Source: ASIA PACIFIC SHORT TERM (3 MTH) LONG TERM …...Apr 09, 2013 · weak in Europe, the sustainability of the rate hikes is in question. Worryingly, AE trade volumes rose only

April 9, 2013

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

ASIA PACIFIC SHIPPING MONITOR SHORT TERM (3 MTH) LONG TERM

SECTOR FLASH NOTE |

Asia-Europe remains troubled Current Asia-North Europe rates, despite carriers’ best efforts at four general rate increases (GRI) since November, are now US$700/teu below their equivalent 2012 levels and US$200/teu lower YTD. The transpacific spot rates are, however, doing better than last year.

Figure 1: Asia-North Europe rates are now below their equivalent 2012 levels

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Please fill in the values above to have them entered in your report

0

500

1,000

1,500

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2,500

J F M A M J J A S O N D

2010 2011 2012 2013

At the start of 2013 , A/NE rates were US$540/teu above the 2012 level.

2013 A/NE rates are currently US$700/teu below the 2012 level, and have declined

US$200/teu from the start of 2013.

SOURCES: CIMB, SHANGHAI SHIPPING EXCHANGE

We remain Neutral on shipping overall, with Pacific Basin staying as our top pick for its compelling valuations and good earnings report card amid weak bulk shipping markets. STX Pan Ocean remains our top Underperform. We also like strong companies with relatively resilient earnings and peer-beating performance like OOIL and SITC, especially after the recent sell-off in the stockmarkets.

Market review Spot SCFI rates on the AE trade fell for the third consecutive week, eroding 72-83% of the 15 March rate increases. Another GRI of US$500/teu is planned for 15 April but with demand conditions still very weak in Europe, the sustainability of the rate hikes is in question. Worryingly, AE trade volumes rose only 0.4% yoy in February, with the largest A/NE trade falling 0.8% yoy.

Spot TP rates rose 1.3-1.7% wow, the second weekly rate increase since the

proposed US$400/feu GRI took effect. Over the past two weeks, carriers have achieved a 50% success rate for this particular GRI. Rates on Asia-USWC have continued to hold above their equivalent 2012 levels, indicating how much better the TP trades will be this year compared to the AE trades. APL predicts that TP trade volumes will rise 5% this year. If this is correct, the gap with supply growth of 6% will not be too large and carriers will have a much easier time keeping 2013 rates above 2012 levels with a bit of discipline.

Separately, tanker and dry bulk rates fell last week due to weaker post-Easter volumes. We expect bulk rates to pick up as more South American grain cargoes are expected.

Our take The recent stock market sell-off has exposed deep value in Pacific Basin; we advise investors with a long-term view to take a position here for an eventual bulk recovery.

CIMB Analyst

Raymond Yap Kok Hoe CFA

T (60) 3 20849769 E [email protected]

Sources: CIMB. COMPANY REPORTS

Highlighted Companies

Orient Overseas (International) Ltd

Outperform, target: HK$59.90 (1x 2013 P/BV). OOIL has one of the lowest gearing levels among long-haul carriers and does not swing between profits and losses as frequently as its peers. The carrier exercises cargo selection to maximise yields.

Neptune Orient Lines Ltd

Underperform, target: S$1.20 (1.1x 2013 P/BV). NOL is joining the league of 10,000+ teu ship operators on the AE trade, which will help it lower unit costs in the next three years. Its heavy exposure to the US trade will help it benefit from strong TP volumes.

China Shipping Container Lines Ltd

Neutral, target: HK$2.21 (0.8x 2013 P/BV). CSCL has the highest operating leverage in our universe and its stock has a high beta. Exposure to the spot market is large, at up to 90% of its Asia-Europe volumes.

SITC International Holdings Company Ltd

Outperform, target: HK$3.20 (1x 2013 P/BV shipping, 7x 2014 P/E land logistics). SITC benefits from the relatively stable rates of its intra-Asia exposure and should see structural cost reductions from its 2012 newbuilding deliveries.

Pacific Basin Shipping Ltd Outperform, target: HK$6.00 (SOP). Pacific Basin is well-positioned to buy more second-hand ships as prices are now considered low. Its current fleet of mostly Japanese-built ships traditionally fetch higher values.

STX Pan Ocean Ltd Underperform, target: S$3.30 (based on SOP). STXPO is the most heavily geared with a substantial portfolio of vessels acquired at high pre-GFC prices. We expect losses for its dry bulk, container and tanker shipping divisions.

MISC Bhd Neutral, TP: RM5.30. Petronas intends to take MISC private and has made an offer of RM5.50 per share. Prior to the offer, Petronas owned 62.67% of MISC.

SHIPPING MONITOR

April 9, 2013

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Figure 2: Sector Comparisons

Price Target Price

(local curr) (local curr) CY2013 CY2014 CY2013 CY2014 CY2013 CY2014 CY2013 CY2014 CY2013 CY2014

Malaysian Bulk Carriers MBC MK Underperform RM1.65 RM1.48 540 40.6 25.3 0.96 0.95 2.4% 3.8% 1002.4 19.8 1.8% 3.6%

Pacific Basin Shipping 2343 HK Outperform HK$4.33 HK$6.00 1,080 16.8 11.9 0.79 0.77 4.8% 6.5% 8.1 6.0 2.6% 4.5%

Precious Shipping PSL TB Underperform THB16.90 THB14.15 600 na 119.0 1.17 1.17 -0.7% 1.0% 16.8 13.8 0.8% 0.5%

STX Pan Ocean STX SP Underperform S$3.91 S$3.30 650 na na 0.43 0.45 -9.4% -3.5% 42.2 19.3 1.3% 1.3%

Thoresen Thai TTA TB Not Rated THB17.70 - 600 151.7 24.8 0.54 0.63 0.3% 2.4% 10.1 8.0 0.9% 1.0%

China COSCO 1919 HK Not Rated HK$3.38 - 5,543 na 17.4 1.1 1.1 -1.6% 4.9% 26.2 12.2 0.2% 0.9%

China Shipping Devt 1138 HK Not Rated HK$3.38 - 2,026 87.1 13.6 0.4 0.4 0.5% 3.1% 20.7 13.7 1.1% 3.2%

Sinotrans Shipping 368 HK Not Rated HK$2.00 - 1,028 29.9 19.1 0.46 0.44 1.5% 2.4% 1.1 0.4 1.9% 3.1%

Sincere Navigation 2605 TT Not Rated TWD26.50 - 502 11.6 10.8 0.96 0.93 8.3% 8.7% 6.1 5.8 4.8% 4.5%

U-Ming Marine 2606 TT Not Rated TWD46.10 - 1,318 35.8 28.0 1.69 1.60 4.5% 5.9% 15.8 14.6 2.5% 3.4%

Dry bulk group na 12.3 0.78 0.73 -0.2% 3.5% 19.9 12.1 1.0% 1.5%

China Shipping Container 2866 HK Neutral HK$1.89 HK$2.21 3,827 na 52.6 0.67 0.66 -1.0% 1.3% 15.1 11.0 0.0% 0.0%

Neptune Orient Lines NOL SP Underperform S$1.15 S$1.20 2,403 na 58.1 1.07 1.05 -6.7% 1.8% 22.7 12.6 0.4% 0.0%

Orient Overseas Intl Ltd 316 HK Outperform HK$47.95 HK$59.90 3,864 9.9 5.8 0.80 0.72 8.3% 13.1% 6.6 4.4 2.5% 4.3%

SITC International 1308 HK Outperform HK$2.74 HK$3.20 912 8.5 7.4 1.19 1.07 14.6% 15.3% 5.3 3.8 4.1% 4.7%

Evergreen 2603 TT Not Rated TWD17.10 - 1,980 14.0 9.3 0.96 0.83 6.6% 9.7% 8.9 6.7 0.8% 2.1%

Wan Hai 2615 TT Not Rated TWD15.95 - 1,179 15.4 9.8 1.16 1.09 7.5% 11.5% 5.0 3.9 1.8% 3.2%

Yang Ming 2609 TT Not Rated TWD13.30 - 1,249 17.2 7.8 1.31 1.07 7.5% 15.1% 9.8 7.2 0.9% 2.9%

AP Moller-Maersk MAERSKA DC Not Rated DKK42,080 - 32,938 9.7 7.8 0.8 0.8 8.4% 10.7% 3.8 3.4 0.0% 0.0%

Container group 7.9 5.4 0.81 0.75 7.1% 10.0% 4.8 4.1 0.4% 0.7%

MISC Bhd MISC MK Neutral RM5.40 RM5.30 7,885 21.3 16.3 1.11 1.07 5.3% 6.7% 14.5 12.5 1.8% 2.7%

Teekay Corp TK US Not Rated US$34.15 - 2,453 293.2 34.1 1.99 2.05 0.6% 5.9% 9.2 8.0 3.7% 3.7%

Frontline FRO US Not Rated US$2.14 - 167 na na na na 256.1% 35.7% 18.6 13.2 0.0% 0.0%

Tsakos Energy TNP US Not Rated US$3.91 - 220 na 14.7 0.26 0.24 -0.2% 1.7% 10.6 8.7 5.1% 5.1%

Teekay Tankers TNK US Not Rated US$2.55 - 202 na 23.2 0.8 0.8 0.4% 4.5% 10.9 8.7 4.7% 5.0%

Odfjell ODF NO Not Rated Nok29.00 - 438 na 14.1 0.4 0.4 -2.0% 3.5% 9.4 7.0 0.4% 1.1%

