Monthly Review of theShipping IndustryInternational award for the Greek “flag” and the value of the Greek-owned merchant fleetEconomic Analysis & MarketsMarch 2015

Ilias Lekkos Lekkosi@piraeusbank.gr Dimitris Gavalas Gavalasd@piraeusbank.grIrini Staggel Staggelir@piraeusbank.gr

Piraeus Bank4 Amerikis Str., 105 64, Athens, GreeceTel.: (+30) 210 328 8187, Fax: (+30) 210 328 8605

researchdivision@piraeusbank.grBloomberg Page: <PBGR>

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• The Greek flag is one of the best flags in the world.

• Reduction of 2.2% in 2014 in the number of ships which are registered in Greece, but improvement based on

their age.

• The Greek-owned ocean-going fleet has the highest value worldwide.

• Summary of the results of the study on improving of the concept of the motorways of the sea by the

Committee on Transport and Tourism of the European Parliament's Directorate General for Internal Policies.

• The deficit in the balance of ships increased by €689.9 mn in 2014 (2014: -1.2% of the GDP, 2013: -0.8% of the

GDP) while it contributed to the trade balance deficit (12.1% of the total).

• The surplus in the maritime transport balance increased by €826 mn during the first three quarters of 2014.

• In 2014 the bank financing of shipping companies reached €13.5 bn (7.5% of GDP).

• In February the Baltic Dry Index (BDI) reached its lowest levels since its creation .

• One factor which may keep the freight market at low levels is the surplus in ship deliveries / demolitions.

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The International Chamber of Shipping has published its annual (2014/2015) Shipping Industry Flag State Performance

Table*.

The purpose of this table is two-fold:

• firstly, to encourage shipowners and operators to examine whether a flag state has sufficient substance before using

it on their ships

• secondly, to encourage them to put pressure on Ship Register administrations to effect any improvements that

might be necessary, especially in relation to safety of life at sea, the protection of the marine environment, and the

provision of decent working and living conditions for seafarers.

Note: The table of all studied flag states and their success / failure according to each criterion may be found via the link of the International Chamber ofShipping http://www.ics-shipping.org/docs/flag-state-performance-table

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The 6 criteria used by the Chamber in order to create the table are:

1. the collective Port State Control record of ships flying a particular flag, since it is a simple means of assessing the

effective enforcement of international rules,

2. the ratification of major international maritime Conventions (this ratification does not necessarily confirm whether

the provisions of these global instruments are being properly enforced),

3. the use of recognized organizations complying with IMO Resolution A.739, which requires Ship Registers to establish

controls over Recognized Organizations conducting survey work on their behalf,

4. the age of fleet, since a flag which has a concentration of younger ships is more likely to attract quality tonnage in

the future,

5. the reporting requirements (both mandatory and recommended), in order to encourage implementation of

international instruments concerning the submission of information by flag states to bodies such as the International

Maritime Organization (IMO) and the International Labour Organization (ILO),

6. the attendance at IMO meetings, since Ship Registers that attend the major IMO meetings are thought more likely

to be committed to the implementation and enforcement of IMO rules.

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Therefore, when taking into account all the above criteria, 13 flags successfully “passed” the ICS evaluation, regarding

all individual parts of the performance table in the shipping industry. These are:

v Greece

v Cayman Islands

v Denmark

v France

v Isle of Man

v Japan

v Liberia

v Marshall Islands

v Netherlands

v Norway

v Korea

v Russia

v United Kingdom

Source: International Chamber of Shipping

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According to data from the Hellenic Statistical Authority (ELSTAT) for the number of ships, the merchant fleet which is

registered in Greece (vessels of 100 GRT and over)* decreased by 2.2% in 2014 (2013: -2.3%). However, despite the

decline in the fleet, in all individual ships, there was some improvement recorded based on their age. Specifically, the

number of ships over 30 years old and less than 5 old years fell while the number of those 5 – 20 years old increased.

Source: ELSTAT

Number of Greek merchant ships of 100 GRT and over,

Note: (1) Merchant ship: Each vessel designed for the transport of passengers or the carriage of goods, for fishing, towing or specially fitted out for other commercial maritimeactivities, also including ships equipped with interim documents. (2) Greek merchant fleet: Merchant ships registered in Greece, which belong to natural or legal persons residingon the Greek territory. The Greek flag carried by these ships means that all their maritime activities, such as subsidies for ship building, cargo limitations, depreciation storageand other tax provisions, are governed by commercial and economic rules which are laid down by the respective Greek authorities. (4) Gross Register Tonnage (GRT): unit ofmeasurement of the total volume in cubic feet of the spaces within the hull and of the enclosed spaces above the deck which are available for carrying goods, food, passengersand crew.

per category by age group

0 200 400 600 800

<5

5-<10

10-<15

15-<20

20-<25

25-<30

30+

2014 2013 2012

0

500

1000

1500

2000

2500

Dry cargo shipsTankers

Passenger and Miscellaneous ships

Total

2010

2005

2006

2007

2008

2009

2004

2011

2012

2013

2014

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The gross tonnage (GRT) of the Greek Merchant Fleet increased by 1.9% in 2014 (2013: 0.8%). An increase was recorded

for the majority of categories, and the tonnage of ships between 5 and 20 years of age also increased.

