shipping outlook

May 29, 2012

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.

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REGIONAL

MALAYSIA

SINGAPORE

INDONESIA

THAILAND

PHILIPPINES

CHINA, HONG KONG

SHIPPING MONITOR SHORT TERM (3 MTH) LONG TERM

WEEKLY REVIEW

The capesize vs. VLCC chasm Capesize rates sank 27.8% wow back to below cash-breakeven levels as demand for iron ore and coal weakened in an environment of declining steel and commodity prices. But Far Eastern demand for long-haul crude oil shipments continued to keep VLCC rates profitable.

Figure 1: Vessel profitability

Ship type VLCC Suezmax Aframax MR product Capesize Panamax Handymax Handysize

Current TCE 42,923 28,489 14,216 6,132 6,426 8,633 11,694 9,703

Operating cost -12,807 -11,436 -10,245 -8,185 -7,500 -6,500 -6,000 -5,000

Cash earnings 30,116 17,053 3,971 -2,053 -1,074 2,133 5,694 4,703

Interest cost -7,441 -4,526 -3,951 -2,570 -3,605 -2,148 -1,956 -1,726

Depreciation cost -9,567 -5,819 -5,079 -3,304 -4,636 -2,762 -2,515 -2,219

Daily profit/(loss) 13,108 6,708 -5,059 -7,927 -9,315 -2,777 1,223 758

TANKERS DRY BULK

SOURCES: CIMB, CLARKSON RESEARCH SERVICES

In the bulk trades, the smaller supramax and handysize segments remain the most profitable while in the tanker trades, the largest VLCC class is the most lucrative. We are Neutral on container shipping and Underweight on bulk/tanker with our preferred picks being OOIL and Pacific Basin. Unfortunately, MISC is not a major VLCC player.

Market review Container freight rates weakened for a third consecutive week, although the rate of decline has slowed. Rates from China to Europe fell 1.4-1.8% while rates to the US remained largely unchanged. Peak season demand during June-August could keep rates relatively stable but downside risks remain for the 4Q. Slot utilisation rates to Europe and the US have declined to 80% and 85%, respectively, down from 100% in January as new capacity is introduced, making it more difficult to pull through the June rate hikes.

On the bulk side, the capesize sector saw rates fall 27.8% wow on slower growth in China, resulting in cancelled iron ore and thermal coal

cargoes. Current capesize rates are once again below cash-breakeven levels. Chinese steel, iron ore and coal prices continued falling, a clear sign of demand weakness. On the other hand, supramax and handysize rates rose slightly last week.

The tanker sector saw average VLCC rates edge lower but rates are likely to hold steady as charterers progress to the second-half June loading programme. The Venezuelan oil-for-loan deal, South Korea‟s purchase of oil from the North Sea and Japan‟s energy deficit are likely to hold VLCC rates at reasonably high levels, barring a pause in China‟s restocking activities. Aframax rates, though slightly higher on average last week, were still too weak to cover capital costs.

Our take Our bearish stock idea is STX Pan Ocean, which remains significantly overvalued relative to the expected secondhand value of its fleet. We also have a Trading Sell on CSCL as it is the most exposed to a reversal of the positive spot rate momentum.

CIMB Analyst

Raymond Yap Kok Hoe CFA

T (60) 3 20849769 E [email protected]

Highlighted Companies

Orient Overseas (International) Ltd

Neutral, target: HK$44.20. OOIL has one of the lowest gearing levels among the long-haul carriers and does not swing between profits and losses as frequently as its peers. The carrier exercises cargo selection to maximise yield.

Neptune Orient Lines Ltd

Neutral, target: S$1.15. NOL is finally joining the league of 10,000+ teu ship operators on the AE trade that will help it lower unit costs over the next three years. Its heavy exposure to the US trade will help it benefit from strong TP volumes.

China Shipping Container Lines Ltd

Trading Sell, target: HK$1.85. CSCL has the highest operating leverage in our coverage 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

Neutral, target: HK$2.35. SITC is unlikely to benefit from a sharp spot rate recovery in the long-haul east-west trades but should do better in the quarters ahead as it expands fleet capacity and passes through higher bunker costs.

Pacific Basin Shipping Ltd Neutral, target: HK$4.62. Pacific Basin is well-positioned to buy more secondhand ships as prices are now considered cheap. But it cannot escape the negative earnings impact of a weaker-than-expected spot market.

STX Pan Ocean Ltd Underperform, target: S$1.45. STXPO is the most heavily geared and has a substantial portfolio of vessels acquired at high pre-GFC prices. We expect it to incur losses on its dry bulk, container and tanker shipping divisions.

MISC Bhd Neutral, TP: RM4.25. While MISC’s decision to exit the liner division will reduce its container losses, this is partly offset by rising losses from the tanker and chemical divisions. Rising bunker costs are putting more pressure on low rates.

Sources: CIMB. COMPANY REPORTS

SHIPPING MONITOR

May 29, 2012

2

Figure 2: Sector Comparisons

Price Target Price

(local curr) (local curr) CY2012 CY2013 CY2012 CY2013 CY2012 CY2013 CY2014 CY2012 CY2013 CY2012 CY2013

Malaysian Bulk Carriers MBC MK Underperform RM1.63 RM1.65 517 23.5 26.0 0.5% 0.92 0.90 3.9% 3.5% 4.5% 7.1 9.0 1.8% 1.8%

Pacific Basin Shipping 2343 HK Neutral HK$3.40 HK$4.62 848 26.8 19.8 -29.3% 0.57 0.56 2.1% 2.8% 4.3% 6.9 6.1 1.9% 2.5%

Precious Shipping PSL TB Neutral THB14.90 THB14.85 489 35.4 20.4 28.3% 0.90 0.88 2.6% 4.4% 5.7% 13.1 11.8 2.0% 2.2%

STX Pan Ocean STX SP Underperform S$5.10 S$1.45 820 na na na 0.47 0.55 -18.4% -15.0% -12.2% na 1172.9 1.1% 1.1%

Thoresen Thai TTA TB Not Rated THB17.10 - 383 na 27.5 20.3% 0.42 0.40 0.0% 1.5% 3.3% 7.1 5.9 1.7% 2.4%

China COSCO 1919 HK Not Rated HK$3.50 - 7,164 na 19.6 na 0.8 0.8 -4.0% 2.7% 7.4% 49.0 14.1 0.2% 1.1%

China Shipping Devt 1138 HK Not Rated HK$4.08 - 2,644 15.9 8.5 -16.2% 0.5 0.5 2.5% 4.8% 7.0% 18.7 13.0 2.1% 3.8%

Sinotrans Shipping 368 HK Not Rated HK$1.72 - 885 9.7 8.0 5.4% 0.40 0.38 4.2% 4.8% 5.6% 0.1 -0.2 3.6% 4.1%

Sincere Navigation 2605 TT Not Rated TWD28.00 - 537 8.4 9.6 -6.0% 1.05 1.01 13.1% 10.7% 9.9% 5.0 4.6 5.8% 5.4%

U-Ming Marine 2606 TT Not Rated TWD45.00 - 1,304 18.0 16.3 1.2% 1.48 1.42 7.8% 8.9% 9.5% 11.4 10.4 4.7% 4.8%

Dry bulk group na 15.9 na 0.80 0.78 -1.4% 2.4% 5.3% 24.8 13.4 1.2% 1.5%

China Shipping Container 2866 HK Trading Sell HK$1.91 HK$1.85 4,585 19.0 na na 0.68 0.69 3.6% -2.1% 3.7% 9.2 22.9 0.0% 0.0%

Neptune Orient Lines NOL SP Neutral S$1.04 S$1.15 2,100 21.8 na na 0.78 0.82 3.7% -5.0% 16.3% 8.2 13.2 0.9% 0.0%

Orient Overseas Intl Ltd 316 HK Neutral HK$40.90 HK$44.20 3,297 16.4 20.6 16.3% 0.74 0.72 4.6% 3.6% 4.4% 7.1 8.5 1.5% 1.2%

SITC International 1308 HK Neutral HK$2.08 HK$2.35 694 9.7 9.3 9.6% 1.00 0.94 10.7% 10.5% 12.5% 4.8 4.0 3.6% 3.8%

Evergreen 2603 TT Not Rated TWD15.00 - 1,759 28.8 9.0 na 0.82 0.75 2.8% 8.7% 9.4% 12.2 7.2 0.4% 1.6%

Wan Hai 2615 TT Not Rated TWD13.60 - 1,019 21.5 12.3 45.3% 0.93 0.96 4.5% 7.7% 10.6% 4.7 3.5 2.2% 2.0%

Yang Ming 2609 TT Not Rated TWD11.80 - 1,123 na 12.8 na 1.13 1.00 -8.3% 8.3% 12.0% 17.8 8.3 0.0% 1.0%

AP Moller-Maersk MAERSKA DC Not Rated DKK34,980 - 26,704 8.1 7.2 -7.7% 0.7 0.7 10.7% 9.3% 10.0% 3.1 2.9 0.0% 0.0%

