Car Carrier - brsbrokers.com

1 Car CarrierClear skies in sight?The car Carrier sector s regression in 2016 seems to have been halted and perhaps reversed in 2017. Demand side indicators spell out a mixed picture. Sales of vehicles in the key markets of China, the European Union (EU) and the United States (US) posted strong performances, but compared to 2016 slowed down in China (+3%) and the EU (+ ), and even slipped overall in the US ( ). 113 NOCC BALTIC 12 decks incl. 4 hoistable. 53,884 square meters equivalent to 6,450 in March 2017 by Hyundai Heavy Industries (HHI) at the Samho yard in South Korea to Norwegian Car Carriers (NOCC). Operated by Liberty Maritime Corporation, who renamed her Liberty activity was consistently sustained throughout the year, with an average of 20 deals registered each month, with the exceptions of September and October when activity slowed down to around 15 deals per month.

2 During the first three quarters of 2017, durations of employment generally did not exceed two months, but they grew to between four to five months in the last quarter. The duration of employment is intrinsically related to the confidence that operators have in their cargo volumes, so the fact that they were unable to commit to long term durations (3+ years) should not come as a surprise. Nevertheless, the size of the idle fleet gradually shrunk from its peak of approximately 30 ships at the start of the year to none at all by November-December in Asia-Pacific, and only a few exceptions in Europe-Atlantic. Downward pressure on charter rates was finally released, but their firming up has proven to be a painfully slow process with only minor improvements so far.

3 Prices rose year-on-year (y-o-y) for both oil (+ ) and nonfuel commodities (+ ), but the positive externalities on the purchasing power of emerging market and developing economies (EMDEs) were slow to be felt. Cargo volumes therefore might have improved relatively compared to the past year, but they still have a considerable way to is therefore on the supply side that we find the keys to reading the performance of the sector in 2017. Heavy demolition activity coupled with negligible investment in newbuildings over the past 24 months resulted in sluggish growth of the fleet. Within this prevailing demand and supply context, operators streamlined their fleets and sought more efficient vessel utilization, so that any extra-ordinary shortage of space could be met through tonnage from the charter market, which was in abundance.

4 As a result, the idle tonnage overhang started drying up, particularly during the fourth quarter, when better than expected cargo volumes out of South Korea and end-of-the-year export quota targets from vehicle manufacturers drove up chartering activity and led to a temporary supply shortage, mainly in Asia-Pacific. Over the course of the past 12 months, the sector s supply side balance had therefore achieved an impressive International Monetary Fund (IMF) is forecasting rises in 2018 in global growth of as well as in world trade volume of However, geopolitical and protectionist risks remain on the horizon, most notably Brexit and any eventual renegotiation of the North American Free Trade Agreement (NAFTA).

5 Nevertheless, we expect that the rebalancing of the supply side is likely to continue in 2018 and that this will act as a buffer to demand side volatility, the extent of which will determine the pace of recovery of charter - Annual review 2018 BRS - Annual review 2018114115 CAR CARRIERCHARTERING ACTIVITYThe Ongoing Anti-Trust InvestigationAs anticipated, the sweeping investigation into the global car Carrier price fixing scandal produced further results throughout the year. In March, South Africa s Competition Commission (CC) proceeded to refer a complaint to the Competition Tribunal against K Line for engaging in prohibited practices in respect of tenders issued by Toyota South Africa Motors (TSAM) for the shipment of Toyota vehicles from South Africa.

6 As a result, the CC is seeking to slap an administrative penalty onto K Line equal to 10% of its annual turnover. In June, Mexico s Federal Economic Competition Commission (COFECE) imposed fines totalling 581,660,000 Mexican pesos ($ million) on five car Carrier operators CSAV, K Line (including K Line America), MOL (including Mitsui OSK Bulk Shipping), NYK and WWL after finding them responsible of monopolistic practices and price fixing. In July, the United States (US) District Court of Baltimore indicted Messrs. Anders Boman, Arild Iversen and Kai Krass, all former executives of WWL, on charges of price-fixing.

7 This brings the number of executives to have been charged by the US Department of Justice (DoJ) since the start of the investigations to eleven. In August, the Federal Court of the Australian Competition & Consumer Commission (ACCC) convicted NYK of criminal cartel conduct and ordered it to pay a fine of $ million, making it the second highest fine imposed in ACCC history and the first successful prosecution under the criminal cartel provisions of the Competition and Consumer Act 2010 (CCA). During the month of September, Hoegh Autoliners was first referred to South Africa s CC s Tribunal for prosecution on seven charges relating to collusive tendering, price fixing and market division, and then agreed a settlement with the US DoJ, including a fine of $ million in relation to exports from the US to the Near East.

8 In October, Fiat Chrysler Automobiles (FCA) filed a complaint with the US Federal Maritime Commission (FMC) seeking damages from seven shipping companies, namely WWL, EUKOR, NYK, MOL, K Line, CSAV, and Hoegh Autoliners, for losses suffered from their price-fixing practices in their seaborne shipments of vehicles. Inter alia, FCA is arguing that it is still being damaged because the prices for transport services currently in force are based on the rigged prices of the past, which were never filed with the FMC. In November, in the aftermath of Hoegh Autoliners agreement with the US DoJ, Ingar Skiaker stepped down as CEO of the like we wrote last year, given the seemingly endless proportions that the scandal is reaching, with some probes by governmental authorities still underway (Australia, Brazil, South Africa, US, etc.)

9 , we anticipate that in 2018 more convictions and penalties will follow and that possibly new investigations are likely to ACTIVITYH eavy demolition activity coupled with negligible investment in newbuildings over the past 24 months resultedin sluggish growth of the fleetPicture: THRUXTON, with post-Panamax beam. 12 decks incl. 4 hoistable. 62,700 square meters equivalent to 7,400 in January 2018 by Shin Kurushima Dockyard at the Onishi yard in Japan to Zodiac : VIKING DESTINY, 12 decks incl. 4 hoistable. 56,794 square meters equivalent to 6,700 CEU. Delivered in March 2017by CSC Jinling Shipyard in China to Gram Car Carriers (GCC) and operated by Hoegh activity was sustained in 2017with an average of20 deals each monthThe dark clouds that were looming on the sector s supply side horizon appear to have dissipated, with clearer skies perhaps in sight.

10 Based on a capacity of 1,000 CEU and above, at the turn of the year, the fl eet counted 757 vessels equal to approximately million CEU, with an average age of years. It marks the fi rst time ever that the million CEU threshold is breached. Compared to 2016, the fl eet expanded by , capacity rose by and the average age increased by The fl eet s growth rate had actually contracted in 2016 for the fi rst time since 2009 and averaged approximately 5% over the past 5 years. BRS - Annual review 2018 BRS - Annual review 2018116117 The overall orderbook ended the year at 32 units, representing of the current fl eet, stretching out into 2021, and accounting for a total of approximately 230,000 CEU.