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Outlook for shipping sector

World Cement,

The cement trade, including the shipping branch, is complicated, consisting of a wide variety of movements and sporadic short and long term shipments. Last year’s construction booms have made some of the world’s biggest cement groups invest in new production capacity to meet the future demand, as well as making available large volumes of cement and clinker for export. Even with the impact of the economic recession, we still believe that there will be a continuous consolidation of the cement industry at a global level in terms of capacity and ownership by the cement majors, and this will continue to act as a restraint on imports in some markets, and will encourage trade in others.

An opportunity
However, the recent economic recession presents a rare but proven opportunity for cement plants to extend their reach, and puts tremendous pressure on plants to reduce operating costs. The negative trends in building activity are expected to continue in Europe and the USA. The economic stimulus programmes are not expected to substantially impact cement demand during 2009.

China and India
In the two biggest cement producing countries - China and India - we have not seen any signs of recession. They continue to expand rapidly, attracting large capacity addition by major players during 2009. Because of China and India, we see the dry bulk industry remain attractive, with demand for dry bulk commodities continuously positive, even though the dry bulk markets have witnessed extreme volatility in recent months. We also see significant levels of litigation disrupting the market.

Shipping outlook
Future shipping rates seem to be under pressure due to overabundance of newbuild ships. My thoughts are that by 2011, there will be almost twice as many ships as needed, across almost all shipping sectors. We believe the industry needs to decrease the ship construction to a lower level. Overall shipping industry asset values look to be in trouble.

Author: Thomas Risstubben, Chairman of the Board, Ohlsson International Ltd

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