Container group 6.0 6.6 45.3% 0.70 0.66 8.4% 7.2% 9.5% 3.9 3.8 0.3% 0.3%

MISC Bhd MISC MK Neutral RM4.11 RM4.25 5,818 23.5 14.5 66.2% 0.85 0.82 3.5% 5.7% 7.0% 31.1 24.6 2.4% 2.5%

Teekay Corp TK US Not Rated US$28.84 - 2,071 na 302.4 na 1.54 1.55 -2.4% 0.5% -0.1% 9.5 8.7 4.4% 4.4%

Frontline FRO US Not Rated US$5.38 - 419 na na na 1.79 5.30 -9.4% -22.7% -7.0% 9.7 9.9 0.0% 0.1%

Tsakos Energy TNP US Not Rated US$5.25 - 295 na na na 0.33 0.32 -4.7% -0.7% 4.2% 13.8 10.2 10.4% 8.8%

Overseas Shipholding OSG US Not Rated US$11.75 - 362 na na na 0.25 0.26 -10.7% -4.5% -7.2% 24.8 14.0 0.0% 0.0%

Teekay Tankers TNK US Not Rated US$4.23 - 335 45.0 18.8 na 0.5 0.6 4.7% -82.0% -53.8% 12.6 8.9 10.9% 15.1%

Odfjell ODF NO Not Rated Nok33.60 - 482 -28.1 9.3 -32.9% 0.5 0.4 -1.3% 6.4% 10.1% 9.3 6.3 1.1% 2.0%

Stolt-Nielsen SNI NO Not Rated Nok99.00 - 1,061 12.7 7.4 25.0% 0.62 0.56 5.0% 8.0% 10.4% 7.8 6.2 6.1% 6.7%

Teekay LNG TGP US Not Rated US$38.43 - 2,776 18.2 16.3 20.4% 2.4 2.5 12.1% 13.0% 18.5% 14.8 14.3 7.0% 7.3%

Golar LNG GLNG US Not Rated US$34.43 - 2,753 15.4 11.3 83.5% 3.48 3.01 23.4% 28.5% 49.2% 11.7 10.9 3.9% 4.2%

Tanker group 67.2 19.9 na 1.18 1.17 1.7% 5.9% 9.7% 12.9 10.9 4.4% 4.7%

Kawasaki Kisen Kaisha 9107 JP Not Rated ¥139 - 1,341 na 14.4 -26.9% 0.44 0.42 -18.0% 3.0% 4.9% 87.7 9.6 0.0% 1.2%

Mitsui OSK Lines 9104 JP Not Rated ¥269 - 4,089 na 23.2 -19.1% 0.51 0.50 -4.6% 2.2% 4.3% 18.2 10.6 1.5% 1.6%

Nippon Yusen KK 9101 JP Not Rated ¥203 - 4,350 na 16.9 -19.0% 0.65 0.54 -11.9% 3.5% 5.7% 14.4 8.2 1.7% 1.9%

Hyundai Merchant Marine 011200 KS Not Rated Won25,550 - 3,120 na 35.2 na 2.28 2.19 -12.4% 6.4% 7.1% 24.3 15.3 0.2% 0.3%

Diversified group na 21.0 -12.5% 0.67 0.62 -10.1% 3.1% 5.1% 19.8 9.9 1.1% 1.3%

Average (all) 27.7 10.5 49.5% 0.79 0.75 2.0% 5.4% 7.9% 7.8 6.6 1.2% 1.4%

Company Bloomberg Ticker Recom.Market Cap

(US$ m)

EV/EBITDA (x) Dividend Yield (%)Core P/E (x) 3-year EPS

CAGR (%)

P/BV (x) Recurring ROE (%)

SOURCES: CIMB, COMPANY REPORTS

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

SHIPPING MONITOR

May 29, 2012

3

Share price performance

Figure 3: Share price performance

Bloomberg 28-May-12 21-May-12 WoW chg 28-Apr-12 1-mth chg 27-Nov-11 6-mth chg 29-May-11 1-year chg

ticker % % % %

Diversified group

Mitsui OSK Lines 9104 JP ¥269 ¥262 2.7% ¥312 -13.8% ¥224 20.1% ¥427 -37.0%

Nippon Yusen KK 9101 JP ¥204 ¥198 3.0% ¥238 -14.3% ¥158 29.1% ¥294 -30.6%

Kawasaki Kisen Kaisha 9107 JP ¥141 ¥132 6.8% ¥170 -17.1% ¥123 14.6% ¥271 -48.0%

Hyundai Merchant Marine 011200 KS Won25,550 Won24,850 2.8% Won28,300 -9.7% Won22,300 14.6% Won32,650 -21.7%

Tanker group

MISC MISC MK RM4.30 RM4.30 0.0% RM4.86 -11.5% RM5.80 -25.9% RM6.69 -35.7%

Teekay Corp TK US US$28.84 US$29.33 -1.7% US$36.10 -20.1% US$25.89 11.4% US$31.64 -8.8%

Frontline FRO US US$4.69 US$4.69 0.0% US$6.44 -27.2% US$2.76 69.9% US$17.58 -73.3%

Tsakos Energy TNP US US$5.25 US$5.11 2.7% US$6.19 -15.1% US$4.70 11.7% US$9.25 -43.2%

Overseas Shipholding OSG US US$11.75 US$10.32 13.9% US$11.85 -0.8% US$9.79 20.0% US$25.96 -54.7%

Teekay Tankers TNK US US$4.26 US$4.26 0.0% US$5.40 -21.1% US$3.55 19.9% US$8.17 -47.9%

Berlian Laju Tanker BLTA IJ Rp196.00 Rp196.00 0.0% Rp196.00 0.0% Rp178.00 10.1% Rp375.00 -47.7%

Odfjell ODF NO Nok33.60 Nok32.50 3.4% Nok34.50 -2.6% Nok29.10 15.5% Nok42.89 -21.7%

Stolt-Nielsen SNI NO Nok99.00 Nok102.00 -2.9% Nok100.50 -1.5% Nok95.73 3.4% Nok114.44 -13.5%

Eitzen Chemical ECHEM NO Nok0.05 Nok0.07 -28.6% Nok0.07 -28.6% Nok0.15 -66.7% Nok0.74 -93.2%

Teekay LNG TGP US US$38.43 US$37.78 1.7% US$40.86 -5.9% US$29.88 28.6% US$32.69 17.5%

Golar LNG GLNG US US$34.43 US$34.02 1.2% US$37.08 -7.1% US$38.19 -9.9% US$31.27 10.1%

Teekay Offshore TOO US US$28.14 US$26.99 4.3% US$29.26 -3.8% US$25.64 9.8% US$27.07 4.0%

Dry bulk group

STX Pan Ocean STX SP S$5.30 S$5.10 3.9% S$7.02 -24.5% S$6.36 -16.7% S$8.90 -40.4%

Pacific Basin 2343 HK HK$3.34 HK$3.55 -5.9% HK$4.00 -16.5% HK$3.25 2.8% HK$4.45 -24.9%

Thoresen Thai TTA TB THB17.10 THB17.10 0.0% THB19.10 -10.5% THB16.56 3.3% THB21.04 -18.7%

Precious Shipping PSL TB THB14.70 THB14.91 -1.4% THB15.90 -7.5% THB14.69 0.1% THB17.44 -15.7%

Malaysian Bulk MBC MK RM1.57 RM1.57 0.0% RM1.60 -1.9% RM1.57 0.0% RM2.35 -33.2%

China COSCO 1919 HK HK$3.48 HK$3.38 3.0% HK$4.50 -22.7% HK$3.27 6.4% HK$6.96 -50.0%

China Shipping Devt 1138 HK HK$4.07 HK$4.22 -3.5% HK$4.87 -16.5% HK$4.20 -3.1% HK$7.65 -46.8%

Sinotrans Shipping 368 HK HK$1.68 HK$1.70 -1.2% HK$1.84 -8.5% HK$1.86 -9.5% HK$2.28 -26.4%

Sincere Navigation 2605 TT TWD28.00 TWD29.05 -3.6% TWD28.95 -3.3% TWD25.15 11.3% TWD30.48 -8.1%

U-Ming Marine 2606 TT TWD44.90 TWD46.95 -4.4% TWD49.55 -9.4% TWD42.85 4.8% TWD55.69 -19.4%

Container group

NOL NOL SP S$1.03 S$1.05 -1.9% S$1.21 -14.5% S$1.01 2.5% S$1.82 -43.4%

OOIL 316 HK HK$41.15 HK$42.05 -2.1% HK$53.00 -22.4% HK$34.50 19.3% HK$58.26 -29.4%

CSCL 2866 HK HK$1.88 HK$1.98 -5.1% HK$2.44 -23.0% HK$1.27 48.0% HK$2.91 -35.4%

Evergreen 2603 TT TWD14.90 TWD15.60 -4.5% TWD17.20 -13.4% TWD14.85 0.3% TWD22.19 -32.9%

Wan Hai 2615 TT TWD13.40 TWD13.40 0.0% TWD14.80 -9.5% TWD12.85 4.3% TWD18.60 -28.0%

Yang Ming 2609 TT TWD11.75 TWD11.60 1.3% TWD12.50 -6.0% TWD11.20 4.9% TWD20.41 -42.4%

