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Lorentzen & Stemoco AS PO Box 7 Lilleaker www.lorstem.comLilleakerveien 4 N-0216 Oslo, Norway Phone +47 22 52 77 00

Published by:

LORENTZEN & STEMOCO

WEEKLY 29.2006

Habits Die Hard

The persistently high gasoline prices since the start of

the US driving season in May have caused anxiety that

US consumers will be forced to restrain their driving

appetite when faced with high costs at the pump.

So far, the sensitivity hasnt really been shown by the

gasoline demand figures published by the US Energy

Information Administration (EIA). During the first half

of this year, as retail gasoline prices in the US have

increased 26% from last years levels, gasoline demand

still remained as strong as last year. For the past three

month of this driving season gasoline demand greweven stronger at 1.8% compared with the same period

last year. Average annual growth for 2000-2005 was

1.4%.

What this is telling us is that US consumers seem to

have adjusted to the new price levels. Rather than

driving less, they simply spend less on other items as

they pay more at the gas station. Habits die hard.

However, in the long term, high gasoline prices will

negatively affect demand. Slower economic growth

and cooling housing markets will make consumers

more cost-conscious. High crude oil prices, changes inproduct specifications and potential supply disruptions

by hurricanes are certainly not helping in easing the

price at the pump.

Economists in the US Energy Department are

estimating that a permanent increase of 10% in the

price of crude oil causes a 0.6% decrease in gasoline

consumption over two years. Although this sensitivity

hasnt really been spotted yet, it will be in the future.

Under the backdrop of higher energy costs, more and

more attention has been focused on finding cheaper

alternative energy sources. As far as gasoline isconcerned, there has been increasing investment

interest in production of so called biodiesel fuels.

So what is biodiesel? According to the US NationalBiodiesel Board, biodiesel is the name of a clean

burning alternative fuel, produced from domestic,

renewable resources. Biodiesel contains no petroleum,

but it can be blended at any level with petroleum diesel

to create a biodiesel blend. It can be used in

compression-ignition (diesel) engines with little or nomodifications. Biodiesel is simple to use,

biodegradable, nontoxic, and essentially free of sulfur

and aromatics.

Biodiesel is made through a chemical process calledtransesterification whereby the glycerin is separated

from the fat or vegetable oil. The process leaves behind

two products -- methyl esters (the chemical name for

biodiesel) and glycerin (a valuable byproduct usually

sold to be used in soaps and other products).

By the end of 2007, global biodiesel production

capacity is set to increase by 9-10 million tons from

about 5 million tons by the end of 2005. Expansion

will come mainly from the US and Europe.

The expanding production capacity for biodiesel will

lead to strong demand for vegetable oils, especially inthe US and Europe. Soybean oil and rapeseed oil are

the main vegetable oils that are currently being used

for producing biodiesel. In Europe, more than 94% of

demand growth for vegetable oils is for biodiesel.

Unlike the US, which has ample production capacity

for vegetable oils by using domestically grown oil

seeds, Europe will be faced with squeeze on vegetable

oil supply, due to a lack of crushing capacity for

vegetable oils and limited oil seeds plantation in the

European region compared with demand growth.

Europe is already a net importer for soybean and

rapeseed oil.

In 2006 it is expected that European imports demand

for vegetable oils will increase by 17%, thanks to the

surging demand for biodiesel and supply deficit within

European countries. China, the second largest importer

of vegetable oils after Europe, is expected to import

7% more than last year, driven by strong domestic

consumption growth. In total, global vegetable oil trade

is set to grow by nearly 8%, higher than the average

growth of 7% during the last five years. Main

vegetable oil producing countries like Argentina,

Brazil, Indonesia and Malaysia are the main exporters

for Europe and other Asian countries.

Employment for smaller sized product and chemical

tankers, which are the main vegetable oil carries,

would benefit strongly from growing vegetable oiltrades. From January 1st 2007, all vegetable oils will

need to be carried by double-hull tonnage under the

Marpol Annex II regulation. Together with the ongoing

IMO phase-out of non-double hull product tankers,

these two regulations will tighten up the tonnage

supply for seaborne vegetable oil trades. Non-doublehull tankers currently carry the majority share of

vegetable oils.

