The World Of Ocean FreightIn Ten Minutes

February 13, 2013

Agenda

• Recap 2012 Major Events• Carrier Challenges as 2013 Begins• Rate Rollercoaster • What to Expect

2012 Major Events

• Jan 2012 - Ocean carrier Financials- Ocean carriers suffered record losses in 2011. Financial performance rallied in the second quarter through GRI’s on every major trade route in the world

2012 Major Events

2012 Major Events

• Jan 2012 - Ocean carrier Financials- Ocean carriers suffered record losses in 2011. Financial performance rallied in the second quarter through GRI’s on every major trade route in the world

• March 2012 – Rate increases on the Asia - Europe trade took the rate levels up by $2300 per 40ft , from $1300 to $3600 per 40ft by Mid Summer

2012 Major Events

• Jan 2012 - Ocean carrier Financials- Ocean carriers suffered record losses in 2011. Financial performance rallied in the second quarter through GRI’s on every major trade route in the world

• March 2012 - Rate increases on the Asia - Europe trade took the rate levels up by $2300 per 40ft , from $1300 to $3600 per 40ft by Mid Summer

• March 2012 – ILA President H. Daggett announces at the TPM conference that the ILA members will go on strike if no new contract is in place by September.

2012 Major Events

• Jan 2012 - Ocean carrier Financials- Ocean carriers suffered record losses in 2011. Financial performance rallied in the second quarter through GRI’s on every major trade route in the world

• March 2012 -Rate increases on the Asia - Europe trade took the rate levels up by $2300 per 40ft , from $1300 to $3600 per 40ft by Mid Summer

• March 2012 – ILA President H. Daggett announces at the TPM conference that the ILA members will go on strike if no new contract is in place by September.

• June 2012 - OCU talks for a new contract had broken off. Perfect Storm on both USA coasts.

2012 Major Events

• July 2012 - Idle containership capacity drops as carriers reactivate ships, ready for a forecasted …‘peak season’.

2012 Major Events

• July 2012 - Idle containership capacity drops as carriers reactivate ships, ready for a forecasted …‘peak season’.

• August 2012 – Bunker prices at $ 645 per ton and Global rate levels reach $2600 per 40ft , an increase of $700 per 40ft since the start of the year

2012 Major Events

2012 Major Events

• July 2012 - Idle containership capacity drops as carriers reactivate ships, ready for a forecasted …‘peak season’.

• August 2012 – Bunker prices at $ 645 per ton and Global rate levels reach $2600 per 40ft , an increase of $700 per 40ft since the start of the year

• September 2012 – ILA/USMX extend contract talks. Negotiations extended 90 days through December 29.

2012 Major Events

• July 2012 - Idle containership capacity drops as carriers reactivate ships, ready for a forecasted …‘peak season’.

• August 2012 – Bunker prices at $ 645 per ton and Global rate levels reach $2600 per 40ft , an increase of $700 per 40ft since the start of the year

• September 2012 – ILA/USMX extend contract talks. Negotiations extended 90 days through December 29.

• October 2012 - TPEB rate levels at record highs. Shanghai-LA/LGB at $3,000 /40.

• October 2012 Super storm Sandy.

2012 Major Events

• November 2012 – 27th , OCU WALK OFF THE JOB.

• ILWU will not cross the OCU picket lines.

• 10 LA/LGB terminals shut down through 5th December – vessels diverted to PNW and AW strings.

• Govt. appointed mediator and LA mayor join the talks

• ILA Pledges Full Support To ILWU”

2012 Major Events

• November 2012 – 27th , OCWU WALK OFF THE JOB.

• ILWU will not cross the OCU picket lines.

• 10 LA/LGB terminals shut down through 5th December – vessels diverted to PNW and AW strings

• Govt. appointed mediator and LA mayor join the talks

• ILA Pledges Full Support To ILWU

• December 2012 – 10th , ILA and USMX return to contract talks. ILA authorizes possible strike when contract expires.

2012 Major Events

• November 2012 – 27th , OCWU WALK OFF THE JOB.

• ILWU will not cross the OCU picket lines.

• 10 LA/LGB terminals shut down through 5th December – vessels diverted to PNW and AW strings.

• Govt. appointed mediator and LA mayor join the ‘talks’’

• ILA Pledges Full Support To ILWU”

• December 2012 – 10th , ILA and USMX return to contract talks. ILA authorizes possible strike when contract expires.

• December 2012 – Strike deadline extended to 2/6/13.

Carrier Challenges as 2013 Begins

• USMX and ILA reach tentative agreement. Strike threat averted. Contract details not public.

Carrier Challenges as 2013 Begins

• USMX and ILA reach tentative agreement. Strike threat averted. Contract details not public.

• Record new capacity coming on. Up 9% or 1.75 Million TEU’s after potential scrapping. (Alphaliner).