Hanjin Shipping 000700 KS Won5,820 Won5,820 0.0% Won7,000 -16.9% Won6,900 -15.7% Won12,800 -54.5%

AP Moller-Maersk MAERSKA DC DKK34,980 DKK36,100 -3.1% DKK41,560 -15.8% DKK30,525 14.6% DKK47,046 -25.6%

Shipbuilding group

Cosco Corp COS SP S$0.92 S$0.90 2.2% S$1.04 -11.1% S$0.81 13.4% S$1.89 -51.2%

Yangzijiang YZJ SP S$0.95 S$0.95 0.0% S$1.14 -16.9% S$0.82 16.0% S$1.54 -38.4%

Daewoo Shipbuilding 042660 KS Won25,800 Won26,750 -3.6% Won30,300 -14.9% Won26,212 -1.6% Won42,037 -38.6%

Hanjin Heavy Industries 097230 KS Won14,650 Won14,600 0.3% Won16,550 -11.5% Won18,050 -18.8% Won33,100 -55.7%

Hyundai Mipo Dockyard 010620 KS Won113,000 Won105,500 7.1% Won121,000 -6.6% Won98,238 15.0% Won167,987 -32.7%

Kawasaki Heavy Industries 7012 JP ¥205 ¥201 2.0% ¥242 -15.3% ¥181 13.3% ¥286 -28.3%

Mitsubishi Heavy Industries 7011 JP ¥321 ¥321 0.0% ¥364 -11.8% ¥317 1.3% ¥374 -14.2%

Keppel Corp KEP SP S$10.04 S$10.00 0.4% S$11.01 -8.8% S$8.70 15.3% S$10.89 -7.8%

SembCorp Marine SMM SP S$4.44 S$4.48 -0.9% S$5.10 -12.9% S$3.51 26.5% S$5.07 -12.4%

Shipowners group

Rickmers Maritime Trust RMT SP S$0.31 S$0.32 -1.6% S$0.31 0.7% S$0.31 0.1% S$0.37 -17.2%

Pacific Shipping Trust PST SP US$0.42 US$0.42 0.0% US$0.42 0.0% US$0.42 0.0% US$0.34 23.1%

First Ship Lease Trust FSLT SP S$0.17 S$0.17 -1.2% S$0.20 -14.2% S$0.29 -41.4% S$0.35 -51.4%

Danaos Corp DAC US US$4.06 US$3.75 8.3% US$3.69 10.0% US$3.33 21.9% US$6.65 -38.9%

Seaspan Corp SSW US US$16.59 US$15.75 5.3% US$16.84 -1.5% US$10.32 60.7% US$16.26 2.1% SOURCES: CIMB, COMPANY REPORTS

SHIPPING MONITOR

May 29, 2012

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Figure 4: Share price performance

-32% -30% -28% -26% -24% -22% -20% -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%

Eitzen Chemical

Pacific Basin

CSCL

Evergreen

U-Ming Marine

Sincere Navigation

Daewoo Shipbuilding

China Shipping Devt

AP Moller-Maersk

Stolt-Nielsen

OOIL

NOL

Teekay Corp

Rickmers Maritime Trust

Precious Shipping

First Ship Lease Trust

Sinotrans Shipping

SembCorp Marine

MISC

Frontline

Teekay Tankers

Berlian Laju Tanker

Thoresen Thai

Malaysian Bulk

Wan Hai

Hanjin Shipping

Yangzijiang

Mitsubishi Heavy

Pacific Shipping Trust

Hanjin Heavy Industries

Keppel Corp

Golar LNG

Yang Ming

Teekay LNG

Kawasaki Heavy Industries

Cosco Corp

Mitsui OSK Lines

Tsakos Energy

Hyundai Merchant Marine

China COSCO

Nippon Yusen KK

Odfjell

STX Pan Ocean

Teekay Offshore

Seaspan Corp

Kawasaki Kisen Kaisha

Hyundai Mipo Dockyard

Danaos Corp

Overseas Shipholding


SHIPPING MONITOR

May 29, 2012

5

Container shipping

Container freight rates stayed on its weakening trend last week, the third consecutive weekly decline since long-haul east-west rates peaked in early-March. The rate of decline has, however, slowed. Rates from China to North Europe fell US$31/teu (-1.8%) while Mediterranean rates fell US$26/teu (-1.4%) last week. Rates from China to the USWC and USEC remained largely unchanged. DHL Global Forwarding said that freight rates should remain largely stable during the traditional June-August peak season but that the risks remain on the downside in the 4Q, especially as so many new ships are still scheduled for delivery.

We believe that the carriers may obtain some of the GRI/PSS targeted for June but this should be relatively short-lived. Recent slot utilisation rates to Europe have declined to 80% while utilisation has fallen to 85% on the USWC, down from 100% in January, as new capacity is introduced. Compared to the end-March position, some 12-13% capacity will be added by carriers into the Asia-North Europe trade by end-July while 6.7% additional capacity will be added to the Asia-USWC trade by end-May. These announced capacity increases and possible capacity additions may act to cap the potential for carriers to enjoy a strong and lengthy peak season.

Figure 5: Container freight rates

Last week

25-May-12 18-May-12 WoW (%) 2Q12 1Q12 4Q11 3Q11 2012 2011 2010

Overall indices

Composite CCFI Index 1,331 1,336 -0.3% 1,253 972 930 987 1,071 993 1,132

Comprehensive SCFI Index 1,409 1,426 -1.2% 1,443 1,071 904 1,026 1,201 1,008 1,373

Asia-Europe

CCFI: North Europe 1,888 1,901 -0.7% 1,747 1,072 962 1,099 1,308 1,174 1,731

SCFI: North Europe (US$/TEU) 1,711 1,742 -1.8% 1,801 1,010 594 808 1,287 875 1,784

CCFI: Mediterranean 2,100 2,045 +2.7% 1,876 1,186 1,176 1,295 1,427 1,294 1,822

SCFI: Mediterranean (US$/TEU) 1,846 1,872 -1.4% 1,870 1,034 794 1,013 1,327 969 1,736

Transpacific

CCFI: West Coast USA 1,049 1,063 -1.3% 1,017 925 862 926 958 939 1,060

SCFI: West Coast USA (US$/FEU) 2,333 2,330 +0.1% 2,325 1,850 1,484 1,640 2,017 1,664 2,335

CCFI: East Coast USA 1,300 1,302 -0.1% 1,239 1,131 1,116 1,203 1,169 1,172 1,279

SCFI: East Coast USA (US$/FEU) 3,481 3,490 -0.3% 3,492 2,998 2,733 3,173 3,171 3,010 3,536

Intra-Asia (US$/TEU)

SCFI: East Japan 354 354 +0.0% 351 334 333 333 340 338 316

SCFI: Singapore 274 282 -2.8% 268 231 227 231 244 211 318

SCFI: Hong Kong 132 135 -2.2% 144 153 158 163 150 155 119

SCFI: Pusan, Korea 156 160 -2.5% 172 170 194 219 171 199 191

SCFI: Kaohsiung, Taiwan 279 292 -4.5% 251 263 193 157 259 195 257

Qtr-to-date Yr-to-date


Figure 6: General Rate Increases / Peak Season Surcharges since late-2011

Asia-Europe Transpacific

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 400-450 500

1 Jun 2012 250-400

10 Jun 2012 PSS 600 SOURCES: CIMB, COMPANY REPORTS

SHIPPING MONITOR

May 29, 2012

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Figure 7: SCFI: Shanghai-USWC (US$/feu) Figure 8: SCFI: Shanghai-USEC (US$/feu)

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SOURCES: SHANGHAI SHIPPING EXCHANGE SOURCES: SHANGHAI SHIPPING EXCHANGE

Figure 9: SCFI: Shanghai-North Europe (US$/teu) Figure 10: SCFI: Shanghai-Mediterranean (US$/teu)

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SHIPPING MONITOR

May 29, 2012

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Figure 13: SCFI: Shanghai-Mid East (US$/teu) Figure 14: SCFI: Shanghai-ANZ (US$/teu)

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Figure 16: Slot utilisation rate on Asia-North Europe (%)

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SOURCES: CIMB, SHANGHAI SHIPPING EXCHANGE

SHIPPING MONITOR

May 29, 2012

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Figure 17: Idle capacity – down to 3.5% of the global fleet as at 21 May 2012 (from a peak of 5.8% on 12 March)

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Idle capacity as a % of f leet - RHS

SOURCES: ALPHALINER

Spot rates on the westbound Asia-Europe trade fell for the third consecutive week, indicating vessel overcapacity on the route and weak European import demand are eroding the general rate increases ocean carriers put into effect on May 1. Carriers have been able to hold onto most of the four large GRIs they put into effect since the beginning of the year, because they have kept vessel capacity relatively tight. But spot rates now are beginning to ease from recent highs as idle capacity returns to the trade and carries deploy newly delivered ships. This will make it more difficult for carriers to collect peak-season surcharges of US$250-400/teu they are seeking in June. (JOC)

David Goldberg, senior VP for ocean freight Asia Pacific at DHL Global Forwarding, said there was a strong risk of rates coming down later in the year after as peak season demand subsided. While rates should remain relatively stable during the peak shipping season, current levels might prove unsustainable during the fourth quarter when volumes usually dip and new ships are due to be delivered.

