Business opportunities in Turkish Maritime Industry Marco Rensma Director MEYS Emerging Markets Research Istanbul, 24 May 2012

www.meys.eu Content presentation

1. Introduction MEYS Emerging Markets Research

2. Global trends seaborne trade and shipbuilding

3. Economic developments

4. Turkish maritime industry: 4.1 Developments seaborn trade Turkey 4.2 Trends in Turkish shipbuilding 4.3 Market of tankers and bulk carriers 4.4 Market of mega yachts 4.5 Market of naval ships 4.6 Market of offshore supply vessels

5. Outlook maritime industry Turkey 2012 - 2014

www.meys.eu 1. Introduction MEYS Emerging Markets Research

www.meys.eu What we do

− International market research and advisory for Dutch companies

− Focus on the emerging markets of: • Romania Turkey • Hungary Morocco • Czech Republic Vietnam

− Business clients from industry, construction, trade & logistics, transport

− Official partner TurkeyDesk - Fenedex

− Writing articles on emerging markets for: • Fenedexpress, monthly magazine Fenedex • Romania Magazine, quarterly magazine Dutch Romanian Network

− Presentations for companies, business associations, and universities on emerging markets and globalisation

− Parttime lecturer Global Marketing, The Hague University of Applied Sciences www.meys.eu 2. Global trends seaborne trade and shipbuilding

www.meys.eu Increased volume world seaborne trade

International developments seaborne trade (millions of tons loaded) 3.000

2.500

2.000

1.500

1.000

500

-

1990 1980 1985 2000 2005 2006 2007 2008 2009 2010 2011

Oil Main bulks* Other dry cargo Container Source: UNCTAD Note: (*) Iron ore, grain, coal, bauxite/alumnia and phosphate www.meys.eu Growth rate world seaborne trade could become lower after 2011

12 125

10 110 8 95 6

(%) 4 80 rate 2 65 USD/barrel Growth 0 50

-2

2003 2006 2009 2001 2002 2004 2005 2007 2008 2010 2011

2012f 2013f 2014f -4 35 -6 20 Seaborne trade Global economy Oil prices (R-axis) Source: UNCTAD, IMF, own calculations www.meys.eu Declining world volume new orders and order books

World volume (million GT) 400 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: SAJN New orders Order books

www.meys.eu Declining demand tankers and bulk carriers; small increase container ships World order book World order book container ships (mill. DWT) (mill. TEU) 160 7.000 140 6.000 120 100 5.000 80 4.000 60 3.000 40 20 2.000

0 1.000

2004 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Tanker < 200.000 DWT Tanker > 200.000 DWT Capesize Source: RS Platou www.meys.eu Falling prices for new tankers, bulk carriers and container vessels 100 90 80

USD 70

60 Million 50 40

30

2009M01 2011M10 2008M01 2008M04 2008M07 2008M10 2009M04 2009M07 2009M10 2010M01 2010M04 2010M07 2010M10 2011M01 2011M04 2011M07 2012M01 2012M04 Suezmax Capesize 3.000 TEU

Source: RS Platou www.meys.eu Lower demand mega yachts

300 261 250 218 214 213 200 195 176

150 114 Numbers 108 100 90

53 50 20 0 2007 2008 2009 2010 2011 2012* New orders Deliveries

Note: (*) Jan. - April Source: Camper and Nicholson, Boat International, SuperYacht Times www.meys.eu Increasing demand for offshore supply vessels (excl. tugboats) Volume world order books OSVs (number) 900 850 800 750 700 650 600 550

500

2008jul

2008jan 2009jan

2007okt 2008okt

2010feb 2011feb 2012feb

2008apr

2009aug 2010aug 2011aug

2009nov 2010nov 2011nov

2009mei 2010mei 2011mei

Source: Marcon International www.meys.eu Increasing overcapacity at worldwide 60

50

40

30 CGT

20 Million 10

0

2009 2010

-10 2008

2011e 2012e 2013e 2014e 2015e -20 Completions Shipbuilding capacity Overcapacity

Source: POSCO Research Institute www.meys.eu 3. Economic developments Turkey

www.meys.eu Turkey higher economic growth rate than EU-27

Economic growth rate (GDP, %) 10,0 8,0 6,0 4,0 2,0 0,0

-2,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -4,0 -6,0 EU-27 the Netherlands Turkey Source: IMF www.meys.eu Strong increase total foreign trade

