During the month of August 2015, PNSC lifted 1,241,564 metric tons liquid and 118,413 metric tons Break Bulk/Bulk cargoes. PNSC also provided Slot/NVOCC services and transported 417 TEUS during the month. All five dry bulk carriers remained fully employed on trip/voyage/time charter worldwide.

Revenue generation for the month of August 2015 was PKR 767.229 million through freights on lift-ing of Liquid Cargo, and PKR 226.60 million against freight on lifting of Dry Cargo. In total monthly revenue of PNSC was PKR 993.83 million.

O U T L O O K

C OMMERCIAL AND FINANCIAL HIGHLIGHT S

Pakistan National Shipping Corporation (PNSC), is a National Flag carrier enjoys a global presence in the shipping world with a fleet of nine (09) ships. It undertakes business operations in an internationally competitive environment, competes even for transportation of national imports and exports and earns most needed foreign exchange for Pakistan.

PNSC fleet is a mix of double hull Aframax tankers, Panamax , Supramax, Handymax and Handysize bulk carriers, all of modern vintage, having a total deadweight carrying capacity 681,806 metric tons. PNSC transports all type of dry and liquid bulk cargoes on several geographical routes covering almost entire world. PNSC undertakes three main functions:

• Fleet Maritime Operations • Real Estate Management of Three Commercial Buildings • Marine Workshop (Repair & Maintenance of ships)

Volume 6 PNSC Monthly Newsletter August - 2015

69th Independence Day Islamic Republic of Pakistan

P A K I S T A N N A T I O N A L S H I P P I N G C O R P O R A T I O N

INSIDE THIS NEWSLETTER Commercial & Financial

Highlights 1

Business Development 1

Business News 2

National Ports and Shipping News

2

Major Events of the Month 3

Global Shipping Updates 4

B U S I N E S S D E V E L O P M E N T S During the month, Chairman PNSC met with top management of renowned organizations & exchanged views on mutual cooperation and business development:

• Vice Admiral Tayab Khawar Ali

DG National Centre For Maritime Policy Research, Bahria University • Commercial Team

TSAKOS Shipping and Trading

• Mr. Irfan Siddiqi

President Meezan Bank

• Members/Representatives of OCAC

(Oil Companies Advisory Committee)

• Mr. Bilal Asghar

(Head Corporate & Investment Banking)

Chairman PNSC presiding a meeting with OCAC members

Chairman PNSC presenting shield to Vice Admiral Tayab Khawar,

Director General NCMPR

Chairman PNSC presenting shield to Mr. Konstantinos Chang

Representative of TSAKOS Shipping and Trading

Ministry of Commerce, Pakistan explored various avenues to enhance bilateral trade to $5 billion in the next five years after lifting of inter-national sanctions against Iran. Pakistan has a narrow export basket to Iran because 63 per cent of exports comprised of rice alone. Paki-stan`s exports to Iran fell to a low level of $43 million in 2014 from $182m in 2010. While Iranian imports fell to $186m in 2014 from $884m in 2010.

Pakistan signed a preferential trade agreement (PTA) with Iran in 2006. Iran is not willing to convert PTA into a free trade agreement. Tar-iff concessions were granted to Iran on 309 tariff lines while Pakistan was offered concessions on 338 tariff lines. Major sectors covered under the PTA were rice, fruits, cotton, cotton yarn, pharmaceutical products and cutlery. In April 2015, Pakistan and Iran decided to pre-pare a five year plan to enhance bilateral trade to the tune of $5bn. The visiting delegation will also discuss expansion of PTA. Experts pre-dict that payment mechanism normalization will pave way for diversification of exports to Iran. (Reported in Dawn News, 25th Aug’15)

Pakistan, Iran eye $5bn trade

LNG Project Status The project to import the liquefied gas from a friendly Islamic state has hit bottlenecks that have virtually impeded its progress. At the moment, the government may not be able to ink LNG deal with Qatar under government to government arrangement, at least, in the next 6 weeks as Qatar wants Pakistan to meet three conditions that include the dredging of Port Qasim by 14 meters, its monitoring and payment mechanism on behalf of power sector with guarantee from Finance Ministry, and opening of back to back stand by letter of credit (SBLC). In the crucial talks between top mandarins of Ministry of Petroleum and Natural Resources and Qatargas company, Pakistan failed to satisfy the authorities from Qatar on the said conditions. However Qatar authorities asked Pakistani counterparts to resolve the

issues by September 30, this calendar year. The Qatar gas company has also raised the issue of fee to be charged by Port Qasim Authority. Regarding the Port parameter issue, the dredging and removing the manoeuvring constraints at the bend of Ahsan channel would cost $ 300 million, which the Port Qasim Authority is not ready to bear. The PQA says that it is the duty of LNG terminal operator to dredge the water channel as it had agreement with the Qatari authorities. (Reported in Business Recorder News, 25th Aug’15)

