, industry consolidation in 2016 will take
effect in 2017 H2 (refer to page 11). Third, although ship-
breaking activity seems to slow, we think it would continue under
the new environmental regulation rolled out by International
Maritime Organization (IMO) (refer to page 10).
Exhibit 6: Newbuilding and Scrapping Activities
Source: Bloomberg, Collaborator Research
0 2,000 4,000
Wan Hai Lines
Zim
K Line
PIL (Pacific Int. Line)
Hyundai M.M.
UASC
MOL
Hamburg Süd Group
Yang Ming Marine…
NYK Line
OOCL
Evergreen Line
Hapag-Lloyd
COSCO Shipping Co…
CMA CGM Group
Mediterranean Shg Co
APM-Maersk
Owned Chartered Orderbook
Exhibit 5: Top Players in Shipping
Industry Unit: thousand TEU
Source: Alphaliner, as of 4/30
Unit: numbers of ship
-N: Newbuilding / -S: Scrapping
-500
-300
-100
100
300
500
700
900
2010 2011 2012 2013 2014 2015 2016
Others-S
Bulkers-S
Containership-S
Chemical Tanker-S
LPG Tanker-S
LNG Tanker-S
Oil Product tanker-S
Crude Oil Tanker-S
Others-N
Bulkers-N
Containership-N
LPG Tanker-N
LNG Tanker-N
Oil Product tanker-N
Crude Oil Tanker-N
Net

7
Supply & Demand Breakdown
For Dry Bulk Shipping, the supply has significantly diminished
over the past few years. The order book in dwt as the percentage
of service in dwt now sits at around 11.21%, with most of them
will be delivered in first halves of 2017/16.
On demand side, based on data from Clarksons Research, about
33%, 25% and 8% of the world dry bulk seaborne trade are iron
ore, coals(coking coal + thermal coal) and steel related product
respectively; if we look deeper into the numbers, we could find
that China almost dominates trades of commodities such as iron
ore and steel by having the largest share in global trade. Thus,
we would take China as the proxy for the demand of dry bulk
shipping.
From the chart of china fixed asset investment (Exhibit 9), we
can easily notice that freight rates of iron ore (Capesize) are
driven by FAI in China, particularly by infrastructure investment.
According to 2017 Economic Blue Book published by Chinese
Academy of Social Sciences (CASS), the total fixed asset
investment in China in 2017 is estimated to be over 67 trillion
yuan, 8.9% growth in nominal term or 8.7% growth in real term,
and infrastructure investment is expected to be around 20 trillion
yuan or 20% YoY in 2017. Hence we think dry bulk shipping
will be profitable as early as 2018’H2 as FAI in private sector
appear to be on the rise and possibility that Chinese government
will maintain infrastructure spending while ship supply fall after
2018.
0
10
20
30
0%
10%
20%
30%
40%
03/14 08/14 01/15 06/15 11/15 04/16 09/16 02/17
FAI (Accu. YoY) FAI by state ( Accu. YoY)
FAI by private sector (Accu. YoY) Brazil Tubarao-Qingdao(RHS)
Aussie Dampier-Qingdao(RHS)
Exhibit 9: China FAI vs. Iron Ore Capesize RatesExhibit 8: Bulk Carrier Capacity Unit: mn, dwt
-1%
1%
2%
3%
4%
5%
6%
7%
0
100
200
300
400
500
600
700
800
13 14 15 16 17 E18 E19 E20 E
Very Large Ore
Carrier (VLOC)
Large Capesize
Capesize
Panamax
Handymax /
Supramax
Handysize
Mini Bulk
YoY(RHS)
Source: Reuters Eikon Source: NBS, Baltic Exchange
0
800
1,600
2,400
3,200
4,000
2013 2014 2015 2016 2016
BDI BCI BPI BSI BHSI
Dry Bulk Shipping
Iron Ore Coal Steel
Top Country % Country % Country %
Importer China 61 India 52 U.S. 19
Japan 10 Malaysia 5.8 Germany 7
Exporter Australia 54 Indonesia 40 China 24
Brazil 22 Australia 26 Japan 9
Table 7: Top Importer & Exporter
of major dry bulk
Source: The Obeservatory of Economic
Complexity (OEC), UN COMTRADE,
International Trade Adminstration of U.S.
Exhibit 7: BDI-related Indices
Source: CEIC
BDI still hovers around the bottom,
while BCI seems to be recovering
gradually.
Unit: per mn tonnes, USD