Stolt-Nielsen SNI NO Not Rated Nok121.50 - 1,361 19.0 11.7 0.86 0.81 4.4% 7.1% 9.0 7.6 3.8% 4.2%

Teekay LNG TGP US Not Rated US$40.16 - 3,085 19.0 20.8 2.6 3.0 14.4% 18.2% 13.9 13.8 6.9% 7.1%

Golar LNG GLNG US Not Rated US$35.58 - 2,861 21.0 9.1 2.98 2.63 15.1% 30.7% 12.7 9.1 4.8% 6.0%

Teekay Offshore TOO US Not Rated US$29.90 - 2,372 18.1 17.1 4.47 4.48 25.9% 26.2% 9.1 8.4 7.2% 7.5%

Tanker group 28.5 16.6 1.48 1.45 5.0% 8.8% 11.4 9.7 3.8% 4.4%

Kawasaki Kisen Kaisha 9107 JP Not Rated ¥209 - 1,990 19.8 11.4 0.77 0.62 3.6% 6.1% 9.0 7.0 0.8% 2.2%

Mitsui OSK Lines 9104 JP Not Rated ¥326 - 3,985 na 23.9 0.84 0.74 -27.1% 3.3% 18.6 10.4 0.3% 1.0%

Nippon Yusen KK 9101 JP Not Rated ¥244 - 4,205 53.8 14.6 0.76 0.59 1.5% 4.6% 11.1 9.0 1.0% 1.8%

Hyundai Merchant Marine 011200 KS Not Rated Won12,450 - 1,685 na 19.2 2.34 2.37 -14.5% 12.2% 21.6 12.6 0.5% 1.6%

Diversified group na 16.5 0.87 0.72 -10.2% 4.8% 13.5 9.5 0.7% 1.6%

Average (all) 25.5 8.6 0.94 0.86 2.7% 7.9% 7.9 6.4 1.3% 1.8%

P/BV (x) Recurring ROE (%) EV/EBITDA (x) Dividend Yield (%)Company Bloomberg Ticker Recom.

Market Cap

(US$ m)

Core P/E (x)

SOURCES: CIMB, COMPANY REPORTS. BLOOMBERG

Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends

SHIPPING MONITOR

April 9, 2013

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Share price performance

Figure 3: Share price performance

Bloomberg 8-Apr-13 1-Apr-13 WoW chg 9-Mar-13 1-mth chg 7-Oct-12 6-mth chg 8-Apr-12 1-year chg

ticker % % % %

Diversified group

Mitsui OSK Lines 9104 JP ¥326 ¥295 10.5% ¥319 2.2% ¥197 65.5% ¥344 -5.2%

Nippon Yusen KK 9101 JP ¥244 ¥233 4.7% ¥240 1.7% ¥151 61.6% ¥249 -2.0%

Kawasaki Kisen Kaisha 9107 JP ¥209 ¥189 10.6% ¥223 -6.3% ¥102 104.9% ¥186 12.4%

Hyundai Merchant Marine 011200 KS Won12,450 Won14,350 -13.2% Won17,200 -27.6% Won26,392 -52.8% Won30,478 -59.2%

Tanker group

MISC MISC MK RM5.40 RM5.37 0.6% RM5.19 4.0% RM4.25 27.1% RM5.31 1.7%

Teekay Corp TK US US$34.15 US$35.41 -3.6% US$34.62 -1.4% US$32.00 6.7% US$34.23 -0.2%

Frontline FRO US US$2.14 US$2.20 -2.7% US$2.23 -4.0% US$3.83 -44.1% US$7.02 -69.5%

Tsakos Energy TNP US US$3.91 US$4.32 -9.5% US$4.12 -5.1% US$4.90 -20.3% US$7.69 -49.2%

Teekay Tankers TNK US US$2.55 US$2.80 -8.9% US$2.76 -7.6% US$3.68 -30.7% US$5.38 -52.6%

Odfjell ODF NO Nok29.00 Nok29.20 -0.7% Nok27.40 5.8% Nok22.30 30.0% Nok37.00 -21.6%

Stolt-Nielsen SNI NO Nok121.50 Nok116.50 4.3% Nok113.50 7.0% Nok105.97 14.7% Nok98.19 23.7%

Teekay LNG TGP US US$40.16 US$40.94 -1.9% US$38.67 3.9% US$37.11 8.2% US$36.55 9.9%

Golar LNG GLNG US US$35.58 US$36.71 -3.1% US$35.30 0.8% US$37.34 -4.7% US$38.30 -7.1%

Teekay Offshore TOO US US$29.90 US$30.47 -1.9% US$28.66 4.3% US$26.94 11.0% US$27.35 9.3%

Dry bulk group

STX Pan Ocean STX SP S$3.91 S$5.05 -22.6% S$5.63 -30.6% S$4.10 -4.6% S$8.23 -52.5%

Pacific Basin 2343 HK HK$4.33 HK$4.61 -6.1% HK$4.65 -6.9% HK$3.85 12.5% HK$4.24 2.2%

Thoresen Thai TTA TB THB17.70 THB18.30 -3.3% THB17.20 2.9% THB16.46 7.5% THB18.13 -2.4%

Precious Shipping PSL TB THB16.90 THB18.30 -7.7% THB16.40 3.0% THB13.22 27.8% THB15.67 7.8%

Malaysian Bulk MBC MK RM1.65 RM1.60 3.1% RM1.52 8.6% RM1.38 19.6% RM1.69 -2.3%

China COSCO 1919 HK HK$3.38 HK$3.66 -7.7% HK$4.38 -22.8% HK$3.40 -0.6% HK$5.10 -33.7%

China Shipping Devt 1138 HK HK$3.38 HK$3.77 -10.3% HK$4.56 -25.9% HK$3.43 -1.5% HK$5.45 -38.0%

Sinotrans Shipping 368 HK HK$2.00 HK$2.07 -3.4% HK$2.16 -7.4% HK$1.76 13.6% HK$1.82 10.1%

Sincere Navigation 2605 TT TWD26.50 TWD26.85 -1.3% TWD27.15 -2.4% TWD25.50 3.9% TWD27.10 -2.2%

U-Ming Marine 2606 TT TWD46.10 TWD46.70 -1.3% TWD45.05 2.3% TWD46.85 -1.6% TWD46.68 -1.2%

Container group

NOL NOL SP S$1.15 S$1.19 -3.0% S$1.18 -2.1% S$1.13 2.2% S$1.43 -19.6%

OOIL 316 HK HK$47.95 HK$52.45 -8.6% HK$55.20 -13.1% HK$45.90 4.5% HK$58.24 -17.7%

CSCL 2866 HK HK$1.89 HK$2.10 -10.0% HK$2.48 -23.8% HK$1.71 10.5% HK$2.83 -33.2%

SITC 1308 HK HK$2.74 HK$2.94 -6.8% HK$2.88 -4.9% HK$1.87 46.5% HK$2.31 18.7%

Evergreen 2603 TT TWD17.10 TWD18.00 -5.0% TWD19.45 -12.1% TWD15.45 10.7% TWD19.50 -12.3%

Wan Hai 2615 TT TWD15.95 TWD15.90 0.3% TWD16.80 -5.1% TWD16.20 -1.5% TWD15.75 1.3%

Yang Ming 2609 TT TWD13.30 TWD14.00 -5.0% TWD14.85 -10.4% TWD12.10 9.9% TWD15.80 -15.8%

Hanjin Shipping 000700 KS Won4,625 Won5,380 -14.0% Won5,740 -19.4% Won6,850 -32.5% Won7,720 -40.1%

AP Moller-Maersk MAERSKA DC DKK42,080 DKK43,480 -3.2% DKK43,800 -3.9% DKK40,640 3.5% DKK39,868 5.5%

Shipbuilding group

Cosco Corp COS SP S$0.88 S$0.90 -2.2% S$0.91 -3.3% S$0.96 -8.3% S$1.10 -19.9%

Yangzijiang YZJ SP S$0.94 S$0.96 -2.1% S$0.95 -1.1% S$0.98 -4.1% S$1.20 -21.6%

Daewoo Shipbuilding 042660 KS Won26,750 Won27,400 -2.4% Won30,900 -13.4% Won25,564 4.6% Won29,627 -9.7%

Hanjin Heavy Industries 097230 KS Won7,650 Won8,900 -14.0% Won9,380 -18.4% Won10,999 -30.4% Won16,291 -53.0%

Hyundai Mipo Dockyard 010620 KS Won111,500 Won117,500 -5.1% Won118,500 -5.9% Won129,947 -14.2% Won129,947 -14.2%

Kawasaki Heavy Industries 7012 JP ¥300 ¥285 5.3% ¥289 3.8% ¥161 86.3% ¥233 28.8%

Mitsubishi Heavy Industries 7011 JP ¥593 ¥519 14.3% ¥541 9.6% ¥350 69.4% ¥378 56.9%

Keppel Corp KEP SP S$11.16 S$11.34 -1.6% S$11.85 -5.8% S$11.42 -2.3% S$10.60 5.3%

SembCorp Marine SMM SP S$4.33 S$4.43 -2.3% S$4.54 -4.6% S$4.95 -12.5% S$5.00 -13.4%

Shipowners group

Rickmers Maritime Trust RMT SP S$0.34 S$0.35 -2.9% S$0.36 -6.2% S$0.33 4.1% S$0.28 21.6%

