Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017

The Board of Directors (the "Board") of Pacific Basin Shipping Limited ("Pacific Basin" or the "Company") are pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (collectively the "Group") for the six months ended 30 June 2017 as follows:

BUSINESS HIGHLIGHTS Better but still challenging dry bulk market conditions in first half 2017

GROUP

  • Market conditions have improved since last year and we

US$ Million

Six Months Ended

2017

30 June

2016

believe the worst of the current dry bulk market cycle is

behind us

Revenue

702.9

488.4

  • We booked a much reduced underlying loss of US$6.7 million

EBITDA #

56.6

(5.0)

and increased positive EBITDA of US$56.6 million

  • Our Handysize and Supramax daily TCE earnings outperformed the market indices by 20% and 11% respectively

  • We took delivery of our final newbuildings and recommenced secondhand acquisitions

  • Our mid-year cash position was US$248 million with net gearing of 40%

  • We opened a new commercial office in Rio and relocated our headquarters in Hong Kong to an improved, lower-cost office

    Underlying loss (6.7) (61.6) Loss attributable to shareholders (12.0) (49.8) Basic earnings per share (HK cents) (2.4) (14.4)

    # EBITDA (earnings before interest, tax, depreciation and amortisation) is our gross profit less general and administrative expenses. EBITDA excludes: depreciation and amortisation; exchange differences; share-based compensation; net unrealised bunker swap contract income and expenses; net unrealised forward freight agreements income and expenses; utilised onerous contracts provisions; and Charter Hire Reduction adjustments.

    FLEET
  • Our last seven newbuildings delivered in the first half of the year

    Our Fleet (as at 30 June 2017)

    Vessels in operation

  • We used the still weak asset values to buy a younger, larger Supramax vessel of better design to one we sold, and we purchased two secondhand Handysize vessels

  • Our owned fleet expanded to 101 ships on the water by mid- year, and we operated about 250 dry bulk ships overall

  • We continued to exercise good control of our operating expenses

  • We have covered 57% of our Handysize and 80% of our Supramax revenue days for second half 2017 at US$8,360 and US$9,830 per day net respectively

    Handysize

    79

    73

    152

    Supramax

    21

    82

    103

    Post-Panamax

    1

    1

    2

    Total

    101

    156

    257

    Owned Chartered Total

    POSITION
  • Market freight rates in the first half were significantly above the historic low levels of one year ago, but earnings are still not profitable for most dry bulk shipowners

  • The shrinking orderbook bodes well for the long term, but reduced scrapping and continued global fleet growth remain negative factors

  • More scrapping and limited ordering are required for a more normal market balance to be sustained

  • Our healthy cash and net gearing positions enhance our ability to safely navigate the protracted challenging environment and attract cargo as a strong partner

  • We continue to assess attractive ship acquisition opportunities to grow and renew our fleet

CHIEF EXECUTIVE'S REVIEW FINANCIAL RESULTS

Dry bulk market freight rates in the first half of 2017 were markedly improved compared to the same period last year, albeit from an historically low base. In this better but still challenging trading environment, our underlying loss reduced to US$6.7 million (2016: US$61.6 million loss) and EBITDA improved to US$56.6 million (2016: negative US$5.0 million and positive US$22.8 for the whole of 2016). Basic EPS was a negative HK2.4 cents.

PERFORMANCE OVERVIEW IMPROVED BUT STILL CHALLENGING MARKET CONDITIONS

With progressively fewer new ships delivering from shipyards and demand gradually recovering, the dry bulk freight market is returning to a healthier balance with demand in the first half outpacing supply. By mid-April, rates were at their highest in over two years, with demand improvements driven most notably by strong underlying demand for South American and US grain exports.

The overall improved earnings environment has resulted in much reduced scrapping which, combined with new ship deliveries, has led to a net growth of 2.0% and 1.5% in the global

Handysize Market Spot Rates in 2015-2017

2016:

Handysize and Supramax fleets.

Despite the market declines in January and May, Handysize and Supramax average freight market indices for the first half of 2017 were around 70% higher than for the same period in 2016. As significant as this improvement is, market freight earnings are still not at profitable levels for most dry bulk shipowners.

US$/day net*

9,000

7,000

5,000

3,000

1,000

0

26 Jul 2017:

$6,970

$8,080

2015:

$3,760

PACIFIC BASIN OUTPERFORMS

Our average Handysize and Supramax daily TCE earnings of US$7,920 and US$8,920 per day net were up 30% and 51% year on year and outperformed the BHSI and BSI indices by 20% and 11% respectively.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2016 2015

* excludes 5% commission

Source: Baltic Exchange, data as at 26 Jul 2017

This TCE premium - including the positive margins we generate with short-term operated ships that we charter to supplement our core owned and long-term fleet - is due mainly to our ability to draw on our experienced teams, global office network, strong cargo support and large fleet of high- quality substitutable ships in a way that optimises ship and cargo combinations for maximum utilisation.