8
As for container shipping, supply also slows down as the
demolition activity accelerate from 2016, and the total TEU
scrapped is forecasted to be over 600 thousand TEU in this year.
Regarding demand for container shipping, we choose G7 and
China as proxies of demand since their imports added together
account for 46.23% of global imports. we believe the demand is
on the right track of recovering as manufacturing purchasing
manager indices (PMI) and consumer confidence in all G7
countries plus china pick up in recent years, especially in the
case of PMIs, which now all well above the watershed 50 line
since Oct. 2016. Besides, U.S. dollar is relatively strong to other
major currencies and such trend is expected to continue owing
to possible fiscal stimulus pledged by the U.S. President Donald
Trump, which could boost trades in other countries. However, we
believe container shipping as a whole still won’t make profit in
next two years considering higher fleet growth and longer
time needed for major economies to recover despite less
newbuilding orders and more concentrated alliances; actually,
time charter rates for containerships are still at the bottom level
(refer to Exhibit 31 in Appendix).
Unit: 000s, TEU
36.17%
10.06%
2.61%
3.02%
33.77%
G7 China South Korea
Netherlands Others
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
5,000
10,000
15,000
20,000
25,000
2013 2014 2015 2016 2017
E
2018
E
2019
E
2020
E
New-Panamax or larger Post-Panamax
Panamax Feedermax
Feeder Small Feeder
YoY (RHS)
Container Shipping
0
150
300
450
600
2013 2014 2015 2016 2017E 2018E 2019E 2020E
New-Panamax or larger Post-Panamax
Panamax Feedermax
Feeder Small Feeder
Exhibit 12: Demolition of Containership
Unit: 000s, TEU
Exhibit 10: Top Importers
Source: WTO
Exhibit 11: Containership Capacity

9
Table 8: G7 & China GDP Forecast
Supply of tanker shipping is anticipated to grow in
2018 and then remain flat all the way to 2020.
Nevertheless, the demands for different types of
tanker is diverged; Those for LNG has been strong
since Feb. last year. For oil tankers, especially for
those routings related to Arabian Gulf, demand is
notably weak owning to oil production cuts
enforced by OPEC, and such uncertainties will exist
for some time in the future, making demand volatile
and more unclear.
0%
2%
4%
6%
8%
0
200
400
600
800
2013 2014 2015 2016 2017 E2018 E2019 E2020 E
Oil Tanker Chemical Tanker LPG Tanker
LNG Tanker Other Tanker YoY
Exhibit 13: Manu. PMI of G7 countries & China
Source: IMF World Economic Outlook
44
46
48
50
52
54
56
58
60
2013 2014 2014 2015 2016 2017
France
Germany
UK
US
Japan
China
Source: Bloomberg
Tanker Shipping
Exhibit 12: Tanker Capacity Unit: mn, dwt
Source: Reuters Eikon Source: Poten & Partners, SSY
As of 5/3, USD per day Current 1 yr 3 yrs
VLCC Dirty
Arabian Gulf to SE Asia 26856.13 -35.00% 79.51%
Arabian Gulf to UK Continent 6150.334 -72.33% 10.90%
West Africa to Far East 24507.07 -43.23% 25.96%
West Africa to US Atlantic 37825.39 -20.98% 40.21%
West Africa to UK Continent 31434.08 -20.31% 72.70%
Suezmax Dirty
Arabian Gulf to SE Asia 10420.34 -64.26% -36.05%
South America to US Gulf 26062.53 -17.27% 13.52%
West Africa to US Gulf 14549.71 -38.61% 4.40%
Aframax Dirty
South America to US Gulf 12626.44 -55.13% -47.32%
South America to US West Coast 26116.17 -7.35% -2.87%
Mediterranean to UK Continent 12429.49 -47.46% -16.59%
LR1 Clean
Arabian Gulf to Far East 6109.173 -51.63% -43.66%
UK Continent to US Atlantic 8566.034 -28.39% 34.72%
LR2 Clean
Arabian Gulf to Far East 7105.468 -58.80% -42.92%
UK Continent to US Atlantic 10848.93 -6.69% --
MR1 Clean
Cross North Sea 16708.18 40.71% 46.27%
LNG Shipping Costs (USD/MMBtu) Current 1 yr 2 yrs
Qatar to South Korea 0.84 7.20% -19.43%
Qatar to Japan 0.89 7.66% -18.84%
Qatar to UK 1.10 8.22% -16.92%
Qatar to Spain 0.91 3.82% -17.07%
Australia to South Korea 0.54 7.33% -18.27%
Australia to Japan 0.55 7.19% -18.00%
Australia to UK 1.47 8.89% -18.18%
Australia to Spain 1.27 4.66% -18.55%
Table 9: Freight Rates of Tankers