Carrier Challenges as 2013 Begins

• USMX and ILA reach tentative agreement. Strike threat averted. Contract details not public.

• Record new capacity coming on. Up 9% or 1.75 Million TEU’s after potential scrapping. (Alphaliner).

• Weaker demand. 2012 ended with Asia/Europe demand down 5% Trans Pacific demand down 0.4%. (JOC)

Carrier Challenges as 2013 Begins

• USMX and ILA reach tentative agreement. Strike threat averted. Contract details not public.

• Record new capacity coming on. Up 9% or 1.75 Million TEU’s after potential scrapping. (Alphaliner).

• Weaker demand. 2012 ended with Asia/Europe demand down 5% Trans Pacific demand down 0.4%. (JOC)

• Economic growth expected at 1% and 1.6% respectively. (JOC)

Carrier Challenges as 2013 Begins

Rate Rollercoaster(January 2013)

• 2013 started with higher spot rates and lower bunker costs.

Rate Rollercoaster (January 2013)

• 2013 started with higher spot rates and lower bunker costs.

• Shanghai Containerized Freight Index showed spot rates +26% 2012/2013. (JOC).

Rate Rollercoaster January 2013)

• 2013 started with higher spot rates and lower bunker costs.

• Shanghai Containerized Freight Index showed spot rates +26% 2012/2013. (JOC).

• Bunker costs -8% 2012/2013. (JOC).

Rate Rollercoaster (January 2013)

• 2013 started with higher spot rates and lower bunker costs.

• Shanghai Containerized Freight Index showed spot rates +26% 2012/2013. (JOC).

• Bunker costs -8% 2012/2013. (JOC).• Liner companies shares up 18% (Dec 12)

among Alphaliner index of 17 main publically listed carriers.

Rate Rollercoaster(January 2013)

• 2013 started with higher spot rates and lower bunker costs.

• Shanghai Containerized Freight Index showed spot rates +26% 2012/2013. (JOC).

• Bunker costs -8% 2012/2013. (JOC).• Liner companies shares up 18% (Dec 12)

among Alphaliner index of 17 main publically listed carriers.

• TPEB GRI implemented Jan 15. Wanted $600. Achieved $300.

Rate Rollercoaster January 2013)

• 2013 started with higher spot rates and lower bunker costs.

• Shanghai Containerized Freight Index showed spot rates +26% 2012/2013. (JOC).

• Bunker costs -8% 2012/2013. (JOC).• Liner companies shares up 18% (Dec 12)

among Alphaliner index of 17 main publically listed carriers.

• TPEB GRI implemented Jan 15. Wanted $600. Achieved $300.

• Subsequent weeks showed gradual rate erosion.

Rate Rollercoaster (January 2013)

TP Spot Rates Weakened End January After Gains From GRI Continuing The Pattern Of Rate Erosion.

Rate Rollercoaster (January 2013)

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Rate Rollercoaster (February 2013)

• Drewry HK/LA benchmark up 4% per FEU to $2,536.• Unexpected Increase not tied to a GRI

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Rate Rollercoaster (February 2013)

• TA Eastbound rates up 1.8% to $2,044/FEU.• TA Westbound down 4.1% to $2,393/FEU

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Rate Rollercoaster (February 2013)

• TP Westbound rates up 9.4% to $921/FEU• Europe to Asia rates up 6.5% to $1,051/FEU.

Rate Rollercoaster (February 2013)

• SHA Composite Index shows rates overall lower.

What to Expect

• Carriers will attempt to hold on to rate increases. April 1 GRI announced.

What to Expect

• Carriers will attempt to hold on to rate increases. April 1 GRI announced.

• Major efforts to manage excess capacity.

What to Expect

• Carriers will attempt to hold on to rate increases. April 1 GRI announced.

• Major efforts to manage excess capacity.

• Slow steaming is here to stay.

What to Expect

• Carriers will attempt to hold on to rate increases. April 1 GRI announced.

• Major efforts to manage excess capacity.

• Slow steaming is here to stay. • Maintenance related dry docking.

What to Expect

• Carriers will attempt to hold on to rate increases. April 1 GRI announced.

• Major efforts to manage excess capacity.

• Slow steaming is here to stay. • Maintenance related dry docking.• Service cuts due to weak demand.

Elimination of sailings, port calls, or entire vessel strings.

What to Expect

• Carriers will attempt to hold on to rate increases. April 1 GRI announced.

• Major efforts to manage excess capacity.

• Slow steaming is here to stay. • Maintenance related dry docking.• Service cuts due to weak demand.

Elimination of sailings, port calls, or entire vessel strings.

• Cancellations = Equipment Shortages.

What to Expect

• Carriers have become adept at managing excess capacity.

What to Expect

• Carriers have become adept at managing excess capacity.

• Message: Excess capacity does not mean rates will collapse in 2013.