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WEEKLY 29.2006 LORENTZEN & STEMOCOThe chemical tanker sector, which has a larger share of

double hull tonnage than product tankers, will benefit

even more from strong tonnage demand for vegetable

oil trades because many chemicals would also demand

higher IMO chemical class tonnage under Marpol

Annex II regulation. A lack of quality DH tonnage

could tighten up fleet supply for the chemical tankermarket.

As long as high oil prices continue to feed into pricy

gasoline and US drivers keep up their driving habits,

the outlook for biodiesel demand will be strong. Not

only will price levels be firming for various vegetableoils, but also vegetable oil seaborne trades will increase

under the current sourcing patterns. Strong tonnage

demand from vegetable oil trades, combined with

Marpol Annex II regulation and ongoing IMO phase-

out, should contribute to a firming chemical tanker

market from 2007 onwards.

Have a nice day!

Lianghui Xia

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WEEKLY 29.2006 LORENTZEN & STEMOCOHANDYSIZE

Atlantic

Owners with tonnage in the US Gulf remained

confident that the recent healthy level of enquiry would

continue.

One report suggested that the 1998 built 46,211

"BROTHER GLORY" may have been booked delivery

US Gulf spot for 4 to 6 months trading at about USD

22,000 daily although this could not be confirmed.

Spot activity included a report that Energy fixed the

1985 built 37,500 dwt "TAI KANG HAI" from the US

Gulf to the Mediterranean at a good USD 18,000 daily.

From the Mediterranean, it was rumoured that 1995

built 42,000 dwt "SEALADY" open spot Damietta had

been booked for a trip via the Black Sea to the east at

about USD 20,000 daily but this could not be verified.

There was also talk that the 2000 built 45,400 dwt

"OCEANTHI" open early August in Greece had also

been booked for a trip to the Far East at about USD

22,500 daily but a charterer was not disclosed.

Pacific

The futures tell the tale perfectly - Capes and

Panamaxes up WoW anything from 10-20% but

Supermaxes up between 1-3% with the exception of

Cal 07 which is up over 6% reflecting a growing focus

and belief that 07 might not be so bad and futures

might be undervalued as we slowly progress through

this year. With all the excitement for the bigger sectors

the Handymax in Pacific is best described as finely

balanced and stable. There is still healthy demand but

rates seem not to be too affected, of note is the slight

improvement on both coasts of India and in Pacificbasin there are a few vessels prompt, spot and

ballasting. This is of interest, the rates are staying

stable but the ships are being fixed closer to spot to

achieve those rates, any tweak of either supply or

demand could have a significant impact. Another factor

that must not be forgotten is Atlantic strength, rates are

rising at a healthy pace and this can only be good news

for the general market (although a dampening

influence on the backhaul routes either in absolute

terms or in the rate of any increase). Long period rates

are steady, Supermaxes being fixed still at USD 21,750

USD 22,000 for 12 months charter, interestingly

Korea Line was rumoured to have taken a 55K NB ex

yard for forward delivery 1-10 Dec. at USD 19,000 for

2 years. Short period remains high and primarily by

backhaul cement. One interesting theory has surfaced

concerning future demand, some USA cement

contracts are up for renewal from September onwards,with many owners burnt from this route there will

surely have to be an enormous hike in freight to cover

future shipments, whether this can be borne by the

purchasers, whether they have to scale down or source

from a different route will be interesting to see. For

next week we have to see demand levels to be able to

judge direction, owners no doubt will have to be alert

for more spot/prompt fixing.

Bunker Prices in Singapore July 21, 2006:

IFO (380): USD 339.00, IFO (180): USD 352.00,MDO: USD 640.50, MGO: USD 647.00.