Source: ELSTAT

Tonnage of Greek merchant ships of 100 GRT and over,

per category by age group

0 5,000,000 10,000,000 15,000,000

<5

5-<10

10-<15

15-<20

20-<25

25-<30

30+

2014 2013 2012

0 20,000,000 40,000,000 60,000,000

Total

Cargoes

Tankers

Pass. ships and other2014 2013 2012

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The company Vessels Value, which specializes in valuations of ocean-going shipping, recently published a study on the

world fleet values in early 2015.

The figures indicate the 10 largest fleets (71.7% of the world fleet value), based on their value in U.S. dollars and in

accordance with the ownership by nationality.

Source: Vessels Value

World fleet valuation(% of total shares)

U.S.Α.5.1%

U.K.3.2% Germany

7.3%

Greece15.5%

Denmark2.8%

Norway4.9%

Singapore5.6%China

10.4%

Japan13.2%

S. Korea3.7%

Other28.3%

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According to data from the study, in early 2015 the Greek-owned ocean-going fleet as a whole has the highest value in

the world ($105.6 bn), thus remaining first.

At the beginning of 2015 there was a record increase in value of 4.5% (2014 estimate: $101.04 bn).

Greece is followed by Japan in second place with $89.75 bn and a marginal increase over the figures of 2014 (0.7%), and

China, Germany, Singapore, the U.S.A. (with an impressive increase of 48.4%), Norway, S. Korea, the United Kingdom,

and Denmark.

Source: Vessels Value

Valuation of the top 10 fleets in ocean-going shipping worldwide (in $ bn)

18.87

22.03

25.21

33.20

34.48

38.25

49.70

70.77

89.75

105.61

0.00 20.00 40.00 60.00 80.00 100.00 120.00

Denmark

U.K.

S. Korea

Norway

U.S.A.

Singapore

Germany

China

Japan

Greece

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We could say that the increase in the value of the Greek-owned fleet since the beginning of 2014 is a sign of the

ongoing development and modernization being implemented by Greek shipowners. At the same time, it indicates that

there is an increased share of global marine transportation capacity in number of vessels and tonnage (GRT).

In particular, among the Greek-owned ocean-going ships, tankers have received the highest valuations, being estimated

to cost $41.7 bn, followed by dry bulk cargo carriers with a value of approximately $35.5 bn.

Source: Vessels Value

Valuation of Greek fleet in ocean-going shipping (in $ bn; % of the total amount)

41.7; 39%

35.5; 34%

12.3; 11%

12.3; 12%3.9; 4%

TankersBulkersContainer shipsLNG carriersLPG carriers

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The Committee on Transport and Tourism requested a study on “improving the concept of Motorways of the Sea” in

order to obtain a complete overview of the historical development of the concept.

The “Motorways of the Sea” programme (MoS) was introduced by the European Commission’s White Paper on transport

policy in 2001. The decision of the Commission to create a European network of short sea shipping links is connected to

the potential contribution of short sea shipping to the reduction of congestion and to the improvement of accessibility of

peripheral regions and island regions.

In the summary of the results of the study it is indicated that the projects included in the programme should concern at

least two ports in two different Member States and that their objective is modal shift.

Consequently, the MoS can contribute to various forms of investment, in relation to:

(a) facilities and infrastructure for ports and hinterland connections;

(b) year-round accessibility of facilities (e.g. dredging and icebreakers);

(c) information and communication technology (ICT) investments for traffic management or electronic reporting systems;

(d) studies identifying market potential for new services.

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However, the summary lists the main criticisms of the MoS expressed by both academia and the ports themselves:

1. Some ports (large or small) are still not aware of the MoS programme;

2. the MoS programme has suffered from not being seen as an appealing proposition, because of the fact that the

concept was not very clear from the outset;

3. the main beneficiaries of the programme are not sufficiently aware of the opportunities it offers;

4. a clear impact assessment of the MoS is currently missing and the performance indicators of the potential investments

need to be determined;

5. the MoS requires continuous adjustment and orientation taking market drivers into account.