10
Industry Trend
September 8th 2016-Finland was accepted to join the convention
on Ballast Water Management (BWM) initiated by International
Maritime Organization (IMO) in 2004, which indirectly triggered
the entry into force since the threshold that all contracting parties
representing 35% of world merchant shipping tonnage was
reached.
Under the Convention's terms, starting exactly on Sep. 8th 2017,
ships will be required to manage their ballast water to remove,
render harmless, or avoid the uptake or discharge of aquatic
organisms and pathogens within ballast water and sediments.
New builds will have to address this when keel laying after
September 2017. Existing vessels will have a grace period to
allow them to be retrofitted with the systems by the first renewal
of their International Oil Pollution Prevention Certificate (IOPP),
which is due at least every five years, during the vessel’s special
survey, i.e., at their next visit to dry dock. This effectively means
that by 2022 all ships in the fleet must have ballast water
treatment systems (BWT) installed.
Ballast water treatment plants and their installation involve a
substantial amount of CAPEX. The cost ranging from $0.5 to
$2m for a bulker. In addition, installation of BWM system requires
a lot of space; adding that space would be an issue for older
vessels.
Apart from BWM regulation, new emission standard is also a
thorny problem awaiting the shipping industry. In 2016, IMO’s
revised MARPOL Annex VI (or International Convention for the
Prevention of Pollution from Ships) stipulated that from Jan. 1st
2020, the global sulphur cap would be reduced from current
3.50% to 0.50%, compared to 0.10% cap for Emission Control
Areas (ECA, refer to Exhibit 14) since Jan. 1st 2015. This is fairly
costly to shipping firms as the additional daily operating cost for
a ship burning 100 tonnes of fuel a day to comply with a 0.50%
sulphur limit could be $15,000 to 30,000 per day compared with
using non-compliant fuel oil, according to IMO MEPC resolution
on July 14th 2016.
Environmental Regulations are put into force in 2016/17 Exhibit 14: ECA Area
Source: Clean Marine Energe
Tier Date
n < 130 130 ≤ n < 2000 n ≥ 2000
Tier I 2000 17 45 ·n^-0.2 9.8
Tier II 2011 14.4 44 ·n^-0.23 7.7
Tier III 2016* 3.4 9 ·n^-0.2 1.96
NOx Limit, g/kWh
Table 10: NOx Limit under MAR-
POL Annex VI
Source: Diesel Net, IMO
Date Sulfur Limit in Fuel (% m/m)
SOx ECA Global
2000 1.5%
2010.7
2012
2015
2020 0.5%
1.0%
4.5%
3.5%
0.1%
Table 11: SOx Limit under MAR-
POL Annex VI
Source: Diesel Net, IMO
*In NOx Emission Control Areas (Tier II
standards apply outside ECAs).
*n is engine maximum operating speed
(n, rpm)

