The document provides an overview of the global shipping and offshore markets in 2013. It discusses trends in various shipping segments including tankers, dry bulk carriers, container ships, car carriers, and LNG carriers. The offshore section covers mobile offshore drilling units, offshore support vessels, and offshore construction vessels. Key points include another year of high fleet growth outpacing tonnage demand growth, declining freight rates and asset values across most shipping segments, and signs of recovery in the LNG and offshore markets. Overall, the markets remained challenging in 2013 but showed potential for recovery in 2014-2015 as the global economy improves and fleet growth moderates.

1. the platou report
2013

2. Contents
introduction........................................................................................................ 3
the shipping environment ................................................................................. 7
the shipbuilding market .................................................................................. 12
the tanker market ............................................................................................ 16
the dry bulk market ......................................................................................... 21
the container ship market .............................................................................. 26
the car carrier market.................................................................................... 28
the lng market................................................................................................... 29
small-scale lng................................................................................................. 30
the demolition market...................................................................................... 31
mobile offshore drilling units...................................................................... 32
the offshore support vessel market............................................................ 35
the offshore contruction vessel market..................................................... 38
Offshore Wind .................................................................................................. 40
rs platou markets............................................................................................. 42
rs platou finans................................................................................................ 45
rs platou real estate........................................................................................ 48
statistics............................................................................................................. 50
Contacts.............................................................................................................. 56
Cover photo: Farstad Shipping

3. Shipping & Offshore:
Shaping the world of energy
Shipping Offshore
Commercial shipping companies transport 90 percent of global The recent tragedy at the gas produc-
goods by weight and volume. Considering its importance, if the tion facility in Algeria brought home
world was just ONE country, shipping would most likely have the vulnerability of onshore installa-
been a public utility! tions in North Africa and the Middle
East when it comes to terrorist at-
Instead, private owners and capital dominate international tacks. The Arab Spring has turned into
shipping. It is up to them to solve the logistical challenges that a shaky Winter, as unrest continues to
arise in our constantly changing markets. spread and escalate in this important
energy- exporting region.
For example, there is currently an intense debate in the US
Congress over whether to approve exports of (shale gas) LNG Some oil company executives believe
from the US. The Department of Energy has approved several offshore energy production is easier to
LNG export licenses, but the majority of Democrats, and quite defend from terrorist attacks, than for
a few Republicans, would like to keep this “new” gas inside na- example onshore installations in North
tional borders. Africa and the Middle East.
Meanwhile, independent ship owners have ordered additional There was a succession of major off-
LNG tonnage in anticipation of US exports from 2015/16. The shore discoveries during 2012 and we
world needs all the energy it can get from politically low-risk continue to believe in increased ac-
countries, so it is important that Washington does not ham- tivity for offshore rigs in general and
string oil and gas exploration and production in the US. The ultra-deep water rigs in particular. The peter m. anker, Managing Partner & CEO
country’s stunning transformation from the world’s biggest im- growth in demand for subsea construc-
porter of petroleum products to its (almost) biggest exporter, tion vessels will continue to accelerate in the years to come. The
feeding the emerging economies in Latin America and Africa, fleet is not only growing by numbers, but also by complexity
is a case in point. of the vessels. We are entering into the development phase of
many deep water projects that demands larger subsea structures
The prospect of serious long-haul LNG volumes coming out of and more complex installation operations.
Canada also looks very promising. It raises the question, could
Canada be the new Qatar of the Americas? Conclusion
While the world has been focused on various macroeconomic cri-
The first quarter of 2013 is characterized by a mixture of signifi- ses during the last few years, the energy markets have undergone
cant uncertainty and opportunity for shipowners and investors. dramatic changes in supply and trading patterns ‘under the radar’.
The markets are in a bottom cycle, with second hand and new
building prices at cyclically low levels. At the same time, the We believe these changes will become much clearer once the
world economy is showing some potential for a strong recovery world economy picks up steam, and could offer positive sur-
soon, and new fuel-efficient designs are an added incentive for prises for both the shipping and offshore markets.
calling the shipyards. Taking this into consideration, we may
well see a nascent recovery in most shipping markets in 2014 Yours Sincerely,
and 2015. Peter M. Anker,
Managing Partner & CEO, RS Platou ASA
introduction 3

4. OSLO
ABERDEEN
LONDON
NEW YORK
GENEVA
HOUSTON
RIO DE JANEIRO
ACCRA
4

5. THE WORLD ACCORDING TO RS PLATOU
the world according to RS Platou
MOSCOW
SHANGHAI
DUBAI
SINGAPORE
PIRAEUS
SYDNEY
CAPE TOWN MELBOURNE
PERTH
SHIPBROKING OFFSHORE INVESTMENT BANKING PROJECT FINANCE
5

6. 6 THE SHIPPING ENVIRONMENT

7. the shipping environment
World shipping 2012;
Down, but not out
2012 turned out to be just as difficult for the shipping markets as we feared it would be. The performance of the world economy was even
weaker than reflected in downbeat expectations at the start of the year, while fleet expansion remained above any reasonably sustainable
long-term growth trend for the fourth consecutive year. Despite another stellar performance from the LNG market and a modest tightening
of the tanker market, capacity utilization for the world’s merchant fleet fell by an estimated 1 percentage point to 84 percent, the lowest
level since the full force Financial Crisis hit in 2009.
Nevertheless, the past year was not without bright spots, despite the fascinating complexities of tonnage demand. Most notably,
the very challenging conditions for many segments. Most obvi- there were significant shifts in transportation distances for both
ously, the fact that both the tanker and dry bulk freight markets tankers (longer) as well as dry bulk (moderately shorter), while
saw periodic rallies through the year is a clear indication that the markedly longer distances seen in the LNG market in 2011
the level of over-capacity is relatively moderate, compared to were sustained in 2012. Furthermore, fleet productivity fell in
what was seen in the 1970s and ‘80s. This is partly due to ton- response to higher bunker prices and increased average vessel
nage demand having enjoyed a surprisingly strong year despite size. Lastly, it was a big year for inventory swings with both tank
an overall weak world economy, as the increased weight of the and dry bulk seeing bigger than normal inventory related trade
commodity intensive non-OECD economies offset weaknesses movement in response to geopolitical factors (tank) and rela-
in the OECD. tive commodity prices (dry bulk).
Another important development was the continued sharp de- Another year of above-trend fleet growth,
cline in the fleet orderbook which declined from 20 percent of but delivery pipeline is emptying
the fleet a year ago to 14 percent at the end of 2012, as new or- The world’s merchant fleet continued its pattern of robust
ders fell to a decade low. Whatever the reasons for this – more growth, adding another 7.8 percent, only slightly less than the
prudent owners, insufficient cash flow, continued challenging record 8.2 percent seen in 2011. This marked the eighth con-
financial conditions – the fact that fleet capacity is responding secutive year where growth exceeded 7 percent. The contribu-
rationally to market conditions raises hope that the industry tors to growth were widely spread among key segments, with
will avoid a repeat of the protracted structural downturn seen dry bulk in front at 12.6 percent and LNG carriers in the back at
in the past. a modest 1.4 percent, which made that segment the place to be
for the second straight year.
Tonnage demand slowed less than the
world economy Overall fleet utilization dropped by
2012 was yet another year dominated by crisis headlines on the 1 percentage point to 84 percent
economic front, as the Euro Crisis not only rolled on but gath- A sizable 4 percent drop in dry bulk fleet utilization, the larg-
ered in strength through the first half of the year. Despite world est segment of the merchant fleet, dragged down overall fleet
GDP growth coming in at a lackluster 3.2 percent, tonnage de- capacity utilization. The container fleet also contributed to
mand registered a healthy rise of 7.1 percent, down from 7.7 this decline, while improvements for the LNG, car carrier and
percent in 2011. The year gave us important demonstrations of tanker segment moderated the drop.The level of 84 percent uti- ➤
THE SHIPPING ENVIRONMENT 7

8. lization is nonetheless weak. According to our records it is the erage earnings rose from $14,800 per day in 2011, to $17,100
second lowest level seen in the past decade, although it is still per day in 2012.
well above the bottom level of 82 percent, seen in 2009.
Dry bulk in 2012: Substantial drop in freight
Asset values continued falling but rate of rates
decline eased Market fundamentals deteriorated further during 2012 caused
It was yet another year of falling asset values, but the pace of by another year with record high deliveries. Even though scrap-
decline slowed and the performance across sectors was more ping also rose to the highest level registered, the net fleet ex-
varied than in 2011. The least variation was seen in newbuilding pansion was above 12 percent from the year before. Despite
prices, which fell across the board by 5 - 10 percent for most size weaker global economic growth, tonnage demand increased
classes. Secondhand values declined as well, due not only to the by a healthy 7 percent thanks to China, which utilized huge ar-
weaker freight market but also because of the emergence of fuel bitrage in iron ore and coal prices, importing much more dry
efficient newbuildings, a possibly important shift in shipping bulk commodities than the underlying demand for steel, energy
technology and design. Values declined, with dry bulk vessels and so forth would suggest. However, the fleet utilization rate
recording significant declines of 20-30 percent, tankers fell by dropped from 87 percent in 2011 to 83 percent in 2012, and this
5-10 percent. It was the fourth straight year of declining asset caused a drop in freight rates of between 40 and 50 percent and
values, and accompanied by poor cash flows it put the indus- in ship values by 20- 30 percent.
try’s balance sheets under further, severe pressure.
The container market in 2012: Box rates and
Tankers in 2012: Little relief, despite demand timecharter rates part company
boom The container ship market in 2012 was characterized by higher
The tanker market experienced some improvement, although average box rates than in 2011, but substantially lower char-
this was unevenly spread between segments and seasons, dem- ter rates. Operators managed to raise the utilization rate, and
onstrating the fragile nature of this market. The good news was thereby freight rates, of the operating fleet by idling more ton-
an estimated 8 percent spike in tonnage demand. This was due nage and creating a higher demand increase through lower fleet
to a combination of increased volume growth and longer dis- productivity. Non-operating owners faced a very difficult year
tances as importers rushed to cover the loss of Iranian oil. Pro- as liners had limited need for the chartering of extra tonnage.
ductivity also fell, as it did for all other segments. These factors Total container ship capacity increased by 7.7 percent, while the
boosted the crude market during the first months of the year, operating fleet grew by 4.5 percent. Tonnage demand is estimat-
and the clean market during the last months. The period in be- ed to have escalated by around 7 percent, with 5 percent higher
tween, on the other hand, was dismal, with most crude carriers trade volume and a drop of 2 percent in fleet productivity. The
in particular consistently trading at, or below, operating costs. low growth in container movements was related to a drop of 3
Fleet growth remained high at 7.2 percent, which prevented any percent in European containerized imports.
sustained increase in rates. For the year, our Tanker Index of av-
tonnage demand growth World merchant fleet 2003–2012
vs world economic growth 2003–2012 Annual Changes
Tonnage demand growth world merchant fleet, annual changes in percent Percent
12 9
10
10 04 8
03 07
8 7
11 06
12/08
6 05 6
5
4
4
2
3
0
2
-2 09 1
-4 0
-1 0 1 2 3 4 5 6 03 04 05 06 07 08 09 10 11 12
World output growth
8 THE SHIPPING ENVIRONMENT

9. LNG in 2012: Longer and stronger World economy and world shipping
The LNG shipping market tightened further during 2012 de- 2012 was not a good year for the world economy with, growth
spite the fact that demand growth slipped into single digits for slipping to little more than 3 percent, the lowest level for a de-
the first time in seven years. The 6 percent growth in tonnage cade, barring the Financial Crisis. Under these circumstances,
demand was mainly due to longer average distances, as the it came as no surprise that the year also witnessed a slowdown
inter-basin trade from the Atlantic to the Pacific continued to in tonnage demand growth. That said, growth of 7.1 percent
expand. Trade volume, in fact, declined by 1 percent. Lower was better than might have been expected, as it represented
fleet productivity also contributed to the demand increase. a more moderate slowdown than that experienced by GDP.
Productivity fell by an estimated 2 - 3 percent owing to high While there were some special situations, as always, we view
bunker prices and increased average vessel size. The LNG fleet this relatively strong performance in trade growth as a con-
grew only 4 percent and thus lifted the fleet utilization rate to 95 firmation of the changing, and more shipping intensive,
percent, which resulted in an average spot rate of $125,000 per composition of the world economy. The commodity inten-
day, up from $93,000 per day in 2011. sive non-OECD economies are increasing in size in relation
to the mature, service-oriented OECD economies. Based on
Car carriers: Uneven improvement the IMF’s current forecasts the former group is on course to
The car carrier market has seen another year of fluctuations in overtake the latter in absolute size, in 2013. This long-term
tonnage demand. 2012 started off well with export volumes trend will underpin overall shipping demand in the years
rising from the recovery of the Japanese automobile industry, to come and gives reasons for optimism regarding recovery.
strong Korean exports and growing US auto sales. However, the The increasing weight of the non-OECD economies was ably
Euro crisis took its toll on European car sales and along with demonstrated this year by the extent to which mere inventory
strikes in Korea, contributed to a fall in export volumes dur- swings in iron ore and coal in China moved the entire dry bulk
ing the second half of the year. Due to reasonably modest fleet market.
growth, the average market balance improved somewhat from
2011, climbing to an estimated 84 percent fleet utilization rate. Status and prospects for the world economy
Prospects for tonnage demand going forward depend heavily 2012 began with forecasters in a downbeat and highly uncer-
on the economic development in key sales markets, as well as tain mood, after 2011 turned into yet another false dawn for the
the possibility of relocation of car production from Japan to world economy. Most notably it became clear that politicians
overseas markets as a result of the strong Yen. were still behind the curve in the Eurozone crisis. In addition, ➤
THE SHIPPING ENVIRONMENT 9

10. the US seemed unable to move out of its 2 percent sluggish anything, falling farther behind the curve. It took a more prag-
growth rate range, regardless of any kind of monetary stimulus matic approach from the ECB with regards to supporting the
thrown at it, while, in the face of all this, China (as well as other region’s bond markets, in order to nudge politicians into agree-
emerging markets) was showing signs of a significant slow- ing on several difficult issues, including debt write down and
down. Forecasters turned out to be relatively accurate in their continued restructuring of the most fragile economies. That in
downbeat view of the world economy, as (preliminary) full year turn improved market sentiment regarding the risk of a breakup
growth figures show an estimated 3.2 per cent increase, not too of the entire Eurozone.
far off the 3.3 percent forecast at the start of the year. Prospects
for 2013 are for a moderate pickup in growth but this will still The troubles in Europe shielded the US from the storm for most
be below the long-term trend. of the year, but the country’s tepid, and disappointing, growth
of around 2 percent slowed further in the fourth quarter, as poli-
The challenges for the world economy differ between the ma- ticians battled over how to avoid the Fiscal Cliff of automatic
ture economies of the OECD and the ‘growth’ economies of tax hikes and spending cuts. Although a last minute deal was
the non-OECD. The former group is struggling with the very reached, unsurprisingly, no fundamental problems were solved
difficult combination of reducing national debts and deficits, and the challenges of dealing with the deficit and national debt
while at the same time avoiding a relapse into recession, mak- are set to re-emerge in 2013.
ing that very task next to impossible. Emerging economies, on
the other hand, are feeling some growth pains from their force- Emerging markets became emerging
ful response to the Financial Crisis, which boosted inflationary risks to growth
pressures in the respective economies via higher commodity A year ago, we discussed the risk of a slowdown in emerging
and property prices. markets and the impact on tonnage demand. The scenario
turned out to be all too realistic, as 2012 featured a broad based
The more positive sentiment visible at the start of 2013 can be slowdown across-the- board in such countries: China’s growth
attributed to two main factors. Number one, that key econo- slowed from 9.5 percent in 2011 to a run rate of 7.5 percent in
mies were pushed to the brink in 2012 – and survived. Sec- 2012. India slowed from 7 percent to 5 percent; Brazil from 4
ondly, leadership changes in the world’s two largest economies percent to 1 percent; and Russia from 5 percent to 4 percent.
went smoothly, reinforcing the notion that the leaders in the US The combination of tighter monetary policy, due to budding
and China are firmly committed to sustained and uninterrupted inflationary pressures in recent years and weaker export mar-
growth. kets, had visible effects and combined to bring GDP growth for
the group classified as ‘developing economies’ below 6 percent
Europe and the US: Muddling through for only the second time in a decade. This, unsurprisingly, had a
In terms of ‘stress tests’, Europe was in the spotlight, as talk of a negative impact on trade growth due to the commodity inten-
‘Grexit’ increasingly dominated the front pages, while, for every sive nature of these economies.
new ‘crisis’ meeting, it became clear that the politicians were, if
ANNUAL GROWTH IN REAL GDP
world seaborne trade and economic growth 1970-2012
Percentage change from previous year
Index 1970=100 Jan 2012 Jan 2013 Jan 2013
500 World output Forecast Estimates Forecast
450 2012 2012 2013
Seaborne dry trade
USA 1.8 2.3 2.0
400 Seaborne oil trade JAPAN 1.7 2.0 1.2
350 EURO AREA -0.5 -0.4 -0.2
C AND E EUROPE 1.1 1.8 2.4
300 RUSSIA 3.3 3.6 3.7
250 CHINA 8.2 7.8 8.2
INDIA 7.0 4.5 5.9
200
ASEAN 5.2 5.7 5.5
150 M EAST AND N AFRICA 3.2 5.2 3.4
SUB-SAHARA AFRICA 5.5 4.8 5.8
100
L AMERICA 3.6 3.0 3.6
50 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 WORLD 3.3 3.2 3.5
Source: IMF
10 THE SHIPPING ENVIRONMENT