Handy (max. 15 yr. old

craned)Dwt

Last Week

(USD/day)

This week

(USD/day)

T/A r/v 45/47 21,400 22,000

42/43 20,000 20,500

37/38 18,200 19,000

28/32 16,000 17,000

USG/F.East 45/47 24,500 25,000

42/43 21,500 22,000

37/38 18,000 18,500

28/32 16,500 17,000

Pac. r/v 45/47 23,750 23,750

Cont./F.East 45/47 22,500 23,200

42/43 19,000 19,700

37/38 18,250 19,000

28/32 15,500 16,500

Med.-B.Sea./F.East 45/47 21,000 22,500

42/43 18,500 20,000

37/38 17,500 19,000

28/32 15,500 17,000

F.East/Europe 45/47 25,000 25,000

12 mos. T/C 50/53 22,000 22,000

45/47 18,500 18,500

42/43 17,500 17,500

37/38 16,500 16,500

28/32 15,000 15,000

PANAMAX

Pacific

The market firmed and continued in this direction over

the past week, the supply and demand were there and

sentiment influence from a firm Cape market no doubt

played its part. The Indices moved up steadily as did

the FFA with the WoW up 15%, closing last night at

23,203 on the spot. The physical market is almost a

mirror image of two weeks ago with short period

activity prevailing and the NOPAC rate being about the

same.

DRY CARGO

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WEEKLY 29.2006 LORENTZEN & STEMOCONOPAC rates having closed on average at about

21,000 last week we now see 22,000 being fixed for a

70,000 whilst the larger 76,000 being rumoured done at

23,750. The Aussie R/V remained quiet with little

reported. In the SE Asia market we saw one fixture

reported at 23,000. Backhaul again not much activitybut we would be guided by the fixture via PNW to the

Continent, delivery Japan at 22,000. The period market

was this week's active playground with short period

being done at 25,250 for a 76000, a 75000 getting

23000 and another 76000 fixing at 24000. Now, the

76,000 fixed at 25,250 was by TMT who legend has it

have a Paper agenda nuff said on that deal we think.

One year trading is at 19,750 for a 70,000 whilst a

Kamsarmax was rumoured fixed and failed at 23,000,

which is probably not surprising.

The coming week ... well, as we are a little gun shy of

predicting these days if you recall, but we do feel that

the market is in all likelihood to hold firm with further

"up" expected.

Modern Panamax

Last Week (USD/mt) This Week (USD/mt)

55,000 hss Gulf/Cont. 20.25 20.25

54,000 hss Gulf/Japan 38.80 38.80

USD/day USD/day

T/A r/v

Pac. r/v 21,500 23,500

Trip Atl./F.East

Trip F.East/Atl. 22,300 23,000

12 mos. T/C 21,000 20,000

CAPESIZE

The Baltic spot rate for Capesize, as measured by the

four TC route average, is at current USD 45,650 per

day. In the third quarter of 2006, pricing at USD

42,600, per day, and in the fourth quarter of 2006 at

USD 46,250 per day.

The entire 2007 is priced at USD 36,900 per day.The entire 2008 is priced at USD 32,600 per day.

The entire 2009 is priced at USD 29,750 per day.

CapesizeLast Week

(USD/mt)

This Week

(USD/mt)

Tubarao/Beilun-Baoshan 25.25 27.50

Richards Bay/Rotterdam 14.00 16.50

Tubarao/Rotterdam 13.50 14.50

Bolivar/Rotterdam 14.00 15.00

Dampier/Beilun-Baoshan 11.00 12.25

Gladstone/Rotterdam 19.00 20.50

USD/day USD/day

Del.Cont.-Med. TCT F.East 51,000 58,000

Del. Gib-Hbg T/A r/v 40,000 45,000

Del.China-Jpn TCT Cont.-Med. 26,000 32,000

F.East r/v 41,000 47,000

One year T/C 170,000 dwt 42,000 45,000

SMALL (5/15.000 DWT) N.W.E.

Beginning of last week we had a lot of trading activity

ex Baltic and on the Continent, but it slowed down

towards the end of the week. With few open ships for

July loading, the rates have stabilized at firm levels.