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In December 2014, the deficit of the ships balance (difference between payments for sales & purchases of ships)

increased by €69.1 mn, and amounted to €-160.8 mn compared to €-91.7 mn in December 2013, since the increase in

the purchases of vessels exceeded the increase in sales.

In 2014 the deficit in the balance of ships increased by €689.9 mn, as the increase of ship purchases (by €183.1 mn) was

much lower than the increase in sales (by €873 mn). The deficit in the balance of ships reached -1.2% of the GDP from

0.8% in 2013, while it contributed to the trade balance deficit in 2014 (12.1% of the total from 8.6% in 2013).

Source: Bank of Greece

Greece: Balance of Ships(mn €)

Jan.-Dec.’13 Jan.-Dec.’14 Dec.’13 Dec.’14

Ships(revenues)

443.0 626.0 40.9 53.8

Ships(payments)

1,926.2 2,799.2 132.6 214.6

Balance of Ships

-1,483.3 -2,173.1 -91.7 -160.8

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As regards the balance of maritime transport, there was an increase in the surplus in the third quarter of 2014 of

€289.1 mn. The balance reached €2.3 bn (3rd quarter ’13: €2 bn). This is due to the simultaneous increase in traffic

revenues of €234.4 mn and the reduction in transport payments of €54.7 mn.

During the first 3 quarters of 2014, the surplus increased by €826 mn from the corresponding period of 2013.

Maritime transport is around 23% of the total transport balance, the amount is equivalent to 2013.

Source: Bank of Greece

Greece: Balance of Services (maritime transports) (mn in €)

3 quarters of ’13

3 quarters of ’14

3rd

quarter’13

3rd

quarter ’14

Balance of maritime transport

5,585.6 6,411.9 1,969.8 2,258.9

Revenues 7,972,2 8,507.7 2,739.3 2,973.7

Payments 2,386.6 2,095.8 769.5 714.8

Percentage of mar. trans. balance at the

bal. of services39% 38.2% 22.6% 22.5%

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In 2014 bank financing of shipping companies reached €13.5 bn (7.5% of GDP), amounting to 14.2% of the total financing of

non-financial corporations and 6.4% of the total funding of the domestic private sector.

In January 2015, the annual rate of decline in bank financing of shipping companies reached -6.2% and the balance of the

funding amounted to €14,3 bn, thus reaching almost 15% of the total financing of non-financial corporations. It must be

noted that the overall financing of the domestic private sector in Jan. ’15 reached €214.1 bn, the monthly net flow reached

€-95 mn, and the annual rate of change -2.9%.

Source: Bank of Greece

Financing* of the domestic private sector (Balance in mn € & % change)

Jan.‘14 Dec. ‘14 Jan.’15TotalBalance of financing 217,612 212,039 214,139Monthly net flow -576 -234 -95(%) 12month change -4.0% -3.1% -2.9%Non-Financial CorporationsBalance of financing 96,147 95,198 96,779Monthly net flow -153 -131 402(%) 12month change -5.3% -3.3% -2.7%ShippingBalance of financing 11,940 13,511 14,322(%) 12month change -7.2% -5.4% -6.2%

Note: (1) The balances include loans and investments in corporate bonds, regardless of whether they have been securitized. (2) Net flows and rates of change arecalculatedafter having taken into account reclassifications and transfers of loans / corporate bonds, deletions, and exchange differences.

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When monitoring the long-term development of the key index of the dry bulk freight market, namely the Baltic Dry Index

(BDI)*, we find that since May 2008, when the index reached the extreme level of approximately 11,000 points, the

average long-term level of fares has fallen to close to 1,900 points. This is an indication of the careful approach we must

take as regards the longitudinal data of the index and the comparisons between different periods.

Source: Baltic Exchange

The BDI Index (USD per points, Jan. ’04 - Mar. ’15)

Note: The BDI is an index of shipping and commerce created by Baltic Exchange (a body having its registered office in London, which provides daily prices for freighttransport) and measures changes in the cost of transporting raw materials by sea, such as metals, grains and fossil fuels. Baltic Exchange is in direct contact withfreight brokers for the assessment of price levels for a specific route, a specific product to be transported and the delivery time (speed). The BDI is a composite indexof three sub-indices that measure different sizes of dry bulk carriers (Capesize, Supramax and Panamax). Multiple geographic routes are evaluated for each index sothat the compositemeasure of the index is even more thorough. The traders use these sub-indicesto settle Forward Freight Agreements).