11. Signs of encouragement as 2013 got underway tone in the world economy, discussed above, is obviously a very
The improvement in sentiment seen at the start of 2013 reflects important factor. The ability for the world economy to influence
stronger underlying data. The biggest, and for shipping, most shipping must in turn be seen against the backdrop of current
important, change is in China. When the economy first began overcapacity conditions that are far more moderate than in the
to slow authorities appeared hesitant to do anything to stimu- dark days of the 1980s. The various freight markets’ demon-
late growth, most likely worried about the lingering inflationary strated ability to respond to changes in trading conditions during
pressures which came as a result of the truly giant stimulus pack- 2012 is a key sign in that regard. The most positive surprise may
age in 2009. However, in September another stimulus package have been on the supply side of the market, however, which has
was revealed and, combined with a softening of banks’ capital responded very rationally to the weak business climate by sharply
requirements, this led to an improvement in the tone of the eco- reducing new orders. The overall orderbook thus fell steadily and
nomic data. ended the year at 14 percent of the fleet, the lowest relative level
in fifteen years and down from 20 percent a year ago.
In the US, the severely deflated housing market gradually im-
proved through the year and, combined with continued growth Finally, the structure of the world economy continues to be-
in the auto and energy producing industries, overall labor mar- come more shipping intensive. Chinese import growth re-
ket conditions began to show signs of more consistent improve- mained close to GDP growth, even during a year of slowdown.
ment late in 2012. Furthermore, the size of the economy is such that even tactical
considerations, like stock building and/or arbitrage inspired
Expectations for the world economy in 2013 are muted. Growth trades, can move entire markets. Also, the shale energy revolu-
is expected to nudge up to 3.5 percent, still well below its long- tion in the US has contributed to a net rise in shipping activity,
term potential. However, calmer financial markets signal an im- by raising the country’s exports of refined oil products and coal
provement in overall business and consumer confidence - vital (and, soon, LNG), while also contributing to longer trading dis-
factors when it comes to making investment decisions that pro- tances for crude oil.
mote growth and employment. The relative stability of the oil
market, despite the fact that the 2012 average price for Brent Market conditions are likely to remain difficult in 2013 for the
was the highest on record - also contributed to a moderately segments that struggled in 2012. However, we believe there are
improved growth situation and the hope that the worst is over. good reasons to hope that shipping has retained its cyclicality
through this difficult period, and will be able to share the fruits
Shipping market prospects: of any improvement in the world economy, once it arrives, rela-
Cyclicality is not dead tively quickly.
On the face of it, there seem to be few reasons to expect much
improvement for world shipping markets in 2013. However, we Ole-Rikard Hammer
believe there are reasons to think that a change is, if not in the Head of Research
air, certainly visible on the horizon. The cautiously improved RS Platou Economic Research
GLOBAL ECONOMIC GROWTH 2003-2013 supply, demand and utilization rate 1990-2012
Forecasts and actual growth rates World merchant fleet
Percent change Mill cgt Utilization rate
6 Forecast 500 130 Supply
Actual Demand
5
400 120 Utilization rate
4
3 300 110
2
200 100
1
100 90
0
-1 0 80
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source: IMF (Forecast per Oct. the year before)
THE SHIPPING ENVIRONMENT 11

12. the shipbuilding market
Building prices at
a ten-year low
Ordering activity fell by 30 percent in 2012, for the second year in a row. The main issues were slower economic growth and
high fleet growth in most shipping segments, resulting in low freight rates and thus lower demand for newbuildings.
The level of new orders amounted to less than 50 percent of our carriers and container ships. However, based on a freight in-
estimated building capacity at the time of delivery. This resulted dex of $13,000 per day in 2012, we would have expected a
in a continued decline in average delivery time and, as a con- higher ordering activity than the 16 mill cgt recorded. An-
sequence, downward pressure on newbuilding prices. During other factor that affected demand was the availability of capi-
2012, our newbuilding price index fell by 12 percent and ended tal. The banks have become quite restrictive for new loans to
at the lowest level seen in ten years measured in real terms. shipowners.
Demand for new tonnage We have roughly estimated that owners invested 30 bill USD
Demand for newbuildings was slow in the first half of 2012, with in conventional ships in 2012, a significant reduction from the
only 3 mill compensated gross tons (cgt) of new orders regis- previous year’s 50 bill USD.
tered per quarter. During the second half of the year, the order-
ing activity picked up to above 5 mill cgt per quarter, which was Chinese shipyards were awarded 40 percent of all orders this
still significantly below the estimated quarterly building capac- year, closely followed by the Koreans, who took 38 percent. A
ity of 8 to 9 mill cgt. third of all new orders in China were from domestic owners,
while in Korea the share was only 10 percent. Japanese yards
The ordering activity has historically been closely correlated took 15 percent of the orders, of which three quarters were from
with our freight rate index based on earnings for tankers, bulk domestic accounts.
building prices for bulk carriers 2003–2012 building prices for tankers 2003–2012
Mill $ Mill $
100 Capesize 170 VLCC
90 Panamax Suezmax
150
Handymax Aframax
80
130 MR Clean
70
110
60
90
50
70
40
30 50
20 30
10 10
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
12 THE SHIPBUILDING MARKET

13. TankerS Korean yards have traditionally been the dominant builder in
During 2012, we registered 15 mill dwt of new orders for tank- this segment, but in 2012 Chinese yards secured 53 percent of
ers, representing a 40 percent increase from 2011 - a much high- all new orders, while Korea took 38 percent.
er growth rate than the 17 percent seen in our tanker rate index.
The shipyards delivered 32 mill dwt and towards the end of the lng
year the orderbook amounted to 51 mill dwt, representing 10 LNG was a segment where freight rates reached historical high
percent of the existing fleet. levels in 2012 and, subsequently, the demand for new tonnage
remained high. This year we registered 33 new orders and, since
In 2012, Korean and Chinese shipyards maintained their 60 and only two vessels were delivered, the orderbook grew significantly.
30 percent respective market shares in the tanker segment, while It ended the year at 92 vessels, or 27 percent of the existing fleet.
Japan took 8 percent of the orders measured in dwt. A new fea-
ture this year was the fact that Korean owners were the most ac- Korean shipbuilders were awarded 76 percent of all new LNG
tive and were responsible for 16 percent of all new contracts. carrier orders.
bulk CarrierS building CapaCiTy
The number of bulk carriers ordered in 2012 declined by almost The trend in deliveries of tonnage, measured as a 12 months
40 percent from the year before - in line with the decline in freight moving average, held fairly steady at a level of 4 mill cgt per
rates - and was tallied at 19 mill dwt. During the year, 98 mill dwt month from the middle of 2010 to half way through 2012.
was delivered and at the end of 2012 the orderbook amounted to Deliveries peaked in June 2012, due to the fact that all new ves-
105 mill dwt, equivalent to 14 percent of the existing fleet. sels delivered after 30 June had to be in compliance with IMO’s
Performance Standard for Protective Coating (PSPC) for bal-
Chinese shipbuilders were again the most active in this segment last water tanks. During the second half of the year, deliveries
in 2012, securing 59 percent of all new orders. Almost all other declined to an average of 2.4 mill cgt per month.
contracts, 38 percent, went to Japanese yards. An estimated 21
percent of the orders came from Japanese owners, followed by If we compare the orderbook for each of the major shipbuilding
Greek and Chinese owners, who had a share of 13 and 11 per- countries at the beginning of the year to what they actually de-
cent, respectively. livered, the slippage (the ratio not delivered) in 2012 is surpris-
ingly similar to what we registered in 2011. Chinese yards deliv-
COnTainer ShipS ered 71 percent of the orderbook, while Korean and Japanese
Demand for container ships in 2012 declined to less than a yards were able to deliver 80 and 93 percent, respectively. In to-
third of the level seen in 2011 (in line with a subdued freight tal, 80 percent of the orders scheduled for 2012 were delivered.
market) and totaled 0.47 mill TEU. During the year, 1.25 mill
TEU was delivered from the shipyards and at the end of 2012 According to the orderbook, a further decline in deliveries in
the orderbook stood at 3.4 mill TEU, representing 20 percent the coming years should be expected. At the end of 2012, some
of the existing fleet. 32 mill cgt was due to be delivered in 2013, representing a 20 ➤
bUilding Prices for container shiPs 2003–2012 neW orders in mill cgt 2003–2012
Mill $ Mill cgt
120 6,000 teu 80 Others
110 4,500 teu LNG
70
100 3,000 teu
Container
90 1,700 teu 60
Bulk carriers
80 1,000 teu 50 Tankers
70
40
60
50 30
40 20
30
10
20
10 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
the shipbuilding market 13

14. percent decline from 2012. As we assume that some slippage The steelplate price varies from country to country, and for a
will also take place in 2013, we expect the decline in deliveries typical Aframax tanker in Korea this has resulted in an 8 mill
to be even more than the 20 percent indicated by the orderbook. USD reduction in direct steel costs.
Slippage per segment The price for main engines has remained at a very low level, as
In the tanker segment, the orderbook at the start of 2012 there has been a huge overcapacity in the production of main
­indicated that 45.6 mill dwt was due to be delivered that year. A engines since 2008. In Korea, engine prices have maintained a
tally at the end of the year showed that only 31.9 mill dwt was level of about 185 USD per BHP from the previous year, while
actually built. The difference can be explained by the fact that the prices in China have been recorded at even lower levels.
orders amounting to 11.1 mill dwt were postponed, 4 mill dwt
cancelled or converted to other ship types, and 1.5 mill dwt of The development of a shipbuilder’s currency against the dollar is
‘new’ contracts were delivered. also an important aspect of the building cost. During 2012, the
Chinese Yuan remained almost unchanged against the dollar,
According to the dry bulk orderbook, in early 2012 we expect- while the Korean Won strengthened by some 8 percent. There
ed 138.8 mill dwt to enter the market that year. The amount of was relief for Japanese builders, as the Yen weakened 13 percent
tonn­ ge actually delivered amounted to 97.6 mill dwt, as 33.6
a against the dollar towards the end of the year.
mill dwt was delayed and 12.9 mill dwt was cancelled, removed
or converted. In addition, 5.4 mill dwt of completed vessels In total, we have estimated that overnight building costs re-
were not in the orderbook at the start of the year, and are there- mained almost unchanged during 2012, but were still around
fore registered as ‘new’ contracts. 20 percent below the record high level estimated for a Korean
builder in 2008.
The orderbook for container ships showed that 1.58 mill TEU
of capacity was due for delivery in 2012. At the end of 2012 Expectations for 2013
we recorded 1.25 mill TEU of actual deliveries. The residual The main driver of the shipping industry, world GDP growth,
amount can be explained by the 0.35 mill TEU postponed, 0.02 is expected to be marginally higher in 2013 than it was in 2012,
mill TEU cancelled and 0.43 mill TEU of ‘new’ orders that were namely 3.4 percent. Based on the historical correlation between
delivered in 2012. the world GDP growth and tonnage demand for the world mer-
chant fleet, we expect a healthy growth of 5-6 percent in demand
Building cost for 2013. We anticipate fleet growth at the same level, taking into
Newbuilding prices have been on a downward trajectory since account some delays and cancellations of orders, combined with a
the second half of 2008, caused by an overcapacity in the new- continued high level of removals. We therefore expect the utiliza-
building market and declining building costs. tion rate for the merchant fleet to remain at 84 percent in 2013.
This should result in freight rates below break-even in the major
Steel is one of the most important materials in shipbuilding and shipping sectors and thereby mitigate owners’ willingness to or-
from 2008 to 2012 our steelplate price index fell by 40 percent. der new ships. Another obstacle for owners who want to order
world market price for heavy steel plates 2003–2012
10 mm+
$/ton
DELIVERIES, NEW ORDERS AND ORDERBOOKS BY VESSEL TYPE 1,400
1,200
New Order Percent
Deliveries orders book of fleet
Type Capacity 2012 2012 end 2012 end 2012 1,000
Tankers Mill. dwt 31.4 14.2 49.4 10.7
Bulk carriers Mill. dwt 97.6 18.6 105.4 16.1 800
Container ships Mill. teu 1.25 0.5 3.4 21.0
LNG Mill. cbm 0.03 5.1 12.6 27.0 600
LPG Mill. cbm 0.6 1.5 2.5 12.7
Car carriers 1,000 cars 209 986 273 7.4 400
Chemical carriers Mill. dwt 0.5 0.9 1.6 4.4
Cruise 1,000 berths 16.1 18.3 74.3 14.8 200
03 04 05 06 07 08 09 10 11 12
14 THE SHIPBUILDING MARKET

15. new tonnage is securing finance, as banks have become more roughly 35 mill cgt, within a couple of years as some shipbuild-
reluctant to finance projects without any charter commitments. ers will cease to exist and others will do their utmost to reduce
capacity in order to survive.
With low demand from the major segments, a higher focus may
be seen on smaller, industrial segments. We also see an increas- In conclusion, we therefore expect a continued downward pres-
ing interest in new eco-designed ships. However, all in all we sure on newbuilding prices in 2013. However, as the price level
expect total demand to remain subdued. According to our esti- at the end of 2012 is getting close to the variable cost level, we
mates, demand may reach 20 - 25 mill cgt in 2013. do not expect a significant drop in the already low prices, unless
there is a meaningful change in input prices or exchange rates.
Building capacity is expected to decline, as shipbuilders are
struggling in a low price environment. At the present price lev- Jørn Bakkelund
el, we have estimated that building capacity may be reduced to RS Platou Economic Research
the shipbuilding market 15

16. the tanker market
Spike in tonnage demand
offers only partial relief
Tanker freight rates improved in 2012 from the exceptionally weak levels of 2011. Statistics show a spike in tonnage demand, but the
majority of participants may not have felt it this way. We estimate that tonnage demand jumped by an exceptional 8 percent, but the
most tangible part of demand growth, trade volume, made only a modest contribution. Longer average distance and reduced productivity
were more important contributory factors. Continued high fleet growth, even higher than 2011, restricted the improvement in average
fleet utilization to a modest 1 percentage point, virtually all of it during the first half of 2012.
The year was split in two for the crude and the clean segments. disrupting refineries, locking up tonnage and rerouting trade
Crude tanker rates experienced a fairly strong start to the year, flows, a combination of factors that caused fundamentals to
particularly for VLCCs, as Saudi Arabia raised production and tighten further. Spot market rates rose markedly, particularly in
importers scrambled to build inventory and adjust to the EU’s the Atlantic Basin, but TC rates remained relatively stable.
pending embargo of Iranian oil. Once the market had made
these adjustments, tonnage demand growth slowed and freight For the full year, our tonnage-weighted Tanker Index of freight
rates for VLCCs and Suezmaxes immediately collapsed through rates rose from $14,800 per day to $17,200 per day, a rise of
the summer before experiencing a modest seasonal rebound in 16 percent. With the exception of Suezmaxes, which bore the
the fourth quarter. brunt of the decline in US imports, all segments contributed
to the increase. For the crude carrier segment, VLCCs saw the
The clean market experienced the opposite development: the largest improvement going from $15,000 to $21,000 per day, a
first half of the year was weak and uneventful but trade growth rise of 40 percent. Meanwhile, for clean tankers LR1 earnings
picked up in the second half as the rise in crude supply which rose more than 50 percent from $11,000 to $17,000 per day.
took place in the first half of the year passed through refineries.
Then, Hurricane Sandy hit the US East Coast in late October, Asset values still under pressure,
but some divergences
Vessel prices remained under pressure during the year. While
freight rates – single voyage 2003–2012 newbuilding prices fell across-the-board by 5 to 10 percent,
Crude carriers
trends in secondhand values were more mixed than in 2011.
1,000 $/day Values for modern VLCCs and Suezmaxes saw only moderate
200 VLCC declines, while prices for Aframaxes and smaller vessels fell by
Suezmax
a further 10 to 20 percent. Values for units 10 years and older,
Aframax
150
average freight rates $1,000 per day
100 Single voyage
2010 2011 2012
50 VLCC 34.8 14.9 20.9
Suezmax 28.0 16.7 14.7
Aframax 21.4 12.9 15.4
LR 2 product 16.2 12.5 14.3
0
03 04 05 06 07 08 09 10 11 12 MR product 8.9 11.3 13.0
16 THE tanker MARKET

17. which had been converging on scrap value, experienced some EU’s announcement in January that it would undertake an em-
improvement. bargo of Iranian oil effective from 1 July 2012 triggered a rush
to build inventories, notably in China. Oil prices jumped as the
A strong but uneven year for tonnage market refocused on the supply risk in an environment of low
demand growth spare production capacity. ➤
Tonnage demand rose markedly during the first months of the
year, but was unable to sustain this rate of growth, as the main
driver had been oil inventory building rather than consumption. Tanker market index 2003–2012
Annual averages (weighted by dwt)
Longer trading distances made a major contribution to tonnage 1,000 $/day
demand growth, increasing by an estimated 3 percent, com- 70
pared to trade growth of 1 percent. Average trading distances
60
lengthened to China and, particularly, to the US. The latter was
surprising, given the focus on reduced overall imports. How­ 50
ever, all of the reduction came from light, sweet oil imports, 40
mainly from West Africa, while long- haul imports from the
30
Middle East increased market share and allowed average dis-
tances to the US to rise by 9 percent ( January to September). 20
The shift still had important freight market consequences, how- 10
ever, as VLCCs benefitted at the expense of Suezmaxes.
0
03 04 05 06 07 08 09 10 11 12
Asian imports had yet another strong year, as China, Japan, In-
dia and Korea all increased imports. All countries, at least pe-
riodically, reduced imports from Iran and replaced these with tanker FLEET 2003–2012
increased imports from West Africa and Latin America. As a Average annual changes
result, average trading distances increased to this region, as well. Percent
8
Europe, on the other hand, reduced its average distances. In 7
contrast to the US, import volume increased, mainly due to
6
lower North Sea production, but the impact on ton-miles was
5
more than negated by the return of short-haul Libyan crude.
The Iranian embargo also allowed for increased shorter haul im- 4
ports from West Africa and Russia. 3
2
Reduced fleet productivity contributed to
1
demand growth
There were important developments in the opaque area of fleet 0
03 04 05 06 07 08 09 10 11 12
productivity. Most obviously, average fleet speed continued to de-
cline, falling by an estimated 0.5 knots, to 12 knots. Higher bunker
prices, particularly early in the year, caused a significant drop in freight rates – single voyage 2003–2012
optimal vessel speed. Changes in average vessel size and ballast Clean carriers
time also contributed. To surmise, we estimate that fleet produc- 1,000 $/day
tivity was reduced by an estimated 3 to 4 percent, which increased 90 85/110,000 dwt
tonnage demand by the same amount. For more details on this 80 70/85,000 dwt
and the complexities of fleet productivity, please see the enclosed 70 45,000 dwt
box article ‘Is the tanker market driven by fundamentals?’ 60
50
Oil market remained stubbornly tight 40
World oil production rose by 2.9 percent in 2012, the largest 30
increase since 2004. This easily overtook the increase in world
20
oil demand, which rose by only 1.1 percent, thanks to the weak
10
world economy. However, the increase in production failed to
0
dent prices, which remained stubbornly high for most of the 03 04 05 06 07 08 09 10 11 12
year. Brent averaged 113 USD per barrel, a record high. The
THE tanker MARKET 17