11
Considering these regulatory factors, we thus think it’s possible
that the number of ship scrapping will continue to grow in the next
3-5 years, which could help normalize the unbalanced demand-
supply.
Companies are taking alternative strategies to fight slack
capacity – M&A and alliance. Over the past few years shows
upside trends in both M&A deal value and count; among those
deals from 2014 to 2017, 32 were done by top 5 five firms if we
only count deals with both acquirer and target belonging to
shipping industry. Also, it is worth noting that starting from July
1st 2017, NYK, MOL and K-Line will integrate their container
shipping business into a joint venture.
On top of that, alliances of liners are rearranged following several
M&A deals last year. Three of four main alliances G6, OCEAN
Three and CKYHE are restructured into only two alliances –
OCEAN, THE Alliance, with each one bigger than before, which
could mean a better slot-sharing among players. The two new
alliances took effect in Apr. 2017.
0
10
20
30
40
50
60
70
80
90
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
13 14 14 15 16
Volume Deal Count (RHS)
Exhibit 15: M & A Deals Count and
Volume
M&A Game and Alliances Reshuffling
Source: Bloomberg
M&A deal (2014-2017)
COSCO 20
AP Moller - Maersk A/S 4
Hapag-Lloyd 3
CMA CGM SA 3
MSC Mediterranean Shipping Co SA 2
Total 32
Source: SDC Platinum
Old % New %
2M 28.0% 2M 30.6%
Maersk 14.7% Maersk (with Hamburg Sud) 16.0%
MSC 13.3% MSC 14.6%
G6 Alliance 17.0% OCEAN 27.1%
Hapag-Lloyd 4.6% CMA CGM (with Neptune) 10.7%
Mitsui O.S.K. Line (MOL) 2.7% COSCO (with CSCL) 8.3%
Nippon Yusen Kaisha (NYK) 2.5% Evergreen 4.9%
Hyundai Merchant Marine 1.9% OOCL* 3.2%
Orient Overseas (OOCL) 2.7% THE ALLAINCE 15.0%
Neptune Orient Lines (NOL)* 2.6% Hapag-Lloyd (with UASC) 5.0%
CKYHE 16.5% Yang Ming 2.8%
CSCO 4.2% Mitsui O.S.K. Line (MOL) 2.5%
Hanjin Shipping 3.1% Nippon Yusen Kaisha (NYK) 2.9%
Kawasaki Kisen Kaisha (K-Line) 1.9% Kawasaki Kisen Kaisha (K-Line) 1.8%
Yang Ming 2.7%
Evergreen 4.6%
OCEAN Three 14.8%
CMA CGM 8.9%
China Shipping Container Lines (CSCL)* 3.5%
United Arab Shipping Co. (UASC)* 2.4%
*Old data based on Dec. 2015/ New data based on Apr. 2017
*Maersk announced the acquisition of Hamburg Sud in 2016
*CMA CGM acquired NOL in 2016
*COSCO merged with China Shipping Container Lines (CSCL) in Jan. 2016
*Hapag Lloyd is seeking takeover of UASC
*OOCL is the subsidiary of Orient Overseas International Limited (OOIL)
Table 13: Comparative Table for Old and New Alliances
Source: Alphaliner, SDC Platinum, Collaborator Research
Unit: mn, USD
Table 12: M&A Deals from 2014

12
Bigger vessel comes with many advantages; one significant
advantage is cost-effectiveness; bunker fuel cost per unit will
decrease as the size gets bigger. According to Drewry, the
bunker cost as the percentage of the ship cost will down from
about 71% to 69% if the size larger than 10k TEU. In addition,
larger ships require smaller crew to operate them. Taking New-
Panamax for example, it is twice the size of the Panamax;
however, it only need a crew of 13 people.
We define large ship to be those with 100k+ in dwt or 10k+ in
TEU. Then we break the current fleet and order book into two
categories (whether that ship is large or not). From Exhibit 12,
we could easily observe that in all three kind of shipping field, the
share of large ship in order book is higher than those in current
fleet, especially in the case of tanker, the share jump from 16.2%
to an incredible 42.1%.
Bigger vessel has become an unstoppable trend
Exhibit 16: Current Fleet and Order Book Breakdown
18.61%
37.10%
26.02%
34.86%
16.22%
42.12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Current Fleet Orderbook Current Fleet Orderbook Current Fleet Orderbook
Bulkers Containerships Tankers
Dwt<100k or TEU<10k Dwt>100k or TEU>10k
Source: Marine Time Insight, Robert Strauss Center of UT, Wikipedia, AFRA system, MAN Diesel & Turbo, Reuters Eikon