On the Asia-Europe trade Goldberg predicted a traditional June-August peak and said that so far volumes had remained mostly unaffected by the Euro crisis. “It seems more of a sovereign debt issue,” he added. “It‟s not really rolling into the corporate and private sector.”

On the trans-Pacific trade he said there would be a cargo build-up in the next three to four months with a more normal peak season of restocking pre-Christmas than witnessed in 2010 or 2011. “But I wonder about the fourth quarter.”

“We‟re already seeing a return of some of the laid up capacity with some carriers restoring routes, so with rates at more than sustainable levels I wonder how long the remainder of ships will stay laid up. Also, there are more new ships to be delivered and new entrants can easily come in and add capacity which would push rates down.” (JOC)

Far East to Europe container traffic is set to fall a further 15% prior to a rebound in 2013, but will then take five years to return to 2011 volumes, according to UK-based consultancy Maritime Traffic Forecasts, and covers the period between now and the end of 2030. MTF predicts that in the period under consideration, the number of loaded teus moved between Asia and Europe will

SHIPPING MONITOR

May 29, 2012

9

increase by an average of 3.8% per annum westbound and by 6.7% eastbound, reflecting the relative strength of the Asian economies. (Lloyd‟s List)

Hapag-Lloyd will implement a general rate increase on its services from India to Europe and the Mediterranean. The planned increase, starting June 1, will be US$200/teu. The German carrier said the GRI will apply to all westbound shipments from India‟s west coast ports of Nhava Sheva (Jawaharlal Nehru) and Mundra to destinations in North Europe, East/West Mediterranean, Black Sea and North Africa. Separately, Hapag-Lloyd said it will impose an “emergency fuel surcharge” on India-North Europe-Mediterranean trade lanes to cover rising bunker costs, also effective June 1. The proposed surcharge on both dry and refrigerated cargo will be US$150/teu. The carrier said the surcharge will be revised “on a monthly basis in line with the Hapag-Lloyd bunker charge.” (JOC)

OOCL will put a general rate increase into effect on cargo moving in both directions on the trans-Atlantic trade as of July 1. “Ocean freight rates continue to be below the required level to cover basic operating costs or transportation costs on our Trans-Atlantic Trade,” it said. This is the second time OOCL has posted a trans-Atlantic GRI this year. It raised rates April 1 on all westbound cargo moving between Europe, Canada, and the U.S. via Canadian ports. OOCL‟s newest trans-Atlantic rate increases are:

US$450/teu and US$600/feu for both westbound and eastbound and applicable to dry and reefer cargo on all the routes and services between Europe, Canada and the U.S. via Canadian ports.

US$400/teu and US$500/feu for both westbound and eastbound and applicable to dry and reefer cargo on all the routes and service between Europe and the U.S.

US$200/teu and US$300/feu for both westbound and eastbound and applicable to dry and reefer cargo on all the routes and services between Europe and Mexico. (JOC)

The idle containership fleet has fallen further in the two weeks to 21 May to 559,500 teu, or 3.5% of the total fleet. A total of 237 units of above 500 teu are without employment. Since mid-March when the idle fleet reached its last peak of 913,000 teu, the unemployed fleet has dropped by 39%, due to the reactivation of services for the summer season. Most of the reactivations involved ships of over 5,000 teu, with the number of idle units dropping from 50 units in March to 16 units currently. Most of the remaining ships of above 5,000 teu are expected to be reactivated in the next two months, as carriers continue to optimise their networks using their largest ships. However, the number of idle units in the smaller sizes has remained stubbornly high despite the scrapping of over 70 units so far this year all of which are below 4,500 teu. (Alphaliner)

MSC is upgrading a second transpacific string with ships of 11,600 teu. MSC is planning to send in July the 11,660 teu MSC IVANA on the Transpacific VSA Loop 2 jointly operated by Maersk, MSC and CMA CGM, replacing the 9,200 teu MSC INES. The service currently deploys two ships of 9,200 teu from MSC and four ships of 8,100-8,500 teu from CMA CGM. The move follows MSC‟s decision to send 11,600-13,000 teu ships on the transpacific 'Pearl River Express' service (PRX) since February this year. The PRX is operated jointly with CMA CGM, who deploys three smaller ships of 9,400-9,600 teu alongside the three MSC units - the 13,092 teu MSC ALTAIR and the 11,660 teu duo MSC LUCIANO and MSC FRANCESCA. The MSC ships are the only vessels of above 10,000 teu deployed on transpacific routes. MSC currently operates 42 ships of

http://www.joc.com/trade-lanes/oocl-hikes-canada-europe-rates

http://www.joc.com/trade-lanes/oocl-hikes-canada-europe-rates

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May 29, 2012

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above 13,000 teu, together with an additional seven units of between 11,600 and 12,500. (Alphaliner)

China Shipping Container Lines plans to borrow US$100m from China Development Bank to replenish its working capital amid continued heavy losses. CSCL has suffered hefty losses since last year due to low rates, high bunker costs and overcapacity in the box shipping markets. Despite several seemingly successful rate hikes since March, CSCL said in its annual report that it would face challenging market conditions in 1H12 due to overcapacity. Earlier this month, the company scrapped its options to buy four 10,000 teu boxships from China Shipbuilding Industry and China State Shipbuilding, to avoid increasing its financial burden. (Lloyd‟s List)

Panama Canal tolls are set to be increased by up to 15% from the start of July, in a move designed to align Canal toll charges with the value the route provides, the Panama Canal Authority (ACP) said in a statement.

In the letter dated May 17, the Japanese Shipowners Association told the ACP: “Amid the current downturn the shipping industry is facing, we are deeply disappointed at learning of your last-minute proposal to increase the canal tolls effective from both July of 2012 and 2013.”

The International Chamber of Shipping has sent a strongly worded letter to the Panama Canal Authority describing the plans as “simply unacceptable”. ICS calls for the plans to be withdrawn and for future increases to offer at least six months‟ notice so that shipping companies can plan properly and assess the impact of proposed changes. The canal is in the middle of a $5.3bn extension plan that will see the construction of new sets of locks on both its Pacific and Atlantic sides. (Lloyd‟s List)

Ocean carriers and shipowners are set to scrap container ships totaling more than 200,000 teu capacity in 2012, more than twice the capacity sent to breakers‟ yards last year. But this will be dwarfed by new vessel deliveries, which are expected to hit 1.4m teu in 2012, Alphaliner said. So far this year 69 ships totaling 124,000 teu have been scrapped, compared to just 85,000 teu for the whole of 2011. By contrast, deliveries of new ships have already reached 621,000 teu.

Scrapping is expected to accelerate through the year, driven by low earnings and a weak outlook for older, less efficient vessels. The sharply higher demolition rate will make 2012 the second highest year of scrapping behind the record-breaking 379,000 teu broken up in 2009, according to Alphaliner. The average age of scrapped container ships has dropped to 26 years compared with 28 years in the past decade. (JOC)

A 13-year-old boxship has been sold for scrap, making it the youngest merchant vessel to be demolished since the global financial downturn took hold in late 2008. It marks the extreme of a growing trend for ever-younger vessels to head for recycling yards, as huge overcapacity has taken hold in chartering markets due to record levels of newbuilding deliveries over the last three years. The 1999-built, 1,733 teu feeder vessel Ocean Producer is underway to an Indian breaking yard, and beats the youngest tanker sold for scrap this year, which was 1997-built, and a 1996-built capesize bulk carrier. Ocean Producer had been moored off Singapore since December 2010, implying it had been in layup for more than a year and struggling to find employment. (Lloyd‟s List)

SHIPPING MONITOR

May 29, 2012

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Dry bulk shipping

The capesize sector saw rates fall 27.8% from the previous week. Over the past 1-2 weeks, capesize rates have remained range-bound but with news of slower growth in China and steel mills returning or cancelling cargoes, vessel owners have become very nervous. Current capesize rates have once again fallen below cash-breakeven levels. In the panamax market, Fearnleys reported low activity and a growing list of available ships in the Atlantic, which caused rates to weaken. In the Pacific, rates to ship coal to China have also tumbled on negative sentiment from the capesize segment.

Supramax rates increased slightly, by 0.9% wow, but rates on the Atlantic and Pacific have diverged further, according to brokers. While supramax rates in the Pacific continue to suffer from the weakening Indonesian coal trade and the struggling Indian iron ore trade, rates in the Atlantic have been rising strongly. This can be attributed to pet coke and scrap cargoes from the US Gulf, which lifted markets, as did strong grain and sugar exports from Brazil. Handysize rates also increased 1.4% wow.

Metal Bulletin reported that more than 600 Indonesian mineral exporters have gained the first of three approvals required before they can export again. However, future exports may be levied a proposed 20% flat tax rate. Chinese buyers have apparently resisted Aneka Tambang‟s attempt to pass through the new tax on its nickel ore exports, raising the possibility that even if exports of ore are subsequently allowed, the volumes will not match previous levels.