18. The increase in production was driven by Libya, but also by the In 2013 we predict relatively similar developments to what we
US. For the tanker market, the latter restricted the increase in forecast a year ago, but with the important caveat that it will be
seaborne trade to a moderate 1 percent, a smaller figure than more difficult to repeat the many positive surprises of 2012. We
might normally have been expected from the observed rise in expect tonnage demand growth to slow significantly, as OPEC’s
oil production. biggest producer, Saudi Arabia, already began to scale back pro-
duction in late 2012.
Fleet capacity growth: High, going on higher, but
orderbook drop continues Fleet growth will, finally, begin to slow, but probably not
Fleet growth developed in line with expectations and was, if any- rapidly enough to improve capacity utilization significantly
thing, somewhat faster than anticipated. Although newbuilding already this year. Deliveries should be lower than in 2012
deliveries fell to 31 mill dwt, down from the record 40 mill dwt and we also expect an increase in scrapping. However, both
in 2011, average fleet growth accelerated from 5.8 percent to 7.2 of these assumptions may prove tenuous. Deliveries will be
percent. This was due to the relatively low level of scrapping, less affected by slippage, both from 2012 and 2013. Meanwhile,
than 15 mill dwt. With single hull tankers having been removed scrapping has proved difficult to get off the ground, because
from the active fleet, the average age of the fleet has declined to of the relatively young fleet. We expect the volume to increase,
about eight years and there is thus a shortage of natural scrapping as more vessels are due for special survey from 2012 onwards.
candidates. A drop in scrap prices, combined with a moderate in- However, any positive sentiment with regards to an impend-
crease in asset values for the oldest vessels, as the freight market ing freight market recovery will also affect owners of older
improved, made scrapping decisions more difficult for owners. tonnage and possibly delay their scrapping decisions. We ex-
pect fleet growth to slow from 7 percent to less than 4 percent,
The real news was another year of exceptionally low ordering, 14 the lowest rate in four years.
mill dwt, far below the rate of deliveries, which caused the order-
book to decline further. The fact that yet another drop in new- China, Iran and the US capable of market surprises
building prices failed to attract more interest only serves as an in- Positive surprises are again more likely to come from the de-
dication of the tough financing conditions for shipping at present. mand side of the market. Chinese oil imports may increase
more than expected as the economy appears to be picking up
Given these developments, the tanker orderbook tumbled from steam, and, particularly, if plans for significant increases in re-
75 mill dwt to 49 mill dwt through the course of the year - the finery capacity go ahead. Likewise, any resolution to the Iranian
lowest level, relative to the size of the fleet, in twelve years. conflict would most likely increase the volume of seaborne oil
trade, at least temporarily.
Market outlook: Challenging 2013, but finally
some light at the end of the tunnel? On the negative side, if US production of light, tight crude con-
A year ago we said the market in 2012 would be ‘flat, but not tinues to beat expectations, seaborne imports will come under
the without potential for surprises.’ We outlined the potential further pressure. Global tanker demand will suffer unless the
for a restocking of oil inventories as a possible surprise scenario. displaced oil can find other markets with at least equal trans-
That indeed turned out to be the case, except to a much stronger portation distances or unless Middle East exporters to the US
degree than expected. can continue to increase their market share. ➤
deliveries and removals of tankers 2003–2012
Excluding chemical carriers world oil production and trade 2003–2012
Mill dwt MBD
50 55 Non-OPEC
Removals
45 production
Deliveries
40 World oil
45 trade
35
OPEC
30 production
25 35
20
15
25
10
5
0 15
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
18 THE tanker MARKET

19. IS THE TANKER MARKET DRIVEN BY FUNDAMENTALS?
Analysts are not only struggling with the prospects for the tanker results in a market-dependent decline in productivity, which is
market, they are also working hard to explain the past. The tanker a part of the overcapacity to be measured. Normally, an increase
fleet is now 42 percent larger than in 2005, while seaborne trade, in in bunker prices also leads to lower speed, but we regard this as a
terms of volume, is up only 6 percent. In 2005, we estimated the utili- structural drop in productivity. In other words, an increase in bun-
zation rate for the tanker fleet to be close to the 90 percent we regard ker prices at a constant dollar rate will lead to slower speed and the
as full capacity utilization. On this basis, we should apparently have need for more tankers to carry out the same transportation work.
had a huge overcapacity of 20-25 percent this year, with permanent Speed is the most complicated element to handle when estimating
lay-up rates as a consequence. Even if 2012 definitely was a difficult over­capacity. Interested readers can find more about speed optimi-
year for tanker owners, it was not that bad. We now estimate the zation in RS Platou Monthly, March 2012.
overcapacity in 2012 to have been 6-7 percent, which we describe as • Another (structural) productivity element is the load factor,
moderate, not in the neighborhood of what we experienced in the defined as the cargo size divided by the deadweight ton of a vessel.
1970s and 1980s (see chart). The current overcapacity could be de- There has been a consistent trend over many years towards larger
scribed as a typical cyclical one, not the type of structural overcapac- Aframaxes, Suezmaxes and VLCCs, while the cargo sizes have
ity tanker owners fought against some decades ago. been more or less unchanged. This means that we need more dead-
weight tons to take the same cargo as before. We have estimated
This gives us reason to ask if the tanker market is now decoupled that this element has reduced the productivity of the fleet by 0.6
from fundamentals? We believe not. The simple comparison be- percent per year, over the last 10 years.
tween the change in the fleet and the change in trade volumes does • The ballast factor describes the share of days in ballast compared
not tell the whole story. There are obviously a number of additional with the total days at sea. Significant and rapid changes in the
factors. Let us try to explain: worldwide trade pattern normally lead to more repositioning of
the fleet, more ballast days and consequently lower (structural)
• Transport distances According to our estimates, average dis- productivity. In the last few years, the stop and go of Libyan
tances increased by 8 percent from 2005 to 2012, resulting in a exports, the sharp drop in exports from Iran and the drastic cuts
14 percent increase in ton-miles in the same period. in US oil import are typical drivers of more ballasting and reduced
• Floating storage employment Over the period from 2005 to productivity.
2012, there have been several years with significant use of tank-
ers for storage purposes, in addition to their traditional trading Our analysis points to a decline of 13 percent in (structural) produc-
employment. tivity and a tanker demand growth of 32 percent from 2005 to 2012,
• Fleet productivity factors These factors are the most challenging compared to the tiny 6 percent growth in seaborne oil trade volumes.
to identify and estimate. Normal productivity can be defined Thus we ended up with a utilization rate in 2012 of 83.5 percent - or
as the number of ton-miles produced per deadweight ton, per an overcapacity of 6.5 percent - a level quite in line with freight mar-
year, at a 90 percent utilization rate. Since our goal is to measure ket conditions in 2012.
the utilization rate of the fleet, we have to differentiate between
market-dependent changes in productivity and structural Erik M. Andersen
changes. For example: In a weakening market, operators want Special Adviser
to reduce vessel speed because optimum speed is falling. This RS Platou Economic Research
TANKER MARKET BALANCE 2005-2012 Tanker overcapacity 1973-2012
Mill dwt (lines) Utilization rate (bars) Overcapacity in percent of total fleet
450 100 Supply 40
Total demand 36
(Based on
ton-miles, 32
400 90 productivity and 28
floating storage)
24
Simple demand
(Based on trade 20
350 80
volumes) 16
Utilization rate 12
(Based on total 8
300 70 demand)
4
Utilization rate
(Based on 0
250 60 “simple” demand) -4
05 06 07 08 09 10 11 12 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12
THE tanker MARKET 19

20. Crude and Clean markeTS likely TO COnTinue TO tanker fleet, five years vs eight for crude, argues against a surge
TraCk eaCh OTher in scrapping.
Product tanker rates increasingly outperformed crude rates
during the second half of 2012, and have begun 2013 on a OddS fOr a CyCliCal upTurn have imprOved,
stronger note. We see the improvement in clean rates as es- buT STrOnger wOrld eCOnOmy needed
sentially a cyclical phenomenon, resulting from the high level We expect that the much-reduced orderbook will lead to a pro-
of crude production and imports in the first half of the year. nounced slowdown in fleet capacity growth to less than 3 per-
Without a significant recovery in oil demand, trade growth is cent per annum over the next three years. In such a scenario,
thus likely to slow for the clean market as well in 2013. How- fleet utilization should begin to improve from 2014 and poten-
ever, trading patterns are becoming more complex because of tially accelerate in 2015. However, this development depends
tightening product specifications. In addition, the reduction on several assumptions, of which the most important is that the
in refinery capacity in the Atlantic Basin, including Venezuela, world economy embarks on a self-sustaining recovery in line
has made seaborne imports a more important swing factor. with its long-term growth potential. When that happens, but
Tonnage demand is less transparent in this segment and may probably not before, oil demand and trade can be expected to
offer upside surprises. accelerate and a cyclical recovery in the crude and clean mar-
kets will arrive.
Fleet capacity growth for product tankers will likely increase in
2013, however, as the level of newbuilding deliveries is sched- Ole-Rikard Hammer
uled to rebound. The relatively low average age of the clean RS Platou Economic Research
sUPPly, demand and Utilization rate 2003–2012 market valUes of tankers 2003–2012
tanker fleet 5 years old
Mill dwt Utilization rate Mill $
500 150 Supply 180 VLCC
Demand 160 Suezmax
450 140 Aframax
Utilization 140
400 130 rate MR Product
120
350 120
100
300 110
80
250 100 60
200 90 40
150 80 20
100 70 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
20 the tanker market

21. the dry bulk market
Substantial drop in
freight rates
Market fundamentals deteriorated further during 2012, as a result of another year with record high deliveries. Despite weaker
global economic growth, tonnage demand increased at a healthy rate thanks to China, which utilized huge arbitrage in iron
ore and coal prices, importing far more dry bulk commodities than the underlying demand for steel, energy and so forth would
usually dictate.
FREIGHT RATES AND SHIP VALUES tern for other segments was the reverse; with a relatively weaker
Considering the year as a whole, our weighted dry bulk index second half compared with the first half.
averaged $9,400 per day in 2012, down from $15,200 per day in
2011. The Capesize sector saw a drop in earnings from $16,200 Ship values fell steadily throughout the year even though sales
to $9,700 per day, while Panamaxes obtained $8,100 per day activity, especially for the larger sizes, increased significantly
compared with a day rate of $14,600 the year before. Supra- compared with the year before. We also registered high activity
maxes earned $9,400 per day against $14,400 per day in 2011, in re-sales of newbuildings, mostly from Chinese yards. Values ➤
while Handysize day rates fell from $10,500 in 2011 to $7,600
per day in 2012.
average freight rates $ 1,000/day
Capesize tonnage was negatively affected by a slowdown in Bra- Trip charter
zilian iron ore exports to Asia during the first part of the year. 2010 2011 2012
Almost all growth in Asian iron ore imports was covered by Capesize 32.8 16.2 9.7
Australia in this period, significantly impacting upon the ton- Panamax 25.8 14.6 8.1
mile growth parameter. In the last quarter, however, Brazilian Supramax 22.4 14.4 9.4
iron ore shipments to Asia recovered substantially, which con- Handysize 16.4 10.5 7.6
tributed to a significant upturn in Capesize earnings. The pat-
DRY BULK IMPORTS BY COUNTRY/REGION t/c rates bulk carriers 2003–2012
2003–2012 12 months
Mill tons/year 1,000 $/day
1,400 China 180 Capesize
Japan 160 Panamax
1,200
Oth Asia 140 Supramax
1,000 W.Europe Handysize
120
800 India
100
600 80
60
400
40
200
20
0 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
THE dry bulk MARKET 21

22. 22 THE DRY BULK MARKET
22 THE dry bulk MARKET

23. for re-sales dropped 15-20 percent, while 5-10 year old tonnage In the rest of the world, dry bulk import rose by around 3 per-
saw values decrease by 20-30 percent. cent from the year before. India continued its impressive growth
in dry bulk imports, mainly in coal, registering a 12 percent es-
SEABORNE TRADE AND TONNAGE DEMAND calation. Far East Asian countries, excluding China, recorded
On a global basis, steel makers raised their output by only only 2 percent higher total imports. European dry bulk imports
1 percent from 2011 to 2012. Asia, the Middle East and North fell by 1 percent, as a result of 8 percent lower iron ore imports.
America recorded moderate increases, while other regions reg- The impact of this was partly negated by 4 percent higher coal
istered lower production. The largest setback was experienced imports.
in the European region, with 3.5 percent lower production.
In terms of the key exporters of iron ore, Australia raised exports
Preliminary data suggests that seaborne transportation of dry by 13 percent, while Brazil reduced its activity by 1 percent. In
bulk commodities rose above 5 percent from the year before. coal transportation, Australian shipments escalated 13 percent,
Real tonnage demand is estimated to have increased around while Indonesia raised its volume by 5 percent. In grain and soy-
7 percent. In addition to somewhat below 5 percent growth bean trade, Brazilian export volumes jumped 16 percent, while
in ton miles, the rise in Chinese coastal trade contributed to US exports fell by 11 percent.
some additional demand. Fleet productivity appears to have
dropped around 2 percent. Among commodities, a 5 percent SAILING DISTANCES
jump was registered in the iron ore trade, while coal shipments On average, we registered slightly shorter hauls in iron ore loads,
increased by 7 percent. Trade in grain and soybean escalated caused by reduced Brazilian market share in the Asian iron ore
3 percent, while shipments of other commodities climbed market. In coal transportation, the average sailing distance was
2 percent. marginally lower. This can be attributed to higher growth in
intra-Pacific coal shipments, compared with trade between the
China increased its dry bulk imports by 12 percent, of which Atlantic and the Pacific regions.
iron ore imports escalated by more than 8 percent, coal by
28 percent and other cargoes by a total of 6 percent. In the More long hauls were registered in the grain and soybean trade.
group of other commodities, the most pronounced jump was This was a result of increased South American exports in rela-
recorded in grain, nickel ore and soybeans. The growth in Chi- tion to the activity of other key exporters.
nese dry bulk imports was surprisingly strong taking into ac-
count only modest increases in domestic steel and energy de- PORT CONGESTION
mand. Significantly lower world market prices of iron ore and Slower growth in the dry bulk trade slightly reduced waiting
coal - compared to higher domestic prices in China - provided times in ports compared with 2011. Chinese, South American
strong incentives for Chinese industries to cover a higher share and Indian congestion was lower than the year before, while
of their raw material demand through overseas import. both Australia and Indonesia experienced longer average port ➤
supply, demand and utilization rate 2003–2012 market Values of Bulk Carriers 2003–2012
Dry bulk fleet 5 years old
Mill dwt Utilization rate Mill $
700 180 Supply 180 Capesize
650 170 Demand 160 Panamax
600 160 Utilization Supramax
140
550 150 rate
500 140 120
450 130 100
400 120 80
350 110
60
300 100
250 90 40
200 80 20
150 70 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
THE dry bulk MARKET 23

24. waiting times. As a whole, the volume of ships constantly wait- MARKET PROSPECTS
ing longer than normal fell moderately from 2011 to 2012.
Last year’s prediction
FLEET PRODUCTIVITY The actual fleet growth of 12 percent was slightly more than we
Cargo movements from the Atlantic to the Pacific continued to predicted. Both delivery and scrapping rates were somewhat
increase at a much greater rate than movements in the opposite higher than we had initially forecasted. Our assumption of a 5-6
direction, further worsening the imbalance in trade. In order percent increase in seaborne trade was not far from the actual
to cover cargo commitments in the Atlantic Basin, ship opera- market reality. In addition, we expected a further reduction in
tors had to ballast ships more frequently from the Pacific to the fleet productivity and a further rise in Chinese coastal trade was
Atlantic. We also registered a general slowdown in the average also anticipated. However, we were wrong in our assumptions
speed during 2012, which was a result of lower freight rates and of longer sailing distances in iron ore and coal and that port con-
higher bunker prices. gestion would increase.
FLEET GROWTH TONNAGE DEMAND IN 2013
Deliveries of new ships rose to 98 mill dwt in 2012, while re- The prevailing forecasts for the world economy in 2013 suggest
movals totaled 33 mill dwt. As a result, the dry bulk fleet in- slightly higher growth than in 2012. In line with this, it is ex-
creased in size by more than 12 percent from 2011 to 2012. pected that dry bulk trade will also grow somewhat more than
last year. Again, China’s economic growth rate will be of vital
By segment, the Panamax/post Panamax fleet was enlarged importance for dry bulk demand. With a share of nearly 40
by 17 percent, while the Capesize and Supramax segments ex- percent of the world deep-sea trade in dry bulk commodities,
panded 13 percent. The Handysize fleet grew by a more moder- Chinese economic growth that isn’t in line with forecasts could
ate 4 percent. have significant impact on the growth rate in tonnage demand.
A crucial development this year would also be the advent of ar-
bitrage in iron ore and coal prices, which will create incentives
for China to source a relatively higher share of its raw material
demand from the international market, instead of utilizing high
cost domestic capacity.
The transportation of other commodities, especially in the min-
erals sector, should expand in tandem with economic growth.
It is perhaps premature to say anything with absolute certainty
about the grain and soybean trade; nevertheless, the droughts
in the US and Russia in 2012 hampered grain exports in the last
bulk carrier fleet 2003–2012 New orders of bulk carriers 2003–2012
Average annual changes
Percent Mill dwt
16 180
14 160
12 140
120
10
100
8
80
6
60
4
40
2 20
0 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
24 THE dry bulk MARKET