13
AP Moller - Maersk A/S (MAERSKB:DC)
AP Moller - Maersk A/S, also known as Maersk, is a Danish
integrated transport and logistics conglomerate with multiple
brands. Effectively from Jan. 1st 2017, Maersk reorganized into
two separate divisions; Transport & Logistics and Energy.
Maersk has five core business, including Maersk Line (Container
shipping branch), APM Terminals (port and inland infrastru
cture provider), Maersk Oil, Maersk Drilling and APM Shipping
Services.
Maersk Line is the world largest container ship operator. As of
Apr. 30th 2017, it operates 633 ships with capacity totalling 3.32
million TEU.
On Dec. 1st 2016, Maersk Line announced its intention to acquire
the German container shipping line Hamburg Süd (rank 10th)
from the Oetker Group. According to the statement published by
Maersk Line on Apr. 28th, Maersk will pay 3.7 billion euro on a
cash and debt-free basis for the acquisition, and such movement
is expected to generate annual synergies of around USD 350-
400 million. The deal is slated to be closed by the end of 2017.
-5%
5%
15%
25%
35%
45%
2010 2011 2012 2013 2014 2015 2016
Operating Income % Pre-Tax Income %
Exhibit 20: EBIT by Business
-20%
-15%
-10%
-5%
0%
5%
10%
15%
-2,000
8,000
18,000
28,000
38,000
48,000
58,000
10 11 12 13 14 15 16
Others
Maersk Tankers
Maersk Supply
Service
Maersk Drilling
Maersk Oil
Svitzer
Damco
APM Terminals
Maersk Line
Exhibit 17: Routes by Transported
Volume
Exhibit 18: Operating Revenue Unit: mn, USD
Source: Company data
M&A- Hamburg Süd
35.4%
49.0%
15.6%
East-West North-South Intra-regional
15.77%
26616.69%
132
20.59%
107
46.94%
134
0%
20%
40%
60%
80%
100%
By capacity By number
<3k 3k – 4.7k 4.7k – 8k > 8k
Exhibit 19: Fleet Analysis (Containership)
-500 -300 -100 100 300 500 700
Others Energy Svitzer Damco APM Terminals Maersk Line
Source: Company data Source: Company data
Unit: mn, USD Exhibit 21: Key Operating Raios

14
AP Moller - Maersk A/S: Summary Financials

15
Evergreen Marine Co. (2603 TT)
Evergreen Marine Corporation (EMC) is the largest container
shipping company in Taiwan. Evergreen used to be the vanguard
of global container shipping industry by introducing the first two-
way Round-the-world service (fixed eastbound/westbound
global routes) in 1984. The busiest routing category of EMC is
America Export, i.e., from E. Asia to N. and C. America, which
accounts for 43% of the company’s fixed routes revenue last
year. According to Alphaliner, EMC is the world 6th biggest liner,
operating 194 ships (or 1.02 million TEU in capacity), with 4.9%
market share. EMC is currently a member of OCEAN.
Exhibit 24: Net Debt to Equity Ratio of Liners
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
0
20
40
60
80
100
120
140
160
2010 2011 2012 2013 2014 2015 2016
Operating Revenue YoY(RHS)
43%
20%
23%
14%
America Export Lines Europe Export Lines
Asia Export Lines Others
Exhibit 22: 2016 Fixed Routes
Revenue Breakdown
Table 14: Operating Revenue Breakdown Unit: 000s, TWD
23.62%
32.35%
66.09%
71.38%
80.33%
87.18%
135.96%
137.23%
138.14%
204.19% 481.59%
0% 100% 200% 300% 400% 500%
Wan Hai
MAERSK
COSCO
HAPAG-LLOYD
Evergreen
K-Line
NYK
CMA CGM
MOL
HYUNDAI MERCHANT
Yang Ming
Exhibit 23: Operating Revenue
Source: Bloomberg
The operating revenue YoY of EMC has declined sharply from
2012, and such situation persisted over the previous few years.
Luckily, in 2016, the decline is gradually fading away. However,
judging from leverage in capital structure, EMC’s net debt to equity
ratio is higher than other top players.
Unit: bn, TWD