Total foreign trade Turkey (billion euro) 300,0

250,0

200,0 Economic liberalisation 150,0

100,0

50,0

2003 2007 2000 2001 2002 2004 2005 2006 2008 2009 2010 2011 Source: Turkstat www.meys.eu Turkey relatively small export sector

Exports, 2011 (% of GDP) Ireland Hungary Estonia Slovakia Netherlands Belgium Czech Republic Lithuania Slovenia Bulgaria Latvia Austria Switzerland Denmark Sweden Poland EU-27 Norway Finland Romania United Kingdom Turkey 0% 20% 40% 60% 80% 100% 120% Source: Eurostat www.meys.eu Turkey large deficit current account

Current account balance, 2011 (% GDP)

Norway Switzerland Netherlands Sweden Denmark Germany Estonia Korea Japan Austria Slovak Republic Ireland Israel Belgium Finland Slovenia United Kingdom Australia France Canada Czech Republic United States Italy Spain New Zealand Portugal Iceland Greece Turkey Source: IMF

-10 -5 0 www.meys.eu 5 10 15 High inflationary pressure Inflation Turkey 2009 – 2012 (%) 30,0

25,0

20,0

15,0

10,0

5,0

0,0

-5,0

2009M11 2009M01 2009M03 2009M05 2009M07 2009M09 2010M01 2010M03 2010M05 2010M07 2010M09 2010M11 2011M01 2011M03 2011M05 2011M07 2011M09 2011M11 2012M01 2012M03

Total Food Energy Source: Eurostat www.meys.eu Weak Turkish Lira

Real effective exchange rate TRY (2010 = 100) 105

100

95

90

85

80

01-2008 04-2008 07-2008 10-2008 01-2009 04-2009 07-2009 10-2009 01-2010 04-2010 07-2010 10-2010 01-2011 04-2011 07-2011 10-2011 01-2012

Source: Bank International Settlements www.meys.eu Turkey Central Bank (still) holds interest rate relatively low Policy rate (%) 7,50

7,00

6,50

6,00

5,50

5,00

2011M12 2010M05 2010M06 2010M07 2010M08 2010M09 2010M10 2010M11 2010M12 2011M01 2011M02 2011M03 2011M04 2011M05 2011M06 2011M07 2011M08 2011M09 2011M10 2011M11 2012M01 2012M02 2012M03 2012M04 Source: Central Bank Turkey www.meys.eu Economic outlook Turkey 2012 – 2014 positive

Growth rates for Turkey (%) 10,0

8,0

6,0

4,0

2,0

0,0 2010 2011 2012 2013 2014 GDP Private consumption

Source: EIU Exports Government consumption

www.meys.eu Turkish current account deficit remains high after 2011

Balance current account Turkey (% GDP) 0,0 2010 2011 2012 2013 2014 -2,0

-4,0

-6,0

-8,0

-10,0 Source: IMF www.meys.eu 4. Turkish Maritime Industry

www.meys.eu 4.1 Developments seaborne trade Turkey

www.meys.eu Turkey strategically located for international seaborne trade

www.meys.eu Ports are located all along Turkish coast

• 175 Ports • 90 per cent private operated

Source: ISPAT

www.meys.eu Busy times at Turkish seaports

Volume goods handled at Turkish seaports (million tons) 400 350

300 Cabotage 250 200 150 100

50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: UMA Total volume Export/import www.meys.eu Slowing down growth rate seaborne trade Growth rate seaborne trade Turkey(%) 60%

40%

20%

0%

-20%

2012M01 2009M01 2009M03 2009M05 2009M07 2009M09 2009M11 2010M01 2010M03 2010M05 2010M07 2010M09 2010M11 2011M01 2011M03 2011M05 2011M07 2011M09 2011M11 2012M03 -40%

-60% Exports Imports Source: Turkish customs www.meys.eu Turkey relatively large merchant fleet

Total DWT merchant fleet as a percentage in world total, 1-1-2011 (%)(a)

Greece Japan Germany China excl. Hong Kong Republic of Korea US Norway China, Hong Kong SAR Denmark Taiwan Singapore Bermuda Italy UK Turkey Russia Canada India Malaysia Belgium Iran Saudi Arabia Brazil Indonesia Cyprus UAE Netherlands France Viet Nam Sweden

Source: UNCTAD 0 5 10 15 20 Note: (a) Vessels of 1,000 GT and above operating under national and foreign flag www.meys.eu Relatively young merchant fleet

Age merchant fleet Turkey, % in total DWT (December 2011)

