Product tanker supply/demand in dwt many expected. This does not mean that drybulk companies are all of a sudden making money,

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1 Crude Products Drybulk Containers AXIA Research An American s view from Piraeus Shipping Weekly Market Overview Over the past weekend, the U.S. was struck by merger mania, with AT&T leading the charge in its bid for Time Warner. Earnings season is also in full swing, and we expect the excuse of the quarter for poor earnings will be the elections in the U.S., and we are concerned this wave of mergers is just a way for stagnant companies to purchase growth. On the data front, the Markit Manufacturing PMI came in at 53. in the United States during October, beating expectations and was 53.3 in the European Union for the same period, also higher than expected. Drybulk This week, Cape rates continued to decline, falling 9.4% to $7,936 per day from $,44 last week, while Panamax rates continued to improve, reaching $7,397 per day from $7,88 last week. Supramax rates were also up to $7,464 per day from $7,35 last week and Handysize rates rose to $6,7 per day from $6,34 last week. Crude tankers Chinese crude imports had another strong month during September, rising 8.3% year over year and year to date Chinese imports are up 4.%. VLCC spot rates declined.9% to $6,63 per day this week from $34,95 last week, while Suezmax rates declined to $9,76 per day from $,6 per day. Aframax rates were flat at $3,58 per day from $3,54 last week. Product tankers A trend we continue to monitor is China s growth in exporting oil products, and during September Chinese product exports increased.% year over year, and year to date are up 39.3% through September, which contrasts significantly with its product imports, which have declined 8.6% year over year in September, and are down 7.% year to date. This hasn t helped product tankers as rates remain under pressure. LR rates declined this week to $,86 per day from $,66 last week, while LRs declined to $8,44 from $9,68 last week. MR rates in the Atlantic rose another 7.9% to $6,663 from $5,8 last week, while MR rates in the Pacific were flat at $8,54 this week from $8,64 this week, and MR rates were down slightly to $,78 per day from $,943 last week. Containerships This week, Hanjin announced it was closing down its European operations as its slow road to dissolution continues. This was good news for its competitors, as the Shanghai Containerized Freight Index hit its highest level of the year this week, reaching 795.6, up.3% from last week. 7 October 6 Robert Perri, CFA Director Research robert.perri@axiacm.com Market Data Current Wk ago Δ w/w BDI 8 87 (8.%) S&P 5,39.4,4.3 (.%) SCFI % WTI crude (.5%) Iron ore % Scrap rates (.%) LIBOR (%) % Vessel earnings monthly trend Drybulk vessels supply/demand in dwt Class 6E 7E Fleet growth.6%.5% Demand growth.4%.% Crude tanker supply/demand in dwt Interesting This week kicks off third quarter earnings season in shipping, which coincidentally is around Οχι (NO!) day in Greece. We are not sure if these are related, but we do believe we will be pleasantly Fleet growth Demand growth 5.9%.6% 4.%.3% surprised by drybulk earnings this quarter as the market fundamentals have been better than Product tanker supply/demand in dwt many expected. This does not mean that drybulk companies are all of a sudden making money, 6E 7E but some may actually lose less (or burn less cash) than expected, which is a positive Fleet growth 4.7% 3.% development compared to the disaster that was the first half of the year. More importantly, if Demand growth 4.5% 4.