Freight weekly report

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---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 11/07/2000
12:35 PM ---------------------------

Enron Capital & Trade Resources Corp. - Europe

From: Chris Connelly 11/05/2000 11:43 AM

To: George McClellan/HOU/ECT@ECT, Stuart Staley/LON/ECT@ECT, Jeffrey A
Shankman/HOU/ECT@ECT, Mike McConnell/HOU/ECT@ECT, Kevin
McGowan/Corp/Enron@ENRON, Tom Mcquade/HOU/ECT@ECT
cc: Peter Bradley/LON/ECT@ECT, Jez Peters/LON/ECT@ECT, Candace
Parker/LON/ECT@ECT, Kenny Nicoll/LON/ECT@ECT, Dimitri Taylor/LON/ECT@ECT,
Andy James/EU/Enron@Enron, Cornelia Luptowitsch/LON/ECT@ECT
Subject: Freight weekly report

Enron Shipping Services Weekly report 43/2000

Highlight
The cape market continues to rise almost daily with RBCT to Rotterdam at
$11.40 and Quennsland to Rotterdam at $15.5 in the spot market. The driving
factor has not been coal as of late, but an unexpected rush of Iron Ore
cargoes. On the panamax front, rates have been easing for the last few
weeks, as the expected strong grain activity in the US gulf as not yet
materialised. The average time charter rate on capes is now in excess of
$25,000 daily and close to $11,000 on panamaxes. The general view in the
market is that prices for both capes and panamaxes will remain strong though
to April/May 2001 by which time steel mills will have reduced raw material
imports and adversely affected cape rates and the shear number of
newbuildings on the panamax front will drag earnings down as well. Our group
tends to believe that the balance of the year will see yet firmer rates but
we expect a slow down and a decrease in rates to take effect towards the
first two months of next year as we already are seeing some owners
desperately seeking to cover themselves for next year at very aggressive
numbers ( Hadeed contract ) and we are getting the feeling that Bocimar is
keenly interested to cover their long position even tough their length is
mainly through March/April next year. Furthernore, the asian owners seem
more and more agressive with rates for next year as their countries are
hitting some rough patches currently, as evidenced by their stock markets and
strong comments against continued strong crude oil prices.

On the ABC front, it appears as if Zodiac and P&O have agreed in principal to
a deal by which Zodiac buys 50% of ABC but gets full control of the company.
Details are still patchy and we are keeping a close eye on the possibility of
Zodiac putting their newly acquired vessels into the Bocimar pool as that
would have a drastic bullish effect on rates for some months to come. We
have proposed to Bocimar a 5 year collar deal by which we get access to 5
million tons of freight each year with ability to settle the collar deal
against an index and have the ability to call upon physical tonnage each
year. Furthermore, we would have ability to have a washout clause for each
year by which we would pay a fix lump sum cash amount. We have also built
in several other options and we are waiting for an answer from Bocimar
sometime next week. This deal would offer us access to modern vessels at a
price similar to that of the cape index of the last 10 years and with enough
built in options to take advantage of any sudden market changes.

On the logistics front, Coeclerici is coming in next week to make a
presentation on their port handling operations in India/ Indonesia and
Venezuela with the idea of teaming up with us on forthcoming tenders where we
would offer the long term coal contracts into or out of certain ports, as the
case maybe, and they would build and manage the port operations. They
currently have some interesting contracts in Indonesian ports which should
have special interest to us vis a vis CLP.

Our two cape deals with Coeclerici are still not finalised as we are still
having a few issues with credit language but expect the deals to close within
the next 10 days.

On the EOL front, Andy James has been able to get EDFtrading to trade 225,000
tons of freight via EOL this week and he has added Louis Dreyfus grain and
Billiton and RWE trading to the list of customers that have trading authority
on our system.

Regarding the lighter side of business, Enron dry bulk shipping was featured
in tradewinds, a weekly shipping newspaper, with 3 pages dedicated to our
rapid growth and clever insights.

Market
Short term Medium term Long Term
Handy Max Up Flat Flat
Panamax Flat Down Down
Cape Size Up Up Flat

Deals Done
Physical Freight
ECS freight
Fixed a panamax for early December loading from Puerto Drummond to LBT

Third parties freight deals
Still negotiating a 6 panamax deal with EDF trading from Richards Bay to Le
Havre for all of next year and looking to sell freight to Preag from KPC to
Rotterdam for similar period.

OTC
FFA s
Very active week in which we transacted with Coeclerici on both Capes and
Panamaxes routes and traded with Jinhui and Conagra on Panaamxes as well.

EOL
Traded 225,000 tons with EDF Trading

Travels
All three of us should be in all week