Figure 18: Dry bulk freight rates

Last week

25-May-12 18-May-12 WoW (%) 2Q12 1Q12 4Q11 3Q11 2012 2011 2010

Baltic Dry Index 1,034 1,141 -9.4% 1,067 881 1,914 1,528 954 1,550 2,753

Baltic Capesize Index 1,424 1,633 -12.8% 1,541 1,618 3,305 2,368 1,586 2,247 3,473

Baltic Panamax Index 1,083 1,274 -15.0% 1,319 1,010 1,823 1,608 1,130 1,743 3,108

Baltic Supramax Index 1,118 1,108 +0.9% 1,054 833 1,389 1,337 920 1,375 2,145

Baltic Handysize Index 651 639 +1.9% 591 465 690 679 514 717 1,124

6,426 8,905 -27.8% 7,264 6,554 28,553 17,289 6,824 15,836 32,875

Iron ore Tubarao-Beilun, 165k dwt 20,061 23,037 -12.9% 22,323 19,998 46,176 29,512 20,884 29,572 47,932

Tubarao-Rotterdam, 165k dwt -931 3,197 -129.1% -612 -845 30,392 13,836 -756 12,746 32,667

Western Australia-Beilun, 165k dwt 7,045 7,825 -10.0% 5,315 4,266 29,184 16,508 4,665 14,808 29,611

Goa-Beilun, 145k dwt 13,826 15,120 -8.6% 13,515 9,176 26,601 15,683 10,829 15,588 28,070

Coal Queensland-Japan, 145k dwt 1,928 3,122 -38.2% 1,483 2,791 25,493 11,120 2,293 10,963 26,584

8,633 10,159 -15.0% 10,605 7,913 14,555 12,906 8,938 13,940 24,858

Coal Newcastle-Japan, 70k dwt 5,905 10,412 -43.3% 9,600 6,453 12,949 9,471 7,652 11,951 23,686

Richards Bay-Rotterdam, 70k dwt -1,425 -1,574 -9.5% -1,508 -1,772 1,737 2,499 -1,671 2,766 13,330

11,694 11,588 +0.9% 11,063 8,658 14,397 14,055 9,574 14,351 22,359

9,702 9,571 +1.4% 8,934 6,958 9,788 10,085 7,711 10,505 16,384

Iron ore Tubarao-Beilun, 165k dwt 19.00 20.70 -8.2% 20.82 20.41 28.69 22.75 20.56 22.53 26.19

Tubarao-Rotterdam, 165k dwt 7.95 9.25 -14.1% 8.65 8.87 15.09 11.62 8.78 11.15 13.66

Western Australia-Beilun, 165k dwt 7.60 7.75 -1.9% 7.70 7.78 11.93 9.35 7.75 9.06 10.35

Goa-Beilun, 145k dwt 10.90 11.30 -3.5% 11.28 10.27 15.05 11.47 10.65 11.49 13.69

Coal Queensland-Japan, 150k dwt 8.50 8.85 -4.0% 8.83 9.35 13.62 10.52 9.15 10.38 11.87

Coal Newcastle-Japan, 70k dwt 14.00 16.50 -15.2% 16.56 15.76 17.90 16.23 16.06 17.12 20.68

Richards Bay-Rotterdam, 70k dwt 12.10 12.30 -1.6% 12.86 13.17 14.33 14.79 13.05 14.62 17.72


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)


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May 29, 2012

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Figure 19: Baltic capesize and panamax TCE/day (US$/day) Figure 20: Baltic supramax and handysize TCE/day (US$/day)

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

Figure 21: Bulk vessel profit/loss (US$/day)

Ship type Capesize Panamax Handymax Handysize

Current TCE 6,426 8,633 11,694 9,703

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

Cash earnings -1,074 2,133 5,694 4,703

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

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

Daily profit/(loss) -9,315 -2,777 1,223 758

Breakeven TCE 15,741 11,410 10,471 8,945 SOURCES: CIMB, MOORE STEPHENS, CLARKSON RESEARCH SERVICES

Capesize rates have fallen due to lower bunker prices and slackening demand as weak manufacturing data from China further dents positive market sentiment. Brokers in Hong Kong predict that the market will hold flat this week if bunker prices stay low. “Belief in a stronger end to the year seems to be waning, but it‟s worth noting that the market did not begin to really push last year until August,” wrote broker Braemar. Early results for manufacturers‟ purchasing in China indicate that industrial output is still slowing. The HSBC Flash Purchasing Managers Index, a preliminary release of the PMI, retreated to 48.7 in May from a final reading of 49.3 for April. (Lloyd‟s List)

Chinese iron ore import prices have fallen to their lowest levels in six months as reports continue to circulate that steel mills are redelivering cargo to traders. For the capesize bulk carrier market, which relies on iron ore as its main cargo, the news will do little to support an improvement in vessel earnings. Chinese steel mills have been postponing shipments of iron ore as steel demand is slowing down.

The last time mills delayed iron ore deliveries was back in October and it led to a counter-intuitive effect on demand for imported ore. Greater volumes are pushed onto the spot market, which in turn reduces the price. Prices fell so low that mills then began to restock.

Clarksons said that the high steel production and low import levels suggested that Chinese steel mills are continuing to source an increasing volume of iron ore from existing stocks or domestic sources rather than boosting purchases of high-cost iron ore from the tight seaborne market. (Lloyd‟s List)

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May 29, 2012

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Traders in Asia say that buyers from China have cancelled orders for thermal coal, supporting reports that emerged last week of steel mills delaying deliveries of iron ore shipments. The defaults and delays come as commodity prices tumble, amid concerns that China‟s economy is slowing more abruptly than expected. At least six thermal coal cargoes have been re-offered on discount, including shipments from the US, Colombia and South Africa, according to Reuters.

An international trader estimated that Chinese traders buying a cargo for a capesize vessel could lose as much as US$1.5m. Benchmark thermal coal prices have fallen to a two-year low. China‟s utilities are well stocked with coal, having bought the commodity in anticipation of higher second-quarter demand. However, growth figures for China in April were well below economists‟ forecasts, taking the government by surprise. The figures suggest that the economy of the world‟s greatest consumer of both thermal coal and iron ore is slowing sharply. (Lloyd‟s List)

The panamax bulk carrier market is in a stand off as owners attempt to prevent rates from falling any further and charterers hold back on fixing ships against cargoes on the expectation of more vessels becoming available for loading dates in the second half of June, but owners are still sticking with higher prices. Unfortunately, the slow down in activity levels has led to rates being chipped away.

Following reports over the last few days about Chinese mills and traders redelivering or deferring iron ore and thermal coal cargoes due to lower than anticipated demand, the dry bulk market has become nervous. This is particularly notable for the panamax sector, which has been enjoying increased employment opportunities from both the Atlantic and Pacific markets shipping coal to China due to expectations of another northern hemisphere summer season creating drought and limiting hydroelectric production. (Lloyd‟s List)

The world‟s two largest supramax markets diverged further this week, as weak commodity markets dragged down the Pacific trade. One Singapore-based broker said the fall in Pacific rates could largely be attributed to the weak commodities market, particularly for iron ore, which this week saw prices drop to the lowest level in five months. Coal prices also fell this week. The markets affected — the Indonesian coal trade and the Indian iron ore trade — are two of the largest supramax trades in the region.

Brokers also noted that Indonesian coal cargoes were commonly getting fixed again on an “arrival pilot station” basis, meaning shipowners have to pay to get to the loading port, further reducing their already meagre profit margins. “We reckon in mid-June we‟ll be coming up again,” the broker said, pointing out that the delayed cargoes could not be put off indefinitely.

These great expectations will no doubt be greeted with enthusiasm in the Atlantic, where the Pacific market crash is stirring fears that shipowners will soon start ballasting over in large numbers. For now, though, in the Atlantic, rates went up as fast as they went down in the Pacific. Pet coke and scrap cargoes from the US Gulf lifted markets, as did strong grain and sugar exports from Brazil. (Lloyd‟s List)

Vale is considering launching another floating storage centre outside China to bypass the ban on its 400,000 dwt vessels entering Chinese harbours. Vale‟s global marketing director Claudio Alves told reporters that South Korea was among the locations that Vale was considering. Vale has used a converted very large crude carrier to store ore for transhipment in the Philippines.

SHIPPING MONITOR

May 29, 2012

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Rongsheng, China‟s largest non-state shipbuilder has said that it is on track to deliver 10 of 14 outstanding orders of VLOCs that it had at the beginning of the year. In April, Rongsheng delivered Vale Dongjiakou and Vale Dalian. (Lloyd‟s List)

Vale plans to build a second floating iron ore transshipment unit, to be located with the first one at Subic Bay in the Philippines. The first station was put into operation in February this year, enabling ore on Valemax ships to be reloaded onto smaller vessels for further regional distribution. “Together with our distribution centers in Oman (already operating) and Malaysia (being built), these transfer stations will absorb the entire capacity of our fleet of 35 Valemax ships, which can transport approximately 60m metric tons of cargo per year,” Vale said. (Metal Bulletin)

Vale has denied claims from China that it has shunned business with the country‟s shipowners and says it has chartered seven Cosco ships this year. Cosco chief executive Ma claimed that Vale had spurned business with Cosco‟s vessels, retaliating against the ban against on the mining giant‟s valemax vessels entering China‟s ports. Mr Ma said that a boycott by Vale had hurt Cosco‟s business and described this as an irrational reaction to the government‟s ban. (Lloyd‟s List)

Dry weather in eastern Australia is threatening the local grain harvest even before it is fully planted. GrainCorp, one of Australia‟s biggest agricultural firms, put out guidance figures for future production warning that the current drought could pose a threat to next year‟s harvest, which is currently being seeded. Australian government estimates released in March already forecast a 1.1m tonnes drop in wheat exports to 19.9m tonnes total for next year, meaning a poor crop could put a substantial dent in exports. This would hurt the Pacific supramax trade, already one of the worst-performing dry bulk shipping subsectors of this year in terms of average charter rates. (Lloyd‟s List)

China will begin to lift its ban on imports of Virginia's hardwood and softwood logs under a six-month pilot project, Virginia Gov. Bob McDonnell said Wednesday.