% the market continues at current levels, we may actually see a drybulk company or two report a profit in the fourth quarter! Although we are not there yet. On the tanker side, it is almost the Containership supply/demand in teu opposite as the third quarter was very weak and results will be significantly down quarter over 6E 7E quarter and year over year. As with dry, all eyes will also be on expectations through the end of Fleet growth 3.9% 3.7% the year, as tanker rates have rebounded recently, but seem to have trouble keeping up any positive momentum for an extended period. We expect any company with a floating dividend Demand growth.4% 3.8% policy to come under increased pressure to cut their dividends under current market conditions. Source: Bloomberg, Baltic Index, AXIA Capital Markets On the containership side, all eyes will be on counterparty risk and current expectations. Many are starting to believe the containership market is poised for a rebound next year, but we remain extremely skeptical as we do not see a scenario where global growth accelerates to a level where the excess capacity plaguing the industry gets absorbed quickly, although increased scrapping would be a significant positive. Please continue to overleaf AXIA Capital Markets LLC, 645 Fifth Avenue, Suite 93, New York, NY Tel: , Fax: , Web: Please refer to the last page for disclosures and analyst certification 6E 7E

2 millions of metric tons Company news Overseas Shipholding Group, Inc. (OSG) On October st, OSG announced that its Board of Directors approved its plan to separate its domestic and international businesses into two independent, publicly traded companies: Overseas Shipholding Group and International Seaways. Once they are separated, International Seaways (INSW) will be the owner and operator one of the largest fleets of international crude and product tankers globally. OSG will consist of the currently existing fleet of tankers and ATBs in the blue water Jones Act market. The spin-off and timing remains subject to the satisfaction of various conditions, and OSG is able at any time to decide to abandon the spin-off. Costamare, Inc. (CMRE) On October 4 th, CMRE reported third quarter adjusted revenues of $5.5 million, adjusted EBITDA of $8.8 million, and net income of $8. million, or $.37 per common share beating the consensus estimates for revenues, EBITDA and EPS of $3.3 million, $76.5 million and $.35 per share, respectively. In addition, CMRE recently took delivery of three 4,44 TEU containerships that are fixed on year time charters with Evergreen and agreed to delay the deliveries of four of its, TEU vessels until the first quarter of 7 (These seven vessels are owned through their joint venture with York Capital). Finally, as previously announced the company cut its quarterly dividend to $. per share, from the previous $.9 per share level, although management continues to take advantage of its dividend reinvestment plan to purchase new shares of CMRE with the proceeds of the dividend, in lieu of cash. Navios Maritime Midstream Partners (NAP) On October 6 th, NAP reported third quarter adjusted revenues of $. million, adjusted EBITDA of $5.7 million, and net income of $5.5 million, or $.6 per common unit beating the consensus estimates for revenues, EBITDA and EPS of $. million, $5.3 million and $.6 per share, respectively. In addition, the company maintained its quarterly distribution at $.45 per unit. Chart of the week Chinese crude oil imports are up 8.3% year over year in September and 4.% year to date Exhibit : Monthly Chinese crude oil imports Source: Bloomberg AXIA Capital Markets LLC Page

3 $ per day 5 year-old asset value (in USD m) Drybulk Another week of weakening Cape rates, while rates across all other size classes improved Table : Drybulk earnings Capesize Panamax Supramax Handysize Source: Baltic Exchange, AXIA Capital Markets Spot, FFA and time charter rates % Δ Current Wk ago Mo ago Yr ago Wk ago Mo ago Yr ago Spot 7,936,44 4,787 9,354 (9.4%) (46.3%) (5.%) 4Q6 9,83,369,86 4,7 (5.%) (9.%) (.%) FY7 8,357 8,59 8,68 9,957 (.7%) (3.7%) (6.%) yr T/C 9,5 9,5 8,75,5.% 5.7% (7.8%) Spot 7,397 7,88 5,95 5,49 4.4% 4.8% 34.7% 4Q6 6,647 6,88 6,698 7,7 (.7%) (.8%) (7.3%) FY7 5,985 6,9 5,953 6,59 (.7%).5% (9.%) yr T/C 7,5 6,83 6,675 7,55 6.% 8.% (4.3%) Spot 7,464 7,35 7,4 6, % 6.%.7% 4Q6 7,4 7,48 7,78 6,55.3%.% 4.% FY7 6,33 6,37 6,45 6,853 (.6%) 3.% (7.6%) yr T/C 7,5 7,5 7,5 7,75.%.% (6.5%) Spot 6,7 6,34 6,8 5,87.%.7%.9% 4Q6 6,9 6,7 5,93 5,869 (.%) 3.3% 4.3% FY7 5,33 5,7 5,3 5,938.3%.% (.9%) yr T/C 6,75 6,75 6,5 7,.% 8.% (3.6%) Exhibit : Handysize average daily earnings 8, 7, 6, 5, Exhibit 3: Handysize 5-yr asset values vs yr t/c rates , 3,,, year avg.,,, 4, 5, One-year time charter rates (in USD per day) Today $.5m/$6,75 Historical Unlevered IRR : 9.5% Current Unlevered IRR : (8.%) Source: Baltic Index Source: Baltic Index, Clarkson Research Services Limited, AXIA Capital Markets Unlevered IRR is calculated using current 5 yr old asset values, assumes the vessel earns the yr t/c rate for five yrs, then sold after yr 5 at a price equal to the yr avg value of a yr old vessel All calculations are the same, except the vessel is sold at a price equal to today s value for a yr old vessel after five yrs AXIA Capital Markets LLC Page 3

4 $ per day 5 year-old asset value (in USD m) Crude tankers Tanker rates couldn t keep up the momentum this week, and have started to decline again Table : Crude tanker earnings VLCC Suezmax Aframax Spot and time charter rates % Δ Current Wk ago Mo ago Yr ago Wk ago Mo ago Yr ago Spot 6,63 34,95 7,98 45,439 (.9%) 36.3% (4.4%) yr T/C 8, 7,5 6,5 5,.8% 5.7% (44.%) 3 yr T/C 7,75 7, 7, 44,.8%.8% (36.9%) Spot 9,76,6 38,6 45,77 (6.6%) (48.9%) (56.9%) yr T/C,5,5,5 39, 4.7% 4.7% (4.9%) 3 yr T/C,75,75 3,5 33,5.% (.6%) (8.%) Spot 3,58 3,54,934 36,83.3% 3.8% (6.5%) yr T/C 6, 6, 6,,.%.% (46.7%) 3 yr T/C 7,5 7,5 7,75 6,75.% (.8%) (35.5%) Source: Baltic Exchange, Clarkson Research Services Limited, AXIA Capital Markets Exhibit 4: Aframax average daily earnings 7, 6, 5, 4,, Exhibit 5: Aframax 5-yr asset values vs yr t/c rates ,, Today: $3.5m/$6, Historical Unlevered IRR : 8.% Current Unlevered IRR : (.8%) year avg.,,, 4, 5, One-year time charter rates (in USD per day) Source: Baltic Index Source: Baltic Index, Clarkson Research Services Limited, AXIA Capital Markets Unlevered IRR is calculated using current 5 yr old asset values, assumes the vessel earns the yr t/c rate for five yrs, then sold after yr 5 at a price equal to the yr avg value of a yr old vessel All calculations are the same, except the vessel is sold at a price equal to today s value for a yr old vessel after five yrs AXIA Capital Markets LLC Page 4

5 $ per day 5 year-old asset value (in USD m) Product Tankers MR rates in the Atlantic bounced back this week, but otherwise rates weakened across the board Table 3: Product tanker earnings LR (TC) LR (TC5) MR MR Spot and time charter rates % Δ Current Wk ago Mo ago Yr ago Wk ago Mo ago Yr ago Spot,86,664 6,97,54 (.5%) 8.8% (46.%) yr T/C 6, 6, 7,5,.% (8.6%) (46.7%) 3 yr T/C 7,65 7,65 8,75 6,5.% (6.%) (33.5%) Spot 8,44 9,68 7,53 5,78 (.8%).% (46.5%) yr T/C 4,65 4,65 5, 6,.% (.5%) (43.8%) 3 yr T/C 5,5 5,5 5,65,.% (3.%) (3.3%) Atlantic 6,663 5,8 7,6 8,66 7.9% (.5%) (64.3%) Pacific 8,54 8,64 9,883 5,337.% (6.5%) (46.%) yr T/C,, 3, 9,5.% (7.7%) (38.5%) 3 yr T/C 4, 4, 4,5 7,5.% (.9%) (.%) Spot,78,943,558 8,744 (.%) (4.7%) (4.9%) yr T/C,,, 7,5.%.% (3.4%) 3 yr T/C 3,5 3,5 3,5 6,5.%.% (8.5%) Source: Baltic Exchange, Clarkson Research Services Limited, AXIA Capital Markets Exhibit 6: LR average daily earnings 6, 5, 4, Exhibit 7: LR 5-yr asset values vs yr t/c rates ,, 5 4, Today: $34.m/$6, Historical Unlevered IRR : 7.% Current Unlevered IRR : (.%),,, 4, 5, year avg. One-year time charter rates (in USD per day) Source: Clarkson Research Services Limited Source: Baltic Index, Clarkson Research Services Limited, AXIA Capital Markets Unlevered IRR is calculated using current 5 yr old asset values, assumes the vessel earns the yr t/c rate for five yrs, then sold after yr 5 at a price equal to the yr avg value of a yr old vessel All calculations are the same, except the vessel is sold at a price equal to today s value for a yr old vessel after five yrs AXIA Capital Markets LLC Page 5

6 5 year-old asset value (in USD m) Containerships The market remains in a holding pattern at the bottom as the aftershocks of Hanjin s collapse continue to be felt Table 4: Containership earnings Time charter rates % Δ Current Mo ago Yr ago Mo ago Yr ago 9, TEU 3 yr T/C, 5, 36, (.%) (38.9%) 6,8 TEU 3 yr T/C 3, 3, 9,.% (3.6%) 4,4 TEU 6-m T/C 4,45 4,7, (5.3%) (55.5%) 5 yr T/C 9,5 9,5 3,.% (6.9%) 3,5 TEU 6-m T/C 5,5 5,5,.% (5.%),5 TEU 6-m T/C 5,8 5,75 8,5.9% (3.8%) 3 yr T/C 8,5 8,5, (.9%) (5.%),7 TEU 6-m T/C 6,75 6,7 9,.7% (6.6%) 3 yr T/C 7,8 7,9,5 (.3%) (5.7%) Source: Clarkson Research Services Limited, AXIA Capital Markets Exhibit 8:,7 TEU average 6m-yr time charter rates 4, Exhibit 9:,7 TEU 5-yr asset values vs yr t/c rates 6, 5, 4 8, 6, 4,, 5,, 5,, 5,, 35, One-year time charter rates (in USD per day) Today: $8.5m/$6,75 Historical Unlevered IRR :.3% Current Unlevered IRR : (6.7%) year avg. Source: Clarkson Research Services Limited Source: Clarkson Research Services Limited, AXIA Capital Markets Unlevered IRR is calculated using current 5 yr old asset values, assumes the vessel earns the yr t/c rate for five yrs, then sold after yr 5 at a price equal to the yr avg value of a yr old vessel All calculations are the same, except the vessel is sold at a price equal to today s value for a yr old vessel after five yrs AXIA Capital Markets LLC Page 6

7 Asset Values Rates remained stable this week as S&P activity in the tanker sector picked up Table 5: Vessel values Vessel price % Δ year over year Newbuild Resale 5 yr yr Scrap Newbuild Resale 5 yr yr Scrap Drybulk Vessels Capesize (.6%) (7.%) (5.%) (.%) (7.3%) Panamax (7.7%) (9.%) (7.6%) (3.8%) (7.4%) Supramax (9.%) (5.7%) (5.6%).% (8.6%) Handysize (4.9%) (6.7%) (8.7%) (.6%) (9.%) Crude Tankers VLCC (.5%) (7.%) (3.8%) (7.3%) (9.4%) Suezmax (4.%) (.%) (8.3%) (7.4%) (7.%) Aframax (4.3%) (7.9%) (3.5%) (35.5%) (7.9%) Product Tankers LR (3.8%) (6.8%) (9.9%) (33.3%) (7.9%) LR (9.9%) (4.3%) (.5%) (.8%) (8.%) MR (7.%) (4.3%) (4.%) (.5%) (8.6%) MR (.4%) (4.3%) (.4%) (7.6%) (7.6%) Containerships 9, TEU (5.5%) (6.%) (6.6%) (6.6%) (.%) 6, TEU (5.6%) (6.3%) (6.7%) (6.7%) (.%) 3, TEU (6.%) (6.7%) (.6%) (3.%) (.%) 9, TEU (6.7%) (.7%) (56.7%) (55.5%) (9.8%) 6,8 TEU (9.7%) (.%) (55.3%) (5.4%) (.%) 4,4 TEU (3.%) (6.7%) (5.%) (57.%) (9.8%) 3,5 TEU (4.%) (.5%) (5.%) (63.6%) (34.3%),5 TEU (8.%) (3.3%) (44.4%) (54.7%) (8.%),7 TEU (3.5%) (8.4%) (3.%) (33.3%) (34.6%) Source: Clarkson Research Services Limited, AXIA Capital Markets For italicized prices are extrapolated by straight line depreciation to current scrap value using a year average vessel life For newbuild and resale, price is for 4,8 teu post-panamax vessels, while second hand values are related to 4,4 teu panamax vessels 3 For newbuild and resale, price is for 3,8 teu post-panamax vessels, while second hand values are related to 3,5 teu panamax vessels AXIA Capital Markets LLC Page 7