5th Professionals Shipping, Logistics & Supply Chain Management Conference Federal Minister for Ports and Shipping Senator Kamran Michael said that the government was aware of the issues confronting shipping, logistics and supply chain industry and would ensure that all the stakeholders work in tandem. He said that the government has a vision to make the country economically strong by developing infrastructure and assured to take professional suggestions into account. Logistics role is crucial in trade and its efficiency directly affects the cost of doing business and end product prices. He said that the government was keen to accelerate the pace of growth and mentioned progress on China Pakistan Economic Corridor. He was speaking as chief guest at the 5th Professionals Shipping, Logistics and Supply Chain Management Conference and Exhibition.

The minister pledged to identify locations for setting up private warehouses and cold storage units at ports. He also mentioned that the new scanners are being in-stalled at all ports to cut clearance time. He further informed that a European Union delegation is visiting Karachi Fisheries to clear five more companies for exports. The minister said that speed boats for fast movement of perishable cargo from Kara-chi to Gulf countries are being arranged, which would help re-duce freight cost without compromising on quality of goods like fresh vegetables and fruits. (Reported in Dawn News, 20th Aug’15)

B U S I N E S S N E W S

Page 2

2,000 Acres Leased to China For Gwadar Economic Zone Pakistan has leased out over 2,000 acres of land to China for 43 years mainly belonging to the Pakistan Navy and the provincial government in order to construct the first Free Economic Zone (FEZ) at Gwadar. Under the much-hyped China-Pakistan Economic Corridor (CPEC), both Beijing and Islamabad decided to utilize $786 million for different important physical projects related to Gwadar, including the construction of airport at an estimated cost of $230 million. In addition, the Gwadar Coal Power Project will be constructed at an estimated cost of $360 million in order to generate 300MW electricity. So, Gwadar will have an overall investment of $1 billion under the CPEC. Another 500 acres of land will be leased out to China very soon to complete their requirement for the construction of the first SEZ (Special Economic Zone) at Gwadar, so the total land of 2,500 acres will be provided to their companies. (Reported in The News, 27th Aug’15)

N A T I O N A L P O R T S & S H I P P I N G N E W S

Brig. (R) Rashid Siddiqui receiving souvenir at the event

PNSC Monthly Newsletter August- 2015

A meeting with Mr. Khalid Pervez, Federal Secretary (Ministry of Ports & Shipping) was held on 11th August 2015 at PNSC Head Office. The agenda of the meeting was “Acquisition of Vessels, Infrastructure, Berthing Delays and Ullage issues at BOP’s KPT”. The meeting was attended by Chairman PNSC and representatives from all the concerned divisions. Chairman PNSC addressed the key matters like Liquid Imports and Tanker Acquisition 2015-16, Projects discussed with delegate from Ministry of Oceans and Fisheries, Republic of Korea and Oil Company Advisory Committee (OCAC). Highlighting the need of Tanker Acquisition, Federal Secretary was briefed that substantial number of vessels were chartered from open market to meet the obligations under COA’s for the liquid imports of the country. Honorable Federal Secretary was further briefed about other projects based on Reconstruction of OP-1 at KPT, Oil Storage & Ullage issues, PNSC workshop, Dredging opportunities in Pakistan, Dry Docking and Ship Overhauling.

M A J O R E V E N T S O F T H E M O N T H

Chairman Meeting With The Federal Secretary Ministry of Ports & Shipping

Flag Hoisting Ceremony

PNSC celebrates all national occasions with patriotism. On account of the 69th Independence Day of Pakistan, a flag hoisting ceremony took place at PNSC head office on 14th August 2015. Executive Director (Admin), Brig (R) Rashid Siddiqui and President CBA Naib Hussain addressed the employees on the occasion.

PNSC Monthly Newsletter August- 2015 Page 3

Farewell to Lt. Col. Ashad Anwer, Mr. Minhaaj & IBA Internees

Chairman presented souvenir to Lt. Col. Ashad Anwer, Act. GM (Personnel) and Mr. Minhaaj, Manager Accounts Ship Stores Dept for their dedication and endeavors for the organization during the period of their service. A tea party was arranged in their honor on 24th August 2015. Earlier on 11th August, shields were presented to IBA students upon completion of their internship.