First Ship Lease Trust FSLT SP S$0.12 S$0.12 0.8% S$0.13 -3.9% S$0.12 0.8% S$0.21 -41.9%

Danaos Corp DAC US US$4.04 US$4.11 -1.7% US$3.58 12.8% US$3.03 33.3% US$3.82 5.8%

Seaspan Corp SSW US US$20.32 US$20.22 0.5% US$19.95 1.9% US$15.57 30.5% US$16.07 26.4% SOURCES: CIMB, BLOOMBERG

SHIPPING MONITOR

April 9, 2013

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Figure 4: Share price performance

-28% -24% -20% -16% -12% -8% -4% 0% 4% 8% 12% 16% 20%

STX Pan Ocean

Hanjin Heavy Industries

Hanjin Shipping

Hyundai Merchant Marine

China Shipping Devt

CSCL

Tsakos Energy

Teekay Tankers

OOIL

Precious Shipping

China COSCO

SITC

Pacific Basin

Hyundai Mipo Dockyard

Evergreen

Yang Ming

Teekay Corp

Sinotrans Shipping

Thoresen Thai

AP Moller-Maersk

Golar LNG

NOL

Rickmers Maritime Trust

Frontline

Daewoo Shipbuilding

SembCorp Marine

Cosco Corp

Yangzijiang

Teekay LNG

Teekay Offshore

Danaos Corp

Keppel Corp

Sincere Navigation

U-Ming Marine

Odfjell

Wan Hai

Seaspan Corp

MISC

First Ship Lease Trust

Malaysian Bulk

Stolt-Nielsen

Nippon Yusen KK

Kawasaki Heavy Industries

Mitsui OSK Lines

Kawasaki Kisen Kaisha

Mitsubishi Heavy Industries

SOURCES: CIMB, BLOOMBERG

SHIPPING MONITOR

April 9, 2013

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Container shipping

Spot SCFI rates on the Asia-Europe (AE) trade fell for the third consecutive week (up to 5 April) since the partially successful general rate increase (GRI) in mid-March. The cumulative effect is to erode 72-83% of the rate increases on the Asia-North Europe (A/NE) and Asia-Mediterranean (A/MED) trades. Another GRI of US$500/teu is planned for next Monday, 15 April but with demand conditions still very weak in Europe, the sustainability of the rate hikes is in question. We highlight in Figure 20 that A/NE rates are now US$700/teu lower than the equivalent 2012 level and have actually declined US$200/teu since the start of 2013 despite carriers’ valiant efforts at rate restoration (four GRIs since 1 November 2012).

Container Trade Statistics reported that AE volumes rose only 0.4% yoy in February 2013, with the largest A/NE trade falling 0.8% yoy and the Asia-West Med trade declining 1.9%. These declines were offset by a 6.6% rise in the Asia-East Med/Black Sea trade volumes. Global Port Tracker predicts that port volumes for north Europe will rise by only 1% this year. On the other hand, Drewry estimated that capacity on the AE trade will increase 6-7% yoy this year, assuming vessel upsizing from the super post-panamax deliveries. As a result of weak demand growth, carriers will have to skip even more sailings as the scope for additional slow steaming is now limited and carriers are reluctant to lay up their largest vessels.

Spot transpacific (TP) SCFI rates rose 1.3-1.7% wow, the second weekly rate increase since the proposed US$400/feu GRI took effect. Over the past two weeks, carriers have achieved a 50% success rate on this particular GRI. We also note on Figure 21 that rates for Asia-USWC have continued to hold up above their equivalent 2012 levels, indicating how much better the TP trades will be this year compared to the AE trades.

Alphaliner is bearish on the TP trade, predicting 6% capacity increase against a 2% demand rise in 2013. However, APL Ltd president Kenneth Glenn does not agree with this assessment, saying that the macroeconomics of the US economy are improving and TP volume growth could be in the region of 5% this year. If this is correct, the gap between supply and demand growth for the TP trades will not be too large and carriers will have a much easier time keeping 2013 rates above 2012 levels with a bit of discipline.

SHIPPING MONITOR

April 9, 2013

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Figure 5: Container freight rates

Last week

5-Apr-13 29-Mar-13 WoW (%) 2Q13 1Q13 4Q12 3Q12 2013 2012 2011

Overall indices

Composite CCFI Index 1,112 1,108 +0.3% 1,112 1,123 1,148 1,265 1,123 1,167 993

Comprehensive SCFI Index 1,141 1,151 -0.9% 1,141 1,180 1,160 1,326 1,178 1,248 1,008

Asia-Europe

SCFI: North Europe (US$/TEU) 1,070 1,140 -6.1% 1,070 1,258 1,204 1,491 1,244 1,362 875

SCFI: Mediterranean (US$/TEU) 1,073 1,128 -4.9% 1,073 1,209 1,015 1,483 1,200 1,341 969

CCFI: North Europe 1,439 1,444 -0.3% 1,439 1,467 1,476 1,759 1,465 1,524 1,174

CCFI: Mediterranean 1,413 1,411 +0.2% 1,413 1,416 1,350 1,835 1,415 1,581 1,294

Transpacific

SCFI: West Coast USA (US$/FEU) 2,302 2,264 +1.7% 2,302 2,326 2,307 2,588 2,324 2,294 1,664

SCFI: East Coast USA (US$/FEU) 3,454 3,411 +1.3% 3,454 3,480 3,340 3,782 3,478 3,425 3,010

CCFI: West Coast USA 1,069 1,079 -1.0% 1,069 1,092 1,113 1,129 1,090 1,052 939

CCFI: East Coast USA 1,218 1,211 +0.5% 1,218 1,248 1,247 1,322 1,246 1,245 1,172

North-South trades (US$/TEU)

SCFI: Australia 1,024 1,029 -0.5% 1,024 985 1,039 878 988 922 769

SCFI: East Coast South Am. 1,736 1,688 +2.8% 1,736 1,984 2,024 1,937 1,966 1,774 1,490

SCFI: South Africa 810 822 -1.5% 810 891 1,005 1,033 886 1,046 992

Intra-Asia (US$/TEU)

SCFI: Middle East 877 902 -2.8% 877 745 731 949 755 989 837

SCFI: East Japan 354 354 0.0% 354 355 349 344 355 345 338

SCFI: Singapore 241 233 3.4% 241 244 258 262 244 255 211

SCFI: Hong Kong 84 84 +0.0% 84 98 108 125 97 131 155

SCFI: Pusan, Korea 219 219 +0.0% 219 201 200 193 202 183 199

SCFI: Kaohsiung, Taiwan 232 232 +0.0% 232 226 229 240 226 248 195

Qtr-to-date Yr-to-date


Figure 6: SCFI: Shanghai-USWC (US$/feu) Figure 7: SCFI: Shanghai-USEC (US$/feu)

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SOURCES: SHANGHAI SHIPPING EXCHANGE SOURCES: SHANGHAI SHIPPING EXCHANGE

SHIPPING MONITOR

April 9, 2013

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Figure 8: SCFI: Shanghai-North Europe (US$/teu) Figure 9: SCFI: Shanghai-Mediterranean (US$/teu)

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Figure 10: SCFI: Shanghai-East Japan (US$/teu) Figure 11: SCFI: Shanghai-South Korea (US$/teu)

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Figure 12: SCFI: Shanghai-Southeast Asia (US$/teu) Figure 13: SCFI: Shanghai-Mid East (US$/teu)

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Figure 14: SCFI: Shanghai-ANZ (US$/teu) Figure 15: SCFI: Shanghai-South Africa (US$/teu)

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Figure 16: Slot utilisation rate on transpacific (%)

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Figure 17: Slot utilisation rate on Asia-North Europe (%)

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Figure 18: Idle capacity

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Figure 19: General Rate Increases / Peak Season Surcharges since late-2011

Asia-Europe Transpacific (US West Coast)

US$/teu US$/feu

Late-Dec 2011 200

Mid-Jan 2012 400

1 Mar 2012 775

15 Mar 2012 300

1 Apr 2012 400

15 Apr 2012 400

1 May 2012 400-450 (partial success) 500 (failed)

1 Jun 2012 250-400 (failed)

10 Jun 2012 PSS 600 (partial success)

15 Jun 2012 350-400 (failed)

1 Jul 2012 400-500 (certain carriers only)

1 Aug 2012 PSS 250-350 (failed)

6 Aug 2012 500 (partial success)

15 Aug 2012 250 (Hapag-Lloyd)

1 Nov 2012 500-550

1 Dec 2012 400 (delayed to mid-Dec)

15 Dec 2012 600 400

10 Jan 2013 PSS 350 600

15 Mar 2013 750

1 Apr 2013 400

15 Apr 2013 500 SOURCES: CIMB, COMPANY REPORTS

Figure 20: Asia-North Europe SCFI spot rates (US$/teu)

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US$200/teu from the start of 2013.

SOURCES: CIMB, SHANGHAI SHIPPIING EXCHANGE

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Figure 21: Asia-USWC SCFI spot rates (US$/teu)

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Current Asia-USWC rates are still US$274/feu higher the 2012 level, and are US$81/feu higher than at the

start of 2013.

SOURCES: CIMB, SHANGHAI SHIPPIING EXCHANGE

Zim Integrated Shipping Services plans to raise rates for all dry cargo on its trade from the Far East to Europe and the Mediterranean, starting 15 April. The increase will be US$500/teu, the container line said. (JOC)

Transpacific container lines have embarked on a final push to secure higher freight rates for the coming year, with a message to customers that conditions in the Asia-US trades are beginning to strengthen.