Several ships are still waiting birthing at Oiltanking

Terminal in Amsterdam without prospect, and similar

waiting times for discharging at Rotterdam and

Thames have been reported.

Outlook: Summer.

CLEAN

The clean tanker rates in the West stayed quite flat thisweek and remained at firm level. The market in the

East was helped by strong market in the West due to

tight vessel supply. During the past three months, we

have seen the US domestic gasoline production surging

to the highest level for the past three years. Together

with strong imports, US gasoline stock finally moved

above 5y-average level. Although the gasoline demand

has been very healthy so far, high domestic production

could curb the imports if no major hurricane threat is

on the horizon soon.

Outlook: Steady.

TANKERS

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WEEKLY 29.2006 LORENTZEN & STEMOCOHANDY CLEAN

(R/V)

Last week

(WS)

This week

(WS)

Average earnings

This week

(USD/day)

33,000 Cont/USAC 317 315 26,750

25,000 Cross UKC 295 300 24,950

27,500 Skikda/UKCM 297 335 29,450

28,500 Caribs/USAC 350 350 23,250

35,000 MEG/E Africa 340 340 31,750

33,000 MEG/Japan 260 270 18,900

30,000 Spore/Japan 237 250 16,650

PANAMAX CLEAN

(R/V)

70,000 Cont/USAC 205 230 47,800

55,000 MEG/JAPAN 200 208 23,150

DIRTY

The VLCC market had another firm week as charters

have been scrambling to cover the demand for August

fixtures. The vessel supply is still fairly tight.

However, the WTI-Brent spread has been falling like a

stone during the last 2 weeks, which could curb the

crude flow into the US and thus potentially softened

the VLCC rates in the short term. A weaker VLCC

market could easily soften the market of smaller sizes.

Outlook: Soft.

VLCC/ULCCLast week

(WS)

This Week

(WS)

Average earnings

This week

(USD/day)

MT 290,000

MEG/Continent 95 100 74,900

TT 275,000

MEG/Continent95 100 41,050

MT 250,000

MEG/S.Korea/Jpn115 135 83,650

TT 260,000

MEG/Singapore130 152 75,700

SUEZMAX

MT 130,000

W.Afr./USG155 149 42,450

MT 130,000

Sidi Kerir/Lavera145 145 40,650

AFRAMAX

80,000

N.Sea/USAC182 212 45,550

80,000

N.Sea/UK-Cont.165 197 61,350

80,000

MEG/Singapore200 215 40,750

70,000

Caribs/USAC-G200 212 36,450

PANAMAX

50,000

Caribs/USG223 210 23,650

VLGC

With holidays coming up and people away from the

office in combination with the present difficult

market, the activity in the VLGC market suffers.

However, there are not many vessels around and we

dont believe we will experience any dramatic drops in

spot rates for the week to come.

There are a few traders sniffing around for vessels first

half August, however, they have not been willing to

pay anything starting with a 6 and they are

temporizing, hoping for freight rates to come down.

For the moment it seems more likely that cargoes will

head east as this netback is substantially stronger vs.western destinations.

40 60,000 Cbm

The Yuzhny line-up for July is totalling about 380 mts

of NH3, with five LGC vessels appearing in the line-

up, equal to about 50% of the product committed.

Yuzhny product prices have remained firm and stable

throughout the month of July in the range of USD

205/210 pmt fob. We have reasons to believe that this

price level will be maintained well into August

following Yara purchases of substantial quantities forAugust loading in line with July pricing.

Nitrochem have taken "STEVEN N" for a voyage of

35 mts NH3 from Yuzhny to contract customers in

GCT/Gabes followed by BASF/Antwerp with loading

early August.

20/40,000 Cbm

The ammonia availability in Ventspils is expected to be

restricted to only 25/30 mts for August following

maintenance shutdowns at the production plants of

Perm and Berezniki. The entire August export volume

is already committed, mainly to Yara and Trammo at a

price level of about USD 215/220 pmt fob. Asmidal in

Algeria will enter into a maintenance shutdown of the

Arzew plant from 4th August resulting in a production

shortage of about 35/40 mts of NH3. The shutdown

might encourage additional midsize shipments from

Yuzhny into OCP/Morocco in order to substitute for

Algerian shortfall under their delivery contract with

Fertiberia.