16
Evergreen Marine Corporation: Summary Financials

17
U-Ming Marine Transport Co. (2606 TT)
U-Ming Marine Transport Co., formerly known as Yue Ming
Transportation Co., is a subsidiary of Far Eastern Group. U-Ming
focuses on dry bulk shipping as well as tanker shipping. Based
in Taiwan, U-Ming’s fleet is the most comprehensive among
other Taiwanese competitors.
In recent years, U-Ming has been actively updating its fleet,
making shares of oil tanker, panama and supramax larger, while
gradually phasing out cement carrier. Currently, after acquiring
2 new supramax ships in Mar. 2017, U-Ming operates 41
vessels with the average age about only 5 years old. Besides,
the share of power-saving ship in terms of capacity now stands
at nearly 70%.
-40%
-20%
0%
20%
40%
60%
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016
Operating Revenue YoY(RHS)
-20%
0%
20%
40%
60%
80%
2010 2011 2012 2013 2014 2015 2016
Gross Margin % Operating Income % Pre-Tax Income %
11.55%
23.62%
27.54%
39.18%
62.31%
104.01%
174.13%
251.77%
0% 70% 140% 210% 280%
Sincere Navigation
Wan Hai
Taiwan Navigation
U-Ming
Chinese Maritime
First Steamship
Wisdom
Shih Wei Navigation
Exhibit 25: U-Ming Fleet
Exhibit 26: Operating Revenue Unit: bn, TWD
16
12
5
4
4
Capesize Panamax
Supramax Cement Carrier
Oil Tanker
Source: Bloomberg
Exhibit 28: Key Operating Ratio
Exhibit 29: Net Debt to Equity Ratio of
Taiwanese Dry Bulk Shipping Companies
90.23%
7.83%
1.94%
Freight Rev.-Owned Freight Rev.-Chartered Others
Exhibit 27: Operating Revenue

18
U-Ming Marine Transport Corporation: Summary Financials

19
Appendix
Exhibit 30: Total Debt Stacked in Shipping Industry
0
50
100
150
200
250
00 02 03 05 07 09 10 12 14 16
Source: Bloomberg
Unit: bn, USD
500
1,500
2,500
3,500
4,500
06/11 02/12 10/12 06/13 02/14 10/14 06/15 02/16 10/16
Shanghai to Rotterdam Shanghai to Genoa
Shanghai to Los Angeles Shanghai to New York
WCI Freight Rate Composite
Exhibit 31: World Container Time Charter Index
Source: Drewry
0
10,000
20,000
30,000
40,000
50,000
60,000
03/12 10/12 05/13 12/13 07/14 02/15 09/15 04/16 11/16
VLCC Dirty Suezmax Dirty Aframax Dirty
LR1 Clean LR2 Clean MR1 Clean
Exhibit 32: Tanker Charter Rates
Source: Poten & Partners, SSY
Unit: USD/ day
0%
10%
20%
30%
40%
0
20,000
40,000
60,000
2012 2012 2013 2014 2015 2016 2017
FAI (LHS) FAI (Accu. YoY)
FAI by state ( Accu. YoY) FAI by private sector (Accu. YoY)
Exhibit 33: China Fixed Assets Investment
Table 15: Vessel Value
Unit: bn, yuan
Unit: mn, USD
Source: VesselsValue Ltd

20
Disclaimer
 These report contain certain forward-looking statements with
respect to the results of operation, financial condition and
current expectation about future events. By their nature,
forward looking statements involve risk and uncertainty
because they relate to events and depend on circumstances
that will occur in the future.
 In preparing the information herein, Collaborator have relied
upon and assumed, without independent verification, the
accuracy and completeness of all information available from
public sources or which was provided to Collaborator or
which was otherwise reviewed by Collaborator. Neither
Collaborator nor its advisors have made any representation
or warranty as to the accuracy or completeness of such
information and nor so they assume any undertaking to
supplement such information as further information becomes
available or in light of changing circumstances.
 None of Collaborator, nor any of their respective affiliates,
advisers or representatives shall have any liability
whatsoever (in negligence or otherwise) for any loss
howsoever arising from any use of this presentation or its
contents or otherwise arising in connection with this
presentation.
 Neither this presentation nor any of its contents may be
reproduced to a third party without the prior written consent
of Collaborator.

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