The Transpacific Stabilization Agreement, which represents 15 global carriers, said in a statement that a combination of leading market indicators and forward bookings suggests ―the beginnings of a gradual upturn in cargo volumes‖. That, in turn, is helping to support the latest round of general rate increases that took effect on 1 April.

The next few weeks are critical for the lines as they finalise annual contracts with customers, most of which come up for renewal on 1 May. TSA member lines say they are experiencing stronger demand and a reversal of the rate erosion seen since the end of 2012. This is ―critical to ongoing negotiations with freight shippers towards signing the 12-month contracts under which more than 90% of containerised cargo from Asia to the US moves,‖ the TSA said.

TSA executive administrator Brian Conrad expected ―modest but steady growth‖ to continue in 2013, with improved vessel utilisations already apparent throughout April, following the traditional lull after Asia’s lunar new year. ―Coming off a period of close to zero cargo growth in 2012, the outlook is definitely more positive at this point,‖ he said. (Lloyd's List)

The Transpacific Stabilization Agreement carriers had some early success in implementing their 1 April recommended general rate increase of US$400/feu to the US west coast and US$600 to all other destinations. Doubts had been raised as to whether the general rate increase would stick because carriers have been announcing capacity additions in recent weeks. The CKYH alliance, Evergreen, the G6 alliance and New World Alliance had all announced plans to increase tonnage on the trade.

According to analyst Alphaliner, planned service adjustments will see average weekly capacity on the trade jump 6%, outpacing expected trade demand growth of 2% this year. Containerisation International research indicates that load factors are expected to increase during

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the first nine months of the year, firming up from the 81% in the first quarter to 92% during the peak season third quarter.

Meanwhile, Cosco Container Lines announced further plans to increase its prices on the trade with a general rate increase on dry and reefer containers from Asia and the Indian subcontinent to US west coast ports of US$800/feu. Prices to east coast ports will increase US$1,000/feu. (Lloyd's List)

Neptune Orient Lines (NOL)’s liner arm, APL Ltd president Kenneth Glenn notes that the macro economics of the US economy are improving and there are strong indications that US exports, especially in the agricultural market, are set to grow. The company’s transpacific volumes rose by 4% in 2012 and Glenn predicts that transpacific volume growth could be in the region of 5% this year, although capacity is likely to exceed this by a couple of percentage points.

Glenn notes that spot rates in the transpacific trades are about 50% higher than they were a year ago, so APL is trying to optimise the mix between spot and contract cargoes. ―There has been a general increase in our presence in the spot market,‖ he said. (Tradewinds)

The latest figures from Container Trades Statistics (CTS) show that volumes from Asia to Europe increased by 0.4% yoy in February to reach 915,000 teu, while the CTS price index for the trade reached 82 compared with 64 during the same month last year.

The 915,000 teu transported during the month is the highest volume recorded in a February since CTS records began in 2011. It is also the second month in a row that the trade has posted a yoy volume increase in the head haul direction after almost a year of declines.

Of the three subsets which make up the Asia-Europe figures, Asia to the East Mediterranean and Black Sea was the strongest performer, with volumes jumping 6.6% year on year to reach 168,233 teu. Volumes from Asia to northern Europe decreased 0.8% and from Asia to the western Mediterranean, they declined 1.9%.

Reefer volume growth also outperformed that of dry containers, with volumes increasing from Asia to Europe by 4.7% to 18,798 teu, while dry container volumes increased by 0.3% to 896,209 teu.

SeaIntel Maritime Analysis chief executive Lars Jensen said he wasn’t surprised by increases in rates but added supply would outstrip demand as the year continued. ―While the overall number is, indeed, an increase, it is clear that trade growth continues to disappoint when compared with the continued upscale of vessel sizes on the trade,‖ he said. ―That rates are up significantly compared to February 2012, which is no surprise, as we came from an extremely low level in the first quarter of 2012. (Lloyd’s List)

Volume growth at north European container ports will ―stagnate‖ this year as consumers remain reluctant to spend, according to Global Port Tracker. Weak economic performance by the eurozone economies, particularly at the end of 2012, saw total container volumes in the Hamburg-Le Havre range of ports reach 39.7m teu last year, falling short of the 2011 figure of 39.9m teu. Looking to the year ahead, Global Port Tracker forecast volumes at ports should grow by a “meagre” 1% this year to 40.1m teu. (Lloyd's List)

Lloyd’s List Intelligence figures show the idle fleet reached 705,994 teu at the end of last week, which represents more than 4.3% of the total global fleet and is an increase of 34% year on year. It is also the third week in a row that the

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idle fleet has risen above the 700,000 teu mark. The last time the idle fleet exceeded this level was in March 2012.

The vessel size category with the highest number of laid-up ships is the 3,000 teu-4,999 teu range, which has more than 192,400 teu of idled capacity. Close behind is the 1,000 teu-2,999 teu range, which represents 178,509 teu, while the 5,000 teu-7,499 teu range is third with 130,891 teu. The 13,000 teu and over category has 26,184 teu of idle capacity. (Lloyd’s List)

United Arab Shipping Company (UASC) and China Shipping Container Lines (CSCL) are furthering their union by teaming up on three Transpacific services. UASC will add a pair of 4,250-teu boxships to CSCL’s existing Asia to Pacific North West service as of mid May. The Kuwait-based containerline will also join CSCL’s Central & North China and Korea to Pacific South West service. And the pair has introduced a new South China to Pacific South West line where each will deploy a trio of 4,250-teu vessels.

UASC says the pact will allow it to meet demand for extensive coverage of the Asian region as well as of the US West Coast, including inland points in the US. They are said to be close to penning a deal with yards for ten 18,000-teu vessels with delivery expected to start from 2016. The vessels are likely to be deployed on a joint Asia to Europe service. (Tradewinds)

China Shipping Container Lines has chosen not to tether itself to any strict pact because of the essential drawbacks of alliances and the company’s ambition for more profit and potency, chairman Li Shaode said.

―We acknowledge the strengths and synergy of alliances, but we also want to avoid the weaknesses that come along,‖ Mr Li said. For companies to be jointly open to external developments requires internal consent. If allies have different understandings of the market and where it is heading, they cannot take cohesive steps, he said.

―CSCL is still a growing line. Our present scale would be unimaginable 10 years back. But had we entered any alliance back then, we could have only been a follower, in lock-step with others; no dominance and no voice,‖ said Mr Li, who has overseen China Shipping Group since its founding in 1997. ―After we substantially upgrade our hardware, fleet and software, management, network and IT system, we may as well discuss the [alliance] issue.‖

Mr Li classified CSCL as a tier II liner, and sought to emulate tier I carriers like Maersk and OOCL, which focus only on better customer service to widen the gap with their rivals.

Like other industries, the aim for liner shipping is to move up the value-added chain, from commoditised cargoes to niche markets. ―It is tempting to get locked-in cargoes controlled by the major [non-vessel operators] or behemoths such as WalMart to at least guarantee the ballast. But we are actively sourcing upper-end freights such as reefers for more stable margins,‖ said Mr Li. ―We have identified our direction: profitability, rather than market share, is the key to success.‖

The main lane service, including Asia-Europe/Mediterranean and Transpacific sailings, accounted for almost 60% of CSCL’s total revenue last year. ―The two markets will continue to be our focus, but another priority is to expand north-south routes, especially Africa and South America,‖ Mr Li said. (Lloyd’s List)

CSCL has unveiled a fleet shake-up plan for the next three to five years that will leave room for ultra-large containership newbuildings without worsening industry-wide oversupply.

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From this year, CSCL will phase out approximately 120,000 teu of tonnage, including scrapping and redelivery. It will replace this with larger and more fuel-efficient cellular vessels.

As of end-2012, the world’s ninth-largest box line by tonnage operated a fleet of 145 vessels totalling 595,991 teu. Of these 63 vessels, or some 180,000 teu, are chartered in, with an average age of five years. Redeliveries will consist mainly of the post-panamax class, including four 8,500 teu, four 9,600 teu and seven 4,250 teu boxships.

Asked whether Maersk’s groundbreaking Triple-E class would be considered, Mr Li said he was in no rush to order before the 18,000 teu behemoth hits the water and is tested by the unpredictability of deepsea voyages. (Lloyd's List)

Maersk Line will continue to simplify its surcharge structure, consolidating its local surcharges. From May 1, the Danish carrier will reduce the number of mandatory local surcharges it implements to three for origin and three for destination. Although the number of mandatory surcharges will be reduced, Maersk will still make separate surcharges for value-added services that may be added to a shipment. In January, Maersk unveiled plans to simplify its surcharges, which many shippers criticise as overly complex throughout the industry as a whole. It aims to reduce the number of surcharges that shippers face from a possible 44 at the end of 2012 to 12. (Lloyd's List)

Mediterranean Shipping Co plans to use the money raised from the sale of a shareholding in its terminals division as a cash reserve rather than reinvesting the proceeds or paying off debts. Global Infrastructure Partners and co-investors have agreed to pay just over US$1.9bn for a 35% stake in MSC’s Terminal Investment Ltd, which has interests in 30 ports around the world. The family-owned business has made it clear that it has no further newbuilding plans for the foreseeable future, given the economic conditions and, in the case of boxships, excess supply. (Lloyd's List)

Compañía Sud Americana de Vapores (CSAV) has received boardroom approval for a US$570m debt and equity investment in seven 9,300 teu containerships and early repayment of a US$258m debt facility at a ―significant discount‖. Last month CSAV announced the signing of a letter of intent with South Korean shipyard Samsung Heavy Industries for the first tranche of vessels, with the option for a further seven. CSAV confirmed that the fuel-efficient ships would be delivered from the end of 2014 as part of a fleet-building strategy to replace existing chartered capacity. CSAV also has the option to order up to seven additional vessels ―on similar conditions‖, it confirmed. (Lloyd's List)

SITC has contracted up to eight 1,800 teu boxships for delivery in 2014, with a price tag of US$23m each, from Taiwan’s CSBC Corporation. The order involves two firm vessels with options for six more ships exercisable in two tranches. Both option tranches will have to be exercised within six months from the effective date of the shipbuilding contracts. (Tradewinds, SITC)

Embiricos-controlled Aeolos Management looks set for a speculative order for up to four 9,000-teu vessels at Hyundai Heavy Industries, comprising two firm orders and two options, for delivery at the end of 2014. They say the price is around US$80m each.