30+ years Mainly smaller vessels < 10.000 DWT 20 - 29 years

10 - 19 years

0 - 9 years

0 10 20 30 40 50 60 Source: Turkey Chamber of Shipping

www.meys.eu Strong increase container handling

Volume container handling Turkish ports (x 1.000 TEU) 7.000 6.000 5.000 4.000 3.000 2.000 1.000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: UMA, TURKLIM www.meys.eu Turkish ports relatively small globally in container handling

Container throughput, 2009 (x 1.000 TEU)

China United States Singapore Hong Kong Japan Korea, Republic of Malaysia UAE Germany Spain Taiwan Netherlands Belgium Italy India Indonesia United Kingdom Brazil Australia Viet Nam France Panama Turkey

Source: UNCTAD - 20.000 40.000 60.000 80.000 100.000 120.000

www.meys.eu 4.2 Trends in Turkish shipbuilding

www.meys.eu Concentration of shipyards in Istanbul (Tuzla Bay) and Yalova

(8) (1) (1) (27) (1) (1)

Yalova (21) Izmit (6) Sakarva (1) Canakkale (2)

71 shipyards as of 1-1-2012

(1) Hatay (1)

Source: UMA www.meys.eu Turkey among the ‘best of the rest’

Top 20 economies for shipbuilding, 2010 deliveries (% in world total DWT)

China 41,07% Republic of Korea 31,34% Japan 21,77% Philippines 1,24% Romania 0,60% Viet Nam 0,56% Denmark 0,50% Taiwan 0,44% Croatia 0,35% Germany 0,35% Turkey 0,33% US 0,22% Russia 0,17% Spain 0,15% Indonesia 0,12% Netherlands 0,12% India 0,09% Italy 0,08% Poland 0,08% Bulgaria 0,07% 0% 10% 20% 30% 40% 50% Source: UNCTAD www.meys.eu Large overcapacity at Turkish shipyards

Number of ships built Ship deliveries and max. production at Turkish shipyards capacity (x 1.000 DWT) 160 4.000 140 3.500 120 3.000 2.500 100 2.000 80 1.500 60 1.000 40 500 -

20

2008 2004 2005 2006 2007 2009 2010 2011

0 2003

2009 2001 2002 2003 2004 2005 2006 2007 2008 2010 2000 Ship deliveries Production capacity

Source: Turkey Chamber of Shipping, UMA www.meys.eu Order books Turkish shipyards are under pressure. Focus primarily on tanker building

Total order books Turkish shipyards Order books by type of ship 2010 (%) (x 1.000 GT) 3.000 9%

2.500 17% 2.000

1% 1.500 2%

1.000 71% 500

Container General cargo RO-RO -

Bulk Carrier Tanker

2008 2005 2006 2007 2009 2010 2011

Source: Turkey Chamber of Shipping, SAJN www.meys.eu 4.3 Market of tankers and bulk carriers

www.meys.eu Tankers and bulk carriers most used vessels in Turkish merchant fleet

Merchant fleet Turkey (DWT)* 11.500.000 10.000.000 8.500.000 7.000.000 5.500.000 4.000.000 2.500.000 1.000.000 2008 2009 2010 2011 Tankers Bulk carriers Total Note: (*) ships over 150 GT Source: UMA www.meys.eu Tankers and bulk carriers main shipbuilding marketsegments

Ship deliveries Turkey 2010 (percentage of built tonnage) 4,6 1,2

16,8

58,6 18,7

Tankers Bulk carriers Other dry cargo/passenger Offshore Source: OECD Others www.meys.eu Since 2007 domestic demand for tankers higher than foreign demand

Tanker deliveries Turkish shipyards (number) 90 80 70 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Export Domestic Source: OECD, Turkey Chamber of Shipping www.meys.eu Decreasing volume order books, particular for tankers Order books Turkey (number) 200 179 175 150 125 116 100 90 77 74 75 57 50 21 21 23 24 21 22 25 8 12 12 10 13 8 0 2 5 3 2 1 0 2008jan 2009feb 2009dec 2010dec 2011mei 2011okt

tanker bulk dry cargo container

Source: OECD, Turkey Chamber of Shipping, Clarkson

www.meys.eu 4.4 Market of mega yachts

www.meys.eu Strong increase international tourism

Foreigners arriving (persons) 35.000.000

30.000.000

25.000.000

20.000.000

15.000.000

10.000.000

5.000.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Turkstat www.meys.eu Turkey third largest builder of mega yachts

Mega yachts builders 2010 (% in total boat length)

Others China UAE Taiwan New Zealand UK US Germany Turkey Netherlands Italy

0 5 10 15 20 25 30 35 Source: Camper and Nicholson www.meys.eu Lower demand mega yachts from Turkish shipyards