25. part of the year and will also negatively impact upon the first delaying deliveries. In 2012, about 70 percent of the delivery
months of this year. However, it is important to take into ac- program at the start of the year ended up entering operation. If
count that record high grain prices over the last year have cre- we assume some 20-25 percent of the scheduled deliveries will
ated strong incentives to increase production this year, which be pushed back into 2014, around 60 mill dwt will go into op-
could result in higher shipments in the second half of 2013. eration this year. Scrapping will, to a large extent, be a function
of the ships’ earnings. We estimate scrapping to reach about a
In terms of forest products, wood pellet transportation is an- similar level as last year.
ticipated to escalate further, especially from North America to
Europe. We also predict a further increase in wood transpor- Based on these assumptions, a fleet growth rate of about 7 per-
tation to China, both in woodchips and logs. Enlarged paper cent can be expected.
production capacity and higher construction activity will most
likely require higher imports in these products, due to restricted CONCLUSION
increase in domestic supply. The supply and demand situation indicates that fleet expansion
and growth in tonnage demand will run fairly parallel this year.
In total, we predict seaborne dry bulk trade to increase by 5-6 However, the slowing trend in fleet growth during the course
percent from 2012 to 2013 Sailing distances in grain, soybeans of the year should create some upside potential for improving
and forestry products are expected to rise due to a stronger in- fundamentals in the second half. Prospects for tonnage demand
crease in South American exports to Asia, in relation to other are also uncertain, but there is some recent evidence of stronger
exporting countries. In iron ore and coal, we assume small economic data in China and the USA. However any immediate
changes in the sailing distances. World logistical capacity is upturn in freight rates, due to stronger than expected recovery
projected to expand by around 5-6 percent and port congestion in tonnage demand, will be quickly offset by lower scrapping
is therefore expected to remain relatively unchanged. The Chi- and a higher fleet growth than expected. Therefore, any poten-
nese cabotage trade is anticipated to increase further, but at a tial upsides appear moderate in the short term.
lower rate than in the most recent years. This is subject to China
sourcing a relatively higher share of raw material demand from A further slowdown in deliveries, combined with a gradual re-
the world market. In addition, we expect fleet productivity to covery in the world economy, should bode well for a fundamen-
continue dropping. tal upturn in 2014.
FLEET TREND Bjørn Bodding
Some 81 mill dwt of new ships are scheduled to become opera- RS Platou Economic Research
tional in 2013. However, it is plausible that a significant volume
of newbuilding deliveries will be postponed until 2014. The dif-
ficult financial situation will probably force ship owners to try
deliveries and Removals of bulk carriers* 2003–2012
Mill dwt
100 Removals
90 Deliveries
80
70
60
50
40
30
20
10
0
03 04 05 06 07 08 09 10 11 12
*Incl. conversions
THE dry bulk MARKET 25

26. the container ship market
ANOTHER WEAK YEAR
The container ship market in 2012 saw higher average box rates than in 2011, but substantially lower charter rates. Operators managed
to raise the utilization rate of the operating fleet by idling more tonnage and creating a higher demand through lower fleet productivity.
Non-operating owners faced a very difficult year, as liners had limited needs to charter extra tonnage.
FREIGHT RATES AND CHARTER RATES vious year. The volume of laden boxes from Asia remained basi-
Freight rates per TEU rose about 25 percent from the previ- cally unchanged, while other regions noticed higher shipments
ous year, calculated on a yearly average basis. However, strong to the US than in the year before. US exports of laden containers
volatility was registered, especially on the Asia to Europe string, rose by 7 percent, and all trades recorded higher volumes than
with sharply escalating rates during the first six months of 2012, in the previous year.
but with an equally dramatic drop during the second half of the
year. In other services, the same general pattern was observed, Container traffic into Europe declined in total by about 4 per-
but with far less volatility. cent. Volumes were relatively stable in the first half of the year,
but dropped significantly during the latter part. Far East Asian
Charter rates were on average between 40 and 50 percent lower volume to Europe dropped 3 percent year-on-year, while traffic
than the year before. After a weak start to 2012, somewhat firm- from the US and South America dropped by 10 and 7 percent,
er rates were recorded in the middle of the year, as some opera- respectively. The only trading region with higher container traf-
tors secured extra tonnage ahead of the expected peak season fic into Europe than last year was India, with a 5 percent escala-
trading period. However, this was only a short-term trend, and tion in volume. European container exports rose by nearly 10
softer rates were noted in the latter part of the year. percent, with volumes to Asia up 7 percent, while traffic to the
US climbed 4 percent.
CONTAINER MOVEMENTS AND TONNAGE DEMAND
Preliminary statistics suggest global container ship demand has Within Asia, container shipments jumped 8 percent, while Far
increased by around 7 percent from 2011 to 2012. Box move- East Asia raised containerized exports to the Middle East by
ments increased by some 5 percent. Assessing trends by region, 5 percent. In other emerging market trades, we registered a 6
in the US containerized imports were up 2 percent from the pre- percent escalation in box movements from the Far East to East
DELIVERIES OF CELLULAR CONTAINER SHIPS 2003–2012 CONTAINER IMPORTS - SELECTED REGIONS 2003–2012
1,000 teu Mill teu
1,500 60 Asia
EU
1,250 50 USA
1,000 40
750 30
500 20
250 10
0 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
26 THE container ship market

27. Coast South America and a 12 percent jump to West Africa. LAST YEAR’S PREDICTIONS
Chinese import and export activity was slow during the first Our expectation of a fairly parallel increase in supply and de-
part of 2012, but showed increasing growth trends in the final mand was not far from the market reality of 2012. We also point-
part of the year. ed out that operators had the potential to increase earnings by
idling more ships and through higher use of slow steaming, and
FLEET PRODUCTIVITY that box rates were likely to increase somewhat during the year.
Fleet productivity decreased significantly in 2012, as a result
of the increased use of ‘extra slow steaming’ on major routes. Historically, container traffic has increased between 2.2 and 2.7
For example, on the Asia to Europe service, round trips were times the world GDP. In 2012, the ratio was only 1.7, the lowest
extended from a typical 63 days, with the use of 10 ships on registered increase in decades. This is probably related to exten-
a weekly basis, to 72 days and, in some cases, even 84 days. sive inventory depletions along with lower economic activity,
This necessitated the use of either 11 or 12 ships respectively especially in Europe, where historical growth in container im-
to maintain weekly sailings. The Asia to US loops also saw in- port has been very high compared to GDP growth.
creased slow steaming, but to a lesser extent than between Asia
and Europe. MARKET OUTLOOK
The prevailing forecasts for world GDP in 2013 suggest an
FLEET TREND increase in world container traffic of nearly 7 percent. This is
About 1.25 mill TEU of new container ship capacity entered based on a factor to global GDP of 2.0. However, European
operation in 2012. This was 300,000 TEU less than planned. GDP is forecast to remain stagnant and this will probably limit
Deliveries were basically in line with the program until midway the growth potential in container trade to Europe. Global trade
through the year, but slowed down significantly in the latter part growth could therefore increase less than the overall macro
of 2012, in tandem with falling freight rates. economic forecasts suggests. We expect higher US container
imports this year than last and we also anticipate trades with
Removals totaled nearly 300,000 TEU of capacity, a new record emerging markets to show stronger growth rates.
in container shipping. The average age of ships sold for scrap-
ping decreased substantially, from 30 years in 2011 to 23 years New ships with a capacity of around 1.9 mill TEU are sched-
in 2012. Most ships sent to breaking last year were in the smaller uled to begin operation in 2013. Weak market conditions will
size segments. The net fleet expansion was 7.7 percent, calcu- most likely cause some slippage. It should also be noted that the
lated on a yearly average basis. At the end of the year, a capacity ships becoming operational are within the largest size catego-
of close to 500,000 TEU was reported to be idle. ries. These ships are destined to operate on the Asia to Europe
service, the trade with potentially the lowest growth in terms of
With a fleet expansion of nearly 8 percent and a demand growth box movements.
of 7 percent, the capacity utilization rate for the total fleet fell
nearly 1 percentage point. However, the operating fleet grew Scrapping is expected to remain at a similar or potentially higher
only 4 percent, leading to an increased operating fleet utiliza- level than in 2012, resulting in a further drop in the age of ships
tion rate of nearly 3 percentage points. sent to the beaches. Scrapping potential is anticipated to be
highest for vessels smaller than 3,000 TEU.
A fleet expansion in the region of 7 percent is expected in 2013.
T/C rates container ships 2003–2012
12 months Based on the above discussion, we expect to see a relatively bal-
1,000 $/day anced growth in the supply and demand parameters in 2013,
60 4,500 teu and consequently only small changes in the utilization rate for
3,000 teu the total fleet. Container carriers could again work to restore
50 1,700 teu
1,000 teu
profitability by adjusting the operating fleet size, which can be
40 done by more idling of ships and by a further reduction in fleet
productivity by, for example, implementing extra slow steaming
30 on certain trades. In any case, we foresee another difficult year
20
for the container ship industry, especially for non-operating
owners, who will experience another year with low demand for
10 charter tonnage from liners.
0
03 04 05 06 07 08 09 10 11 12 Bjørn Bodding
RS Platou Economic Research
THE container ship market 27

28. the car carrier market
A troublesome recovery
It has been a story of ups and downs for the car carrier market in were reduced in the third quarter. Furthermore, Japanese exports
2012. The year started off well, with very positive US auto sales, did not seem to recover the volumes lost in 2011, and fourth
high export volumes out of Korea and a full recovery of Japanese quarter exports were significantly down compared to the year
exports, after the difficulties experienced in 2011. Charter rates before. This is likely to be a consequence of relocation of produc-
firmed up, but as we moved into the second half several factors tion, with auto makers seeking to cut production in Japan, due to
impacted negatively on tonnage demand, pulling rates down to- the strong Yen and weak domestic demand, and instead produce
wards the end of the year. closer to their sales markets.
Sales in the US continued trending positively throughout the As a consequence, demand growth developed negatively towards
year, ending at 14.5 mill light vehicles, up 13 percent from 2011. the end of 2012. Annualized demand growth is estimated at 8
Forecasts for 2013 indicate another 3-4 percent growth across percent, which is lower than we had expected. Given the cur-
the next 12 months. The story of European sales is completely rent macroeconomic uncertainties, we estimate that demand will
different; The Euro crisis has scared consumers away from show grow by around 4 percent in 2013.
rooms, and sales are down 8 percent in Western Europe, to levels
not seen since 1993. The economic outlook does not seem to in- The car carrier fleet at year-end consisted of 713 vessels, of which
dicate any improvement in 2013, and forecasts indicate a further 36 were delivered in 2012. Only five vessels were removed from
3-5 percent sales decline this year. the fleet, resulting in a fleet growth of 6.5 percent. The order book
stood at 42 vessels, representing 7 percent of the active fleet. Only
Auto sales mirror the production situation: While North Ameri- 19 vessels are scheduled for delivery in 2013, indicating a fleet
can capacity is being increased and new facilities are in the pipe- growth of 4 percent.
line, many European plants suffer from overcapacity and at least
five factories are expected to be closed over the next years. 27 vessels were added to the order book in 2012, a massive in-
crease from previous years. 10 of these will be of Post-Panamax
In other markets sales are generally growing, with the BRIC coun- design. In addition to fleet renewal programs, owners are taking
tries in particular subject to attention from auto makers, both in advantage of the low newbuilding prices and as a consequence
terms of sales and as locations for new production facilities. we may see further orders for 2014 deliveries, currently standing
at 19 vessels.
Tonnage demand developed positively during the first half of the
year. However, as strikes hit Korean factories, export volumes Given the development throughout 2012, we saw only a minor
improvement in the market balance: Fleet utilization is estimated
at 84 percent, compared to 83 percent in 2011. Due to challeng-
ing market conditions, outlook for 2013 indicates a flat develop-
JAPANESE AND KOREAN AUTOMOBILE EXPORT 2003–2012
ment, or possibly a small improvement, due to the limited fleet
Mill vehicles
growth. We estimate an annual average fleet utilization of 84-85
8 Japan percent. Along with economic growth and its influence on auto
7 Korea sales, the most critical factor going forward is the possibility of
further relocation of production out of Japan. Although we have
6
seen a recent weakening of the Yen, some auto makers have al-
5
ready made their decisions to move parts of production overseas,
4 and we believe that a weaker Yen must be seen over the long-term
3 in order for this tendency to change.
2
Ole Gustav Eriksen
1
RS Platou Economic Research
0
03 04 05 06 07 08 09 10 11 12
28 THE car carrier market

29. the lng market
Another record year
The double-digit growth trend in supply and demand we have Fukushima meltdown in 2011 were shut in early May for periodic
seen in the LNG shipping market since 2006 finally came to an maintenance. However, two reactors at Kansai Electric’s Ohi plant
end in 2012. Our estimates suggest that demand growth was 6 passed the new stress test and were restarted in July. These reactors
percent and the fleet grew by less than 4 percent. This resulted in represent 5 percent of Japans nuclear power generating capacity.
a 3 percentage points rise in the utilization rate, and a subsequent
hike in the average spot rate for modern standard sized steamship We have further estimated that the productivity factor of the
to $125 000 per day. LNG shipping fleet declined by 2 to 3 percent in 2012. A regime
of higher bunker cost and an increase in ship size that is not al-
On the demand side, the development in transported volumes ways utilized are the rationale behind this change in productivity.
proved rather disappointing in 2012. We have estimated a mar- Thus, in sum the tonnage demand for LNG carriers increased by
ginal decline of 1 percent in volumes, inferior to the 6 percent 6 percent this year.
growth we expected in this report a year ago. The main explana-
tory factors were delay in the inauguration of Angola LNG which The active average LNG carrier fleet in 2012 grew by 4 percent.
was postponed a full year from first quarter 2012. A second cause Two new vessels entered into service and three vessels were re-
was technical issues that restrained production in various lique- moved. During the the year we have estimated that 0.8 mill cbm
faction plants. Several explosions along the feedgas pipeline to of carrying capacity was laid-up.
Yemen LNG hampered their production, Tangguh LNG’s sec-
ond train were shut after a fire during maintenance of the first For 2013 we expect transported volumes to increase by 3 percent.
train. Snohvit LNG in Norway also experienced unplanned stops Two new LNG projects are expected to start production, Angola
in production. Algeria, Egypt, Indonesia and Oman lowered their LNG and Sonatrach’s Skikda project. However, Indonesia has
LNG exports in 2012. announced a cut in LNG exports by 13.8 percent due to higher
domestic demand for natural gas.
The second ingredient of the ton-mile demand, transported dis-
tance, is estimated to have grown by 3 percent in 2012. The main The most difficult factor to forecast is the development in trans-
driver of this parameter has been a 25 percent increase in inter- port distance. For 2013 we anticipate a decline of 1 percent as we
basin trades between the Atlantic and the Pacific basin. This was believe the inter-basin trade will continue at a high level. However,
caused by an increased demand for LNG in Japan following the since the middle of 2011, an increasing share of the LNG produc-
shut-down of its nuclear power plants. Most of these power plants tion in the Middle East has been sold East of Suez. Should this
remained dormant during 2012 as the last active reactor since the trend prevail, it is likely to do so on the expense of the inter-basin
trade volume and could thus lead to shorter transport distances.
Coupled with an assumption of a small decline in the fleet’s pro-
ductivity, we expect tonnage demand to grow by 3 percent in 2013.
Short term rate for LNG carriers 2005 - 2012
$/day According to the orderbook there will be 23 vessels delivered
160 000 from the shipyards in 2013 and we expect only a limited number
140 000 of old vessels removed from the market. As most of these new-
120 000
buildings will come in the second half of the year, the average
LNG fleet is only expected to grow by 2.5 percent this year.
100 000
80 000 In conclusion, after taking into consideration the above assump-
60 000 tions, we forecast that the fleet utilization rate should increase
40 000 marginally to 96 percent in 2013, which indicates yet another
20 000
tight year in the LNG shipping market.
0
05 06 07 08 09 10 11 12 Jørn Bakkelund
RS Platou Economic Research
THE LNG MARKET 29

30. Small-scale LNG
A NEW MARKET EMERGING
In many ways, 2012 will be remembered as the year when the small-scale LNG market ‘shifted into second gear’. The market developed
from being a small, exotic and local market (mainly in Norway, Sweden and Japan) employing only a handful of vessels, into a hot topic
discussed worldwide.
SIGNIFICANT EVENTS The small-scale LNG market mainly serves the following types
In 2012, we have experienced some notable ‘world first’ events of consumers/purposes:
for small-scale LNG, such as:
• Small to medium sized businesses where LNG is used for
• The world’s first dedicated LNG bunker barge was ordered heating, or as feedstock
and commissioned in Norway by AGA. It will be in operation • As a road traffic and marine transport fuel
by January 2013 in Stockholm, Sweden
• The world’s ‘largest’ small-scale LNG vessel with a Type C The latter is becoming increasingly important. In 2012, there
tank was christened Coral Energy in December 2012. This was a sharp increase of consumption of LNG as a marine fuel,
vessel will be operating on a long-term charter for Skangass although from a very low level.
of Norway
• The world’s first LNG-fuelled RO-PAX vessels were launched. RS Platou estimates that, based upon existing orders at ship-
They will go into operation in 2013 for Viking Line and Fjord- yards for ships capable of burning LNG as fuel, this increase will
Line be even stronger in 2013 and the years that follow (see graph
• The world’s first LNG-fuelled container vessels (3,100 TEU) below).
were contracted by TOTE. The vessels will operate between
Florida and Puerto Rico from 2015 PREDICTIONS
• Several important shipping hubs – including Singapore, The push for small-scale LNG will be strong in Europe, due to
Rotter­ am, Zeebrugge and Gothenburg – announced plans
d both environmental and economic drivers. In the US, we expect
to follow Stockholm, and several smaller Norwegian ports, in an even stronger push for LNG as fuel in the coming years, driv-
making LNG available as marine fuel en by the considerable cost difference between LNG and other
• Supermajor Shell acquired Norwegian small-scale LNG play- fuels, both on land and at sea.
er Gasnor. This is an example of major LNG players showing
firm interest in this segment. An increase in the use of LNG as a marine fuel will result in
more demand for LNG transportation by sea, in smaller par-
cels. We therefore believe that there will be increasing need for
Annual consumption of LNG as marine fuel small-scale LNG feeder vessels, and also LNG Bunkering ves-
sels, in the coming years.
Mill mt
1,2 Projects under At a time when many shipping segments are experiencing real
development
1,0 challenges, and with very low newbuilding volumes, prices are
Vessels beiing
quoted by yards also expected to be very attractive for shipowners deciding to
0,8
Vessels under enter this new market in 2013.
construction
0,6
Vessels in-service Egil Rokstad
0,4 RS Platou Shipbrokers
0,2
0
06 07 08 09 10 11 12 13 14 15 16 17
30 Small-scale LNG