POSITIVE INITIATIVES

During the half year, we completed our newbuilding programme with the delivery of seven newbuildings of the latest, efficient designs. The last of these delivered in May 2017.

We used the still weak asset values to purchase a secondhand Supramax and sell an older, smaller Supramax, thereby trading up to a vessel of better design and longer life at an attractive price. We also purchased two secondhand Handysize vessels. By 30 June we had expanded our owned fleet to 101 ships on the water out of about 250 ships that we operate overall.

Our new commercial office in Rio de Janeiro has generated valuable new business since it was established early this year to help grow our cargo volumes and support our many customers on the east coast of South America while enabling us to more fully cover all regions in the Atlantic.

In May, we relocated our headquarters to Wong Chuk Hang, about 15 minutes from Hong Kong's Central business district. We now benefit from a better, more energised, collaborative and productive office with a markedly lower rent which will result in significant cost savings over the coming six years.

We sold one towage vessel in June 2017 and have agreed the sale of our final tug for delivery in the second half of 2017. Together, these disposals will generate sale proceeds of approximately US$2 million and conclude our exit from this non-core activity.

BALANCE SHEET

With our final newbuildings all paid for and delivered, we had cash and deposits of US$248 million as at 30 June 2017. We drew down our remaining Japanese export credit facilities and other committed facilities following the delivery of our newbuildings resulting in net borrowings of US$705 million and net gearing of 40%.

STRATEGY AND POSITION WELL POSITIONED FOR A RECOVERING MARKET

We believe the worst of the current dry bulk market cycle is behind us. However, the market improvement year on year was from a very low base, and more time, scrapping and limited ordering are required for a more normal market balance to be sustained.

The Handysize and Supramax segments have seen historically low ordering over the past 18 months which bodes well for the long term. However, while the dry bulk orderbook is shrinking, scrapping has reduced and the global fleet is still growing.

We believe that new low sulphur fuel regulations (effective from 2020) will lead to higher fuel costs and hence lower ship operating speeds. Also, ballast water treatment regulations require investment for compliance with effect from special surveys between September 2019 to 2024. Combined, these regulations will over time drive scrapping of older ships and ships of poor design, thus improving the supply-demand balance.

We continued to achieve reductions in our vessel operating costs - without impacting maintenance or safety - through scale benefits as our owned fleet has grown further.

We have healthy cash and net gearing positions which contribute to the strong corporate profile that sets us apart as a preferred, strong, reliable and safe partner for customers and other stakeholders.

We continue to look for and assess attractive ship acquisition opportunities to grow and renew our fleet with modern, high-quality secondhand ships or resales that can generate a reasonable pay-back and cash flow even in today's challenging market, and can reduce our average daily vessel costs.

We will continue to focus on our world-leading Handysize and Supramax dry bulk business where we have developed a strong competitive edge and an exceptional fleet.

Our strategy is to be the best operator in our space and maximise our fleet's utilisation and TCE earnings by leveraging all the key attributes of our business model. Minor bulk shipping demand is characterised by diversified geographical, cargo and customer profiles. This, combined with our large fleet of substitutable ships and worldwide office network, allows for the combination of trades to achieve higher laden utilisation, which is exactly our strategy and how we can deliver value over market earnings.

We thank you as always for your continued support.

Mats Berglund

Reduction in Chinese industrial growth and investments

impacting demand for dry bulk shipping

Environmental policy in China encouraging greater shift to renewable energy, possibly impacting coal imports

Increased protectionism dampening trade by favouring domestic supplies over foreign imports

Increased new ship ordering if the price gap between newbuilding and secondhand ships closes

Reduced scrapping due to improved market conditions may be insufficient to offset new ship deliveries

Periods of low fuel prices supporting faster ship operating speeds which increases supply

Hong Kong, 28 July 2017 Chief Executive Officer

DRY BULK OUTLOOK POSSIBLE MARKET DRIVERS IN THE MEDIUM TERM OPPORTUNITIES THREATS

Increasing government stimulus driving greater infrastructure

investment in both China and the US

Continued strong grain demand for animal feed due to shift towards meat-based diet

Environmental policy in China encouraging shift from domestic to imported supply of resources

Continued historically low new ship ordering and shrinking orderbook influenced by:

  1. the large gap between newbuilding and secondhand prices;

  2. new low sulphur and BWTS rules causing uncertainty about ship designs; and

  3. new accounting rules from 2019 discouraging long time charters

Environmental regulations encouraging increased ship scrapping

Periods of higher fuel oil prices encouraging slower ship operating speeds which decreases supply

MARKET & BUSINESS REVIEW DRY BULK MARKET REVIEW FREIGHT MARKET SUMMARY

Handysize and Supramax spot market rates averaged US$6,590 and US$8,010 per day net respectively in the first half of 2017, representing a substantial 69% and 76% improvement in average earnings from a very low base in the first half of 2016. As significant as this improvement is, market freight earnings are still not at profitable levels for most dry bulk shipowners.