Market of mega yachts Turkey (number) 29 30 27 25 25 23 20 19 18 18 15 10 10 5 6 5 1

0

2007 2008 2009 2010 2011 2012* Completed New orders

Note: (*) Jan. – April Source: SuperYacht Times, Camper and Nicholson

www.meys.eu Lower prices 2012Q1 after records in 2010 and 2011 Average asking prices mega yachts Turkey (Loa per metre) 450.000 400.000 350.000 300.000

250.000 Euro 200.000 150.000 100.000 50.000 2007 2008 2009 2010 2011 2012*

Note: (*) Jan. - April Source: Boat International, Super Yacht Times, The Yacht Market www.meys.eu Examples of mega yachts built in Turkey

Boat: Aegean Yacht Ketch Boat: Peri 37M Builder: Aegean Yacht Builder: Peri Yachts Boat length (Loa): 26.60 metres Boat length (Loa): 37.75 metres Asking price: 2.000.000 euro Asking price: 8.000.000 euro

www.meys.eu 4.5 Market of naval ships

www.meys.eu Strong increase turnover Turkish defense industry

Defense industry Turkey (x 1.000 USD) 3.500.000 3.000.000 2.500.000 2.000.000 1.500.000 1.000.000 500.000

-

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: SaSad Turnover Exports

www.meys.eu Strong increase in expenditures on military equipment

Development Defense Industry Support Fund 2.000 1.800 1.600 1.400 1.200 USD 1.000

Million 800 600 400 200

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Income Expenditures

Source: Undersecretary Defense Industry (SSM) www.meys.eu Large investment programs Turkish navy MILGEM GENESIS • Investment program of 2 billion dollars over • Upgrading weapons a period of 15 years systems on board 8 frigates • Building of twelve (four optional) Patrol and Anti-Submarine Warfare Ships

Submarines TF-2000 • Building of 6 submarines • Building of 6 anti-air frigates • Value of the contract 2 billion dollars • Value of the contract 3 billion • Cooperation between HDW from Germany and dollars several Turkish companies, among others Aselan • First delivery 2018 and Havelsan

www.meys.eu 4.6 Market of Offshore Supply Vessels

www.meys.eu Turkey small builder in global market of OSVs

Volume order books OSVs Turkish shipyards (number) 14

12 Turkey 1% of global market 10

8

6

4

2

0

2008jul

2009jan 2008jan

2007okt 2008okt

2010feb 2011feb 2012feb

2008apr

2009aug 2010aug 2011aug

2009nov 2010nov 2011nov

2009mei 2010mei 2011mei

Source: Marcon International www.meys.eu Examples Turkish built OSVs

RMK CEMRE Shipyard • Offshore multi-purpose ship • Offshore support vessel • 7.800 DWT • LOA 86 metres • Delivery 2009 • Delivery September 2011 • North Sea Shipping (Norway) • Havyard (Norway)

www.meys.eu 5. Outlook maritime industry Turkey 2012 - 2014

www.meys.eu Market segment Outlook Market opportunities Market threats 2012 – 2014 Tankers ++ ✓ Increasing demand oil and gas transport ✓ Falling newbuilding prices ✓ Strong domestic base -> excess capacity ✓ Partly replacement merchant fleet ✓ Strong competition Asia ✓ Regional energy hub ✓ High investments costs ✓ Relatively low labour costs Bulk carriers + ✓ Growing economy Turkey ✓ Falling newbuilding prices ✓ Partly replacement merchant fleet -> excess capacity ✓ Relatively low labour costs ✓ Strong competition Asia ✓ Lower growth rate global economy Container ships + ✓ Growing economy Turkey ✓ Falling newbuilding prices ✓ Regional trading hub -> excess capacity ✓ Relative low labour costs ✓ Strong competition Asia ✓ Lower growth rate global economy Mega yachts ++ ✓ Strong increase international tourism ✓ Strong competition from ✓ Higher incomes in Turkey Europe ✓ Volatile and small global market Naval ships +++ ✓ High government expenditures ✓ Political developments ✓ Increase foreign demand ✓ Difficult market to enter for new foreign companies OSVs ++ ✓ Investments by oil and gas industry ✓ Strong global competition ✓ Increasing energy demand Turkey ✓ High investments in R&D ✓ Strong dependence on foreign imports www.meys.eu Thank you for your attention!

Marco Rensma Mobile: +31(0)612792560 E-mail: [email protected]

www.meys.eu