Boxship players believe Embiricos is ordering the 9,000-teu vessels speculatively. ―The company has a record of ordering ships without charter contracts,‖ said one market source. Last summer, Embiricos was reported

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to have contracted Hanjin Heavy Industries & Construction’s Subic yard to build two 6,700-teu newbuildings, plus two options, for delivery in 2014 at US$57m each. However, sources familiar with the owner say it did not exercise the options, while the firm newbuildings have been reduced to just one unit.

―We heard Embiricos only managed to secure financing for one vessel and, as a result, the contract for the other firm ship failed to materialise,‖ said a source, adding that the company’s sole newbuilding at Hanjin is still charter free.

Last month, Embiricos refixed two of its largest boxships — the 6,627-teu CMA CGM Bizet (built 2001) and 6,446-teu CMA CGM Ravel (built 2002) — to CMA CGM for 12 months each at US$23,000/day. The ships were acquired by the Greek owner in 2010 for around US$35m apiece from the then cash-strapped French owner. (Tradewinds)

In 2008, MCC Transport joined the ranks of regional intra-Asian liner operators by taking over the operations of Maersk. It was then that chief executive Tim Wickmann was brought in to build up the company in its new role.

Today, MCC’s mix of feeder and regular liner business stands at around 50:50, although this ratio is adjusted to take into account which sector will bring in the highest return. ―Feeder cargoes do not make us much money but they usually cover the costs. Shipping companies feedering cargoes do not want to pay a lot more than cost. They can always charter their own ship. Normal intra-Asian cargoes pay more, but if rates drop below cost, we can always shift more focus to feeder cargoes,‖ said Wickmann.

Wickmann admits that growth in intra-Asia has slowed in recent years. Last year, for example, the trade grew by a mere 6%, although this is higher than the overall growth registered by the global liner industry. (Tradewinds)

The last thing Tim Wickmann, chief executive of MCC Transport, wants to see is larger ships being displaced from mainline routes being cascaded down into his intra-Asian playground.

According to Wickmann, larger ships cannot fit into many of Asia’s smaller container ports and can only be used on trunk routes where they face stiff competition from mainline ships.

He says that outside of the trunk routes the only way they could work is if several carriers got together and ran them to larger ports such as Laem Chabang in Thailand and Jakarta in Indonesia, the only ports they could fit into where the mainline ships do not go. Only then could the economies of scale be realised.

On the economic side, Wickmann points out that the larger ships take longer to load and discharge, which means they need to steam faster and burn a lot more fuel to keep to their schedules.

Wickmann says frequency is vital in intra-Asia and this would not be maintained if an operator decides to consolidate cargoes of a particular route onto one large ship. ―We can’t run a service from Tanjung Pelepas just once a week and if we were to deploy larger ships on the same frequency we do now, we would be utilising only half their capacity,‖ he added. (Tradewinds)

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Hong Kong International Terminals Ltd., operated by Li’s Hutchison Port Holdings Trust (HPHT), is losing customers as a strike by dockworkers causes a 20-fold increase in vessel berthing times, from three hours to 60 hours, at the world’s third-biggest container port.

The dock workers, who are employed by contractors, are demanding that hourly wages rise by 25% or HK$12.50 from about HK$50, the union said. The strikers are demanding direct talks with HIT.

The company has lost about HK$5m (US$644,000) a day, and may face claims from shipping companies, said Gerry Yim, managing director of HIT. HIT operates 12 berths at four terminals in the Chinese city and two through a venture with Cosco Pacific. Hong Kong has nine terminals.

Evergreen Marine said it has diverted at least three ships after more than 10 vessels faced delays and Mitsui OSK said more vessels may skip Hong Kong stops. Orient Overseas International Ltd. the city’s biggest container carrier, said its ships are also delayed. Maersk Line, the world’s biggest container shipping company, sees ―minimal impact‖ as its main vessels call at the port operated by Modern Terminal Ltd. (Bloomberg)

At least 110 fully cellular containerships last week were bound for Hong Kong, where operations at core terminals have sharply slowed down amid the largest industrial action the Chinese territory has seen in decades. The figures include vessels calling at berths other than those of HIT, the strike-hit operator that handles more than half of Hong Kong’s box volumes.

As the strike by workers employed by HIT contractors enters its second week, many liner operators have begun to omit calls at Hong Kong, diverting cargoes to nearby terminals in Shenzhen, Kaohsiung and others.

Affected carriers include Mitsui OSK Lines, which has diverted six vessels away from Hong Kong, Evergreen Marine, which has skipped up to four calls, and Kawasaki Kisen Kaisha, which has omitted two, according to company officials.

K Line estimated that around 100 vessels would need berth space in the three days from late Wednesday and 40 might have to skip Hong Kong, revise port rotation or arrange mid-stream operations. ―[Those affected are] relatively small vessels engaged in intra-Asia trades,‖ the carrier said.

In the worst-case scenario, major ports in Asia-Europe and transpacific routes could also feel the impact of the delays when vessels now calling at Hong Kong arrive later than scheduled, warned Roberto Giannetta, secretary of Hong Kong Liner Shipping Association. ―Ships are generally running on very tight schedules,‖ Mr Giannetta said. ―If there is a delay in Hong Kong there would be ripple effects in subsequent ports.‖

According to Lloyd’s List Intelligence data, Taiwanese line Yang Ming Marine Transport may face the worst headache, with nine vessels arriving in Hong Kong last week. Its compatriot Evergreen also had nine vessels scheduled. Intra-Asia specialist Wan Hai Lines had 11 vessels calling. Orient Overseas Container Line had three post-panamax ships, four panamax vessels and one smaller ship due.

With nearby ports in southern and central China technically capable of handling giant vessels, finding terminals to take transhipments cargoes might not be difficult, at least in the short run. ―I personally think the strike will have very small impact on shipping and international trade,‖ said Michael Lee, chairman of planning and development committee of Chinese Maritime Research Institute. ―For exports, cargoes owners can easily stream out from Yantian and Shekou in Shenzhen, or Nansha in Guangzhou. For transhipments, vessels can discharge cargoes in Singapore or Kaohsiung first.‖ (Lloyd’s List)

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Dry bulk shipping

The bulk market had a quiet week due to the Easter holidays, resulting in bulk rates taking a slight step back. Capesize rates slipped 8.9% wow due to an inactive week with few inquiries. Average capesize rates have remained below the US$7,500 cash breakeven levels for the 10th consecutive week. A slowdown in Chinese steel demand and relatively high iron ore prices may prolong the current weak environment.

Panamax rates fell slightly to US$8,755/day as cargo flows into the market have slowed. According to Fearnleys, more than 200 ships are waiting at the major grain ports on South America’s east coast in the hope of a second batch of grain cargoes. Supramax and handysize rates also weakened 3-4% wow on the back of a quiet week.

Figure 22: Dry bulk freight rates

Last week

5-Apr-13 29-Mar-13 WoW (%) 2Q13 1Q13 4Q12 3Q12 2013 2012 2011

Baltic Dry Index 861 910 -5.4% 874 799 934 843 799 919 1,550

Baltic Capesize Index 1,215 1,249 -2.7% 1,220 1,369 1,970 1,269 1,386 1,569 2,247

Baltic Panamax Index 1,094 1,162 -5.9% 1,118 892 815 830 841 962 1,743

Baltic Supramax Index 912 944 -3.4% 921 777 729 984 777 903 1,375

Baltic Handysize Index 525 547 -4.0% 532 464 436 551 464 517 717

4,261 4,678 -8.9% 4,261 6,024 12,352 4,929 6,024 7,463 15,836

Iron ore Tubarao-Beilun, 165k dwt 16,205 16,092 +0.7% 16,205 16,732 25,491 17,701 16,786 20,973 29,572

Tubarao-Rotterdam, 165k dwt -3,273 -3,615 -9.5% -3,273 -529 8,317 -3,066 -271 833 12,746

Western Australia-Beilun, 165k dwt 3,927 4,953 -20.7% 3,927 4,866 13,871 4,015 4,859 6,781 14,808

Goa-Beilun, 145k dwt 6,013 5,934 +1.3% 6,013 7,584 13,650 6,020 7,722 10,319 15,588

Coal Queensland-Japan, 145k dwt 1,321 2,283 -42.1% 1,321 1,556 8,509 -205 1,495 3,037 10,963