Although technical details are being finalized, Virginia logs will be allowed to re-enter China beginning on June 1 in certain designated ports and with enhanced pest treatment and testing protocols under the terms of the pilot project. China banned hardwood and softwood log exports from Virginia and South Carolina in April 2011, citing pest interceptions on logs exported from the U.S.

China‟s ban on log imports from Virginia depressed throughput at the Port of Virginia last year. Total volume through the Virginia ports rose by just 1.2 percent year-over-year, half the growth rates at other East Coast ports. The value of Virginia's 2011 global log exports was estimated at nearly $57 million, down $10 million from 2010. Prior to the ban, Virginia was a major East Coast log supplier to China, the world's largest log importer. (JOC)

Rio Tinto could expand its global iron ore capacity to 450m tonnes per annum by 2016. The target capacity includes Rio‟s operation in Canada and its new project in Guinea. Rio is pressing ahead with expansion in iron ore, unlike rival BHP Billiton, which has recently decided to curb its US$80bn spending plan. (Metal Bulletin)

SHIPPING MONITOR

May 29, 2012

15

More than 600 Indonesian mineral exporters have gained the first of three approvals which are required before they can export again. “We have announced the names of the 608 companies that have been given clearance to export. Hundreds more are still being processed,” an official at the ministry of energy and resources said. The recommendation from this ministry has to be followed by registration with the trade ministry and final approval from Indonesia‟s finance ministry.

Aneka Tambang (Antam), Indonesia‟s second largest nickel producer, is one among the 608. Antam‟s president director Alwin Syah Loebis said, “We‟ve not been informed how long it needs to take to get approval from the ministry. It may take two weeks. It may take longer.” The introduction of a proposed 20% flat tax rate on minerals has not been confirmed, so even after registering as exporters, miners may still need to wait for the finance ministry to issue the regulations on the tax to be levied on ore exports. (Metal Bulletin)

At least one Indonesian exporter, nickel producer PT Aneka Tambang (Antam), has begun offering material for export again after the government confirmed a flat-rate 20% tax on minerals exports.

Antam has been negotiating with its buyers to share the 20% tax burden, Alwin Syah Loebis, Antam's president director said. “Our buyers are very understanding. They know that none of the additional 20% tax goes into Antam‟s pocket,” he said. “Some buyers have actually agreed to bear all of the tax costs, while some others are willing to share part of the costs.”

But Chinese buyers have said they are not willing to pay higher prices for Antam's ores. Antam has started offering nickel ore at 1.8% nickel grade at $73-75 cif Chinese ports this week, up $6 from its last offers before the export ban. Freight charges to China are about $18 per tonne, market participants said.

"This price is obviously too high and no one has accepted it," a source at a Chinese stainless steel mill said. "Do you think buyers will accept the higher prices? Of course not, demand [in China] is weak," an official at a trading company in China said. "Miners [such as Antam] have made a lot of money in the past several years. They are able to afford the taxes," another official at a trading company in China said. (Metal Bulletin)

The Chinese government is considering reserving cargoes of strategic commodities and energy products for national flag vessels, in an attempt to save ailing state-owned shipowners. A cargo reservation system would grant national flag vessels the right to carry certain proportions of the flag state‟s international trades, which would often come at the expense of cargo owners and foreign shipping lines. However, such a system can take many forms depending on cargo types and enforcement, so it remains difficult to assess its real impact at this stage. (Lloyd‟s List)

The long decline in dry bulk asset values could finally be grinding to a halt, as secondhand modern ships were sold at better prices than in recent deals. Brokers reported the 2005-built, 52,489 dwt Treasure Island was sold for US$20m-20.5m. The price reportedly paid for Treasure Island is well above the ship‟s current US$18.4m valuation by online appraiser VesselsValue and also an improvement over the last done deal: the sale of the 2006-built, 52,481 dwt Furness Hartlepool last month, selling for a reported US$20.5m.

Asset values for smaller bulk vessels have performed better throughout the downturn because these sectors of the market are thought to be suffering from less severe overtonnaging. Consequently, it is no surprise that they are the first to show signs of recovery. However, there were also

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reports of a larger panamax bulk carrier being sold at a price level above the last done deal. (Lloyd‟s List)

Tanker shipping

Average VLCC rates edged lower, mainly due to a 16.9% wow decline in rates on the Middle East-Far East trade as a result of an expanding tonnage list and as charterers held off from further fixing in order to bring VLCC rates down. In the coming weeks, rates are likely to hold steady as charterers progress to the second-half June loading programme. After the near-doubling of suezmax rates on the West Africa to US in the previous week, rates came down 29% as falling bunker prices are offering owners better returns. A more flexible tonnage list and softer VLCC rates also contributed to the decline in rates, according to Weber. The aframax market‟s performance was mixed with rates on the Caribbean declining 30% due to an oversupply of vessels. In the Mediterranean, availability was slightly tighter, which allowed aframax rates to increase 9.1% wow.

Both Weber and Lloyd‟s List highlighted the new oil-for-loan deal between Venezuela and China. Lloyd‟s List reported that Venezuela has voted to double the amount of money repayable in oil that it borrows from China in a move that will boost long-haul tanker shipments on the Americas to Asia trade route. VLCCs will gain the most from Venezuela agreeing to increase its borrowing from US$4bn to US$8bn, experts said. Also benefitting the VLCC trade, South Korea has begun to import more crude from the North Sea area since a free trade agreement with the EU came into effect in December.

Meanwhile, Japan, which is currently not generating any electricity from any of its nuclear plants, could suffer from electricity blackouts during what is expected to be a hotter-than-usual summer. Since Japan‟s gas-fired power plants are running at close to capacity, further LNG imports may be limited and Japan may have to increase the import of Middle East oil cargoes on VLCCs for power generation purposes. Balancing this out is a potential plateau of China‟s total import volumes as inventories have reached the highest levels in seven months. All considered, the VLCC sector, currently enjoying the highest rates of return, should continue to see the most resilient earnings in the immediate future, barring a sharp slowdown in China‟s GDP growth, a pause in its restocking activities or an escalation of hostilities in the Middle East that could cut off Iranian crude completely from the market.

Figure 22: Tanker freight rates

Last week

25-May-12 18-May-12 WoW (%) 2Q12 1Q12 4Q11 3Q11 2012 2011 2010

Baltic Dirty Tanker Index 733 765 -4.2% 772 814 813 708 797 788 898

Baltic Clean Tanker Index 609 616 -1.1% 626 688 743 677 664 726 731

42,923 45,618 -5.9% 42,872 36,114 23,018 11,372 38,688 22,137 42,638

AG-FE Ras Tanura-Chiba 35,686 42,958 -16.9% 39,888 31,916 18,689 8,160 34,953 18,212 41,615

AG-USG Ras Tanura-LOOP 16,301 16,352 -0.3% 15,310 3,959 592 -755 8,283 2,489 20,944

WA-USG Bonny-LOOP 51,030 52,890 -3.5% 44,141 42,176 28,451 13,621 42,924 24,841 43,466

28,489 36,131 -21.2% 20,474 25,113 20,704 10,020 23,346 17,238 29,593

MED-MED Sidi Kerir-Lavera 33,369 43,399 -23.1% 25,760 32,305 32,650 13,608 29,812 25,110 36,301

WA-USAC Bonny-Philadelphia 25,799 36,392 -29.1% 16,134 20,329 17,481 5,864 18,731 13,368 26,217

14,216 12,926 +10.0% 13,122 15,180 14,927 9,016 14,396 12,726 18,155

CARIB-USG Curacao-Texas 14,803 21,064 -29.7% 11,827 15,672 8,574 5,557 14,207 8,225 17,032

SEA-FE Jakarta-Chiba 7,914 6,681 +18.5% 7,081 7,941 7,617 5,667 7,613 8,007 14,652

MED-MED Sidi Kerir-Trieste 11,938 10,947 +9.1% 12,950 15,430 21,945 5,268 14,485 13,562 19,820

UKC-UKC Sullum Voe-Wi'shaven 23,324 16,220 +43.8% 20,105 19,334 24,806 13,830 19,627 18,599 24,220

AG-SEA Ras Tanura-Singapore 12,551 11,690 +7.4% 11,954 14,130 10,758 12,314 13,301 12,721 15,711

LR1 tanker Ras Tanura-Chiba 75k 4,449 6,079 -26.8% 6,104 3,003 6,858 13,214 4,185 10,462 14,539