31. the demolition market
Weak markets pull recycling up
2012 was a busy year for recycling, surpassing 2011 volumes by more than 40 percent. Weak freight markets within the tank, dry bulk and
container segments were the key drivers. However, due to massive deliveries of new capacity from shipyards, the high scrapping activity
could not prevent a strong fleet growth.
The year was characterized by fluctuations in currencies and yards in the same period, and therefore did not prevent a sub-
steel price, resulting in very volatile demolition prices. India, in stantial fleet growth within this segment. It is worth noting that
particular, was troubled by a very unstable currency and prices the average age of bulk carriers scrapped came down from 30
that shifted throughout the year, starting above $500/ldt for years in 2011 to 27 years in 2012, with the average age of the
tankers and container ships. They remained fairly healthy un- 74 Capesizes scrapped being only 22 years. 67 Panamax/Post-
til May, when they dropped by $100/ldt and hovered between Panamaxes, 151 Handymaxes/Supramaxes and 220 Handy-
$380 and $450/ldt for the rest of the year, ending around $450/ sizes were also beached during the year. Prospects for the dry
ldt. bulk market in 2013 indicate a substantial potential for further
recycling, and we may also see the average vessel age decrease
Close to 800 vessels were beached on the subcontinent alone, further.
with India taking the majority, while Pakistan turned out to
have the healthiest appetite for large tankers and Capesize bulk The situation in the container ship market also accelerated de-
carriers. China and Turkey were also active in the market and molition. 159 vessels were scrapped in 2012, compared to 57 in
claimed a solid share in 2012. 2011, representing an increase of 160 percent in terms of capac-
ity, to 300,000 TEU. However, with one exception, these vessels
Tanker demolition increased by 24 percent from 2011, to were all below 4,000 TEU, and amount to only one quarter of
11.7 mill dwt, of which 3 mill dwt was single-hull tonnage. 10 the capacity delivered in the same period. As for bulk carriers,
VLCCs, 21 Suezmaxes and 35 Aframaxes were scrapped, with the average age of recycled vessels has been reduced, from an
an average age of 23 years, down from 25 years in 2011. average of 30 years in 2011, to 23 years in 2012.
The quantity of bulk carriers sold for recycling increased by Delivery rates for these three large segments are expected to re-
more than 50 percent from 2011, to 33 mill dwt, primarily as main high this year, while the freight markets are not expected
a consequence of the very poor freight market. Despite being a to greatly improve. As a result, we expect another busy year for
high number, this represents only one third of deliveries from recycling in 2013, with further high demolition volumes.
demolition prices tankers 2003–2012 Tonnage sold for recycling 2003–2012
$/ldt Mill dwt
800 India/ 60 Others
Bangladesh
700 Far East Bulk carriers
50
600 Tankers
40
500
400 30
300 20
200
10
100
0 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
THE demolition market 31

32. mobile offshore drilling units
Hitting new heights
Day rates/Utilization: review of the year In 2012, the global annual average day rates for MW units in-
The jack-up market tightened considerably in 2012 and we ob- creased by 5 percent to 235,000 USD, while the global annual
served the active jack-up utilization rate increase 6 percentage average day rates of DW units increased by 14 percent year-on-
points to 92 percent. While modern Independent Cantilever year, rising to 305,000 USD.
units built after 1998 (modern units) were still enjoying basi-
cally full active utilization in 2012, the older Independent Can- On a regional basis, the strength of the North Sea, and espe-
tilever units (built prior to 1998, standard units) experienced a cially the Norwegian sector, continued unabated through 2012.
comeback, driving up the overall active utilization rate. As the As a consequence of the opening of the Barents Sea to explo-
jack-up fleet approached full utilization, day rates of both stan- ration, and recent major new discoveries on the Norwegian
dard and modern units increased substantially. Global average Continental Shelf, offshore activity increased. The Norwegian
day rates of standard units averaged 102,000 USD in 2012, an MODU fleet has experienced 100 percent utilization for some
increase of 30 percent compared to 2011, while global average time and the volume of new fixtures is boosting the contract
day rates of modern units averaged 147,000 USD in 2012, a rise backlog of rig owners. Typically, the annual average day rates of
of 15 percent over the previous year. high-specification floaters rose from 460,000 USD a year ago, to
currently close to 590,000 USD.
The floater market also tightened and active utilization in-
creased by 2 percentage points, averaging nearly 96 percent Demand
in 2012. The tightening of the market was seen in all sub-seg- Along with oil prices, which were basically unchanged, demand
ments, although mostly in the Ultra-Deepwater (UDW) sector. growth for jack-ups slowed down, but nevertheless achieved a
The UDW active utilization rate remained close to 100 percent substantial increase. At the end of last year (2011) we recorded
throughout 2012. The few available UDW units in 2012 were 353 jack-ups on contract, while 374 jack-ups were on contract
easily absorbed in the market and, as fixing activity added to the as this year (2012) came to a close. This equates to an annual
gains achieved in 2011, the annual average day rate increased increase of nearly 6 percent, which is down from the 18 percent
to 606,000 USD in 2012, from 478,000 USD the year before. growth observed last year, but still well above the long-term
It should also be noted that contract lengths were stretched demand growth of the last 25 years (1.8 percent per annum).
considerably. On the back of the strength of the UDW market, Demand increases for jack-ups in the same period were ob-
active utilizations of both Mid-water (MW) units and Deep- served in many regional markets, but were particularly strong
water (DW) units increased to 92 and 96 percent respectively. in West Africa (+19 percent), the Middle East (+10 percent)
market development 2003–2012 market development 2003–2012
Floaters Jack-ups
No. of rigs Utilization rate No. of rigs Utilization rate
320 150 Total 500 190 Total
supply supply
280 140 Active 450 170 Active
supply supply
240 130 Demand Demand
400 150
Active Active
200 120
utilization utilization
350 130
160 110
300 110
120 100
90 250 90
80
40 80 200 70
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
32 MOBILE OFFSHORE drilling UNITS

33. and South East Asia (+11 percent). In the same period, jack-up ern UDW units. As an example of this, the number of MW
demand in the North Sea and Gulf of Mexico was virtually flat. units operating in both West Africa and Brazil has declined in
Reserves under development in shallow water – a major market the last year, while the quantity of UDW units on contract has
driver – also increased significantly in 2012, with the Middle increased. UDW demand is, of course, supported by a string of
East and South East Asia acting as the main regional contribu- major discoveries. These discoveries are also broadening in geo-
tors to jack-up demand growth. It is also interesting to note that graphical scope and can be highly profitable. This trend was re-
‘average days per well in shallow water’ is a factor that has been inforced in 2012, with major discoveries in, for example, pre-salt
increasing substantially across the last few years. There are many formations in Angola and East Africa. Furthermore, many of the
ways of interpreting this data, but with the delivery of new jack- discoveries made in the last 10 years are moving into develop-
ups oil companies are able to drill more complex, but also more ment, which should propel UDW demand further.
time consuming, wells than before.
Fleet trend
Floater demand strengthened progressively through 2012. At The increase in jack-up utilization was aided by a more dynamic
the end of last year we recorded 222 units on contract, while supply side than usual. At the start of the year, jack-up order
254 floaters were on contract at the end of 2012. The major- books indicated that 29 units were to be delivered in 2012.
ity of the increase in demand was concentrated in the Gulf of However, at the end of the year only 11 newbuilds had come
Mexico, South America and the North Sea. Floater activity in into operation. This appears to have been the modus operandi
The Gulf of Mexico has now surpassed pre-Macondo levels. of yards during the last few years. It seems that many (possibly
inexperienced) yards were forced to postpone delivery dates
Fixing activity of floaters (as measured in rig years), which is a significantly, but it should also be mentioned that many units
more forward looking indicator, increased in 2012 by 18 per- were intended to be delivered towards the end of the year, with
cent compared to 2011 (excluding the fixtures from Petrobras’ delivery now expected in the first months of 2013. At the same
newbuilding program in 2011/2012). We estimate that the ac- time, a number of jack-ups were either sold out of the market,
cumulated length of contracts signed in 2012 was nearly 300 rig mainly to accommodation, or scrapped - although it should be
years, which easily exceeds the 254 floaters on contract at the noted that several standard IC units were reactivated from cold
end of 2012. The different floater segments produced very dif- stacking as the jack-up market improved. By the end of 2012,
ferent results. While UDW units increased fixing activity by 67 fleet adjustments had mitigated a potentially large increase in
percent, fixing activity of MW and DW units declined 16 per- supply. Our figures indicate that the total jack-up fleet increased
cent and 30 percent respectively. It is noteworthy that the large by only five units, or 1 percent, in 2012.
increase in UDW fixing activity was achieved without Petrobras
entering the international markets (with the exception of one The process of jack-up renewal slowed down in 2012, with 24 re-
floater contract). corded new orders, substantially down from the 46 orders made
in 2011. The fairly large orderbook, combined with more difficult
Most of the MW and DW units are of course built in the 70s access to capital, worked to slow down ordering activity.
and 80s and, as charterers have become more safety conscious
and demanding (perhaps due to higher well complexity), these The floater fleet grew more or less as expected, with 18 of 20
units are, to a certain extent, being crowded out by more mod- units delivered. We estimate the floater fleet to have expanded ➤
day rate of rigs 2003–2012 NEWBUILDING PRICE OF RIGS 2003–2012
1,000 $/day Mill $ Semi/Drillship
700 Deepwater, High 800 Drillship
(10,000ft WD)
600 Midwater, High 700
Semi (Harsh
Midwater, Low Environment)
500 600
Jackup, High Spec Jackup (400ft
400 500
Premium)
Jackup, 300ft
400
300 Jackup (350ft
300 Premium)
200
200
100
100
0 0
03 04 05 06 07 08 09 10 11 12
03 04 05 06 07 08 09 10 11 12
MOBILE OFFSHORE drilling UNITS 33

34. by 23 units, or 8.5 percent, in 2012. The newbuilding market Fleet trend
for floaters was seemingly active in 2012, with 38 drill ships and The current jack-up orderbook indicates that 63 units will be
15 semi-submersibles ordered. The level of semi-submersible delivered in 2013 and 23 units will be delivered in 2014. De-
ordering was influenced by the tight market on the Norwegian lays, which were widespread in 2011 and 2012, are gradually
Continental Shelf. A further breakdown reveals, however, that expected to subside in 2013, as a larger proportion of units will
26 of the units were part of the Petrobras newbuild program be delivered from established/experienced yards. That said, a
and many units were options declared. Furthermore, the five recent accident at an established jack-up yard raises questions
Ocean Rig floaters, which were part of Petrobras’ newbuilding about delivery certainty from even the most experienced yards.
program, seem to have been cancelled. Outside of Brazil, the It is, as ever, difficult to estimate the scrapping/removal of older
majority of contracts were once again placed at Daewoo, Hyun- standard units, but there has been an increasing trend to re-
dai and Samsung. move them. In 2012, close to 15 units were removed and it will
come as no surprise if that number is surpassed in 2013. This
means the jack-up fleet is expected to grow by close to 7 percent
Market Prospects in 2013, before slowing down to 4 percent in 2014.
Fixing activity and rig demand The current floater orderbook indicates 20 units will be deliv-
Given the current economic climate and oil supply dynamics, ered in 2013 and 23 units in 2014. There have, historically, been
oil prices are expected to decline somewhat (~10 percent) in fewer delays at floater yards and we expect this trend to con-
2013. Oil prices are, unsurprisingly, vital to rig demand, as the tinue in 2013 and 2014. Scrapping/removals are also expected
link between oil and gas companies’ incomes and the level of rig to be insignificant. The floater fleet should therefore grow by
fixing activity has historically been strong. Total rig fixing activ- 9-10 percent in 2013 and by 4-5 percent in 2014.
ity is therefore expected to decline by 5-10 percent in 2012.
Conclusions
Jack-up fixing activity, and the resultant demand, is therefore Active jack-up utilization in 2013 is expected to average be-
currently moving into a cyclical headwind. Although shallow tween 87-90 percent, which is 2-4 percentage points below the
water fields under development have been rising in recent active utilization of 2012. In 2013, short-term strength is likely
years, a softer macro environment could slow down growth. to be followed by weakness, as a consequence of substantial
Oil and gas discoveries in maturing shallow water basins have fleet expansion. Modern units are still likely to command high
also been following a flat/declining trend for a number of years, utilizations, but, as older units come off contract, day rates are
thus removing upside for jack-up demand. However, more time likely to come under pressure for both types of assets. A weak-
consuming, complex wells could add to jack-up demand and es- ening of fundamentals may give owners the impetus to remove
pecially demand for modern units. Given the above, demand is parts of the standard units built in the 70s and 80s.
expected to increase between 2 and 4 percent in 2012.
Active utilization for floaters is also expected to remain at a high
We expect a continued increase in preference for deepwater level in 2013. Fixing activity should be more than sufficient to
plays among oil and gas companies. Floater demand is therefore fully employ most units this year. Close to full utilization is ex-
expected to grow substantially. Demand will, to a large extent, pected in most segments, and particularly the UDW segment.
be governed by the growth of the floater fleet itself, as close to
100 percent utilization is expected. Lower rig productivity, as a Sven Ziegler
result of difficult geology and increasing complexity in deeper RS Platou Offshore Research
waters, could add to rig demand.
rig market key figures
End 95 End 00 End 05 End 08 End 09 End 10 End 11 End 12
Oil price (Brent, $/barrel) 17.8 25.5 56.8 40.2 74.3 91.7 108 109.6
Gas price (Henry Hub, $/bcf) 2.57 8.90 13.05 5.82 5.35 4.25 3.20 3.34
Oil consumption (mbd) 70.0 79.2 83.3 85.5 86.9 90.8 90.2 91.6
Total rig demand 413 461 488 552 496 508 576 628
Total rig supply 513 560 562 622 667 701 726 753
Rig utilization (on total supply) 80.5% 82.3% 86.8% 88.7% 74.4% 72% 79% 83%
34 MOBILE OFFSHORE drilling UNITS

35. the offshore support vessel market
Unfulfilled expectations
PSVs 150,000 GBP. Term rates of large AHTS vessels were also driven
Increasing pessimism among owners spread through the OSV upwards at the start of the year, to such an extent that they pulled
market in 2012, especially towards the latter half of the year. The the annual average up by 15 percent in 2012. As expectations
North Sea was symptomatic of the global trends. Average annual were lowered through the year, term rates fell substantially. An-
spot rates dropped by 16 percent for medium-sized tonnage to nual averages for spot rates of large AHTS vessels declined by
9,800 GBP in 2012, while large-sized tonnage dropped even 30 percent to 22,400 GBP. The decline in day rates was reflected
more - by 18 percent to 12,700 GBP. Annual average term rates in utilizations, with the total North Sea AHTS vessel utilization
show a different picture, rising 4 percent and dropping 3 percent rate dropping to 66 percent in 2012, compared to 76 percent the
for medium and large-sized tonnage respectively. However, closer previous year. Clearly demand did not live up to expectations
scrutiny shows that term rates declined steeply from the middle and was held back by several factors. Although the North Sea
of the year, as market expectations were lowered. rig count increased in 2012, the number of wells drilled was flat.
In other words, there were fewer rig moves than expected. The
North Sea fleet utilization rates were also dropping through 2012. additional rig capacity that was expected to enter the North Sea
Medium-sized PSV utilization in the North Sea decreased from was also delayed. Furthermore, a softer PSV market resulted in
85 percent in 2011, to 82 percent in 2012. Large-sized PSVs av- AHTS vessels being out-competed for cargo work. Finally, the
eraged 97 percent fleet utilization in 2011, but dropped to 92 North Sea weather proved much better in 2012 than 2011, thus
percent in 2012. Although North Sea PSV demand was increas- facilitating easier operations.
ing, the influx of vessels from Norwegian yards, which raised the
North Sea fleet by 23 units (or close to 13 percent), sent the PSV Elsewhere, the large AHTS market was largely unchanged. Term
utilization and day rates lower. rates for all sizes of AHTS vessels in Brazil increased by an average
of 7-10 percent, but the net effect was not considerable, given the
In previous years, surplus PSVs in the North Sea have moved to increases in operational costs. In West Africa AHTS term rates
other relatively more attractive regions, thus rebalancing the mar- were also close to unchanged.
ket. However, two main factors were blocking this rebalancing in
2012. Global floater activity, which is one of the main drivers of The market balance for smaller AHTS vessels tightened moder-
PSV demand, grew substantially in the first half of 2012, but was ately in 2012, especially in SE Asia. We observed that term rates
flat in the second half, thus limiting PSV demand growth. At the for smaller AHTS (5,150 BHP) increased by 8 percent to 8,800
same time, Petrobras, which has previously been a major taker USD in 2012. Term rates for their larger siblings (12,000 BHP)
of vessels internationally, basically stopped fixing new vessels, as increased even more, climbing by 19 percent to 18,800 USD.
new management reassessed logistical needs offshore. As a result, Jack-up demand, which is a main driver of such tonnage, also
term rates for PSVs in both Brazil and West Africa started drop- grew considerably in both the Middle East and SE Asia, where
ping towards the end of the year, making shifting tonnage out of many of the vessels are located. In addition, deliveries of AHTS
the North Sea less attractive. vessels slowed down in 2012.
One region where demand continued to rise on the back of in- Demand: Review of 2012 and prospects
creasing UDW demand was the Gulf of Mexico. Term rates in the Global OSV demand is estimated to have increased by close to
Gulf of Mexico rose by close to 30 percent during 2012, to an 9 percent in 2012 - a similar level to the demand growth seen in
average of 27,000 USD per day for large PSVs. As a result, some 2011. The increase in OSV demand in 2012 came on the back
Jones Act vessels returned for operations in US waters. of continued rising global EP spending, which is estimated to
have escalated by 15 percent in 2012.
AHTS
The large AHTS market in the North Sea disappointed in 2012. Rising rig demand was again symptomatic of the increasing OSV
Owners’ expectations were raised after the weather-induced mar- demand. As reported in the rig section, jack-ups on contract
ket of the second half of 2011 saw a series of spot fixtures above globally increased from 353 units at the end of 2011 to 374 units ➤
The offshore support vessel market 35