8,755 9,412 -7.0% 8,755 7,192 6,789 6,498 7,192 7,682 13,940

Coal Newcastle-Japan, 70k dwt 10,448 10,672 -2.1% 10,448 7,102 6,634 5,731 6,805 6,863 11,951

Richards Bay-Rotterdam, 70k dwt -438 -731 -40.1% -438 -2,689 -2,270 -1,436 -2,853 -1,712 2,766

9,533 9,866 -3.4% 9,533 8,171 7,601 10,150 8,171 9,414 14,351

7,797 8,111 -3.9% 7,797 6,938 6,426 7,891 6,938 7,624 10,505

Iron ore Tubarao-Beilun, 165k dwt 17.25 17.45 -1.1% 17.25 17.80 20.58 18.32 17.83 19.72 22.53

Tubarao-Rotterdam, 165k dwt 7.15 7.25 -1.4% 7.15 8.02 9.71 7.51 8.08 8.55 11.15

Western Australia-Beilun, 165k dwt 6.95 7.15 -2.8% 6.95 7.21 8.78 7.08 7.21 7.75 9.06

Goa-Beilun, 145k dwt 8.50 8.50 +0.0% 8.50 9.06 10.78 8.77 9.10 10.11 11.49

Coal Queensland-Japan, 150k dwt 8.00 8.25 -3.0% 8.00 8.19 9.65 7.95 8.19 8.82 10.38

Coal Newcastle-Japan, 70k dwt 15.85 16.05 -1.2% 15.85 14.32 14.01 13.77 14.18 14.75 17.12

Richards Bay-Rotterdam, 70k dwt 12.10 12.10 +0.0% 12.10 10.93 10.81 11.90 10.83 12.03 14.62


Capesize spot rates (US$/tonne)

Panamax spot rates (US$/tonne)

Capesize average TCE (US$/day)

Panamax average TCE (US$/day)

Supramax average TCE (US$/day)

Handysize average TCE (US$/day)

SOURCES: CIMB, CLARKSON RESEARCH SERVICES

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Figure 23: Baltic capesize and panamax TCE/day (US$/day) Figure 24: Baltic capesize and panamax TCE/day (US$/day)

Title:

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SOURCES: CIMB, CLARKSON RESEARCH SERVICES SOURCES: CIMB, CLARKSON RESEARCH SERVICES

Figure 25: Bulk vessel profit/loss (US$/day)

Ship type Capesize Panamax Handymax Handysize

Current TCE 4,261 8,755 9,533 7,797

Operating cost -7,500 -6,500 -6,000 -5,250

Cash earnings -3,239 2,255 3,533 2,547

Interest cost -3,605 -2,148 -1,956 -1,726

Depreciation cost -4,636 -2,762 -2,515 -2,219

Daily profit/(loss) -11,480 -2,655 -938 -1,398

Breakeven TCE 15,741 11,410 10,471 9,195 SOURCES: CIMB, MOORE STEPHENS, CLARKSON RESEARCH SERVICES

Precious Shipping has continued on the acquisition trail after ordering another cement carrier newbuilding in China. The Khalid Hashim-led owner will pay US$24.2m for the vessel at China Shipbuilding & Offshore International Co and Shanhaiguan New Shipbuilding Industry Co. It follows an order in December for two identical vessels at the same yards for the same price. Precious expects to receive its latest acquisition by 31 July 2014 with the first and second vessels due to arrive in January and April of that year. (Tradewinds)

Eagle Bulk Shipping has backed a recovery in the dry-cargo market to take hold within the next year. CEO Sophocles Zoullas believes the slowing of newbuilding deliveries and a continued appetite for scrapping will lead to a revival in the sector. Barring any macroeconomic shocks, such as a breakup in the Eurozone, the market will remain choppy in the short term before the real recovery late this year or early next. His optimism comes despite a sharp upturn in capesize ordering activity this year, with John Fredriksen’s Frontline 2012 the flag bearer. (Tradewinds)

Greece's shortsea shipowners have blamed political unrest in the countries bordering the eastern Mediterranean, as well as systemic shipping industry woes, for a sharp dive in trade during the past two years. Political crisis in Syria was one of the factors disrupting trade for members. According to association members, the Mediterranean-trading shipping community has already suffered several bankruptcies. Brokers said about 40 bulkers of Mediterranean size have gone for scrap since the start of 2012. ―In recent years, the Greek shortsea sector has advanced several proposals for government

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support for fleet renewal, but most of these ideas have been put on ice in view of the Greek economic crisis. (Lloyd's List)

Beijing will launch a series of incentives to stimulate the country’s beleaguered shipbuilding industry, to comply with international green standards and to lure more foreign shipowners to shop at China’s newbuilding market. The long-awaited scheme, dubbed the ―2013-2015 three-year shipbuilding action plan‖, will unite support from various ministerial departments. Chinese yards on average have barely enough orders to last the next two years, according to China Association of the National Shipbuilding Industry statistics.

Key policies in the action plan include more aggressive support for export sellers and buyer credit for eco-ship newbuildings and offshore orders, scrapping subsidies to domestic shipowners and higher standards for ships entering Chinese waters. The two policy banks, Cexim and CDB, have been told to provide unlimited financing for orders placed at a selection of ―mainstay shipyards‖.

The 2011-2015 five-year plan also demands a 70% concentration rate, or market share, for the top 10 shipyards. With the new three-year plan as a phase II buttress, Beijing is willing to let non-competitive yards close. Another key message from the action plan is to encourage domestic shipowners to scrap more, with specific newbuilding projects attached to phased-out vessels. In addition, new regulations will ensure that all vessels in Chinese waters comply with the International Maritime Organization’s energy-efficiency design index. (Lloyd's List)

More big name shipowners will default or be forced into restructuring this year, with banks becoming even more unwilling to lend money to the industry, according to a new report from Standard & Poor’s. The decision of major lender Commerzbank has also prompted speculation that other banks are eager to dispose of their shipping portfolios, the ratings agency noted.

―Distressed shipping companies may find it difficult to obtain financing to roll over maturities or to meet their ongoing operating needs. For those that can access financing, we believe pricing will likely be substantially higher than in the past few years, which will put further pressure on already reduced cashflows.‖

S&P stressed that charter rates have fallen by as much as 80% below their 10-year historical average, in parallel with declining economic activity. High operating costs, particularly for fuel, are also depressing earnings. Over the past 10 years, the global containership and dry bulk fleets have more than doubled, while the tanker fleet has grown by more than 50%. (Lloyd's List)

John Fredriksen’s Frontline 2012 could soon add at least a dozen extra capesize bulkers to its already overflowing orderbook, Fearnley Securities believes.

Frontline 2012 has blazed a trail in penning 50 new vessels in the past year, including 24 capes. "However, we believe an additional 12-16 capesizes could be declared within a relatively short period,‖ Fearnley Securities believes. Further orders for dry cargo vessels will eventually be followed by contracts for crude tankers. ―The orderbook for FRO2012 is expected to be closer to 100 than 50 vessels within year end,‖ they said. (Tradewinds)

German owner Oldendorff Carriers has finalised its order for a series of up to six Newcastlemax newbuildings at Hyundai Heavy Industries (HHI). The deal is for four firm 207,000-dwt bulkers, with one plus one option vessels, for delivery between the end of 2014 and early 2015. No price has been

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disclosed but brokers suggest more than US$50m per ship. The company currently controls around 441 vessels, both owned and chartered, ranging from handysize to capesize. Some sources say they are not surprised with Oldendorff’s move to book capesize newbuildings as it has been looking to order eco-friendly ships for some time. It kicked off its ordering spree last year. (Tradewinds)

STX Pan Ocean is seeking to raise cash through ship sales after a bid to sell a major shareholding in the company flopped this week. The company could potentially raise more than US$80m through the sale of two kamsarmax newbuildings and two containerships it has just put on the market. The 83,000-dwt bulkers are due for delivery from STX Dalian Shipyard in May and October this year. VesselsValue.com estimates the ships to be worth US$24.5m each. (Tradewinds)

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Tanker shipping

The inactive market over the past two weeks has taken a toll on VLCC rates, with earnings falling from US$14,709/day to just US$10,031/day. Rates are now back to below cash breakeven levels. Unfortunately for shipowners, the market is likely to remain challenging in the coming weeks and VLCC rates could remain depressed in the near term.

VLCC rates averaged just US$14,611/day in 1Q13, down substantially from US$36,114/day in 1Q12 and US$23,420/day in 4Q12. According to Weber, the VLCC spot market tonne-mile demand in 1Q13 fell by 14% from 4Q12 and is down 18% from 1Q12. This is attributed to declining crude imports by countries in the east, falling US imports from the Middle East and lower oil production by the Middle Eastern countries in 1Q13. Compounding the lower demand is the net fleet growth of 5% yoy, further exacerbating the demand-supply imbalance. Weber also puts the VLCC near-term prospects as poor.

Suezmax rates also fell more than US$2,000/day from the previous week due to slow levels of activity, especially in the Atlantic. Gibsons does not pin much hope on a big rebound in the near term as charterers appear to be holding back. Crude exports out of West Africa have also been going through a lull recently, further pressuring rates downward. Rates held steady for aframaxes operating in the Mediterranean and Caribbean, with demand and supply well balanced. Other regions saw a notable rise in fixtures, which helped push rates higher.