The Middle East Gulf product market is undergoing a

significant correction with product prices lately

GAS

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WEEKLY 29.2006 LORENTZEN & STEMOCOdropping with about USD 25 pmt from a level of about

USD 235 pmt to about USD 210 pmt for loading early

August. The price drop has been partly motivated by

competition from new production capacity of Yara in

Burrup/Australia. The new Safco IV plant in Al Jubail

which is expected to come on stream by the end of thisquarter might put further downward pressure on

product prices in the region. The new Safco plant

which is a combined ammonia/urea plant will have an

ammonia export capacity of about 450 mts yearly. The

IFFCO requirement of 20/25 mts NH3 for arrival

Paradip within end August/early September could very

well receive offers down towards USD 250/255 pmt

c+f based on a Middle East Gulf netback of about USD

210 pmt and a shipping element for such voyage of

only about USD 40/45 pmt based on very competitive

time charter tonnage held by some Middle East Gulf

producers. Trammo has sold 8,000 mts NH3 into

GFCL/Kakinada at about USD 270 pmt c+f net and

another 10,000 mts NH3 into Formosa Plastic in

Mailiao at about USD 275 pmt c+f. "HERAKLES" as

Keytrade sublet has been fixed for the lifting with

loading of 18 mts NH3 ex BIK around 10/12 July.

Spot gas at Henry Hub closed this week at USD 5,89

mm/btu equivalent to a production cost of ammonia of

about 240 pmt ex plant.

Contract prices in USG have been settled around USD

275 pmt c+f for second half July by both Yara and

PCS.

LNG

The joint venture between Aker Kvrner and IHI has

been awarded a USD 665m contract for the

construction of a LNG receiving terminal for

Occidental Petroleums Ingleside Energy Centre in

Texas. Ingleside is expected to take about three years

to complete and construction is scheduled to begin in

the first quarter of 2007.

The Dutch gas shipping specialist Anthony Veder has

ordered its first LNG carrier. The 7,500 cbm vessel

will also be able to transport other gases like LPG and

petchem gases. The vessel will be built by the Polish

yard Remontowa and delivery is scheduled for the end

of 2008. The newbuilding has a long-term, 15-year

contract with the Norwegian company Gasnor.

Russian president Vladimir Putin has endorsed the St.

Petersburg LNG project between Gazprom and Petro-

Canada. The two companies unveiled plans for a USD

1.5bn LNG plant last year. The aim is to ship LNG to a

Canadian regasification plant at Quebec for distribution

in both Canada and the US.

The growing importance of LNG in the worlds energy

supplies has been underlined by the worlds leading

industrialised countries. The G8 countries have

endorsed a statement that commits its members to

promoting LNG as a way to add stability to global

energy markets. The G8 leaders agreed to call for

lower barriers to energy trade and investment, with a

special emphasis on LNG.

MISC has signed new charter agreements with

Malaysia LNG on four older LNG carriers that will tie

up the ships for the rest of their operational life.

Malaysia LNG will extend charters on two vessels

already under its control, the 19,000 cbm "AMAN

BINTULU" (built 1993) and "AMAN HAKATA"(built 1998). It has also signed new charter contracts

on MISCs 130,000-cbm "TENAGA TIGA" (1981)

and 130,000-cbm "TENAGA LIMA" (1981).

For further information about the gas market, please

read our weekly gas report.

Bulk

"FORMOSA QUEEN" 5,779 dwt. Built Shin Kochi

1996, NK class. 2 holds/hatches. 2/30ts. and 1/25ts.

derricks. Akasaka 2,800 BHP. Sold to undisclosed

buyers for USD 5.7 mill.

"JELAND STAR" 10,393 dwt. Built Kochi Jyuko

1973, KI class. 3 holds/hatches. 4/20ts. derricks. MAN

6,000 BHP. Sold to undisclosed buyers for USD 1.68

mill.