The dry bulk freight market indices were characterised by a familiar pattern with a short seasonal decline at the start of the year, recovery after Chinese New Year and a stronger second quarter, especially in the Pacific which started the year markedly weaker than the

Baltic Handysize Index (BHSI) & Baltic Supramax Index (BSI)#

US$/day net*

10,000

8,000

6,000

4,000

2,000

0

BSI

$8,700

BHSI

$6,970

Atlantic. By mid-April, rates were at their highest in over two years, driven by increased Chinese industrial imports of major and minor bulks, record South American grain export volumes and improved US grain exports compared to a year earlier.

Market rates have softened since end April following the seasonal peaks in the South

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

* excludes 5% commission

# BSI is now based on a standard 58,000 dwt bulk carrier Source: Baltic Exchange, data as at 26 Jul 2017

American agricultural export seasons and, in part, due to reduced Australian coal port congestion and exports in the wake of Cyclone Debbie.

KEY SUPPLY DEVELOPMENTS

The global fleets of 25,000-40,000 dwt Handysize and 50,000-60,000 dwt Supramax ships grew 2.0% and 1.5% net respectively during the half year as much reduced scrapping outweighed a reduction in newbuilding deliveries. Overall dry bulk capacity expanded by 2.3% in the period.

The reduced pace of scrapping to 1.0% of existing dry bulk capacity and 1.0% of Handysize capacity was due to the markedly improved freight market conditions compared to a year before.

A reduction in newbuilding deliveries to 3.2% of existing capacity was expected due to the declining orderbook. Deliveries appear to have been boosted by a number of Chinese-built newbuildings that had essentially been completed some time ago but withheld by their builders until markets improved.

Yard deliveries are typically higher early in the year, so net fleet growth is likely to reduce in the second half - depending on scrapping, more of which is required for a more normal market balance to be sustained.

SHIP VALUES

Improved freight market conditions overall have supported sale and purchase activity and increased vessel values. Clarksons Platou currently values a benchmark five year old Handysize bulk carrier at US$14.0 million - up 4% since the start of 2017 and 47% from one year ago.

Newbuilding prices have increased 10% since the beginning of the year to US$21.5 million. The gap between newbuilding and secondhand prices continues to discourage new ship ordering which will benefit freight market fundamentals in the future.

KEY DEMAND DEVELOPMENTS

Clarksons Platou estimate dry bulk shipping demand in the first quarter to have improved by 4.9% from a year earlier. This compares favourably to 0.4% growth in the first quarter of 2016 and a 1.7% decline in the first quarter of 2015. Data for the second quarter is not yet available but will likely show an improved demand/supply balance compared to a year ago.

Key drivers through the first half included improved North and South American grain exports despite increased stock piling by farmers speculating on price and, in Brazil, currency exchange rate changes.

Cyclone Debbie affected Australian coal operations causing a dramatic reduction in metallurgical coal exports in April causing coal importers to look to other exporters to cover the shortfall.

Brazilian fertiliser imports saw a strong upswing, and coal imports to Vietnam, Philippines, Thailand and Malaysia increased due to increased coal- fired power capacity. India registered higher steel and grain imports.

In January to June, Chinese imports of eight minor bulks that we track increased 15%, and Chinese dry bulk imports overall increased 12%. Chinese steel exports reduced 25% in the first six months despite a 4% increase in production, illustrating the strength of domestic demand growth from industrial activity.

ORDERBOOK

The dry bulk orderbook has reduced further to 8% from 15% a year ago. New ship ordering remained very limited at 5.5 million dwt in the first half of the year, representing 1.4% of the fleet (annualised) with most new orders placed for larger Panamax and Kamsarmax ships.

Historically low new ordering and a continued orderbook delivery shortfall should result in further reductions in new ship deliveries in the coming years. Scheduled deliveries for this year are 37% smaller than last year, and we expect actual deliveries will be around 38 to 44 million deadweight tonnes compared to last year's 47 million deadweight tonnes.

Pacific Basin Shipping Limited published this content on 28 July 2017 and is solely responsible for the information contained herein.
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