Figure 26: Tanker freight rates

Last week

5-Apr-13 29-Mar-13 WoW (%) 2Q13 1Q13 4Q12 3Q12 2013 2012 2011

Baltic Dirty Tanker Index 707 661 +7.0% 685 661 703 631 663 722 788

Baltic Clean Tanker Index 662 691 -4.2% 670 704 696 583 701 645 726

10,031 11,624 -13.7% 10,031 14,611 23,420 10,910 14,284 26,813 22,137

AG-FE Ras Tanura-Chiba 4,787 8,728 -45.2% 4,787 9,137 18,246 4,449 8,826 21,830 18,212

AG-USG Ras Tanura-LOOP -13,676 -13,901 -1.6% -13,676 -12,300 -1,714 -8,167 -12,398 1,589 2,489

WA-USG Bonny-LOOP 15,548 15,796 -1.6% 15,548 21,161 25,560 15,516 20,760 30,333 24,841

14,756 16,922 -12.8% 14,756 14,693 14,651 12,724 14,697 18,386 17,238

MED-MED Sidi Kerir-Lavera 20,015 24,393 -17.9% 20,015 20,329 17,198 13,362 20,307 22,108 25,110

WA-USAC Bonny-Philadelphia 13,422 15,311 -12.3% 13,422 10,023 9,748 6,990 10,266 13,368 13,368

19,899 17,939 +10.9% 19,899 14,269 13,079 12,376 14,671 13,977 12,726

CARIB-USG Curacao-Texas 9,913 10,056 -1.4% 9,913 12,738 12,309 7,988 12,536 12,310 8,225

SEA-FE Jakarta-Chiba 8,359 6,568 +27.3% 8,359 8,662 14,042 13,780 8,640 11,199 8,007

MED-MED Sidi Kerir-Trieste 24,221 23,916 +1.3% 24,221 15,398 10,707 12,037 16,028 13,685 13,562

UKC-UKC Sullum Voe-Wi'shaven 36,054 27,359 +31.8% 36,054 17,563 17,305 15,610 18,884 18,512 18,599

AG-SEA Ras Tanura-Singapore 9,615 9,223 +4.3% 9,615 10,411 14,075 15,518 10,354 14,177 12,721

LR1 tanker Ras Tanura-Chiba 75k 17,793 20,436 -12.9% 17,793 12,038 20,795 13,297 12,449 11,253 10,462

Handysize Selected routes 20,645 22,035 -6.3% 20,645 21,518 16,604 9,467 21,456 13,162 12,644

MR tanker Selected routes 25-55k 11,239 12,577 -10.6% 11,239 10,700 10,117 4,050 10,738 6,191 7,587

Aframax average TCE (US$/day)

Clean tanker average TCE (US$/day)


VLCC average TCE (US$/day)

Suezmax average TCE (US$/day)


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Figure 27: Crude tanker TCE shipping rates (US$/day)

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Figure 28: Product tanker TCE shipping rates (US$/day)

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Figure 29: Tanker vessel profit/loss (US$/day)

Ship type VLCC Suezmax Aframax MR product

Current TCE 10,031 14,756 19,899 11,239

Operating cost -10,800 -9,700 -8,500 -8,185

Cash earnings -769 5,056 11,399 3,054

Interest cost -7,441 -4,526 -3,951 -2,570

Depreciation cost -9,567 -5,819 -5,079 -3,304

Daily profit/(loss) -17,777 -5,289 2,369 -2,820

Breakeven TCE 27,808 20,045 17,530 14,059 SOURCES: CIMB, MOORE STEPHENS, CLARKSON RESEARCH SERVICES

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Figure 30: Spot VLCC demand vs supply

SOURCES: CIMB, WEBER

The number of VLCCs available for employment in the Middle East Gulf rose by as many as 10 over the Easter holiday break, exacerbating the tonnage oversupply that is preventing freight rates improving significantly for owners. Some 91 VLCCs will be competing against each other for employment in the region in the next four weeks, up from 81 in the past week. The extra vessels in the region kept a cap on rates, despite increased levels of inquiry and chartering in the last few days. There is now a surplus of 51 ships in the Middle East Gulf.

A five-year-old double-hull VLCC is now valued at US$53.85m, down from US$54m a month ago and US$55m at the end of last year. Newbuilding prices are also dropping, and are now US$90.5m, having stood at US$92m in January and US$97m a year ago. Although the tanker market is in the doldrums, owners are still placing orders for new vessels. Deals have been inked for 73 VLCCs, 14 ordered last year, and 13 so far this year, according to Clarksons.

The VLCC market is forecast to improve, becoming a better balanced market in 2014-2015. This year, McQuilling Services forecasts a 5% rise in tonne-mile demand for VLCCs, driven by Asian demand for crude. Chinese refinery expansion of around 800,000 barrels per day is expected to spur demand for crude and thus to create employment for VLCCs. West African cargoes will increasingly find their way to Asia on VLCCs as countries such as China diversify their sources of crude imports. (Lloyd's List)

Cash burn is likely to continue for owners of modern VLCCs for ―a few more years‖, ICAP believes. Its warning comes after three years of below breakeven rates on the key TD3 route (Middle East Gulf to Japan) for all VLCCs on the water. ICAP notes cash burn for modern VLCCs has become progressively worse over the past few years.

It calculates around 30% of the VLCC fleet require rates of over US$30,000 daily to breakeven. VLCCs delivered in 2010, equal to 9% of the fleet, are burning the most cash right now as they have the highest breakeven rate at US$37,000 daily, ICAP explains. A further quarter of all VLs – mostly those

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hitting the water between 2011 and 2013 – need between US$25,000 and US$30,000 to make ends meet.

ICAP admits exact levels will vary greatly, but it notes the environment will remain tricky with a modern fleet and falling scrap prices working against demolition deals. ―Despite rising tonne-mile demand for VLCCs the current picture will not change significantly until VLCC scrapping accelerates,‖ ICAP said. (Tradewinds, ICAP)

Although the three main shipping industry segments remain beset by the downturn, Standard & Poor’s expects the tanker sector to bounce back first. S&P analyst Izabela Listowska argues that tankers will see moderate oversupply of new tonnage hit the water this year, but that the pace of further arrivals will then slow significantly. The weak global economy is having knock-on effects on oil consumption, making for weak demand prospects.

Accordingly, she expects time charter rates for tankers to trend sideways for the next couple of quarters, before turning round in late 2013 and enjoying a gradual upturn from next year. Supply and demand will come back into kilter, underpinned by rising tonne-mile demand that reflects changes in trading patterns. Spot rates will remain volatile, with short-term rallies linked to trades, seasonality and vessel availability.

Product tankers should do better than crude tankers, because that sub-sector is already approaching supply-demand equilibrium. However, S&P notes that orders have accelerated in recent months.

In dry bulk, new vessel deliveries remain robust and commodity imports remain muted, which is likely to keep dry bulk charter rates close to historic lows. Improvement is possible from the end of 2013, as tonnage growth rates ease. However, a downbeat Ms Listowska says ―a recovery would come from very depressed levels, so that even if charter rates will likely rebound toward the end of this year to average 10%-15% above 2012, they will remain 40%-70% below their historical 10-year averages, depending on vessel class‖.

In the container industry, trade volumes should pick up modestly and growth could return this year to historical average rates of 5%-6%. But deliveries will outpace demand growth well into 2013. ―Accounting for non-delivery and scrapping, we calculate that vessel classes with capacity of more than 8,000 teu will expand by a large annual rate of close to 20% in 2013 and likely in 2014.‖ The assumption is that freight rates will remain flat on average in 2013, with fundamentals on Asia-US and transatlantic trade lanes looking brighter than for Asia-Europe routes. S&P forecasts more favourable rate trends on US-related routes, offset by a moderate dip on Asia-Europe routes. (Lloyd's List)

Sitting in a trading environment can give a much clearer view of what is going to happen on the shipping markets, Paul Thomas maintains. He explains that the cargo flows allow traders to see the different demand/supply scenarios and how these might play out positively or negatively on shipping whether that be in the short term or medium term. ―It’s oil that moves ships, not ships that move oil,‖ he said, quoting a familiar phrase. Vitol, like all traders, will go with the trends and sniff out where the opportunities lie.

Thomas highlights one of the major changes in today’s market as the increase in products being exported from the US, on the back of the increase in shale-crude production. In parallel, he says the market is seeing more import demand from Africa and South America. But this is coupled with refinery closures in places like Hawaii, Australia and the West, while new refineries are being built in the East. He explains that this has had the effect of increasing tonne-miles.

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On the crude side, oil imports into the US have deteriorated, changing the dynamics of this market, while there has been too much overbuilding in the good times. On the bulk side, which is not Thomas’s main focus, he sees a far simpler equation. There seems to be about the same amount of cargoes moving, he says, but there are just too many ships. (Tradewinds)

The Onassis group of Greece is showing its commitment to the VLCC sector and is being linked to the purchase of two modern tankers from Malaysia’s AET. The Greek owner was believed to be closely negotiating for the eight-year-old, 309,200-dwt Eagle Venice and 307,000-dwt Eagle Valencia (both built 2005) for something under US$40m each. Both vessels were built at Samsung Heavy Industries. This indicates fairly stable prices for VLCCs of this age.