Handysize Selected routes 11,841 11,525 +2.7% 10,546 15,642 13,395 7,278 13,701 12,644 13,148

MR tanker Selected routes 25-55k 6,132 5,566 +10.2% 5,869 4,805 7,505 6,478 5,211 7,587 7,756

Aframax average TCE (US$/day)

Clean tanker average TCE (US$/day)


VLCC average TCE (US$/day)

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Figure 23: Crude tanker TCE shipping rates (US$/day)

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

Ship type VLCC Suezmax Aframax MR product

Current TCE 42,923 28,489 14,216 6,132

Operating cost -12,807 -11,436 -10,245 -8,185

Cash earnings 30,116 17,053 3,971 -2,053

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

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

Daily profit/(loss) 13,108 6,708 -5,059 -7,927

Breakeven TCE 29,815 21,781 19,275 14,059 SOURCES: CIMB, MOORE STEPHENS, CLARKSON RESEARCH SERVICES

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Charterers have secured ships for most of their crude oil cargoes loading on VLCCs in the Middle East Gulf spot market in early June and are now holding back from fixing in order to bring freight rates down. Their tactics appear to be working, with brokers reporting that rates were falling. Singapore-based broker Marex Spectron highlighted the oversupply of ships available for the small number cargoes to come onto the market, saying in a report that nine cargoes were left for the 36 VLCCs available, or four ships for every cargo.

Other brokers reported that delays at Chinese discharge ports were stopping rates from dropping even further. The Chinese were active in the market over the last week. Unipec booked six VLCCs for Middle East Gulf to China voyages. The Chinese were not just taking crude from the Middle East Gulf. Unipec took two VLCCs from West Africa, which commentators have previously said is part of China‟s strategy to diversify where it sources its oil from, amid concerns over supply from a Middle East region wrought with tension. (Lloyd‟s List)

Chinese demand for crude oil showed anaemic growth in April and the country‟s appetite for products even declined slightly, the first time it did so since February 2009. Data released by the National Bureau of Statistics shows the weakness in underlying demand in China. Crude demand grew by 0.1% month on month, and product demand declined by 0.3%. Latest official customs data showed a 1.3m tonne month-on-month decline in April with imports totalling 22.3m tonnes that month. This represents approximately four very large crude carrier loadings. Inventories in the country rose nonetheless, reaching their highest level in seven months, according to Chinese government data. Chinese imports for the year to date were still up by 9.3% compared to last year. However, for April, year-on-year growth amounted to only 3.3%, fuelling analysts‟ fears of a slowdown. (Lloyd‟s List)

Venezuela has voted to double the amount of money repayable in oil that it borrows from China, in a move that will boost longhaul tanker shipments on the Americas to Asia trade route. VLCCs will gain most from Venezuela agreeing to increase its borrowing from US$4bn to US$8bn, experts said. Repayment in oil suits China, which is increasingly diversifying its sources of oil away from the troubled Middle East. The Americas to Asia oil trade has grown by 33% year on year and is at its highest level since 2007. This trade has made up around 18% of tonne-mile demand for VLCCs so far in 2012. A further increase in cargoes here will contribute to higher tonne-mile growth in VLCCs than for other crude tanker classes. (Lloyd‟s List)

A record 24m barrels of North Sea crude carried on 12 VLCCs has been exported to South Korea since December after a free trade agreement with the European Union opened up an arbitrage opportunity. The agreement, which started in July last year, reportedly gives South Korean refiners around a $3 per barrel discount compared with prices from other suppliers. The aim of the agreement was to enable an expansion of trade flows between the EU and South Korea, which in the case of North Sea oil appears to be working.

The longhaul voyage also appears to be lucrative for shipowners plying the trade route. The rise in North Sea oil exports to South Korea comes as interest among energy majors in North Sea crude exploration and production is building. Recent tax breaks handed out by the UK coalition government are encouraging oil companies to invest in the North Sea and explore the last untapped part of the region in the deepwater west of Shetland. (Lloyd‟s List)

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Even with more business being concluded in the cross-Mediterranean spot market this week, aframax rates failed to budge as an oversupply of ships immediately absorbed any cargoes coming onto the market. Still, brokers said the Mediterranean market was seeing more action in terms of trade than it had in recent days. Several cargoes coming to market on failed to make a dent in rates as more than half a dozen vessels came out to bid on the trips. Vessels are now commonly being fixed only a week before loading. Brokers active in the Mediterranean market said that it was likely that rates would trend downward somewhat over the coming days. (Lloyd‟s List)

P&I clubs have welcomed hints that the European Union could offer to suspend its threatened ban on P&I insurance of cargoes laden in Iran as a bargaining chip in new negotiations over Tehran‟s nuclear programme. The west is ready to make concessions, although it will stand firm on prohibiting the import of Iranian crude into the EU. The P&I restrictions, due to take effect on July 1, have been widely criticised by Asian countries, many of them major buyers of Iranian crude. Without cover, few shipowners are prepared to carry consignments, because of the risk of massive liability claims in the event of a serious spill. Indian and Chinese shipowners in particular have called on their governments to step into the breach by providing so-called sovereign cover. (Lloyd‟s List)

EU oil companies and their overseas units cannot buy, import into the EU or transport even tiny amounts of crude or refined oil of Iranian origin under rules coming into effect July 1. However, the way many oil transactions are carried out in Asia mean they could inadvertently break the rules, and even their best efforts to comply will be further undermined by a widespread industry practice of blending fuel oil from several sources. A major component of Iran's oil exports is fuel oil, used to power ship engines or in power stations.

The EU embargo is causing difficulties for international shipping companies buying fuel for their vessels in Singapore—the world's largest bunkering, or ship refueling port—as blending is deeply entrenched there. Singapore has no embargo against Iranian oil, and once Iranian oil lands in any of the Platts-designated onshore or offshore storage sites in Singapore or Malaysia, its onward sale in the window will have Singapore as the source of origin, and not Iran. It is unclear if buying Iranian-blended fuel in the window would be considered a less serious offense by Brussels given the buyer has no control or knowledge of the source of the cargo.

Their insurance cover may be invalid if they buy Iran-blended bunker fuel, as most are insured by the London-based International Group of P&I Clubs, which has to comply with the ban. (WSJ)

Talks in Baghdad between Iran and six world powers have ended without any new progress, apart from an agreement from all parties to meet again in June. Delegates from Iran met their counterparts from the UK, China, France, Russia, the US and Germany for two days to try to convince Iran to suspend its nuclear weapons programme.

The main focus of a package of proposals put to Iran aimed to persuade Tehran to shelve its enrichment of uranium to 20% purity. The offer did not include any plan to relax sanctions, as many had hoped.

Some sources had expected the six powers to use the forthcoming insurance ban on tankers carrying Iranian oil as a bartering tool. The ban comes into force on July 1, making it difficult for tankers to secure adequate liability cover. However, the insurance ban was not discussed. (Lloyd‟s List)

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As Iran continues to grapple with the West over its nuclear ambitions, experts say the nation could double its already sizable oil output if sanctions were lifted to allow foreign investment into its oil industry. Iran currently produces around 3.4m barrels of oil a day, according to the U.S. Energy Information Administration. That makes it the world's sixth-largest oil producer.

If the current sanctions were lifted to allow foreign capital and knowledge into Iran, the country could boost oil production significantly. “The discoveries there have been huge. Billions of barrels have been added in the last few years.” At 137bnbarrels, Iran has the world's fourth largest supply of proven oil reserves -- more than twice the size of Russia's. Yet Russia produces around 10 million barrels a day, nearly three times as much as Iran.

The problem with Iran is that much of its oil equipment is old, and drilling new wells has been slow, due to years of sanctions and underinvestment. They need international partners to bring money and know-how. Any of the big oil firms would jump at the chance to invest in Iran but the problem is western sanctions prevent these companies from investing in Iran. (CNNMoney)

The Seaway pipeline that connects Cushing, Oklahoma to the US Gulf Coast has reversed direction and the first oil will arrive in Houston early next month. Volumes are initially expected to reach 150,000 barrels per day, enough to fill a VLCC in two weeks. Pipeline owners Enbridge and Enterprise Products intend to increase capacity to 400,000 barrels per day by early 2013 and ultimately up to 850,000 barrels per day. Until recently, the pipeline was pumping oil in the opposite direction, creating a glut of oil in the American heartland. The reversal is part of a growing trend that could see the US reduce its dependence on Middle Eastern oil as the North American continent increases its own oil production. (Lloyd‟s List)

Eitzen Chemical put on a brave face yesterday by pointing to potential improvements to come this year, but suffered a US$16.8m loss in 1Q12. Oslo-headquartered Eitzen said it was in discussions with its banks over a financial restructuring. The company‟s time charter revenues increased by 10% in the first quarter compared with the previous quarter to $2.1m, averaging $10,640 per day. Eitzen is convinced that the supply of chemical tanker tonnage will be reduced over the next few years as owners hold back from ordering and scrapping continues. It said the 2012 outlook was more optimistic than for 2011. Meanwhile, Bergen-based chemical tanker owner Odfjell has warned of tough times in the first half of this year for chemical tanker owners after making a loss of $4m in the first quarter. Maritime consultancy Drewry has weighed in with its forecast, saying in a report last week that chemical tanker owners face insolvency unless freight rates pick up. (Lloyd‟s List)

Frontline 2012 , the tanker spin-off set up by John Fredriksen at the end of last year in response to Frontline‟s substantial losses, said yesterday it generated a net income of US$2.4m for the first quarter and will aggressively stamp its presence on the tanker market by ordering up to 24 new ships. The target within three years is to create a world-leading commodity shipping company comprised solely of modern ships. As such, Frontline 2012 is building its fleet and is in discussions to take over a total of 16 newbuilding contracts for crude and product tankers, with eight more optional contracts. In order to finance these contracts, valued at $578m, Frontline 2012 said it will raise around $200m in new equity. Frontline 2012‟s current newbuilding programme comprises five VLCC tankers, at a contractual cost of $525m. (Lloyd‟s List)

http://money.cnn.com/2012/03/30/news/international/Iran-sanctions/index.htm?iid=EL

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With Japan‟s nuclear power now completely offline, experts argue that greater volumes of LNG will be shipped on vessels to Japan to meet the power requirement that keeps air conditioners running. The Japan Meteorological Agency has forecast higher than average temperatures this summer, particularly in western Japan, where the nation‟s third largest city is located.

