Dry Bulk Freight Outlook 2nd Annual Conference Coal Market in India 2012 DRY BULK MARKET AND INDIAN COAL PERSPECTIVE Cape: 100k dwt and above; Pmax: 60k-99k, Smax: 35k-59k, Hsize: below 35k 2 DRY BULK FREIGHT MARKET TREND CONTINUES TO BE IN A STATE OF EXTREME WEAKNESS 3 COAL FREIGHT TO INDIA HAS FOLLOWED THE BROADER TREND OF TIME CHARTER RATES 4 TWO KEY FACTORS IMPACTING THE FREIGHT MARKET OVER LAST 2 YEARS 1. BUNKER PRICE- HAVE HAD AN EXTREME NEGATIVE IMPACT ON RATES SINCE 2011 5 TWO KEY FACTORS IMPACTING THE FREIGHT MARKET IN LAST 2 YEARS 2. FLEET SUPPLY HAS CONSISTENTLY OUTWEIGHED FLEET DEMAND 6 SUPPLY SIDE DYNAMICS 2012 ANOTHER RECORD YEAR 7 SUPPLY SIDE DYNAMICS OUTLOOK 8 SCRAPPING, LAYUPS AND SLOW STEAMING CONTINUE TO KEEP FLEET SUPPLY GROWTH IN CHECK 9 STEEL PRODUCTION REFLECTING THE WEAK MACRO FUNDAMENTALS GLOBALLY 10 MACRO FUNDAMENTALS 11 CHINA PROPERTIES – IN A RECOVERY PHASE MONETARY POLICY – COMING TO THE AID ONCE MORE PBOC reduced the benchmark interest rate for the 2nd time within a month. On the same day ECB cut the interest rate by 25 bps BoE increased their asset purchase program by 50 bln pounds. Fed already extended its operation twist by USD 267 bln, till the end of the year. 12 COAL MOVEMENT CHINA DEPRESSED – BUT SIGNS OF IMPROVEMENT 13 COAL MOVEMENT INDIAN IMPORTS HURT BY RUPEE DEPRECIATION – BUT THE FUNDAMENTAL DEFICIT CONTINUES 14 IRON-ORE EXPORTS – WILL SUPPORT THE CAPE MARKET IN 2H12 15 INDIA IRON-ORE WOULD CREATE WEAKNESS IN PMAX/SMAX SEGMENTS 16 NICKEL ORE LOW DEMAND FROM CHINA AND EXPORT RESTRICTIONS IN INDONESIA 17 GRAINS TRADE US GRAINS EXPORT WILL PROVIDE A SEASONAL PUSH TO FREIGHT – WEATHER A CONCERN 18 IN SUMMARY Fleet growth would reduce by more than half in 2013 compared to 2011-12 pace. Cargo growth would exceed supply only marginally, while the macro risk would remain at elevated levels. Fundamental Weakness Remains but Volatility to continue. Market would be better balanced post 2013, with an expectation of demand growth finally exceeding supply growth. But two major risk factors remain: Europe blow out and a return to global recession would drastically reduce the prospects of demand growth. A surge in new contracting of the new “economic ship” variety. 19 Who are We ? 20 At a glance LD COMMODITIES KEY FACTS AND FIGURES World leader in the processing of agricultural products and the merchandising of a diverse range of commodities Privately held, controlled by the Robert Louis-Dreyfus trust and approximately 20% employee-owned Part of the Louis Dreyfus Group A vital player in the global food chain 21 History A NEW GROUP WITH 160 YEARS 1851 1860-1900 Founded by Leopold Louis-Dreyfus trading grain in France and Switzerland OF HISTORY 1990s-2005 1970s-80s International operations serving Europe, the Americas, Africa and Asia The Group extends its agricultural activities to cotton, sugar, citrus, coffee Adds processing operations in citrus and oilseeds to origination and marketing activities Acquired sugar production in Brazil Begins futures trading Enters metals business General Lagos (Argentina) 2007 2009 2008 Excellent profitability Enters new local markets: Vietnam, Colombia, Ethiopia Expands new product lines: fertilizers, milk… Acquisition of four sugar mills in Brazil Acquisition of the Bazhou oilseeds crushing plant in China Bazhou (China) Net sales doubled compared to 2006, well above US$35 bn Net sales US$ 34 bn, Fixed Assets above US$5.5 bn Dedicated region set up: Middle East and Africa Approx. 