The markets have been strong for yet anotherweek. In the Capesize market tonnage demand hasbeen driving rates upward and at the moment ratesare extremely healthy. Both operator and shippercargoes were in the market this week on C5 mostlooking at early October dates and paying aroundUSD 8.20. On the Tub / Qingdao route operatorshad a range of cargo dates available to interestedowners and the rates even from last week haverisen again almost USD 2.00 / tonne, now sittingaround the mid USD 18’s. On the C17 route shipperAssmang Ore and Metal were in the market and thefixing rates for cargoes on this route was aroundUSD 13.70.

On the Panamax routes rates have moved upwardstoo, however, there is a little more downwardforecast in the short term for this sector with lessenquiry seen. Out of Indonesia the freight rate forcargoes to India was around USD 9.40 with a 80cent premium for West Coast destinations. To SouthChinese Coal ports the freight rate was a touchbelow USD 8.00. Ex Australia the freight rate forEast Coast India cargoes were paying around USD14.90 and to China around USD 2.00 less at aroundUSD 12.85.

Bunkers have recorded small changes howevermost of the price changes in freight rates can beattributed to vessel returns. Singapore Bunkerscurrently sit around USD 342 / tonne IFO 380, USD317 / tonne bss Houston.

On the smaller size ships rates were also up a touchwith Handysize ships now getting rates in the USD9,000 for Pacific trips. Many higher level fixtureshave been reported however without a whole lot ofconsistency. Many owners are failing on subjects tokeep upping their rates. However, on the cargo sidethere is no marked increase so at least some of theincreases seem to be somewhat sentiment drivenpossibly influenced by the top size markets.

The rise of credit growth in China has causedconcern among credit rating agencies for a while.This week however, arguing that despite China’sefforts to introduce deleveraging policies, overallcredit in the corporate sectors remains at a 9 percent point. While S&P say they expect somedeleveraging over the coming years, it is likely tomuch more gradual than what was hoped earlier inthe year.

The result has been a one notch downgrade to A+from AA-.

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Few markets enjoy as steady supply asbig agriculture, with bumper crops forcorn, soybeans and wheat becoming thenorm over the past years, pushinginventories to their limit and pricesdown to levels where many smallerfarmers struggle turning a profit whenmarketing their produce.

While this surplus in producing regionsis a burden for many, the shippingindustry is set to enjoy the fact thatthere will be sufficient cargoes to satisfyone of the most demographically linkeddemand growth curves in the world.Quite simply, more people, more needfor food (and energy in the case of grainderived ethanol).

It is however important to understandwhat has caused the sensationalincreases in yield for key crops over thepast decade as it explains much of whatcan be expected to occur going forward.To illustrate this, corn is a good case inpoint.

Since 2000, the use of geneticallymodified strains of corn in the US hasseen explosive growth, increasing at anaverage rate of 13.4 per cent per yearuntil 2010. As the US market hasreached some level of saturation, thegrowth has levelled off, with 92 per centof current US corn being geneticallymodified to be either herbicide tolerant(HT), insect resistant, containing genes

from the soil bacterium Bacillusthuringiensis (Bt) or both. This allowsfarmers to rid their crops of the mostcommon yield hampering threats,namely weeds and pests.

As a result the productivity of US corncrops have seen tremendous gains overthe same period. Corn yields in the fiveseasons from 1996-2000 averaged 131.8bushels per acre, whereas the years2013-2017 are set to average 168.4Bu/acre.

The US is only one of several keymarkets in which GMO crops are used.Notable countries also allowing theiruse include Argentina and Canada, andwhile local legislation plays a large rolein their approval, the increased securityof supply, something which historicallyhas been unheard of when talking ofgrain and oilseeds, will most likely leadto further use in the coming years.

The downside of such steady supply is ofcourse that the urgency oftenassociated with shortages, leading tosudden spikes in freight rates, is set tobecome less frequent. Regionaldisruptions should however beexpected, as illustrated by the 2012droughts drastically reducing corn yieldsin the US. Individual harvests willtherefore remain at risk, particularly

Few as global warming is set to causeincreasingly frequent extremes inweather. However, chances are thatother regions will have ample supply tofill the gap, as the use of ever moreresistant crops continues to spread.

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The Affinity Dry Index (ADI) is calculated based on our freight rate estimates of the routes found in the route descriptions. Based on 7 January2016, each Affinity index uses the average of freight rates for each segment compared to base rate as of the index start date (note that theSupramax rate is included in the Affinity Ultramax Index calculation).

Please note:- As of 21 January 2016, the Affinity Dry Indices have been rebased to 7 Jan 2016, from their original starting point on 20 Aug 2015.- As of 14 July 2016 routes H4 and H5 have been added to the Affinity Dry Index and the Affinity Handysize Index calculation, causing small

negativechanges in each index not reflecting actual market movements.

The information contained within this report is given in good faith based on the current market situation at the time of preparing this report and as such is specific to that point only. While all reasonable care has been taken in the preparation and collation of information in this report Affinity (Shipping) LLP (and all associated and affiliated companies) does not accept any liability whatsoever for any errors of fact or opinion based on such facts.

Some industry information relating to the shipping industry can be difficult to find or establish. Some data may not be available and may need to be estimated or assessed and where such data may be limited or unavailable subjective assessment may have to be used.

No market analysis can guarantee accuracy. The usual fundamentals may not always govern the markets, for example psychology, market cycles and external events (such as acts of god or developments in future technologies) could cause markets to depart from their natural/usual course. Such external events have not been

considered as part of this analysis. Historical market behaviour does not predict future market behaviour and shipping is an inherently high risk business. You should therefore consider a variety of information and potential outcomes when making decisions based on the information contained in this report.

All information provided by Affinity (Shipping) LLP is without any guarantee whatsoever. Affinity (Shipping) LLP or any of its subsidiaries or affiliates will not be liable for any consequences thereof.

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