Oil Tankers: The tanker market continued to decline during 2Q:09, with rates for modern
VLCCs averaging $27,720 per vessel/day compared to $130,671 per vessel/day in 2Q:08. We
suggest that part of this weakness has been the result of VLCCs, which were being used for
floating storage, offloading their cargoes and returning to trading. However, we estimate 35-50
vessels are still being used for floating storage and expect this number to gradually fall over the
course of the year. We continue to believe 2009 will be a difficult year for tankers as worldwide
oil demand growth slows and new vessels enter the fleet.
n We have updated our rate assumptions, forecasts and price targets for a number of tanker
names in our coverage universe (see page 10).
n Dry Bulk: Dry bulk rates continued to trend higher in 2Q:09, particularly Capesize rates, as
China remained an active importer of iron ore. We suggest this increase in imports was partly
due to restocking and partly to the replacement of domestically mined ore with cheaper, higher
quality imported ore. However, we believe the surge of imports into China will be more subdued
in the second half of 2009 as stockpiles remain high and rising ore prices make domestic ore
more competitive. Furthermore, while OECD industrial activity appears to have stabilized
somewhat, we believe the outlook for any meaningful recovery in output is weak.
n We have updated our rate assumptions, forecasts and price targets for a number of dry bulk
names in our coverage universe (see page 19).
n LPG: Time charter rates for VLGCs fell during 2Q:09 as a number of new deliveries into the
fleet weighed on the market. An uncertain outlook for Middle Eastern exports, combined with
excessive tonnage supply, we think could lead to a difficult near-term market environment for
the sector.