Northern Sea Route. - for Far East Commercial Perspective -

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1 Northern Sea Route - for Far East Commercial Perspective -

2 Contents 1. Intro - Backgrounds - 1 st Arctic Experience - Korea Arctic History 2. Far East NSR Shipping Patterns 3. Risks from Cargo Owner s Point of View 4. Far East Strategy and Expectation 5. Plan for Sustainable Arctic Business

3 Backgrounds Hyundai Glovis persues sustainable Arctic partner representing S.Korea Korea s Geographic Status One of the best location for NSR hub in Far-East - Many great ports i.e. Busan, Ulsan, Gwanyang - Ulsan has one of the biggest chemical industry cluster in Asia NORTH POLE NSR Bering Strait Center of Far-East market Center of the biggest markets in the world - World s 1 st & 2 nd largest LNG importer (Japan & Korea ) - 3 top 10 crude oil importers (China, Japan, Korea) SUEZ CANAL RUSSIA INDIA Korea CHINA Ready to Support on Arctic shipping Ministry and Local Gov ts are building up favorable policies. - Port cost reductions by volume - Bonus incentives to the First NSR shipping companies to Korean ports - Gov t-private sector, research centers hold strategic conference - Training program has been in place for Ice Navigation

4 Korea Arctic History 02 : Dasan Research Station in Spitsbergen Island 08 : Apply for Observer Status in Arctic Council 09 : 1 st Ice Breaker Araon Delivered (for Research) 12 : Joined Svalbard Treaty Baby Seal 13. May : Granted Arctic Council Observer Status 13. Oct. : 1 st NSR Operation with Stena

5 1 st Arctic Experience

6 Far East NSR Shipping Patterns 2 types of NSR shipping pattern based on Trading Routes Far East NSR Shipping Pattern Transit Shipping (Europe Far-East) Destination Shipping (NSR Origin Cargos) Depend on trading arbitration market Russia/North Sea Project Cargos No frequent energy trading between North Europe and Far-East Russian Energy Development Projects are increasing

7 Risks from Cargo Owner s Point of View Frequent Delays Open June~Oct. Uncertainty - Harsh/fickle weather - Deviation on ice condition - Ice Pilot on-board delay - Icebreaker waiting, etc -Can t use whole year - Only operational around Summer season Safety Accident & Repair - Harsh/fickle weather can delay rescue & repair - Repair/Rescue cost increase - Not much of alternatives Infrastructure - Limited number of Icebreaker - Emergent parts supply - Delay can cause Sea farers isolation - Weather monitoring for better decision Commercial Demerits on Profit - Cost for Ice breaker/ice Pilot - Higher Ice Class vessel cost - Higher bunker/insurance cost - Less cargo hold capacity - Shallow draft - Ballast repositioning cost Ice Clause - Any delay or deviation caused by or resulting from ice shall be for the Charterers account and the Vessel shall remain on-hire.

8 Far East Strategy - Far-East companies will try to participate more on development projects matching destination market s needs - They would persue package type of investment including logsitics initiatives - As Development Projects increase, chances of Destination Shipping will increase - Becuase of disadvantages vs Southern Route, Transit Shipping will not be prefered to Far-East cargo owners and shipping companies, but small portion of transit shipping by Far- East shipping companies will continue

9 Some Expectations - Plannings and Solutions for worst case senarios need to be strengthened - NSR ports need to have better infra structure Safer NSR - Political/Policy uncertainty around NSR seems to be improving but would need more advertisement to cargo owners in the East - If communication in NSR to be in English, the route service will be more favorable - If Ice Breaker/Ice Pilot tariffs to be more reasonably suggested for Far-East shipping companies - Ice class vessel, Insurance cost, Ice pilot, etc cost need to be overcome Commercial - When environmental regulation gets reinforced, possible cost increase - When NSR ports economic trading gets more stimulated, it can bring more traffic in NSR.

10 Plan for Sustainable Arctic Business International Relationship Academic Research Sustainable Arctic Business Biz Model Development Set up Laws & Policies

11 Plan for Sustainable Arctic Business Hyundia Glovis implemented Eco-cycle PLAN-DO-SEE for social resonsibility. < Green Company Award in 2012>

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