"GRETA-C" 19,461 dwt. Built Damen 2002, LR class.

2 holds. 3/45ts. cranes. 1,226 TEU. B&W 10,686 BHP.

Sold to Chinese buyers for USD 26.75 mill.

"TIARELLA" 27,476 dwt. Built Oshima 1977, RS

class. 5 holds/hatches. 5/15ts. cranes. Sulzer 11,550

BHP. Sold to Chinese buyers for USD 3.2 mill.

"SUMMER"/"AUTUMN" 29,129 dwt. Built China

1978, BV class. 5 holds/9 hatches. 3/20ts. and 2/15ts.

cranes. 826 TEU. Sulzer 13,300 BHP. Sold en bloc to

Navlamar, Greece for USD 4.4 mill. each.

SALE & PURCHASE

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WEEKLY 29.2006 LORENTZEN & STEMOCO"FEDERAL PESCADORES" 40,864 dwt. Built

Sanoyas 1986, BV class. 5 holds/hatches. 5/25ts.

cranes. 824 TEU. Sulzer 8,440 BHP. Sold to

undisclosed buyers for USD 11 mill.

"ZENOVIA" 43,595 dwt. Built Tsuneishi 1992, NK

class. 5 holds/hatches. 4/30ts. cranes. B&W 8,230

BHP. Sold to Korean buyers for USD 20.5 mill.

"ARISTEA M" 45,584 dwt. Built Halla 1997, RINA

class. 5 holds/hatches. 4/30ts. cranes. B&W 9,459

BHP. Sold to undisclosed buyers for USD 25 mill.

"POPI S" 64,916 dwt. Built Hitachi 1982, ABS class. 7

holds/hatches. B&W 13,800 BHP. Sold to Chinese

buyers for USD 8.5 mill.

"TORM TEKLA" 69,268 dwt. Built Tsuneishi 1993,

NV class. 7 holds/hatches. B&W 12,120 BHP. Sold toGreek buyers for USD 23.6 mill. incl. balance of T/C

until Nov. 2006 at USD 19,700 per day.

"FOUR STERLING" 69,616 dwt. Built Tsuneishi

1993, ABS class. 7 holds/hatches. B&W 11,640 BHP.

Sold to Far Eastern buyers for USD 23 mill.

"TORM MARINA" 69,637 dwt. Built Hashihama

1990, NV class. 7 holds/hatches. B&W 12,106 BHP.

Sold to undisclosed buyers for USD 20 mill.

"MASTER NICOS" 69,668 dwt. Built I.H.I. 1989, LR

class. 7 holds/hatches. Sulzer 9,136 BHP. Sold to

Chinese buyers for USD 18.5 mill.

Cont.

"BESIRE KALKAVAN" 12,184 dwt. Built Tuzla

1998, ABS class. 5 holds/7 hatches. 2/40ts. cranes.

1,145 TEU. B&W 15,600 BHP. Sold to undisclosed

buyers for USD 20 mill.

"PU TRUSTY" 14,300 dwt. Built MTW 1992, GL

class. 3 holds/7 hatches. 1/40ts. crane. 1,166 TEU.

Sulzer 10,808 BHP. Sold to Marfret, France for USD14.25 mill.

Tank

"BONITO" 5,500 dwt. Built Tuzla 2001, BV class.

Coated. Coiled. Alpha 3,698 BHP. Sold to US based

buyers for USD 13 mill.

"ALHASBAH"/"ALDANA" 113,000 dwt. Built

Hyundai 2006, NV class. Coiled. DB/DS. B&W

18,420 BHP. Sold en bloc to Foresight Group, UK

based Indian buyers, for USD 70 mill. each.

"GLYFADA SPIRIT" 159,600 dwt. Built Samsung

2003, ABS class. Coiled. DB/DS. B&W 25,320 BHP.

Sold to NAT for USD 80.9 mill.

Best regards,

LORENTZEN & STEMOCO AS