0

2000

4000

6000

8000

10000

12000

14000

1/1/

2004

1/8/

2004

1/3/

2005

1/10

/200

5

1/5/

2006

1/12

/200

6

1/7/

2007

1/2/

2008

1/9/

2008

1/4/

2009

1/11

/200

9

1/6/

2010

1/1/

2011

1/8/

2011

1/3/

2012

1/10

/201

2

1/5/

2013

1/12

/201

3

1/7/

2014

1/2/

2015

May 2008

March 5th2015

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From the middle of the 3rd quarter of 2014, the index has been declining, thus closing at the end of the year at 782

points after it had reached 1,484 points on 4 Nov. ’14 (a change of 702 points). This evolution reflects the continued

decline in the average level of fares for dry bulk carriers.

It is noted that in February 2015, the BDI was found at the lowest levels since its creation (1985). Specifically, on

February 18th the index marginally exceeded 500 points (509 points), before there was a gradual recovery over the next

two weeks and finally on 5 Mar. ’15 it reached 561 points.

We should point out that the last time there was a prolonged low level period for the index (less than 600 points) was in

summer (July-August) 1986.

Source: Baltic Exchange

The BDI Index (USD per points, Nov. ’14 - Mar. ’15)

0

200

400

600

800

1000

1200

1400

1600

4/11

/201

4

11/1

1/2…

18/1

1/2…

25/1

1/2…

2/12

/201

4

9/12

/201

4

16/1

2/2…

23/1

2/2…

30/1

2/2…

6/1/

2015

13/1

/201

5

20/1

/201

5

27/1

/201

5

3/2/

2015

10/2

/201

5

17/2

/201

5

24/2

/201

5

3/3/

2015

November 4th, 2014

March 5th, 2015

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The two main reasons for this situation with regards to the

dry cargo carriers is the oversupply of vessels and the

decline in prices in the last month in basic bulk cargoes such

as iron ore and cereals, which maintain a balance that

pushes the fares to low levels.

A further negative factor is the deceleration of the Chinese

economy (4th quarter of ’14: 1.5% QoQ & 3rd quarter of ’14:

1.9% QoQ), and the stagnation in the European economy. In

particular, during the 4th quarter of ’14, GDP increased

marginally by 0.3% QoQ in the Eurozone and by 0.4% QoQ in

the European Union.

Source: Department of Labor-U.S.A., National Institute of Statistics and Censuses-Argentina, Eurostat

Index of Producer Prices – Grains(annual % of changes)

Index of Producer Prices – Iron Ore (annual % of changes)

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Jan

-06

Mar

-06

May

-06

Jul-

06

Sep

-06

No

v-0

6Ja

n-0

7M

ar-0

7M

ay-0

7Ju

l-0

7Se

p-0

7N

ov-

07

Jan

-08

Mar

-08

May

-08

Jul-

08

Sep

-08

No

v-0

8Ja

n-0

9M

ar-0

9M

ay-0

9Ju

l-0

9Se

p-0

9N

ov-

09

Jan

-10

Mar

-10

May

-10

Jul-

10

Sep

-10

No

v-1

0Ja

n-1

1M

ar-1

1M

ay-1

1Ju

l-1

1Se

p-1

1N

ov-

11

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2Ja

n-1

3M

ar-1

3M

ay-1

3Ju

l-1

3Se

p-1

3N

ov-

13

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

USA EU Argentina

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Jan-

06

Apr-

06Ju

l-06

Oct

-06

Jan-

07

Apr-

07Ju

l-07

Oct

-07

Jan-

08

Apr-

08Ju

l-08

Oct

-08

Jan-

09

Apr-

09Ju

l-09

Oct

-09

Jan-

10

Apr-

10Ju

l-10

Oct

-10

Jan-

11

Apr-

11Ju

l-11

Oct

-11

Jan-

12

Apr-

12Ju

l-12

Oct

-12

Jan-

13

Apr-

13Ju

l-13

Oct

-13

Jan-

14

Apr-

14Ju

l-14

Oct

-14

USA EU

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At the same time, there is one factor which may

adversely affect the freight market:

• the surplus of the balance of ship deliveries /

demolitions, where the deliveries of

newbuilding ships are more than demolitions

worldwide, thus maintaining the existing

oversupply.

Specifically, in January 2015 this balance amounted

to +185 ships (9,758,542 GRT) and especially per

category

• bulkers: 49 vessels (4,921,824 GRT),

• tankers: 10 vessels (1,490,079 GRT),

• container ships: 10 vessels (1,458,697 GRT),

• gas carriers : 11 vessels (752,849 GRT),

• other ships : 105 vessels (1,135,093 GRT).

Source: Clarkson Research Services

Balance of ship deliveries /Demolitions (per category)

based on number

based on tonnage

0 50 100 150

Cargoes

Tankers

Container

ships

Gas carriers

Other vessels

Demolitions Deliveries

0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000

Cargoes

Tankers

Containerships

Gas

carriers

Other vessels

Demolitions Deliveries

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