Guy CampbellChairman

The Baltic Exchange

The Baltic Exchange

IGC 2015 Grains Conference

9 June 2015

Background: The Baltic Exchange• Centre of the global bulk shipping community

• (firms with interests affected by freight rates + related markets/services)• 271 year old global membership organisation

• “Baltic” name is traditional – but a truly global membership• 650 Companies strong, 3200+ individuals

• Physical shipping Market• Charterers… (grain houses, energy providers, mining companies…)• Shipowners; Greeks, Chinese (few UK owners left)• Shipbrokers - Members account for:

• 35% of all dry bulk fixtures Globally• 60% of tanker fixtures Globally

• Derivatives markets (FFA’s)– Freight derivative traders ;

• Shipowners & charterers• Banks• Hedge funds• Power companies• Mills• Mining companies…

– Derivatives brokers

• Ship-financing; Banks, lenders

• Service industries; legal companies, accountancy firms, news vendors

1. Representing the bulk shipping community2. Framework of ethics for the market

• The Baltic Code• “Our Word Our Bond”• Dispute resolution services

3. Education4. Business venue5. Networking & Social events6. Only provider of independent freight market data & information.

Used by:• shipping companies• commodity houses• financial organisations• news vendors • others

The Baltic’s role

• Freight market indices used for:• Price discovery / charting voyage rates• Fixing on floating rate TC• Calculating values when contracts become frustrated / legal

hearings• Settlement mechanism for the freight derivatives (FFAs) markets

contracts• Cost calculation for bulk importers / commodity houses• Market indicator for shipping and financial market analysts

Baltic Exchange – physical markets covered

Swire BulkHandysize bulk division running a modern, fuel

efficient fleetGlobal presence in Singapore, San Francisco and

London

China Navigation Company Pte LtdWholly owned private subsidiary

of John Swire & SonsStarted operations in 1872 on the

Yangtze RiverSwire Bulk, Swire Shipping and

Swire Bulk Logistics

Dry Bulk Balance: Demand Vs Supply

Lehman Bros files 3 months after BDI collapse

Baltic Exchange: physical markets covered• Dry Markets –

• Split by asset class:

• Capesize: • 9 hatches• Size: 180k dwt• Typical cargo: Iron Ore, Coal

• Panamax / Kamsarmax: • 6-7 hatches• Size: 60k dwt – 82k dwt• Typical cargo: Iron ore, coal,

grain, fertz, minerals

• Supramax• 5 hatches, own grabs (cranes)• Size: 40k dwt - 60k dwt• Typical cargo: coal, grain,

fertz, steel, steel

• Handysize• 4-5 hatches, own grabs• Size: <40k dwt• Typical cargo: Coal, grain,

fertz, steel, cement, etc.

• Tanker Markets • Spectrum of markets ranging from 300kt – 30kt covering:

• Dirty / crude oil voyages• Clean / refined oil voyages• Oil products / chemicals voyages• Gas voyages

Baltic Exchange benchmark production;independent, neutral, accurate market data

Board of Directors

Baltic Exchange Information Services Ltd

Charterers(Members)

FFA Brokers Assoc

Freight Market Info Users Group

Owners(Members)

Panellists

• All sides of market represented• Accountable and market self-regulated decision making process

Shipbroker assessments

331 individual broker panellists

• Baltic members

• Subscribers

• News vendors Quote vendors

Checks dataQueries if necessaryAverages out - including highs and lows

Supramax

Arrow Chartering (UK)AuseaClarksonsHartland ShippingHowe Robinson Partners

John F Dillon & CoLMB Bulk CharteringRigel ShippingSimpson Spence YoungYamamizu Shipping Co

Panamax

Ausea Beijing

Barry Rogliano Salles

Braemar ACM

Shipbroking

Clarksons (Geneva)

Clarksons (Asia)

Doric Shipbrokers

Hartland Shipping

Howe Robinson Partners

H Vogemann

LMB Bulk Chartering

Rigel Shipping

Simpson Spence Young

Simpson Spence Young

(Asia)

Yamamizu Shipping Co

Baltic benchmark production: Independent, neutral & accurate data

Creating Indices;who are the Baltic panellists?

• Balanced geographical spread across all routes

• Expert broking companies

• No principal panellists

• Avoid panellists who are exclusive representatives of charterers that are strongly influential in relevant trades

• Panellists must be recognised as: “competent, professional firms, actively engaged in the markets they report, with adequate personnel to perform the role of panellist”

• Members of the Baltic Exchange

• Audited once a year

Supramax vessels carry almost 1bt of cargo

Supramax trade has increased 60% in the past 10 years.

Coals and grains account for ~50% of all supra cargoes

Metals & minerals account for 25%

Iron Ore 30%

Total Coal 25%

Total Agribulk 13%

Bauxite/Alumina2%

Minor Ores3%

Steel Ind Minor Bulks11%

Phosphorus / Fertilizers

4%

Forest products5%

Other Minor Bulks7%

Total traded dry bulk commodities (2014)

Supramax fleet positions - 8 June 2015

Therefore indices must change: Supramax revisions (2015)

Rte Description Durn WtgS1B_58 Canakkale tct China via med or Bl sea 40/50 5%S1C_58 USG tct China-Japan 50/55 5% new routeS2_58 NChina 1 Nopac/Aus RV 35/40 20% revised dely areaS3_58 NChina tct W Africa (Dak-Doual) 55/65 15% revised dely area and redelyS4A _58 USG tct Skaw-Passero 25/30 7.5%S4B _58 Skaw-Passero tct USG 25/30 10%S5_58 W Africa tct N China via ECSA 60/65 5% Route included to BSI & TCS8_58 S China tct India via Indonesia 20/25 15% BES Asia route added to BSI & TCS9_58 W Africa tct Skaw-Passero via ECSA 45/50 7.5% Route included to BSI & TCS10_58 S China tct China via Indonesia 20/25 10% BES Asia route added to BSI & TC

New TCA is approx -$609 on average below current/old 6TCA (basis 2014 data) 2015: 25% inter Atlantic / 15% fronthaul / 45% inter Pacific / 15% backhaul Old: 25% even average across each traded geographical area

Standard Tess 5858,328 mt dwt on 12.80 m ssw.Max age 15 yearsLoa 189.99 m / Beam 32.26 m5 holds/hatches, 72,360.3 cbm grain / 70,557.8 cbm bale4 x 30t cr + 12 cbm grabs14k ballast on 32mt / 14k laden on 33mt Ifo (380cst) no das12k ballast on 23mt / 12k laden on 24mt Ifo (380cst) no das

Standard Tess 5252,454 mt dwt on 12.02 m ssw SD ST BC

Max age 10 yearsLoa 189.99 m , Beam 32.26 m. 5 holds/hatches

67,756 cbm grain / 65,600 cbm bale4 x 30 mt cranes + 12 cbm grabs

14k lad / 14.5k ballast on 30 mt Ifo (380 cst) Nodas

Old vessel New vessel

And evolution of cargo flows must be represented: