Voyage Calculations. The Northern Sea Route

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1 Henrik Falck Tschudi Shipping Company AS Voyage Calculations The Northern Sea Route TFMS Forum Copenhagen, October 24 th. 2012

2 TSCHUDI SHIPPING COMPANY AS Tschudi Shipping Company AS is the holding company for the Tschudi Group with roots back to The Tschudi Group is a shipping and logistics group with particular focus on the east west trades of cargoes and projects involving the Baltic, Russia and the CIS countries including the Northern Regions of Russia and Norway. The Tschudi group currently owns a fleet of 16 multipurpose container vessels, tugs and offshore vessels in addition to operating container lines between northern European ports in the Baltic and North Sea.

Baltic, Russia and the CIS countries including the Northern Regions of Russia and Norway.

3 Sydvaranger Gruve Northern Iron - In 2006, Tschudi Shipping Company bought the closed down iron ore mine in Kirkenes, Northern Norway. - In November 2009 the first Panamax loaded for China with of cargo. - In September 2010 we did the first transit through the Northern Sea Route. - Production in 2011 was 1,5 mill. mt with forecast for 2012 at 2,0 mill. mt. Th N th I i li t d th A t li t k h (ASX) The company Northern Iron is listed on the Australian stock exchange (ASX) Ticker code NFE Tschudi controls abt. 20% of the outstanding shares today.

- In November 2009 the first Panamax loaded for China with 75 000 of cargo. - In September 2010 we did the first transit through the Northern Sea Route.

4 Tschudi Kirkenes 20 km from Russian Border Our Bulk Terminal in Kirkenes is able To load vessels up to dwt In addition we have: m 2 quay with draft of 8,2 m m 3 covered warehouse m 3 silo storage m 2 levelled area for further development

have: -6 000 m 2 quay with draft of 8,2 m -5 000 m 3 covered

5 Kirkenes Industrial Logistics Area - KILA. KILA m² area and more than 600 m deep water quays can be constructed.

6 KILA (Kirkenes Industrial Logistics Area) THE WESTERN ENTRY POINT TO THE NORTHERN SEA ROUTE m² = 200 soccerfields Kontakt: Trond Dahlberg, mobil: , mail: td@tschudikirkenes.no

000.000m² = 200 soccerfields Kontakt: Trond

7 Kirkenes Kirkenes 9 days from the Pacific Ocean 9 days from the Mediterranean

8 Hammerfest Melkøya LNG Terminal

9 POLARCUS SEISMIC VESSEL HAMMERFEST NEW ZEALAND TC-Rate usd pd Routing Distance (13 kts) Canal cost Bunker TOTAL Via Suez45,1 days usd usd usd * Via Panama 39,4 days usd usd usd Via NSR 31,5 days usd usd usd ** SAVING VERSUS PANAMA IS usd (* ** extra insurance)

Panama 39,4 days usd 50 000 usd 1 417 000 usd 7 377 000 Via NSR 31,5 days usd 370 000 usd 1

10 Savings in USD for 21,4 days saved in time. LNG from Melkøya to Yokohama cbm Full roundvoyage - Spot market rate usd 15/mmBtu 1. Timecharter per day usd * 21,4 * 2 usd Bunkers burn off lng 0,1% per day * 21,4 * 2 usd Suez round voyage cost usd NSR tariff usd 5 * mt + usd 2,5 * * (usd ) Savings (Full Roundvoyage) usd (* displacement tons)

Timecharter per day usd 150 000 * 21,4 * 2 usd 6 420 000 2.

11 3 roundtrips per season may add up to a total savings of usd 25 million Yamal is another 8 days (roundtrip) better positioned with NSR representing even more value. We are talking about unlocking the High North in general and Siberia in particular.

positioned with NSR representing even more value.

12 Typical trading pattern for dry bulk Panamaxes Trans-Atlantic Trans-Pacific Timecharter Rate Timecharter Rate $ per day $ per day From Atlantic ti to the From Pacific to the Pacific Atlantic $ per day $ per day

Rate 7 500 $ per day 7 500 $ per day From Atlantic ti to

13 Kirkenes - Shanghai 18 day shorter one way (Panamax iron ore) 1. Timecharter per day usd * 18 usd Bunkers fuel 33 * 700 * 18 usd Insurance usd +/- 4. Ports usd n/a 5. Suez cost (one way) usd NSR tariff usd 5 * mt (usd ) Savings usd Savings per ton usd 7.50

Bunkers fuel 33 * 700 * 18 usd 416 000 3. Insurance usd +/- 4. Ports usd n/a 5.

14 Same difference explained another way SUEZ NSR DIFFERENCE Bunkers 44*700* *700* TC - Cost 48 * * Canal Ports Total NSR Fee Suez Cost Bunker consumption per day* Price + Timecharter cost = Break even Number of days (3,3 days) St.Petersburg (Russia) is only 5,5 days shorter

250 000 250 000 0 Total 2 372 000 1 795 000 560 000 NSR Fee Suez Cost Bunker consumption per day* Price

15 Last Done. Freight rate mt * usd 33,5 usd Commission 5% usd Bunkers 44 days*33 mt* usd 700 usd Bunkers in port 4 days*3 mt* usd1 000 usd Suez Canal usd Ports usd Insurance usd Extra usd T/C result usd T/C result per day (usd / 48 days) usd T/C result per day for a vessel loading mt usd

usd 700 usd 1 016 000 Bunkers in port 4 days*3 mt* usd1 000 usd 12 000 Suez Canal usd 250 000

16 Since the cargo owner should not care about what routing the owner takes, let us use last done (usd 33,5) on a smaller Panamax through NSR Freight rate mt * usd 33,5 usd Commission 5% usd Bunkers 26 days*33 mt* usd 700 usd Bunkers in port 4 days*3 mt* usd1 000 usd NSR Fee usd Ports usd Insurance usd Extra usd T/C result usd T/C result per day (usd / 30 days) usd T/C result per day for the large Panamax going through Suez usd

Bunkers in port 4 days*3 mt* usd1 000 usd 12 000 NSR Fee usd 350 000 Ports usd 250 000 Insurance usd 70 000 Extra usd 50 000 T/C

17 Another Point: If you have a vessel in Rotterdam today and can fix a cargo from Kirkenes to China and you have tonnage that can do the NSR, - you will be making usd per day in stead of usd that your competitors are getting through Suez, - even after adjusting for economy of scale and you will be 18 days closer to the next loading port.

800 per day in stead of usd 19 200 that your competitors are getting through Suez, -

18 If a vessel makes one trip a year through the NSR, thereby saving 18 days and if a vessel has a technical lifespan of 20 years then this vessel will have gained one extra year of trading. 18 days * 20 years = 360 days The value of one year extra trading varies between usd pd and usd pd?

19 VITINO

20 Tanker Market Rotterdam-Vitino-NSR- Shanghaih 21 days Rotterdam-Vitino-Suez-Shanghai 40 days Savings 19 days Shanghai-Pusan-NSR-Rotterdam Shanghai-Pusan-Suez-Rotterdam Savings Total roundtrip savings 25 days 37 days 12 days 31 days

21 Tanker Market 31 days savings represent: Timecharter cost 31days * usd (?) usd Bunker cost 31days * 32 ton * usd 700 usd Extra canal cost *2 usd Extra Insurance usd +/- 0 Total savings usd Savings per ton (2 * ) usd 5.50

22 Tanker Market It is probably the lower freight cost using the NSR that makes this trade possible. From a cargo owners perspective it is possible to do 3 roundvoyages during the NSR season, compared to only 2 roundvoyages through Suez.

23 SUMMARY Port charges remain the same Commission remain the same Extra insurance will be higher h for some operators and lower for others, but deductible will be (much) higher. NSR transit fee will be higher than Suez cost and (much) higher than the Panama Canal. Main cost elements are the timecharter cost (for LNG and Seismic) and bunker costs (Tankers and Bulkers)

24 FINAL REMARKS NSR will be handling less than 50 vessels this season Compared to in Suez Compared to in Panama NSR will remain a niche (Arctic) in a segment (Ice) of the market As my calculations have shown it is a very interesting niche.

25 Thank you for your attention

Cross Border Logistical Chains and Joint Infrastructure as Preconditions for Effective Resource Development in the Arctic.

Felix H. Tschudi Tschudi Shipping Company Cross Border Logistical Chains and Joint Infrastructure as Preconditions for Effective Resource Development in the Arctic. Arctic Business Forum, Rovaniemi, 13.03.2013