36. in December 2012, a rise of 6 percent. Similarly, floater activity more, scrapping was insignificant in 2012. Our figures indicate
was significantly higher and our figures show global demand in- only five AHTS vessels and two PSVs were scrapped. As a result
creased 12 percent - from 226 units at the end of 2011, to 254 of these developments, total fleet growth in 2012 was 6 percent
units a year later. As mentioned earlier, the number of rising float- and 9 percent for the AHTS and PSV fleets respectively.
ers on contract was greater towards the first half of 2012. The
floater fleet was close to fully utilized during the year, with an in- Trends in new orders in 2012 showed a continued divergence in
crease in working units resulting mainly from newbuilds entering preference regarding tonnage. Our records show that 187 PSVs
operation. The second half of 2012 experienced a temporary lull and 86 AHTS were ordered in 2012. Most of the AHTS ordered
in floater newbuilds entering the market, thus impacting nega- were in the smallest category (66 units), with few new orders of
tively on OSV demand growth. larger AHTS vessels. The record levels of PSV investments should
be seen in relation to increasing expectations for deepwater activ-
Global OSV demand is expected to continue to grow by between ity, and the growing preference for investments in UDW floaters.
8 and 10 percent in 2013. OSV demand growth is likely to be
driven by a further focus on exploring and developing deepwater The current AHTS orderbook indicates that 131 units will be
assets. From the second quarter of 2013, we expect an additional delivered in 2013 and 21 units will be delivered in 2014. How-
23 UDW floaters to be delivered over the course of the year. As ever, it is expected that delays at yards, which have been exten-
vessels per rig serviced in deepwater tend to be relatively high, sive over the last few years, will continue in 2013 and mitigate
and distances from shore-base to offshore locations tend to be some of the fleet growth. Scrapping/removal of tonnage is ex-
further, demand for OSVs is expected to receive an additional pected to remain insignificant, despite a large part of the fleet
boost. On a regional basis, we expect OSV demand growth to be being built as early as the 70s/80s. Although, it must be said,
driven strongly by additional deepwater activity in West and East there is an increased focus from charterers on the age of ves-
Africa and the Gulf of Mexico. In South America, Petrobras is un- sels and vessel specifications. Many charterers are, for example,
likely to be the same driver of tonnage demand, as it is now close demanding vessels that are no older than 10-15 years, while DP
to having contracted its stated goal of deepwater offshore rigs. II has become the industry standard. Many of the older, lower
Further gains in jack-up demand in the Middle East and South specification vessels are therefore removed from actively par-
East Asia will also boost demand of small/mid-size AHTS vessels ticipating in the offshore markets. Due to their low scrapping
(see rig section). value they are not sent to the breakers, but rather ‘idled’. The
competitive fleet may therefore be smaller than indicated in the
fleeT Trend and new OrderS fleet counts. This also applies to the PSV fleet. Given the above,
The fleet grew considerably less than the orderbook suggested at we expect the total AHTS fleet will probably grow by close to 4
the start of 2012. Our records show 119 AHTS vessels and 105 percent in 2013.
PSVs were delivered in 2012, while, at the start of the year, 200
AHTS and 170 PSVs were scheduled for delivery. Inexperience, The current PSV orderbook indicates that 230 units will be de-
especially in the final construction stages, is quoted as the main livered in 2013 and 116 units in 2014. However, significant de-
reason for delays. Many new yards are located in the Asian region lays are also expected for PSVs in 2013. Yards have managed to
and they appear to be responsible for the majority of delays. Once deliver a maximum of 25-30 vessels per quarter over the last few
north sea tonnage 2003–2012 north sea tonnage 2003–2012
ahts average t/c rates (rePorted and estimated) Psv average t/c rates (rePorted and estimated)
£/day £/day
45,000 20,000+ 30000 900+ m2
BHP deck area
40,000
16-19,999 25000 750-899 m2
35,000 BHP deck area
10-15,999
30,000 20000 500-749 m2
BHP
25,000 8-9,999 deck area
BHP 15000 3,100+ dwt
20,000
2,200 -3,099
15,000 10000 dwt
10,000 2,200+ dwt
5000
5,000
0 0
03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12
36 the offshore support vessel market

37. years. However, if the productivity of new yards, especially the Seasonal demand drivers, such as new Greenland campaigns,
Chinese yards, improves, then the delivery rate per quarter has will not kick in before 2014 and 2015. Past experience of similar
the potential to increase. We currently expect the PSV fleet to campaigns has shown a pattern of high vessel intensity per rig,
grow by 120 vessels, or 10 percent, in 2013. If yard productivity which could work to boost OSV demand. The North Sea AHTS
improves this figure might prove to be conservative. market balance is therefore unlikely to tighten considerably
before 2014. However, as before, the harsh environment and
Conclusions weather will have the final say in the strength of the large AHTS
On a global basis, OSV day rates and fleet utilization for OSVs market in the North Sea. Elsewhere, this market could be fur-
are forecast to rise moderately in 2013. This means the loosen- ther marginalized as ageing, conventionally-moored floaters are
ing of the OSV balance, seen in particular during the second being crowded out by new, dynamically-positioned UDW float-
half of 2012, is expected to be reversed in 2013. The main driver ers. The conventionally-moored floaters are of course a main
of the change will be new UDW floaters entering service, espe- demand driver in the large AHTS market.
cially from the second quarter of 2013, resulting in increased
demand for additional DP II PSVs. Day rates for smaller/medium-sized AHTS vessels in the main
markets of Asia and West Africa should be fairly balanced in
The North Sea PSV market will still see additional units being 2013, given the number of expected deliveries in relation to in-
delivered from Norwegian yards. However, increasing income creasing jack-up demand.
differentials between the North Sea and other regions will
probably lead to vessels leaving the North Sea, thus tightening Sven Ziegler
the supply-demand balance. RS Platou Offshore Research
AHTS/PSV new orders per year
AHTS/PSV FLEET OVERVIEW
No. of vessels
250
AHTS In Service Orderbook
Total Total
PSV AHTS 4-7,999 BHP 1,140 89
200
AHTS 8-9,999 BHP 212 6
AHTS 10-15,999 BHP 314 26
150 AHTS 16-19,999 BHP 112 19
AHTS 20,000+ BHP 67 13
AHTS Total 1,845 153
100 PSV 500 m2 364 56
PSV 500-749 m2 436 47
50 PSV 750-899 m2 91 109
PSV 900+ m2 245 148
PSV Total 1136 360
0 Total Orderbook 2981 513
03 04 05 06 07 08 09 10 11 12
the offshore support vessel market 37

38. the offshore construction vessel market
Newbuilding bonanza
2012 has been an active year in the subsea market, especially in terms of the number of newbuilding orders at Norwegian yards, and
collaboration arrangements between contractors. The growth in the subsea construction fleet will continue to accelerate in the years to
come. The fleet is not growing only by numbers but also by complexity of the vessels, which is driven by larger projects and larger subsea
structures in increasing water depths.
Compared to 2011, the number of subsea, fixed platform and order activity in the two first quarters was due to contractors
floating platform installations has increased. Asia/Pacific, being selective with regard to which projects to take on. We an-
Northern Europe and West Africa have all been growth mar- ticipate a very strong fourth quarter in 2012, based on several
kets, while the subsea installation sector in the Gulf of Mexico large contract awards for the two main contractors in the subsea
has been struggling due to a lack of contract awards between segment.
2008 and 2011. This reduced activity is mainly a result of the
Macondo accident, and partly down to repercussions from the The current DP construction fleet consists of 364 vessels in ser-
financial crisis of 2007-2008. vice and 50 vessels on order. 20 vessels were delivered in 2012,
producing a fleet growth of almost 6 percent. Newbuilding ac-
It is anticipated that there will be strong development in the tivity has been very high, as a result of increasing day rates and a
subsea and floating production installation market in the next positive outlook for the subsea market.
few years. The increase will be driven by high activity in Asia/
Pacific and West Africa, and a normalization in the Gulf of Day rates for modern subsea tonnage have been climbing in
Mexico region. The fixed installation market is expected to see 2012, due to increased activity and only moderate fleet growth.
a reduction of activity in the long run, as a result of depleting Vessels with 150 to 250 ton cranes have been achieving rates
shallow water reserves. of around $45,000-65,000 per day. For vessels with a 400 ton
crane, rates are in the range of $90,000-110,000 per day. There
Order intake for subsea contractors was not particularly strong is a significant disparity in the specification of the different Div-
in the first two quarters of 2012, but the third quarter enjoyed ing Support Vessels, but day rates for modern tonnage are esti-
strong ordering levels. It has been speculated that the drop in mated to be around $100,000-140,000 per day.
Norwegian yards have had a high order intake thanks to a sub-
Order backlog and inbound orders
Selcted subsea companies stantial number of new orders in the subsea segment. In total,
17 subsea vessels (with LOA over 80 meters) have been or-
25 7 Inbound dered. Siem Offshore has been the most active player, ordering
orders
6
four new vessels at STX yards and one new light construction/
Order
20
backlog renewables vessel at Fjellstrand. Some of the newbuildings
5 have been fixed on long-term charters, but the majority of the
Subsea backlog BNUSD
Inbound orders BNUSD
15 4 newbuildings is still open for charter. In terms of vessels with
LOA of more than 150 meters, the large contractors have been
3
10 committing to long-term charters in order to increase the sup-
2 ply side of the market. However, in the past almost all subsea
5 vessels were built ‘on speculation’ by Norwegian owners. The
1
strained financial market and the high capital cost of larger high-
0 0
03 04 05 06 07 08 09 10 11 12 end vessels are believed to be the main reasons for the increased
willingness from contractors to commit to newbuildings.
38 the offshore construction vessel market

39. Against the backdrop of reduced activity in the conventional
shipbuilding market, many yards have shown interest in vessels
with an LOA of more than 150m. If the conventional shipping
market continues to be weak, there could be a shift from North-
west Europe to the Far East in terms of shipbuilding location.
In 2012, several noteworthy alliances were formed, with Tech-
nip and Heerema signing a worldwide agreement on the ultra-
deepwater subsea construction market. McDermott also signed
an exclusive alliance with Ocean Installer on rigid pipe laying in
the North Sea just prior to the end of the year. This means that
McDermott is making a return to the North Sea, while Ocean In-
staller can now compete for EPC/EPCI projects in the area.
In addition, EMAS AMC took control over Caesar and Express
from Helix, enabling them to deliver a wider service in the rigid
pipe laying market. The mergers and ventures between larger sub-
sea contractors has open up a window for new players to enter
the scene, those new entrants are supported by the end clients in
order to generate competition. The new players consist of con-
tractors lower down in the food chain that now would like to have
a bigger bite of the market. However, in order to do so they need
new and additional vessels that can perform the required work.
Ocean Installer, the newcomer in the SURF segment, has en-
joyed great success establishing itself as a serious player in the
market. In June this year, the firm teamed up with Solstad for
a new high-specification subsea construction vessel, which will
be an important asset in its portfolio when delivered.
With increased EP spending and a high oil price, global oil
and gas companies are expected to take on new projects and
increase activity in the subsea construction market. Deep-wa-
ter demand is expected to be particular strong as the trend for
more and more equipment being put on the seabed will con-
tinue. One factor that will contribute to increase the growth in
demand for subsea vessels is the renewable market, which has
absorbed several vessels during 2012. Conclusion is that the
market will continue to need even larger and more sophisticat-
ed vessels in the years to come. This has and will continue to be
confirmed by the fact that all speculative large new buildings to
date have found a “home” before delivery from the yard.
Bård Thuen Høgheim
RS Platou Offshore Research
the offshore construction vessel market 39

40. offshore wind
Maturing market
There have been a few ups and downs in the offshore wind market in 2012, but overall it has been a satisfactory year. Growth in 2012 was
again driven by the UK, but new megawatts are being lined up elsewhere in Europe, Asia and North America. Delays in current and future
projects are still due to cabling issues, with Germany experiencing the biggest problems.
Global installed capacity to date is 4.9 GW, which is equiva- back to 2018, due to issues with the power transmission. Delays
lent to the annual consumption of just over 2.8 mill European seem to be the rule, rather than the exception, for Round 3 pro­
households. Added capacity is in excess of 800 MW, which jects, due to uncertainties regarding consenting, financing and
amounts to an annual growth rate of approximately 20 percent. technology. The first Round 3 project will most likely be Dong’s
The added capacity originates mainly from the UK, where Sher- and SMart Wind’s Hornsea Project, which is expected to start
ingham Shoal and Greater Gabbard were the biggest projects to construction in 2015.
come onstream in 2012. Greater Gabbard is probably the most
problematic offshore wind project to date, and was supposed There is a drive towards reducing the cost of energy and many
to have been onstream in 2010. Legal proceedings with regards market players are choosing increased integration. As an example,
to financial responsibility will probably continue for some time Areva has already established close links with HGO Infra Sea of
as a result of the difficulties experienced by the project. No Solutions and signed an LOI with STX France on the founda-
commercial projects have been finalized in regions other than tions side. Generally speaking, there is a trend towards indus-
Northern Europe, but China had some pilot projects coming trialization of the industry, in a bid to reduce the overall cost of
onstream in 2012. Going forward, Germany and the UK will development. Repower has also urged closer supply chain col-
drive growth, but it will require more time than first anticipat- laboration, in order to deliver more cost efficient products.
ed. German projects are delayed by at least 12 months on the
North Sea side, due to cabling issues and submarine cable sup- In addition, there has also been increased interest from the Oil
ply. Other countries that will supplement the expected growth Gas players, demonstrated by Siem Offshore’s order of a new
in Northern Europe will be Belgium, Denmark, Sweden and Operation Maintenance wind farm vessel from Fjellstrand.
the Netherlands. In Asia, China, Japan, Korea and Taiwan will
be the fastest growing markets. In the US, Cape Wind will be Technically speaking, grid connections are still the major hur-
the first project, with several other projects being lined up for dle in offshore wind developments – a factor that has caused
development. long delays in the German North Sea projects, as well as de-
laying developments in the UK. High Voltage Direct Current
The prevalent market driver in the offshore wind sector is, and (HVDC) transmission platforms are one of the biggest supply
will continue to be, government subsidies. In order to reach grid chain bottlenecks, due to a low number of providers and high
parity, technological progress, which is driven by large-scale construction risk.
government support, is essential.
Another major obstacle in offshore wind development is secur-
Several governments are adjusting their policies in order to en- ing financing for projects. Construction risk is often the main
courage offshore wind farm development. Germany has taken concern from the financiers’ point of view. The Green Invest-
a step in the right direction by addressing issues of power grid ment Bank has now decided that it will only finance projects
connection, while the USA will open competitive tenders for that are constructed, refusing to take on any construction risk.
three projects next year. Meanwhile, Denmark is pushing for This will favor developed players who can demonstrate good
20% community ownership of near-shore wind farms, in order track records and solid balance sheets.
to create local enthusiasm for the projects.
TIV CTV – Day rates
Several of the UK’s Round 3 projects have been delayed; for Earnings for second generation Turbine Installation Vessels
example, East Anglia was planned for 2017, but is now pushed (TIVs) have been in the range of €140,000 to €160,000 per day
40 offshore wind

41. for short-term contracts, with long-term rates anticipated to be then anticipated that a significant amount of capacity will be
between €110,000 and €130,000 for 2012. However, there have released, as dedicated foundation installation vessels enter the
not been many fixtures in the long-term segment. First genera- market. Monopiles are currently the most common founda-
tion TIVs earned between €80,000 and €120,000 per day last tion type, but these have water depth restrictions of around 30
year. At present, there is not much available vessel capacity in meters. As wind farms are developed in deeper waters, a new
the market, however, due to delays in the German sector, con- type of foundation is required and we anticipate jacket foun-
tracts may be cancelled and some vessels may be freed up. dations to capture a significant market share, as monopiles are
phased out.
Spot day rates for the Crew Transfer Vessels (CTVs) that are
classified to work in international waters have been steady in Offshore wind - Transactions
2012, with day rates for 12 pax vessels in the range of €3,000 In May 2012, Marubeni Corporation and Innovation Network
to €4,500 (depending on 12/24 hours service). Vessels that of Japan jointly completed the acquisition of Seajacks Inter-
are only fit to work in the UK have been trading at between national, in a deal that was valued at a reported 850 mill USD.
€1,500 and €2,500 per day. Bigger vessels with 24 pax (LOA There were also other Japanese companies active in the offshore
above 20 meters) have achieved day rates in the range €4,500 wind sector in 2012. Mitsubishi partnered up with TenneT on
to €5,000 for long-term rates, with even higher earnings from offshore grid connections in Germany. The transaction involved
spot jobs. Mitsubishi taking a 49 percent share in BorWin1 and 2, mark-
ing a ‘first of its kind’ transaction in the German market. Other
TIV CTV – Fleet trends and newbuilding noteworthy transactions included Dong’s sale of 50 percent of
There are currently 22 dedicated Turbine Installation Vessels the Borkum Riffgrund 1 offshore wind farm to the parent com-
(TIVs) in service and six on order. Eight new TIVs were de- pany of Lego and Oticon Foundation. The reported price for
livered during 2012, facilitating a fleet growth of 50 percent. the 277,2MW project was 790 mill USD.
During 2012 three new orders were placed; two at European
yards and one at a Chinese yard. The TIV market is expected Bård Thuen Høgheim
to be firm towards 2015 and the beginning of 2016, but it is RS Platou Offshore Research
offshore wind 41

42. 42 RS PLATOU MARKETS

43. rs platou markets
A Quiet Bull Market on a
turbulent Rollercoaster ride
2012 will go down in the history books as one of the most turbulent financial years in memory, with governmental intervention,
a presidential election and an imminent fiscal cliff hanging like a dark cloud over the slow global economy. Despite the bumpy ride,
­
global equity markets grew between 15 and 17 percent from the beginning of the year, while the oil price remained steady at a high level.
After several years of upheaval, 2012 finally gave investors a Following a difficult second quarter, global equity markets re-
year many had wished for. The year featured slow and steady versed course again and advanced during the third quarter of
gains, as the stock market overcame a world of worries. 2012, assisted by additional monetary policies announced in
Europe and the United States to accommodate for the gener-
The first quarter of 2012 started optimistically, with a posi- ally weak economic backdrop. The world’s leading central banks
tive development in the financial markets for both shares and stole the spotlight this quarter, as weak global growth, high un-
corporate bonds, and especially high-yield bonds. However, employment rates and rumblings about a potential collapse of
the crisis in Europe spoiled the party somewhat, despite an the Eurozone created a climate for yet another bank interven-
improving outlook for stronger economic growth in the Unit- tion, which came with a ‘whatever it takes’ approach from the
ed States. By April 2012, the party was definitely over. During European Central Bank. The back-and-forth between risk-tak-
the second quarter, equity markets were hit by news out of ing and risk-aversion in the fixed income market continued dur-
Europe, as investors worried about the ability of several Euro- ing the third quarter, and riskier, higher-yielding assets returned
pean countries to repay their sovereign debt, and that a weak to favor. Investor demand for yield, combined with additional
European economy could trigger a U.S. recession. Despite monetary easing, fueled the gains.
these uncertainties, many companies took advantage of the
low interest rates to refinance debt. During the first quarter, The third quarter was a difficult quarter, with many bumps in
RS Platou Markets completed five high-yield debt transac- the road. However, RS Platou Markets advised, and had a role
tions with a total value of approximately NOK 3.7 billion. in, a total of six transactions, both of debt and equity raising and
MA, with a total value of NOK 1.7 billion.
Stock markets dropped sharply in May, as investors realized
that the Euro crisis was developing into something far more The fourth quarter mirrored the second quarter’s weakness, in
serious, eroding their appetite for risk. At the same time, gov- the aftermath of the central bank-driven rally. Companies be-
ernment bond yields in the United States, Germany, Sweden gan to take a more cautious approach, wary of the presidential
and Norway dropped to historically low levels. The first half of election, uncertainty of the Congressional budget negotiations
2012 ended as it had started, with a fateful summit in the Eu- and the fiscal cliff. Despite a sideways Norwegian stock market,
rozone. Despite the generally difficult market conditions, RS global stock markets rallied yet again, paving the way for a trans-
Platou Markets participated in four equity transactions during action effective quarter.
the second quarter of the year, raising a total of approximately
NOK 2 billion. In addition, we participated in various MA RS Platou Markets participated in eight transactions, divided
transactions, including one together with our parent compa- equally between debt and equity. One deal of note was a USD
ny, RS Platou ASA, showing the strengthening collaboration 132 million registered directed offering in the US-listed Scorpio
between the companies. Tankers Inc. ➤
RS PLATOU MARKETS 43

44. Despite this rollercoaster ride in the financial markets, the OSE edging higher into 2013. Lastly, European officials have turned
Benchmark Index gained approximately 15 percent during the more positive to the economic outlook which adds to the mar-
year, compared to the SP500 with 16 percent. The Interna- ket sentiment.
tional Equity markets also performed very well, with gains rang-
ing from 15 to 17 percent. Corporations may take advantage of a fixed income market re-
turning to more healthy interest rates both for investment grade
The high oil price has been stable throughout 2012 and there and high-yield issuers. 2012 was a year where several issuers used
are no signals that this should change in the immediate future. the Norwegian bond market to refinance maturing debt. At time
Unlike during the financial crisis in 2008 and 2009, the oil price of writing, high-yield bond market spreads are at the lowest since
has this time withstood the economic turbulence. 2011. This may lead to new first time issuers of corporate bond
debt entering the market. A trend which mushroomed during
In a market with a high degree of uncertainty and reduced risk 2012 was the switch from bank debt to bond debt. Banks are
appetite, companies with a desire to list have endured a chal- reducing balance sheets to stay compliant with new regulations
lenging year. We have seen some periods with increased opti- and risk measures which lead to corporates seeking other financ-
mism, producing occasional windows of opportunities, but ing sources. As the new regulations are becoming tighter rather
taken as a whole, global IPO issuance suffered in 2012. The year than looser, we could expect this trend to continue through 2013.
started off slowly in the IPO market, but picked up somewhat With “risk-free” interest rates expected to stay subdued, inves-
by the fourth quarter, with over 200 deals recorded for a total tors should continue to inject funds into risky asset classes such
value of approximately USD 100 billion. The US market ac- as equities and high yield bonds. Furthermore, at some point we
counted for 80 IPOs, with a total deal value of approximately are bound to see a reversal of the unconventional relationship of
USD 40 billion, greatly helped by the massive USD 16 billion tight safe-haven yields combined with high returns in equities
Facebook listing. In Europe, approximately USD 10 billion was and tighter high yield spreads.
raised from 12 IPOs, while Asia counted approximately 90,
with a value of approximately USD 42 billion. As a comparison, We also expect stock markets to continue to grow throughout
Norway only had eight listings this year, with a total value of ap- 2013, as Europe is stabilizing, Chinese growth is strengthening
proximately USD 2 billion. and there is political stability. However, there can be no assur-
ance that these factors will endure.
Other noteworthy news in 2012 was the sale of NYSE Euron-
ext to the Intercontinental Exchange for USD 8.2 billion. The We expect an average oil price for 2013 of USD 100 per barrel.
deal, announced in December 2012, is still pending regula- This will translate into an EP spending growth of between 6
tory approvals. In Norway, the Oslo Stock Exchange changed and 7 percent. This is yet another sign that we are in an oil ser-
its opening hours and is now closing at 16:30 CET. This has vices super-cycle, despite the fact that this growth is somewhat
helped investment banks in Norway, who can now contact down from 2012. Increased oil demand, combined with higher
investors earlier during capital raisings outside the opening depletion rate in existing producing fields, forces EP compa-
hours of the stock exchange. The new opening hours are cur- nies to increase their efforts to reverse this trend. Although we
rently subject to a six month trial period, which expires in are experiencing a sharp increase in output from the shale oil/
February 2013. However, it is expected that the Oslo Stock gas play in North America, we do not expect this to have a nega-
Exchange will introduce these opening hours on a permanent tive effect on our oil price scenario, or on EP spending. As a
basis. result, we expect the increased EP spending to have a positive
effect on the oil services stock during 2013.
OUTLOOK FOR 2013
2012 has cleared up many political and economic uncertainties. Following several years with a depressed shipping market, we
Although political and economic risks remain, they are signifi- expect 2013 to be a turning point. Fleet growth is expected to
cantly reduced due to US growth in fundamentals such as con- slow considerably during 2013/14, which should have a posi-
sumer goods and housing markets. Another important driver tive effect on freight rates. With ship values already at a 20 year
of global growth is Chinese GDP growth which is estimated to low, we believe that the stage is now set for a revaluation of ship-
have bottomed out in 2012 at its lowest level since 2009 and ping stocks.
44 RS PLATOU MARKETS

45. rs platou finans
PROJECT FINANCE
IS STILL AT CHALLENGE IN ALL
SHIPPING MARKETS
How do we structure project finance when the time charter levels in most shipping markets barely cover operating costs?
When ‘KS’ financing re-emerged in the early 2000s, the typical deal was based on sale/leaseback structures, whereby the shipowner
sold a second hand vessel to swap book equity with cash and reinvesting in new tonnage. The deal would also generate a positive
cashflow to the shipowner, based on operating income, less operating costs, on top of the agreed bareboat rate.
This is not the case today. The average annual time charter earn- charter earnings are covering the operating costs, the equity in-
ings for tankers, bulkers and container vessels are entering a vestors are willing to wait for improved market conditions and
fifth consecutive year where the rates do not cover the financial make a profit on the basis of an ‘asset play’ scenario.
and operating costs for modern tonnage.
In addition, the equity is less exposed when there is no mort-
At the same time, most shipping banks are taking a hit on existing gage on the vessel.
shipping loans and have limited capacity to consider new busi-
ness. The big drop in the US interest rate level does not compen- Both newbuilding and second hand prices have dropped to a
sate for the increased margins now being offered by the banks. historical low level. The potential upside is exciting and it is all a
question about buying the right vessel at the right time.
On top of this, the tightening of conditions required in order
to get bank financing is limiting the number of possible sale/ RS Platou Finans believes the KS market will enter a period
leaseback deals. The conditions/criteria for financing include, with various asset play projects being offered to shipping inves-
among others; only modern vessels, only assets that are easy to tors. Both the dry bulk and container markets are showing signs
sell, only charterers with a strong balance sheet, short loan pro- of improvement. More buyers are inspecting vessels and the
file, low gearing level and higher arrangement fees. volume of transactions is picking up.
The likely alternative is therefore to find other sources of fund- A growing share of Norwegian KS projects have been invest-
ing. ments in the offshore sector. A stable oil price, financially strong
end users, and long-term time charter and bareboat contracts
Many shipowners have decided to test the bond market. This (with a profit margin for both the investors and the operators)
has become a competitive alternative, with flexible terms and have continued throughout the financial crisis.
better cashflow. However, bond financing is more difficult to ar-
range for project finance, as most bond investors will require All the KS houses have experienced projects with financial dif-
backing from a strong balance sheet. ficulties within the majority of shipping markets during the last
four years. However, offshore projects with long-term charter
The likely alternative in the present financial climate is to fi- contracts have been performing well, and have been able to pay
nance new projects with 100 percent equity. As long as the time the investors a steady dividend throughout the same period. ➤
rs platou finans 45

46. The nOrwegian kS markeT in 2012 ing scrapped and few newbuildings being delivered, the market
The reported project volume among the top four KS houses in conditions have remained weak.
2012 was in excess of 600 mill USD. The level of activity is still
limited compared to the top year of 2007, when the total in- Two bulk projects were merged into a new company and the
vestments reached 5 bill USD. However, the trend is positive, investors injected fresh equity. At the same time, a new charter
despite the lack of bank funding, and 2012 was the year with the agreement was made and the bank restructured the debt. The
highest activity since the start of the financial crisis. new company is now performing well.
About 75 percent of the projects were related to offshore invest- On the positive side, we sold some PSVs and a cement ship with
ments, with a mix of newbuilding asset play deals and long-term good returns to the investors. The second shipping fund that was
bareboat contracts involving modern OSVs. The banks still established prior to the financial crisis also ended with a positive
have some funding available for these projects, as long as the return, despite investment in some loss making projects.
end user is a financially strong company.
The majority of existing projects are now performing well after
The expected interest in asset play deals in the traditional some years with restructuring and sales. Dividends are paid out
shipping segments did not materialize last year. The recover- on a regular basis and the charterers are paying on time.
ies in container, dry bulk and tanker markets were postponed
for another year, with analysts now expecting the first half of A total of four new projects were completed in 2012, includ-
2014 to be the period with improving utilization rates and ing two offshore projects, one bulker and one small passenger
better earnings. vessel.
Apart from the offshore projects and a couple of container asset In total, RS Platou Finans is now the corporate manager of 45
play deals, the project houses concluded some long-term char- projects, consisting of more than 90 vessels with a value close to
ter projects in other industrial shipping markets. 2 bill USD. The portfolio is dominated by offshore projects, but
we expect the activity level in the traditional shipping markets
rS plaTOu finanS’ pOrTfOliO Of prOJeCTS to pick up in the near future.
Ten projects in RS Platou Finans’ exsiting portfolio were sold
last year. Some projects made a good return, but there were The corporate management also includes some projects limited
also some losses. After several years with very bad market con- to pure accounting services. There is a market for professional
ditions, all the reefer projects ended with the majority of eq- independent corporate management services and RS Platou
uity lost. The specialized reefer vessels have been replaced by Finans has been appointed by several domestic and foreign
container vessels and, even with a large number of vessels be- shipowners to perform this job.
total ProJects by emPloyment total ProJects by segments
Funds 4% Other 5%
Asset play 4%
Product tankers 7%
Timecharter 16% Shipping founds 4%
Offshore/
Cable layers 4% Supply 39%
Bareboat 76%
Reefer vessels 9%
Bulk carrier 16%
LPG/Chemical tankers 16%
46 rs platou finans

47. MS Nordstjernen has sailed with the Coastal Express for 56 years and was preserved by the Directorate for Cultural Heritage in 2012.
She is now owned by a company under RS Platou Finans management. Copyright notice: Hurtigruten ASA/Britta Ludwig.
sUmmary ks-hoUses 2005 - 2012
(fearnleys, nrP, Pareto, PlatoU)
Mill $
4000
Total Project Price
3500 Paid in Equity
Uncalled capital
3000
2500
2000
1500
1000
500
0
2005 2006 2007 2008 2009 2010 2011 2012
rs platou finans 47

48. rs platou real estate
2012 transaCtion
market dominated by large
single assets
nOrwegian markeT 2012 prime assets that generate a predictable low-risk cash flow, or
In 2012, Platou Real Estate concluded 12 projects with an in- high-risk conversion/development projects with a potential for
vestment value of 1.5 bill NOK – making us one of the largest higher returns. Due to a very strong housing market fueled by
syndicate players in the market. The total transaction market high demand and marginal supply, many professional, financial,
appeared to exceed around 50 bill NOK, and was dominated investors are pursuing opportunities in the housing-develop-
by large single asset transactions; such as the new Statoil ASA ment market. Following this trend, Platou Real Estate is also
headquarters (3.0 bill NOK), the new DNB Bank ASA head- involved in the largest housing transformation plan initiated by
quarters (4.8 bill NOK) and in addition a portfolio of shopping the municipality of Oslo - the Ensjøplan. At present, we are de-
centers in central parts of Norway – Sector Shopping (7.0 bill veloping approximately 200 residential units, and actively look-
NOK). ing for additional projects in the Ensjø area.
In spite of the challenging market conditions, RS Platou Real finanCing
Estate has also sold two projects during 2012. Both have deliv- The financing difficulties we experienced in 2011 intensified in
ered solid returns to the shareholders, with an internal rate of 2012, and even some of Norway’s largest, industrial real estate
return (IRR) of 12 percent and 35 percent respectively. players did not get traditional bank financing. For example, the
Sector Shopping transaction was financed both in the bank and
As we reported last year, professional investors dominate the the bond market. The banks, in general, are adapting to new EU
equity market. Most of them are searching for either secure regulations regarding risk and equity and are offloading their
balances for real estate. The financial climate and lack of tradi-
tional bank credit has boosted the private bond market, which
transaction market volUme - norWay (billion nok)
was fifteen times higher in 2012 than in 2011. Both institutional
and private investors revealed a growing appetite for 5-7 year
80
single asset real estate bonds, yielding from 5-7 percent per an-
Retail num. As regards restructuring of existing funds, larger entities,
Professional
and/or other real estate vehicles, falling interest rates have made
60 the interest derivatives too expensive to break up and contri-
buted to an expectant market.
40
The eurOpean real eSTaTe markeT 2012
The eurOpean real eSTaTe markeT
20 – CharaCTeriSTiCS Of 2012
As Europe fell back into recession at the close of the year, the
commercial real estate market suffered as a result. Investment
0
04 05 06 07 08 09 10 11 12 13E activity decreased and was particularly hit by the lack of avail-
ability of debt financing, as banks focused on managing their ex-
source: rs platou
48 rs platou real estate

49. Grenseveien 97: a housing project under development in a joint venture between Platou Real Estate and Scandinavian Development
(one of the most experienced and well-respected developers in Norway).
isting loans and adjusting to new, stricter capital requirements. Seeing greaT OppOrTuniTieS in The SeCOndary
At the same time, the investment market remains tight in the real eSTaTe markeT
major markets of Northern Europe, such as the UK, Germany Since 2009, RS Platou Fund Management has launched three
and Scandinavia. While peripheral markets are experiencing a funds investing in the Nordic secondary real estate market.
low appetite for investment, considerable equity is chasing se- These investments capitalize on mispricing in the secondary
cure, income-producing core assets in Northern Europe, keep- market. Exploiting the management’s unique insight into Nor-
ing prime yields at low levels. The flavor of the investment mar- dic unlisted real estate vehicles, the funds have great value appre-
ket is very much characterized by an aversion to risk. ciation potential. The track record after four years is very good
with a two digit IRR. As we continue to see great potential in
The occupier market is suffering from the economic slowdown, the secondary market, RS Platou Fund Management will carry
and the focus remains on cost cutting. Generally, rents in prime on building platforms upon which our investors can participate
markets are stable or slightly increasing, while more peripheral in this opportunity. We are increasingly experiencing appetite
markets are experiencing the opposite. The retail market is suf- among international investors for this investment strategy.
fering as a consequence of low income growth, increasing un-
employment and falling consumer confidence. In the logistics
market, weak trade volume and economic uncertainty has re-
duced demand for logistics space.
The trend for lower new-building levels over the past few years
is now functioning as a partial cushion against reduced demand.
However, in the light of the economic uncertainty and restric-
tive financing conditions, we expect 2013 to continue in much
the same way as 2012 ended.
rS plaTOu’S eurOpean real eSTaTe fundS
Since 2007, RS Platou Fund Management has managed two
pan-European, opportunistic real estate funds. Despite the
negative developments in the European real estate market,
the funds have delivered performances in the top quartile. We
have succeeded in offsetting the effects of the negative mar-
kets by active asset management, repositioning and develop-
ment. Main exposures are in France and Germany, as well as
two development projects in Poland. We expect 2013 to con- Piastow Office Centre in Szczecin, Poland – an 18,000 sqm office building
tinue to be challenging, but are seeing some signs of market under construction. The development project is managed by RS Platou
improvement. Fund Management. Its first phase will be finalized in Q1 2013.
rs platou real estate 49

50. statistics
1 World fleet develoPment
mill dwt
start
2003
2004
tankers
270.7
279.1
chemical
carriers
23.1
25.0
bulk
carriers*
289.1
297.4
combined
carriers
12.6
12.1
others
181.2
189.6
total
776.8
803.3
2005 295.0 25.7 314.9 11.6 200.5 847.6
2006 317.7 26.9 336.0 11.6 213.3 905.4
2007 334.7 29.0 359.2 11.2 232.5 966.7
2008 352.3 31.7 387.1 11.2 254.2 1 036.4
2009 369.0 34.0 415.0 10.4 278.3 1 106.7
2010 396.2 35.8 453.4 9.6 300.0 1 194.9
2011 413.1 36.1 527.7 6.8 315.1 1 298.8
2012 439.0 36.5 609.2 330.9 1 415.6
2013 460.5 36.6 673.5 350.1 1 520.7
* from 2012 combined carriers incl. in bulk carrier fleet
2 deliveries
mill dwt
2003
2004
tankers
27.9
26.4
chemical
carriers
2.0
0.8
bulk
carriers*
11.8
18.3
combined
carriers
0.2
-
others
11.2
11.9
total
53.1
57.4
2005 28.0 1.5 22.3 - 13.8 65.6
2006 23.0 2.4 25.5 - 20.3 71.1
2007 28.7 3.0 28.6 - 23.0 83.3
2008 33.2 2.9 32.6 - 28.4 97.2
2009 45.7 2.2 48.3 - 28.4 124.7
2010 38.9 1.7 80.6 0.6 22.7 144.5
2011 39.7 1.0 99.2 1.0 22.7 163.6
2012 31.4 0.5 98.2 19.2 149.4
* incl. conversions
3 neW orders
mill dwt
2003
2004
tankers
47.9
34.0
chemical
carriers
1.4
2.2
bulk
carriers
27.9
28.8
combined
carriers
-
-
others
27.5
28.1
total
104.7
93.1
2005 24.0 0.9 16.8 - 25.9 67.6
2006 74.7 6.8 39.0 - 25.7 146.2
2007 42.1 10.1 161.6 3.4 52.4 269.6
2008 47.4 2.7 91.4 - 20.4 161.9
2009 10.3 0.8 33.6 - 1.5 46.2
2010 38.5 1.6 83.5 - 10.8 134.4
2011 9.2 0.5 28.0 - 25.7 63.3
2012 14.2 0.9 18.6 - 11.1 44.8
4 order book
mill dwt
start
2003
2004
tankers
45.3
65.1
chemical
carriers
10.8
10.2
bulk
carriers
30.3
48.4
combined
carriers
0.2
-
others
22.9
41.2
total
109.5
164.8
2005 72.0 11.6 60.6 - 56.2 200.4
2006 76.5 3.3 61.4 - 68.1 209.3
2007 128.7 11.0 78.9 - 80.0 298.6
2008 147.7 19.0 216.1 3.4 105.7 491.9
2009 164.0 18.4 286.3 3.4 92.2 564.3
2010 120.6 13.9 268.7 3.4 70.5 477.1
2011 113.4 9.7 246.5 2.76 53.7 426.0
2011 75.0 1.4 191.5 53.7 321.5
2012 49.4 1.6 105.4 54.6 211.0
50 statistiCs