In November 2011, AET had concluded a deal to sell the Eagle Valencia to Athens-based Gulf Marine for US$53m but it failed to go through. AET has a fleet of 13 VLCCs including the Eagle Valencia and Eagle Venice. It includes three chartered units. (Tradewinds)

Navios Maritime Acquisition has splashed out over US$140m on a quintet of MR2 product tankers. Angeliki Frangou-led Navios Acquisition picked up a pair of second-hand ships and three eco newbuildings in a spree which could swell to seven if options are taken up. "We have been able to put the net proceeds of our recent equity raising to good work, by acquiring vessels that were available at favorable prices. We anticipate chartering these vessels out shortly and will update investors once we secure charters that we find attractive in the current market." (Tradewinds)

Temasek has set up a new company called Pavilion Energy that will invest US$800m in the LNG industry in the Asia-Pacific region. Singapore is on the cusp of radically changing LNG shipping, with the imminent opening of its import terminal widely expected to create a new LNG trading hub in Asia. Industry watchers expect LNG to be shipped to Singapore on large vessels, then shipped out to other gas-hungry Asian countries on smaller ships, generating new trade patterns.

The development of an LNG hub in Singapore could also accelerate adoption of a new pricing mechanism for Asia, which pays the world’s highest prices for its imported LNG from producers such as Qatar. High prices are leading Japan, the world’s top importer, desperately to seek a new gas pricing structure not linked to the price of oil.

It is not yet known how much of the US$800m will be invested in import terminals and how much will go towards ships. However, Pavilion Energy’s new chief executive, Seah Moon Ming, said that the investment would be spread across the entire LNG supply chain, which includes shipping. (Lloyd's List)

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Commodity prices and currencies

Brent crude prices tumbled 4.7% wow to US$104/barrel, after a disappointing US jobs report which sparked some concern over the recovery of the world's largest economy and also the largest consumer of oil. Bunker prices fell 1.5% to US$636/ton.

Chinese steel prices continue to weaken, falling 0.4-0.8% wow, as a result of waning confidence in steel demand as a result of the recent curbs on China's property sector. Steel prices have been on a steady decline over the past six weeks. For more information on China's property sector, kindly refer to our

analyst, Johnson Hu's report. PDF

Figure 31: Economics & Commodities

Last week Qtr-to-date Yr-to-date

5-Apr-13 29-Mar-13 WoW (%) 1Q13 4Q12 3Q12 2Q12 2013 2012 2011

Brent crude (US$/barrel) 104.09 109.27 -4.7% 112.82 110.46 110.07 109.05 112.82 112.03 112.64

Sing bunker (US$/ton) 636.00 646.00 -1.5% 643.09 629.09 660.93 673.40 643.09 677.04 672.87

China: Iron ore spot cfr imports (US$/ton) 137.50 137.50 +0.0% 149.12 123.15 116.69 142.73 149.12 132.42 172.46

China: Rebar (Rmb/ton) 3,630 3,655 -0.7% 3,746 3,679 3,675 4,169 3,746 3,940 4,738

China: HRC (Rmb/ton) 3,830 3,845 -0.4% 4,050 3,831 3,661 4,262 4,050 4,005 4,658

China: CRC (Rmb/ton) 4,864 4,886 -0.5% 4,855 4,556 4,598 5,106 4,855 4,869 5,491

China: Wire rod (Rmb/ton) 3,620 3,651 -0.8% 3,695 3,651 3,684 4,187 3,695 3,945 4,783

Qinhuangdao 6800 kc coal FOB (US$/ton) 113.87 113.87 +0.0% 114.92 116.40 117.97 140.77 114.92 129.70 148.03

Newcastle 6700 kc coal CFR (US$/ton) 95.80 96.05 -0.3% 99.52 93.90 94.10 102.83 99.52 103.11 129.61

Euro US$1.30 US$1.28 +1.3% US$1.32 US$1.30 US$1.25 US$1.28 US$1.32 US$1.29 US$1.39

Yen ¥97.57 ¥94.22 -3.4% ¥92.36 ¥81.30 ¥78.63 ¥80.08 ¥92.65 ¥79.85 ¥79.72

Renminbi Rmb6.21 Rmb6.21 +0.1% Rmb6.22 Rmb6.24 Rmb6.35 Rmb6.33 Rmb6.22 Rmb6.31 Rmb6.46

HK$ HK$7.77 HK$7.76 -0.0% HK$7.76 HK$7.75 HK$7.76 HK$7.76 HK$7.76 HK$7.76 HK$7.78

Ringgit RM3.06 RM3.09 +1.2% RM3.08 RM3.06 RM3.12 RM3.11 RM3.08 RM3.09 RM3.06

S$ S$1.24 S$1.24 +0.0% S$1.24 S$1.22 S$1.25 S$1.26 S$1.24 S$1.25 S$1.26

Baht THB29.25 THB29.26 +0.0% THB29.80 THB30.67 THB31.34 THB31.28 THB29.76 THB31.07 THB30.48

Rupiah Rp9,753 Rp9,735 -0.2% Rp9,713 Rp9,646 Rp9,507 Rp9,309 Rp9,716 Rp9,385 Rp8,772

US$ LIBOR - 3m (%) 0.28% 0.28% -0.00% 0.29% 0.32% 0.42% 0.47% 0.29% 0.43% 0.34% SOURCES: CIMB, BLOOMBERG

Global oil prices have fallen further after a dismal US jobs report renewed concerns about the strength of the world's biggest economy and traders kept an eye on Iran nuclear talks. The highly anticipated jobs market report fell far short of market expectations.

The Labor Department said the United States added just 88,000 jobs in March. The unemployment rate dipped to 7.6% from 7.7% in February, but only because people dropped out of the workforce.

Also in focus were talks under way between Iran and six world powers in Almaty, Kazakhstan. Iran and the so-called P5+1 failed on Friday to reach a breakthrough in the dispute over Iran's contested nuclear program. Iran insists it is for peaceful purposes but the P5+1, which also includes Britain, China, France, Russia and the United States, suspect it masks a nuclear weapons program. (Sky News Australia)

China's demand for iron ore is playing a major role in keeping the market in the commodity buoyant. China imported 19m tonnes of iron ore from Australia in March, a 22% increase on February's figure. (BBC News)

https://brokingrfs.cimb.com/3YyFnssaki7apap4md1SargRf8ojot8mnGsIeVfbQ37AMBRkNMXAg76OuAHuc9bKu61r0qQiqiQ1.pdf

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Figure 32: Singapore bunker fuel (US$/MT) and Eur Brent Crude (US$/bbl)

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Figure 33: Iron ore spot prices in India

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Figure 35: Domestic Chinese steel prices (Rmb/tonne)

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India CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI)

Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia

Singapore CIMB Research Pte. Ltd. Monetary Authority of Singapore

South Korea CIMB Securities Limited, Korea Branch Financial Services Commission and Financial Supervisory Service

Thailand CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand

(i) As of April 8, 2013, CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:

(a) Malaysian Bulk Carriers, MISC Bhd, Neptune Orient Lines

(ii) As of April 9, 2013, the analyst(s) who prepared this report, has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:

(a) -

The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CIMB may or may not issue regular reports on the subject matter of this report at any frequency and may cease to do so or change the periodicity of reports at any time. CIMB is under no obligation to update this report in the event of a material change to the information contained in this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof.

Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.

Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Securities (Australia) Limited (“CSAL”) (ABN 84 002 768 701, AFS Licence number 240 530). CSAL is a Market Participant of ASX Ltd, a Clearing Participant of ASX Clear Pty Ltd, a Settlement Participant of ASX Settlement Pty Ltd, and, a participant of Chi X Australia Pty Ltd. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual recipient.

France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument.

Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities

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covered in this report should contact the Head of Sales at CIMB Securities Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong).

India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (“CIMB India”) which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 and in accordance with the provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with SEBI as an Investment Adviser.

The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates.

Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations.

Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.

New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978.

Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR.

As of April 8, 2013, CIMBR does not have a proprietary position in the recommended securities in this report.

South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch ("CIMB Korea") which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea.

The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial investment instruments and it is not intended as a solicitation for the purchase of any financial investment instrument.

This publication is strictly confidential and is for private circulation only, and no part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB Korea.

Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.

Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China.

Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS.

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range 90 – 100 80 – 89 70 – 79 Below 70 or No Survey Result

Description Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorised and regulated by the Financial Services Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely

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directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are persons falling within Article 49 (2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.

Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Services Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research.

United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Rating Distribution (%) Investment Banking clients (%)

Outperform/Buy/Trading Buy 50.9% 8.1%

Neutral 35.2% 4.8%

Underperform/Sell/Trading Sell 13.9% 5.9%

Distribution of stock ratings and investment banking clients for quarter ended on 31 March 2013

984 companies under coverage

Recommendation Framework #1 *

Stock Sector

OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return

by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to

outperform the relevant primary market index over the next 12 months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total

return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in

line with the relevant primary market index over the next 12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total

return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to

underperform the relevant primary market index over the next 12 months.

TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return

by 5% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to

outperform the relevant primary market index over the next 3 months.

TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total

return by 5% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to

underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan

Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market

volatility or other justifiable company or industry-specific reasons.

CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

Recommendation Framework #2 **

Stock Sector

OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of +10% or better over the next 12 months.

NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal

number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or

(ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%;

both over the next 12 months.

UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of -10% or worse over the next 12 months.

TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of +10% or better over the next 3 months.

TRADING SELL: Expected negative total returns of 10% or more over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of -10% or worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily

outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011.

AAV – not available, ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH - Good, BEC - Very Good, BECL - Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY – Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Very Good, ITD - Good, IVL - Very Good, JAS – Very Good, KAMART – not available, KBANK - Excellent, KK – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM – Very Good, TICON – Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good, WORK – Good.

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