PPI TS 23 PRESENTATION – TARRAGONA 2019

THE OPEN HATCH SEGMENT

Saga Welco

Managing Fleets - Open Hatch Segment :

How do customers value high quality cargo care, efficient cargo handling and fulfilment of stringent transportation requirements?

CONTENT

Head office in Norway. Branch offices in main load / discharge areas

Specialized vessels for unitized cargoes; pulp, plywood, lumber, non-ferrous metals and project cargoes

Short, medium and long term Contracts of Affreightment

Parcel service or full vessel shipments

Fleet of 53 vessels, 2,66 M ton DWT 43,131 – 56,816 Dwt capacity1,673,000 - 2,557,000 Cft capacityLOA 194.9 - 213.5 m; Beam 30.5-32.2 mAdvanced cargo handling system:

10 - 11 box-shaped holds, open hatch access, no overhang 2 x 40 – 70 mt travelling gantry cranesRain protection with retractable curtainsDehumidification system in all holds

SAGA WELCO

COMMODITIES CARRIED

Paper, Rolled Newsprint/DirectoryLumber, Packaged Kiln

Dried/Green

Clay, Bagged/ Bulk

Bulk CommoditiesSteel Coil/Pipe/Bar

Aluminium IngotWind Mills

Pulp, Baled and Rolled

Jumbo units

THE OPEN HATCH SEGMENT

SUPPLY SIDE TRENDS

DEMAND SIDE TRENDS

SERVICE LEVEL

FUTURE

- Fleet of Open Hatch breakbulk vessels built for lifespan service to selected industries, specialised to handle high value unitised cargo such as:

- Wood pulp

- Plywood / lumber

- Nonferrous metals

- Project cargoes, steel products

- Vessels are tailor made for cost efficient cargo care and handling with minimum risk of claims for damage

THE OPEN HATCH SEGMENT

- Providing:

Parcel cargo concept, offering semi-liner service to industrial

customers

Short / medium and long term Contracts of Affreightment (COA)

Proven reliable service and commitment

- COA portfolio with several customers

Larger pulp mills

Consolidation among pulp producers

Large customers require transportation service / frequency to all

main areas

- Leading to consolidation in shipping – critical mass / large fleet of vessels

OPEN HATCH SEGMENT

OPEN HATCH - SUPPLY SIDE TRENDS

• The Open Hatch Gantry crane fleet is «shrinking» year by year and is currently 99 vessels above 30,000 DWT with 23 vessels older than 25 years.

• The Open Hatch Jib crane fleet is growing and is currently 128 vessels above 30,000 dwt (6 mill dwt).

• The Semi Open Hatch Jib crane fleet above 30,000 dwt equals 486 vessels ( 19 mill dwt).

OPEN HATCH - SUPPLY SIDE TRENDS

• Newbuildings have «economy of scale» due to larger cargo intake and less investment cost as a result of a softer newbuilding market and less expensive jib cranes

• Only G2Ocean and Saga Welco can deliver a frequent parcel service to all destinations from East Coast South America

• PanOcean and Cosco have successfully secured long term full ship contracts.

• Containers offer service from a few large ports

Increasing demand for market pulp in terms of volume and TMD (ton mile demand)

Main end user growth market is Asia (China)

Large expansion of hardwood pulp capacity in S. America 2020-22

Larger pulp mills / bigger customers / longer term shipping contracts

Pulp producers invest billions $$$ in production capacity and the product needs to be transported to the markets across the world – need reliable long term transport providers / owners

DEMAND SIDE TRENDS

The main success factors and key performance indicators historically provided by the Open Hatch segment to the market pulp industry for its product to the port of discharge have been among the following:

- Owners focused on serving the market pulp industry

- Competitive terms

- Reliability of service / scheduling

- Flexibility in volume / areas, covering all main markets

- Predictable transit times

- Minimal cargo claims

Fulfilment of transportation requirements

WHAT LEVEL OF SERVICE IS EXPECTED?

The main front haul market for the Open Hatch vessels has traditionally been closely linked to the market pulp industry through long term Contracts of Affreightment, which have provided customers with the necessary vessel capacity and high quality service, and the owners with employment of the vessels at reasonable return on investment.

Large capital investments in new suitable vessels will be required in order to provide the necessary capacity to provide for:

1) The new transportation requirements coming on stream in the near future

2) To renew the aging part of the Open Hatch fleet

OPEN HATCH / MARKET PULP - FUTURE?

The investment in new vessel capacity will only be financially feasible through a combination of long term commitments from customers and at terms which give owners a reasonable return on investment.

How do the market pulp producers value service from ship owners who will be willing to invest in specialised vessels with optimum cargo care, efficient cargo handling and supported by a highly skilled and professional organisation providing fulfilment of stringent transportation requirements?

The answer is important in order for ship owners to evaluate the feasibility of investment in the right type of vessels to secure future deep sea transportation capacity combined with the expected level of service.

OPEN HATCH / MARKET PULP - FUTURE?

THANK YOU FOR YOUR ATTENTION!

Kurt Erik Hjelset

keh@sagawelco.com