51. 5 tonnage sold for scraPPing, lost and other removals
mill dwt
2003
2004
tankers
19.5
10.6
chemical
carriers
0.1
0.1
bulk
carriers
3.5
0.8
combined
carriers
0.7
0.5
others
2.8
1.0
total
26.6
13.0
2005 5.3 0.3 1.2 0.0 1.0 7.8
2006 6.0 0.2 2.2 0.3 1.1 9.8
2007 11.1 0.4 0.7 0.0 1.4 13.6
2008 16.6 0.5 4.7 0.8 4.3 26.9
2009 18.4 0.5 9.9 0.9 6.7 36.4
2010 22.0 1.3 6.3 0.1 7.7 37.3
2011 13.8 0.6 23.2 6.9 44.5
2012 11.7 0.8 34.8 11.6 59.0
6
tanker fleet by size (incl. chemical carriers)
mill dwt
start 10-69,999 70-119,999 120-199,999 200,000+ total
2003 64.3 63.8 35.0 130.7 293.8
2004 66.0 69.9 37.5 130.9 304.1
2005 68.8 75.6 39.7 136.6 320.7
2006 73.4 83.5 42.9 144.6 344.5
2007 79.4 89.6 46.2 148.6 363.7
2008 85.9 97.1 48.4 152.6 383.9
2009 93.6 103.6 47.8 157.9 403.0
2010 106.5 108.5 59.4 157.6 432.0
2011 109.1 116.0 62.6 161.5 449.3
2012 112.2 121.0 68.2 174.2 475.6
2013 114.3 123.8 72.8 186.2 497.1
7 tanker deliveries by size (incl. chemical carriers)
TANKER DELIVERIES BY SIZE (incl. chemical carriers)
mill dwt
Mill dwt
2003
2004
10-69,999
5.2
5.8
70-119,999
9.7
8.6
120-199,999
4.2
3.7
200,000+
10.7
9.1
total
29.9
27.2
2005 6.7 9.6 4.0 9.1 29.5
2006 8.1 7.9 4.0 5.5 25.4
2007 9.4 8.6 4.2 9.5 31.7
2008 11.2 10.3 2.2 12.4 36.1
2009 16.4 7.3 13.3 11.0 48.0
2010 8.4 9.9 5.7 16.6 40.5
2011 5.9 8.4 7.0 19.4 40.7
2012 3.4 5.8 7.4 15.4 32.0
8
neW orders of tankers by size (incl. chemical carriers)
mill dwt
10-69,999 70-119,999 120-199,999 200,000+ total
2003 10.0 15.2 8.7 15.5 49.3
2004 7.8 10.9 4.5 13.0 36.2
2005 7.0 5.8 1.1 11.0 24.9
2006 16.2 21.6 13.3 30.3 81.5
2007 15.4 13.5 8.3 15.0 52.2
2008 6.3 5.3 5.8 32.8 50.1
2009 1.4 0.6 3.3 5.8 11.1
2010 2.1 6.8 11.3 19.9 40.1
2011 2.7 1.9 2.8 2.2 9.6
2012 6.1 1.1 2.5 5.3 15.1
statistiCs 51

52. 9 neW orders of tankers by size - QUarterly (incl. chemical carriers)
mill dwt and number of vessels
2011 1
2
10-69,999
dwt
0.3
0.7
no
13
16
70-119,999
dwt
0.3
0.5
no
4
5
120-199,999
dwt
1.0
1.5
no
7
10
dwt
2.2
0.0
200,000+
no
7
0
dwt
3.9
2.7
total
no
31
31
3 0.7 24 1.0 10 0.2 1 0.0 0 1.9 35
4 0.9 18 0.1 1 0.1 1 0.0 0 1.1 20
2012 1 1.0 23 0.3 3 0.2 1 1.3 4 2.8 31
2 1.3 27 0.6 6 0.3 2 0.6 2 2.8 37
3 1.3 26 0.1 1 0.2 2 0.3 1 1.9 30
4 2.6 56 0.1 1 1.8 14 3.2 10 7.7 81
10
tankers sold for scraPPing by size (incl. chemical carriers)
mill dwt
10-69,999 70-119,999 120-199,999 200,000+ total
2003 3.5 3.5 1.8 9.0 17.8
2004 2.8 2.6 1.3 1.5 8.2
2005 1.9 1.5 0.4 0.0 3.8
2006 2.0 1.2 0.0 0.0 3.2
2007 2.6 0.7 0.2 0.0 3.5
2008 1.8 0.8 0.2 1.3 4.0
2009 3.0 1.3 1.1 2.4 7.7
2010 5.3 1.8 1.4 3.4 11.9
2011 2.4 2.6 1.0 3.0 9.0
2012 1.1 3.7 3.2 2.8 10.8
11
bUlk carrier fleet by size
mill dwt
start 10-59,999 60-79,999 80,000+ total
2003 120.5 75.1 93.6 289.1
2004 123.1 75.8 98.4 297.4
2005 128.5 81.1 105.3 314.9
2006 135.1 86.5 114.5 336.0
2007 140.6 90.8 127.8 359.2
2008 149.3 94.8 143.1 387.1
2009 156.5 97.6 160.9 415.0
2010 163.6 98.9 190.9 453.4
2011 184.0 102.8 240.9 527.7
2012 204.4 106.5 294.5 605.5
2013 219.0 108.3 343.3 670.7
12 bUlk carriers deliveries by size
mill dwt
2003
2004
10-59,999
5.1
6.1
60-79,999
1.3
5.3
80,000+
5.4
6.9
total
11.8
18.3
2005 7.3 5.6 9.4 22.3
2006 6.7 4.9 13.9 25.5
2007 9.2 4.1 15.3 28.6
2008 9.1 4.1 19.4 32.6
2009 13.5 3.2 31.6 48.3
2010 23.3 4.3 53.0 80.6
2011 27.3 7.6 64.3 99.2
2012 26.0 9.4 62.8 98.2
* incl. converted tonnage
52 statistiCs

53. 13 neW orders of bUlk carriers by size
NEW ORDERS OF BULK CARRIERS BY SIZE
mill dwt
Mill dwt
2003
2004
10-59,999
7.7
9.5
60-79,999
7.7
4.5
80,000+
12.6
14.8
total
27.9
28.8
2005 6.0 1.8 9.0 16.8
2006 14.6 2.3 22.2 39.0
2007 38.6 7.1 115.9 161.6
2008 31.7 5.1 54.6 91.4
2009 11.8 3.4 18.4 33.6
2010 21.1 6.3 56.0 83.5
2011 16.2 8.0 3.8 28.0
2012 7.4 4.5 6.8 18.6
14
neW orders of bUlk carriers by size - QUarterly
mill dwt and number of vessels
10-59,999 60-79,999 80,000+ total
dwt no dwt no dwt no dwt no
2011 1 9.2 70 3.3 68 1.0 14 13.6 152
2 2.7 23 0.8 21 0.5 7 4.0 51
3 2.8 19 1.4 33 1.3 18 5.5 70
4 1.5 10 2.4 59 0.9 13 4.9 82
2012 1 0.8 26 0.9 13 2.2 15 4.0 54
2 2.3 57 1.4 21 0.5 6 4.2 84
3 2.7 69 1.5 23 1.9 16 6.1 108
4 1.6 38 0.6 9 2.2 18 4.4 65
15 bUlk carriers sold for recycling by size
mill dwt
2003
2004
10-59,999
2.4
0.6
60-79,999
0.5
0.1
80,000+
0.6
0.1
total
3.4
0.8
2005 0.6 0.2 0.2 1.1
2006 1.1 0.6 0.5 2.2
2007 0.5 0.1 0.1 0.7
2008 1.8 1.2 1.5 4.6
2009 6.3 1.8 1.6 9.8
2010 2.7 0.4 2.9 5.9
2011 6.6 3.7 10.7 21.1
2012 11.4 7.6 14.0 33.0
16 age Profile for tankers
mill dwt (incl. chemical carriers) - 1.1.2013
10-69,999
70-119,999
-92
12.9
6.2
93-97
9.0
8.2
98-02
year of built
15.2
17.3
03-07
36.8
43.7
08-12
40.4
48.4
total
114.3
123.8
120-199,999 2.0 6.2 14.8 20.2 29.6 72.8
200,000+ 1.1 16.3 43.4 44.5 80.9 186.2
total 22.3 39.6 90.7 145.1 199.3 497.1
statistiCs 53

54. 17 age Profile for bUlk carriers
mill dwt - 1.1.2012
10-59,999
60-79,999
-92
37.5
14.9
93-97
21.8
19.1
98-02
year of built
24.2
24.9
03-07
31.1
20.7
08-12
104.5
28.9
total
219.0
108.3
80,000+ 24.8 36.7 21.9 51.3 208.5 343.3
total 77.1 77.6 71.0 103.1 341.9 670.7
18 orderbook by year of delivery - tankers
mill dwt (incl. chemical carriers)- 1.1.2013
size
10-69,999
70-119,999
total on order
11.5
5.6
2013
6.2
3.7
delivery schedule
2014
3.6
1.9
2015+
1.8
0.0
120-199,999 12.6 8.2 1.5 2.9
200,000+ 21.2 14.6 6.3 0.3
total 51.0 32.7 13.2 5.0
19 orderbook by year of delivery - bUlk carriers
mill dwt - 1.1.2013
size
10-59,999
60-79,999
total on order
25.5
15.5
2013
19.4
12.3
delivery schedule
2014
4.5
2.9
2015+
1.6
0.2
80,000+ 64.5 49.6 13.3 1.6
total 105.4 81.3 20.7 3.4
20 orderbook by year of delivery - container shiPs
1,000 teu - 1.1.2013
size
below 1,000
1,000 - 1,999
total on order
1.8
80.1
2013
1.8
52.0
delivery schedule
2014
0.0
25.8
2015+
0.0
2.2
2,000 - 3,999 247.4 180.7 26.5 40.3
4,000+ 3 091.3 1644.8 1070.1 376.4
total 3 420.6 1879.4 1122.4 418.9
54 statistiCs

55. 21 second hand Prices of 5 year old tankers
mill $
start
2003
2004
mr Product
19.5
28.0
aframax
26.5
38.0
suezmax
37.0
48.0
vlcc
51.0
72.0
2005 39.0 56.0 71.5 106.0
2006 45.0 61.5 75.0 113.5
2007 45.0 64.0 81.0 118.0
2008 50.0 68.0 93.0 136.0
2009 38.0 53.0 71.0 102.0
2010 25.0 40.0 56.0 82.0
2011 27.0 40.0 58.0 85.0
2012 27.0 35.0 45.0 62.0
2013 24.0 28.0 44.0 60.0
22 second hand Prices of 5 year old bUlk carriers
mill $
start
2003
2004
handymax
14.8
20.5
Panamax
16.5
27.5
capesize
27.5
45.0
2005 31.0 38.0 64.0
2006 25.5 29.0 55.0
2007 40.5 45.5 80.0
2008 73.0 88.0 138.0
2009 26.5 30.0 49.0
2010 28.0 34.0 55.0
2011 31.5 37.5 52.0
2012 25.0 26.0 38.0
2013 19.0 19.0 31.0
statistiCs 55

56. Contacts
Oslo Aberdeen Houston
RS Platou ASA The Stewart Group Limited Lone Star RS Platou Inc.
Haakon VII’s gate 10 City Wharf 363 N. Sam Houston Parkway E.
N-0119 Oslo Shiprow Suite 125, Houston
Norway Aberdeen AB11 5BY Texas 77060
Tel: +47 2311 2000 United Kingdom USA
Fax: +47 2311 2300 Tel: +44 1224 256 600 Tel: +1 281 445 5600
office@platou.com aberdeen@stewartgroup.co.uk Fax: +1 281 445 1090
tankers@lsrsp.com
RS Platou Shipbrokers Accra ops@lsrsp.com
Tel: +47 2311 2000 Stewart Group (Ghana) Limited snp@lsrsp.com
Fax: +47 2311 2300 No.33 Sir Arku Korsah Road gas-chems@lsrsp.com
office@platou.com Airport Residential Area
Accra RS Platou (USA) Inc.
Sale and Purchase +47 2311 2500 snp@platou.com Ghana 15995 N. Barkers Landing
Newbuilding +47 2311 2650 new@platou.com Tel: +44 1224 256 650 Suite 310, Houston
Dry Cargo +47 2311 2450 dry@platou.com accra@stewartoffshoreghana.com Texas 77079
Car +47 2311 2600 car@platou.com USA
Economic Research +47 2311 2000 ecr@platou.com Cape Town Tel: +1 281 260 9980
RS Platou Africa Limited Fax: +1 281 260 9981
RS Platou Offshore 7C4 Somerset Square offshore@platouusa.com
Tel: +47 2311 2700 High Field Road, Green Point
Fax: +47 2311 2388 Cape Town London
off@platou.com South Africa RS Platou London
Tel: +27 21 418 1896 Floor 38A, Tower 42
Drilling Units +47 2311 2700 rig@platou.com Fax: +27 21 418 1902 25 Old Broad Street
Field Development +47 2311 2700 fpso@platou.com africa@platou.com London EC2V 1HQ
Offshore Support Vessels +47 2311 2700 off@platou.com United Kingdom
Chartering +47 2311 2700 osv.chartering@platou.com Dubai Tel: +44 20 7448 7110
Specialized vessels +47 2311 2700 osv.special@platou.com Rigships FZCO Fax: +44 20 7448 7111
SnP and Newbuilding +47 2311 2700 osv.projects@platou.com Building W3, Office 512 snp@platoulondon.com
Operations +47 2311 2700 osv.operations@platou.com Dubai Airport Free Zone gas@platoulondon.com
Economic Research +47 2311 2700 ofr@platou.com Dubai, P.O. Box 371014
United Arab Emirates Luxembourg
RS Platou Markets AS Tel: +971 4299 7885 RS Platou Fund Management AS
Tel: +47 2201 6300 info@rig-ships.com 16, rue Beck
Fax: +47 2311 6310 L-1222 Luxembourg
office@platou.com Geneva Tel: +352 2621 1767
RS Platou Geneve SA Fax: +352 26 21 17 69
RS Platou Finans AS 19, Rue de la Corraterie realestate@platou.com
Tel: +47 2311 2000 CH-1204 Geneva
Fax: +47 2311 2327 Switzerland Melbourne
finans@platou.com Tel: +41 22 715 1800 RS Platou Melbourne SA
Fax: +41 22 715 1820 Office 2, Level 10
RS Platou Real Estate AS dry@platou.ch 499 St. Kilda
Tel: +47 2311 2000 Melbourne 3004
Fax: +47 2311 2323 Victoria, Australia
realestate@platou.com Tel: +61 613 9867 1466
Fax: +61 613 9820 0106
drycargo.australia@platou.com
56 contacts

57. Moscow Shanghai
RS Platou ASA, Moscow RS Platou ASA Shanghai Repr. Office
Bronnaya Plaza, Bldg. 1, Floor 7 Lippo Plaza, Unit 2212-2213
32, Sadova-Kudrinskaya St. 222 Huai Hai Zhong Road
Moscow 123001 Shanghai 200021,
Russia Federation People’s Republic of China
Tel: +7 495 787 9922 Tel: +86 21 5396 5959
Fax: +7 495 787 9929 Fax: +86 21 5396 5665
moscow@platou.com pshang@platoushanghai.com
new@platoushanghai.com
New York snp@platoushanghai.com
RS Platou Markets Inc.
410 Park Avenue, 7th floor, Suite 710 Singapore
New York, NY 10022 RS Platou (Asia) Pte. Ltd.
United States 3 Temasek Avenue
Tel: +1 212 317 7080 # 20-01 Centennial Tower
Fax: +1 212 207 9043 Singapore 039190
office@platou.com Tel: +65 6336 8733
Fax: +65 6336 8740
Perth snp@platou.com.sg
RS Platou Perth SA newbuild@platou.com.sg
8/38 Colin St. dry@platou.com.sg
West Perth 6005 offshore@platou.com.sg
WA, Australia
Tel: +61 618 9226 0618 RS Platou Finans Singapore Pte. Ltd.
Fax: +61 618 9486 8120 3 Temasek Avenue
drycargo.australia@platou.com # 20-01 Centennial Tower
Singapore 039190
Piraeus Tel: +65 6306 3400
RS Platou Hellas Ltd. Fax: +65 6306 8890
1-3 Filellinon Str. finans@platou.com.sg
185 36 Piraeus
Greece Sydney
Tel: +30 210 4294 070 RS Platou Sydney SA
Fax: +30 210 4294 071 Ground Floor, 174 Willoughby Road
snp@platou.gr Crows Nest, Sydney 2065
dry@platou.gr NSW, Australia
Tel: +61 612 9937 8800
Rio de Janeiro Fax: +61 612 9437 0036
RS Platou (Brasil) Ltda. drycargo.australia@platou.com
Av. Rio Branco 89, Sala 1601
CEP 20.040-004 Centro
Rio de Janeiro
Brazil
Tel: +55 21 2233 3840
south.america@platou.com

58. www.platou.com