Chairman Presenting Shield to Lt. Col Ashad Anwer Chairman Presenting Shield to Mr. Minhaaj Chairman Presenting Shield to IBA Internee

PNSC Monthly Newsletter August- 2015

G L O B A L S H I P P I N G U P D A T E S

LNG carrier freight rates have come under severe pressure due to rising fleet supply and stabilizing LNG demand, as Japan prepares to restart its nuclear power plants. Despite the general market belief that new LNG supply from Australian projects will provide ample em-ployment to the growing fleet, there are immediate challenges on freight rates. This is due to 49 million tones per annum of Australian LNG cargo supply expected to hit the market over the next two years. The LNG fleet continues to rise, with 30 more vessels expected to be delivered this year and a further 41 next year. The majority are yet to secure dedicated employment at present, around 30-40 vessels are sitting idle. “With Asian demand stabilizing, contractual supply from Australian projects will substantially reduce the dependency of Asian buyers on the spot market. Approximately 75% of new LNG shipping capacity serving this trade has been contracted by Asian buyers, principally the big three importers i.e. Japan, South Korea and China. (Reported in Hellenic Shipping News, 19th Aug’15)

Challenging Times Ahead For LNG shipping

New Suez Canal Opened With Fanfare

COSCO and China Shipping Co. merger is a big deal. With a merger, the larger China-owned shipping company would make a significant jump from occupying the sixth and seventh largest shipping company spots to the world's fourth largest shipping company, controlling a good 8 percent of global container shipping capacity. The new entity would be solid on the Asia-Europe trade but would have less share of the market on the other trades. The COSCO and China Shipping merged company would usurp the world's fourth largest shipping carrier seat from Hapag-Lloyd, which became the fourth largest carrier by merging with CSAV. The three largest container shipping companies in the world are Maersk, Mediterranean Shipping Co., and CMA CGM. It is still easy to see how the world of international shipping carriers is shrinking. The merger between COSCO and China Shipping Co. will be one more step in the ever decreasing number of competitors shipping containers across the oceans. (Reported in China Business Review, 28th Aug’15)

COSCO & China Shipping Merger Rattles Market

Many believe that the current collapse in prices is engineered by Saudia Arabia in an effort to knock out the US production as it is estimated that the cost of production of a fracking rig, including the financing cost, is about 70 USD per barrel. So with the oil prices in the region of USD 25-30, it is very difficult for refineries in the US to compete and this is also evident in the fact that the number of fracking rigs dropped from 1608 in October 2014 to 747 in April 2015. (Reported in Intermodal News, 25th Aug’15)

Slump in Global Oil Prices Poses Threat to US Production

Dry bulk ship owner appeared optimistic on the long term prospects of the dry bulk market, mainly thanks to an expected resolution of the oversupply problems of the market. Average spot rates so far in the third quarter are higher than the rates in the first half of 2015 which means that the company’s revenues are expected to improve compared to the two previous quarters. In terms of demand, it was witnessed that a slight improvement in total demand in the second quarter of the year compared to the previous slow quarter. Measured in tonne miles, demand for dry bulk commodities grew by one percent compared to first quarter, but still one percent lower than same quarter last year. Asset prices have reacted positively so far in third quarter to the improved spot market freight environment. (Reported in Hellenic Shipping News, 28th Aug’15)

Dry Bulk Ship Owner Optimistic About Future Prospects of the Market

P.N.S.C Building Moulvi Tamizuddin Khan Road, P.O. Box No. 5350, Karachi-Pakistan. Phone : (92-21) 99203980-99 (20 Lines) Fax : (92-21) 99203974, 235636658.

E-mail: communication@pnsc.com.pk URL : http://www.pnsc.com.pk

Page 4

Egyptian President unveiled an expanded Suez Canal, with the first ship passing through the waterway in what Egypt hopes will boost its economy and global standing. Initial estimates suggested the new route would take up to three years to build. The new section, funded entirely by Egyptian investors, runs part of the way alongside the existing canal connecting the Red Sea and the Mediterranean. It involved 37 kilometers of dry digging, creating what is effectively a `second lane` and widening and deepening another 35 kilometers of the existing canal. It will cut the waiting period for vessels from 18 hours to 11. By 2023, the number of ships using the canal will increase to 97 per day from 49 now, according to government projections. Officials hope the new water way will generate more than double Suez earn-ings from $5.3bn expected at the end of 2015 to $13.2bn in 2023. (Reported in Dawn News, 7th Aug’15)

Somalia Warns of Return to Piracy In northern Somalia, government officials are warning of a revival of piracy, unless foreign nations and the naval armada patrolling the coast do more to help create jobs and security ashore, and to combat illegal fishing at sea. Lack of jobs in Somalia could entice young men to resort to piracy once again and the issue is compli-cated. After decades of internal conflict, Somalia is still struggling to negotiate the terms of its reintegration as a nation-state. Different administrations have been issuing fishing licenses, and while Puntland believes it is currently being cheated of hundreds of millions of dollars in revenues, there are deep concerns about corrup-tion. There’s uncertainty between the federal government [of Somalia] and regions [like Puntland] for fishing companies regarding the validity of licenses and who to buy from. (Reported in Intermodal News, 30th Aug’15)