8 AXIA Research Disclosures This communication is not research or a research report. It is for informational purposes and institutional clients only; it is not an offer or solicitation of an offer to buy or sell any security or instrument, or to make any investment. This material does not constitute investment advice because it does not take into account the particular investment objectives, financial situations, or needs of individual clients. Clients seeking investment advice specific to their financial profiles and goals should contact their professional advisors, including independent tax advisors. In reaching a determination as to the appropriateness of any proposed transaction or strategy, clients should undertake a thorough independent review of the legal, regulatory, credit, accounting and economic consequences of such transaction in relation to their particular circumstances and make their own independent decisions. The information and any opinions contained herein are as of the date of this material and AXIA Capital Markets ( ACM ) does not undertake any obligation to update them. All market prices, data and other information are not warranted as to the completeness or accuracy and are subject to change without notice. This communication is not a complete analysis of every material fact concerning any company, industry or security. ACM assumes that it will be read in conjunction with other available reports and data. Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding future performance. No investor can assume that reliance on the views, opinions or recommendations contained herein will produce profitable results. Foreign-currencydenominated securities are subject to fluctuations in currency exchange rates that could have a positive or adverse effect on an investor's return upon the conversion into local currency of dividends or interest received, or proceeds from the sale of such securities. In addition, the value of U.S. dollar-denominated ADRs and the value of U.S. dollar-denominated ordinary shares, or common shares, of foreign issuers can be influenced by fluctuations in currency exchange rates. Clarkson Research Services Limited (CRSL) Clarkson Research Services Limited (CRSL) have not reviewed the context of any of the statistics or information contained in the commentaries and all statistics and information were obtained by AXIA Capital Markets LLC from standard CRSL published sources. Furthermore, CRSL have not carried out any form of due diligence exercise on the information, as would be the case with finance raising documentation such as Initial Public Offerings (IPOs) or Bond Placements. Therefore reliance on the statistics and information contained within the commentaries will be for the risk of the party relying on the information and CRSL does not accept any liability whatsoever for relying on the statistics or information. Insofar as the statistical and graphical market information comes from CRSL, CRSL points out that such information is drawn from the CRSL database and other sources. CRSL has advised that: (i) some information in CRSL s database is derived from estimates or subjective judgments; and (ii) the information in the database of other maritime data collection agencies may differ from the information in CRSL s database; and (iii) whilst CRSL has taken reasonable care in the compilation of that statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such information does not obviate any need to make appropriate further enquiries; and (vi) the provision of such information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (vii) shipping is a variable and cyclical business and any forecasting concerning it cannot be very accurate. AXIA Capital Markets LLC 645 Fifth Avenue, Suite 93 New York, NY, US Tel: Fax: Research & Sales Robert Perri, CFA - Director of Research