Ocean Carriers

Questions to address by each group before presentations as well as during the presentations:

1) Assess the demand and supply of the capesize dry bulk industry. What do you expect to happen to demand relative to supply over the next four or five years? Please thoroughly explain and justify. What do you expect to happen to prices over both the short-run and the long-run?

Future supply of the capesize vessels is the sum of current vessels-the vessels that will be scraped + new ships delivered. From Exhibit 2, we can find there are 2 million tons of capesize with the age over 24 years. So in the next four or five years, we expect that these old vessels would be soon scrapped, which will reduce the supply of the capiesize vessels. On the other hand, the old vessels were small portion of total; it is not a large amount reduction in supply. Form the Exhibit 3, we can find current order of new capesize vessels delivered in the 4 years, so the supply of capesize vessel in the next four or five years will be increase. So we think the supply in the next four or five years will be having a small increase. For the demand, The demand for dry bulk capesizes was determined by the world economy, especially its basic industries, form the case over 85% of the capesize vessels are used for shipping iron ore and coal, and Linn will care market for iron ore and find Australian production in iron ore will be large, but I calculate increase rate of Iron ore vessel shipments and avg. 3-yr charter rate

1994 1995 1996 1997 1998 1999 2000

5.87% -3.02% 10.13% -0.94% -2.38% 7.32%

1.61% -24.08% 14.09% -18.6% -3.44% 21.53%

Form that, we find change of Iron ore vessel shipments and Ave. 3-yr charter rate are same, the Iron ore vessel shipments is increase for five years, but the Ave. 3-yr charter rate is decrease. So I think the demand will be decrease. In summary, we expect the dry bulk market is not good.

For the price, it should be determined by supply and demand. In short...