OCEAN CARRIER OUTLOOK2010/2011

November 18, 2010

2008INCREASED CARRIER COSTS

• Carrier Fuel Costs Up 75%

• New ILWU Contract

• Inland Transport and Repositioning Costs

• Panama Canal Fees Rising

• Environmental and Security Initiatives

Source: TPM 2008

2008CARRIER RESPONSE

• Demand & Utilization Levels High Levels Still High.

• Rate Increases Sought.

• Vessels Re-Deployed

• New Vessel Sharing Arrangements

• “Slow Steaming” Source: TPM

2008

2009ECONOMIC DOWNTURN

• Inventories Slashed

• Decreased Demand

• Excess Capacity

• Rates Slashed In Most Lanes

• Top 10 Carriers Reported Losses of $11 Billion

2010RATE NEGOTIATIONS

• Revenue Recovery Above Customer Relations

• Carriers Uniquely Unified In Negotiation Strategy

• Rate Increases

• Capacity Reduced/The Singapore Parking Lot

• Increased “Slow Steaming”

• Inventory Rebuild

• The “New Economics” (Drewry Shipping)

2010/2011“NEW ECONOMICS”

• 2010 Rate/Volume Boom In Spite Of, Not Because Of, The Economy.

• Housing Market Stalled

• Unemployment High

• Retail Sales Unexciting

• Boom Over? Inventory Rebuild Over• Carriers Return To Profitability (JOC, Nov. 2010)

• Spot Rates Moving Down. (Drewry, Nov. 2010)

2011RATE ENVIRONMENT

Driving Rates Up

• Trade Growth

• Capacity Management

• Carrier Revenue Strategy

• Fuel Prices

• “New Economics”

Driving Rates Down• Weak Macro

Economics

• Early Peak Season End

• Added Capacity Trans Pac and Asia/Europe

• Carrier Vessel Order Book

• New/Niche Players

• Government Regulation?

Can The Carriers Continue To Manage The Supply-Demand Balancing Act??