However, other experts, including the International Energy Agency, have pointed out that Japan‟s gas-fired power plants are already running at near full capacity, limiting the amount of extra LNG they can take. With nuclear power out of the picture and limits to LNG intake, there are real fears that the lights could go out across Japan this summer.

With gas plants at capacity, Japan has been burning crude oil to generate power. This is evident from shipbrokers‟ fixture lists, which show Japan has been busy booking VLCCs from major oil producers in the Middle East. (Lloyd‟s List)

Figure 26: Japanese imports of various fuels and energy sources

SOURCES: WSJ

The United State‟s energy system is „just short of chaos‟ and the United States could be a mere three years away from gas lines if something doesn‟t change, according to John Hofmeister, CEO of Citizens for Affordable Energy. Today, the United States consumes 18.5m barrels but produces only 7m barrels daily, Hofmeister said. As a result, customers will have paid more for gas in 2011 and 2012 than in any other year in living memory.

A former president of Houston-based Shell Oil Co., Hofmeister noted that the United States has had a non-drilling policy on 85% of the U.S. coastline‟s outer shelf for the past 30 years. On land, half the drillable land is federally owned, yet no permits are being granted, he said. If such available oil reserves are opened up, it eliminates 3m barrels a day of imports," he added. (Metal Bulletin)

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Commodity prices and currencies

Oil prices stabilised last week with WTI crude declining 0.9% wow to US$90.66/barrel from US$105/barrel a month ago. Bunker prices inched up slightly by 0.2% wow, trading at US$664.50/tonne. For the coming week, the US May jobs report as well as the situation in Europe would most likely dictate the direction of oil prices.

Chinese iron ore import prices continue to fall, dipping 1.4% wow to US$137.50/tonne as it was reported that steel mills are postponing purchases of iron ore and some even redelivering cargoes. Steel prices also weakened about 1% wow on concerns over China‟s slower growth. Early results for manufacturers‟ purchasing in China indicate that industrial output is still slowing.

Figure 27: Economics & Commodities

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

25-May-12 18-May-12 WoW (%) 2Q12 1Q12 4Q11 3Q11 2012 2011 2010

WTI crude (US$/barrel) 90.66 91.48 -0.9% 99.35 102.84 93.90 89.56 101.09 95.25 79.39

Sing bunker (US$/ton) 664.50 663.00 +0.2% 710.17 744.78 690.46 668.91 727.46 672.87 474.87

China: Iron ore spot cfr imports (US$/ton) 137.50 139.50 -1.4% 145.75 147.12 147.85 183.57 146.43 172.46 151.92

China: Domestic iron ore (US$/ton) 168.29 168.77 -0.3% 170.30 173.12 183.20 204.85 171.71 195.98 154.95

China: Rebar (Rmb/ton) 4,052 4,097 -1.1% 4,225 4,238 4,347 4,926 4,231 4,738 4,167

China: HRC (Rmb/ton) 4,191 4,227 -0.9% 4,321 4,265 4,297 4,802 4,293 4,658 4,241

China: CRC (Rmb/ton) 5,076 5,124 -0.9% 5,173 5,214 5,339 5,510 5,194 5,491 5,600

China: Wire rod (Rmb/ton) 4,076 4,113 -0.9% 4,249 4,259 4,496 4,981 4,254 4,783 4,244

Qinhuangdao 6800 kc coal FOB (US$/ton) 142.27 142.27 +0.0% 143.54 143.66 153.60 149.52 143.60 148.03 115.09

Newcastle 6700 kc coal CFR (US$/ton) 105.45 105.80 -0.3% 108.87 121.63 127.56 131.13 115.25 129.61 110.70

Euro US$1.25 US$1.28 -2.1% US$1.30 US$1.31 US$1.35 US$1.41 US$1.31 US$1.39 US$1.33

Yen ¥79.68 ¥79.02 -0.8% ¥80.53 ¥79.39 ¥77.33 ¥77.73 ¥79.96 ¥79.72 ¥87.79

Renminbi Rmb6.34 Rmb6.33 -0.3% Rmb6.31 Rmb6.31 Rmb6.36 Rmb6.42 Rmb6.31 Rmb6.46 Rmb6.77

HK$ HK$7.76 HK$7.77 +0.0% HK$7.76 HK$7.76 HK$7.78 HK$7.79 HK$7.76 HK$7.78 HK$7.77

Ringgit RM3.15 RM3.13 -0.6% RM3.08 RM3.06 RM3.15 RM3.02 RM3.07 RM3.06 RM3.22

S$ S$1.28 S$1.28 -0.5% S$1.26 S$1.26 S$1.29 S$1.23 S$1.26 S$1.26 S$1.36

Baht THB31.67 THB31.41 -0.8% THB31.06 THB30.98 THB31.00 THB30.12 THB31.02 THB30.48 THB31.72

Rupiah Rp9,454 Rp9,350 -1.1% Rp9,228 Rp9,079 Rp8,983 Rp8,608 Rp9,153 Rp8,772 Rp9,086

US$ LIBOR - 3m (%) 0.47% 0.47% +0.00% 0.51% 0.51% 0.48% 0.30% 0.49% 0.34% 0.34% SOURCES: CIMB, COMPANY REPORTS

Chinese steelmakers reduced their export prices for hot rolled coil (HRC) on lower domestic prices and fewer overseas bookings. Steelmakers including Anshan Steel and Wuhan Steel have cut their June list prices since the previous week and also reduced export prices in response to the sluggish spot market. (Metal Bulletin)

China‟s imported iron ore market continued its downward trend as buying interesting remained thin due to weak steel prices. Iron ore inventories at steel mills near powers are as low as one week‟s worth, a Shanghai trader said, while stockpiles of finished steel products are well above normal levels. Slack domestic demand and a shaky external economic environment are still weighing on the market, and prices of 62% Fe fines are likely to sink below US$125 per tonne cfr, several traders said. (Metal Bulletin)

US crude oil stocks have reached 382.5m barrels, their highest level since 1990, according to the latest American Department of Energy data. Bunker prices have plummeted in recent weeks as US crude oil stocks ballooned to their highest level in over two decades. With the US, the biggest single oil consumer, showing signs of crude oversupply, the price of oil took a tumble, dragging bunker fuel prices along with it. Continued uncertainty in Europe driven by the sovereign debt crisis shook confidence in an economic recovery there, depressing oil prices further. “In a lot of places in the US it is the

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old-fashioned infrastructure that is keeping the prices up,” a broker said. The recent reversal of the Seaway pipeline, which connects Houston to Oklahoma, has also reduced an oil glut in the American plains, while simultaneously drawing more crude towards Houston. (Lloyd‟s List)

Figure 28: Singapore bunker fuel (US$/MT) and US WTI Crude (US$/bbl)

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Figure 29: China domestic iron ore prices versus spot prices in India

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Figure 30: Domestic Chinese coal price vs. Newcastle price (US$/tonne)

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Figure 31: Domestic Chinese steel prices (Rmb/tonne)

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(a) Malaysian Bulk Carriers, MISC Bhd

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(a) -

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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

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business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978.

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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

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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 solely to persons who qualify as "Major 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 and investment professionals 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 an Institutional Investor must not rely on this communication. However, the delivery of this research report to any person in the United States of America shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. 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.

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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 and Jakarta 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)

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Recommendation Framework #2 **

Stock Sector

OUTPERFORM: Expected positive total returns of 15% 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 +15% or better over the next 12 months.

NEUTRAL: Expected total returns of between -15% and +15% 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 +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months.

UNDERPERFORM: Expected negative total returns of 15% 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 -15% or worse over the next 12 months.

TRADING BUY: Expected positive total returns of 15% 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 +15% or better over the next 3 months.

TRADING SELL: Expected negative total returns of 15% 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 -15% 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.

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

ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCP - Excellent, 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, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, ITD - Good, IVL - Very Good, KBANK - 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, 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, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good:

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