Dear Fellow Shareholders,

Following several challenging years for Danaos, we took proactive measures in 2018 to lay the foundation for a bright and prosperous future. Significant efforts were put forth to financially solidify the company, culminating in the completion of a comprehensive refinancing in August 2018 that further reduced indebtedness by 551 million USD and extended debt maturities by five years. The collapse of Hanjin, formerly an important charter counterparty, had created certain issues for Danaos, and I am pleased that we have been able to manage the company through these turbulent times and again position the company for growth.

The containership industry is in a significantly more stable state than it has been over the past few years, although headwinds brought on by trade disputes have impacted cargo flows and more importantly sentiment. Our cautiously optimistic view is supported by a record low orderbook for containerships, which is concentrated in large 11,000+ TEU vessels, and an idle fleet of less than 2 percent. These supply dynamics have planted the seeds for a firmer market. Indeed, we have already seen charter rates for older 5,000+ TEU post-panamax vessels rebound from the lows seen at the end of 2018 and prospects look brighter.

Liner companies have also managed to remain profitable through a softer market, although profitability was below 2017 levels. They have been much more successful at maintaining box rates at profitable levels, although they will be faced with the challenge of passing on to the shippers higher bunkering costs that are expected following the implementation of the new sulfur cap in 2020. The incremental fuel cost for the liner industry alone has been estimated at 10 billion USD, and there is no way it can be absorbed by the industry.

This is a year of preparation of the shipping industry for compliance with the 2020 sulfur cap. The new regulations will cause significant disruption as the outlook for supply sources and ultimately availability of compliant fuel is not completely clear. Danaos has been diligently preparing for the new regulations and has been at the forefront of the evaluation of scrubber systems, and we have thus far successfully completed our first scrubber installation with 10 more installations scheduled. Our investments in scrubbers have been paid for by the charterers of the vessels through increased charter rates. We will continue to evaluate further scrubber investments on a case-bycase basis and will also allow time for the industry to adapt to the new regulations. One thing is for certain, and that is that increased fuel costs will entail upsizing vessel capacity and slow-steaming to reduce liner costs, which will provide support for midsize vessels which were disproportionately impacted in weaker markets.

Danaos is committed to acting as a responsible corporate citizen and helping to drive change in the industry. Along with sulfur emissions, we are actively focused on reducing greenhouse gas emissions. The shipping industry has set various milestones to reduce greenhouse gas emissions, with the first to occur in 2030 when a 40 percent reduction in CO2 intensity will be mandated. The International Maritime Organization will soon begin to study various ways to achieve these targets. These goals will require very advanced technological skills, which has always been a core strength of Danaos, and we expect to maintain our leadership role as the industry continues to reduce its environmental footprint.

In the meantime, we are focused on continuing to execute on our strategy of optimizing our existing assets and also exploring growth opportunities in the market following our successful refinancing. A significant portion of our fleet is secured with long-term charters, providing us 1.5 billion USD of contract coverage. This gives us the necessary visibility to grow the company for our shareholders and minimize risks to our financial results.

Respectfully,

signature Dr. John Coustas
President & CEO

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Corporate

C/O Danaos Shipping Co Ltd.
3, Christaki Kompou Street Peters House 3011, Limassol Cyprus
Tel:  +30 210 419 6480
+30 213 017 6480
Fax: +30 210 419 6489

Athens Branch
14, Akti Kondyli, Piraeus Athens, 18545 Greece