34,000 employees, offices in more than 55 countries Expansion in Asia with acquisitions of an edible-oil refinery in India, and a stake in an Indonesian palm-oil plantation company Acquisition of rapeseed crushing plant in Wittenberg (Germany) Kandla (India) Investment in Brazilian sugarcane processing facilities and plantations Merger of operations with Santelisa Vale (Brazil) to create LDC-SEV Santa Elisa (Brazil) 2006 Robert Louis- Dreyfus establishes his vision of the Louis Dreyfus Group: The Louis Dreyfus Group restructured into autonomous subsidiaries Creation of LDCommodities LDCommodities is rationalized through a matrix organization: Regions/Platforms Asset-based strategy 2010 Pursuing growth, excellent financial performance, confirming benefits of diversification and asset-based strategy Enters the apple juice concentrate market (China) Acquisition of Cotton assets Pursuing logistics investments o/w Port Lampung (Indonesia),cereal terminal (Argentina) UN Global Compact signatory An ambition takes shape 22 What PRODUCING AND MERCHANDISING MAJOR AGRICULTURAL COMMODITIES PROTEINS PRESENCE IN TRADE FLOWS COMMENTS OILSEEDS #3-4 Key presence in major exporters: Brazil, Argentina #4 world crushing capacity GRAINS #2-3 Key presence in all major grains origins: US, FSU, South America, Australia RICE #1 Significant participation in the distribution flows to Africa FREIGHT One of the largest chartering entities Supporting the Group’s commodities Platforms and mitigating risk OTHER LDC SEV TROPICALS FINANCE JUICE #3 Recent entry into the Chinese Apple Juice industry COTTON #1 Expanding assets in Australia and America COFFEE #4 #1 in Robusta coffee SUGAR #2 Growing participation in the raw and refined sugar markets LDC-SEV #2 40 million metric tons crushing capacity per year METALS #4 Copper concentrates, zinc concentrates, cathodes market share Sourcing in both New Zealand & Latin America MILK FERTILIZERS >1% Top 15 in Latin America Recent entry into West African markets through SSI acquisition Helping feed and clothe up to 450 million people 23 Where WORLDWIDE GEOGRAPHICAL SCOPE expanding in the world’s largest export market where it all started rich challenges, rapid growth capturing production and consumption opportunities preparing the future abundant origination Strategically located, strategically diverse 24 Where SELECTED PORT FACILITIES BAHIA BLANCA, ARGENTINA Deepwater Grain Export Terminal GENERAL LAGOS, ARGENTINA Soybean Crush/Grain Export Terminal PORT CARTIER, CANADA Deepwater Transhipment Port PORTLAND, OREGON Grain Export Terminal SEATTLE, WASHINGTON Deepwater Grain Export Terminal HOUSTON, TEXAS Grain Export Terminal A Major Exporter From Every Region of the World 25 How A SOLID PRESENCE AT EVERY STEP OF THE TROPICALS PROTEINS Fixed-Asset Operator VALUE CHAIN Intelligent Merchant OILSEEDS FOOD GRAINS RICE FEED JUICE COTTON COFFEE TEXTILE LDC SEV SUGAR LDC-SEV OTHER METALS ORIGINATION & PRODUCTION PROCESSING & REFINING STORAGE & TRANSPORT RESEARCH & MERCHANDISING PACKING & DISTRIBUTION FUEL MILK FERTILIZERS INDUSTRIAL Managing risk and adding value across the supply chain 26 At a glance LD COMMODITIES OCEAN FREIGHT 45 million tons of cargo carried, equally balanced between LDC cargo and 3rd party customers including major global miners, utilities, and steel producers Total fleet operations, spanning the Capesize, Panamax, Supramax, and Handysize segments, in excess of 63,000 vessel days (~172 vessels) A trusted partner and supplier, with an unmatched record of honoring its contractual commitments Expansion driven by relationships with worldwide chartering organizations that engage our research, risk management, and logistics services to assist their operations Strength, Reputation, and Performance built over 160 years 27 Where WORLDWIDE GEOGRAPHICAL SCOPE Global team, with chartering offices covering all time zones Global network of offices and logistics specialists in over 55 countries Capable of providing a wide range of services: • Short term contracts, vessel leases, and spot cargo voyages • Long term contracts of affreightment (COA’s) • Ocean freight price risk management • Logistics services and support including ocean freight consultancy • Outsourced chartering and back office solutions Custom solutions for a global marketplace 28 FOR MORE INFORMATION Kunal Kapoor Head of Research Ocean Freight Platform Office 91-124-4625 650 Mobile 91-9350 770 662 kunal.kapoor@ldcom.com Louis Dreyfus Commodities India Pvt. Ltd. 8th Floor, Tower A, Building No. 5, Cyber City, DLF Phase III Gurgaon 29