c a p i t a l a d v i s o r s

April, 2009

Containerized Sea

Freight Demand:

Drivers and Outlook

2

Primary Containerized Ocean Freight Flows in 2008

EuropeNorth America

Latin

America

Africa

Asia

Middle

East

Intra-Asia

31%

69%

42%58%

56%

55%

64%

3.4

Asia6.9

North

America

20.1

3.4

69%Other

Consumer Spending

64%

2008 GDPTrillions of US$, current prices

16

51%49%

4.5

Source: IMF World Economic Outlook , Bureau of Economic Analysis, Eurostat, The Economist, MergeGlobal analysis and estimates

Global containerized sea freight flows are concentrated in three regions

Freight FlowsMillions of FEU

6.3 DestinationOrigin

1.51.4

1.0

1.2

1.0

0.8

Glo

bal C

on

tain

eriz

ed

Fre

igh

t Flo

ws

6.33.2

6.3

3

Demand-pull is the most meaningful way to think about global container

flows

Key Points

Dem

an

d-p

ull C

on

cep

t

1\ IMF estimates as of October, 2008.

Source: IMF World Economic Outlook , Bureau of Economic Analysis, Eurostat, The Economist, MergeGlobal analysis and estimates

Global economic activity is

disproportionately concentrated in

North America, the European

Union and Asia

The consumer-driven portion of

economic activity is even more

concentrated in North America

and Europe

Not surprisingly, global container

flows are primarily driven by the

fronthaul lanes from Asia to North

America and Europe

These two lanes effectively drive

supply, pricing and, ultimately,

profitability in the container

shipping industry

This presentation will thus focus

on the 2 most important markets

and how they influence industry-

wide decision making

39%

61%

31%

69%

16

NA

42%

58%

23

Europe

49%

51%

15

Asia

8

Rest of

the world

Other

Consumer

Spending

87%

World GDP by Area: 2008\1

Trillions of US$, current prices

15% 15%

16%

Into NA

18% Into EU

Into AsiaInto RoW

36%

Intra-

Asia

2008 Intercontinental and Intra-Asian Containerized Flows

FEU (55 mil total)

17%

23%

18%

Into NA

25%Into EU

Into Asia

Into

RoW

17%

Intra-Asia

FEU-Km (605 bil total)

70%

From Asia:

68%

From Asia:

81%

From Asia:

80%

From Asia:

4

Households are the most important component of the demand-pull

concept

Source: U.S. Census Bureau, European Commission, MergeGlobal analysis and estimates

Domestic

Production

Import

SubstitutionSupply

Residential

Food

Non-food

Consumables

Services

Transportation

Household

Expenditures

Income

Savings

Fixed Assets

(e.g., housing)

Credit

Investments

Household

Capacity to Spend

Demand

FEUs per

household

North America

9 Mil FEU

126 Mil HH

.07

Europe

10 Mil FEU

187 Mil HH

.05

Th

e K

ey R

ole

of H

ou

seh

old

s

Import FEUs per household

5

Households make consumption and other financial decisions based not

only on ―money‖ but also on ―confidence‖

Key Points

1\ At current prices, excluding food.

Source: Census Bureau, Office of Federal Housing

Enterprise Oversight, Bureau of Labor Statistics, Bureau of

Economic Analysis, Federal Reserve, MergeGlobal analysis

Much of the current discussion about

timing the bottom of the recession has

centered around consumers’ and

businesses’ incomes, balance sheets

and, crucially, access to credit

However, sustained household

consumption stems from both money

and confidence, which are

interrelated but in ways that are not

always clearly understood

Money and confidence can only be

assessed in a multifactorial way:

– Retail sales

– Unemployment

– Housing starts

– Home prices

– Savings rate

– Household net worth

– Others (e.g., consumer prices)

Tracking the Confluence of Money and Confidence in North America

-12%

-7%

-2%

3%

8%

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Retail Sales\1

YoY% , monthly through February 2009

4%

5%

6%

7%

8%

9%

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Unemployment RateMonthly through February 2009

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Housing StartsMillions (SAAR), monthly through Feb. ’09

-12%

-7%

-2%

3%

8%

1Q

04

3Q

04

1Q

05

3Q

05

1Q

06

3Q

06

1Q

07

3Q

07

1Q

08

3Q

08

Home Prices, National AverageYoY% , quarterly through 4Q08

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1Q

04

3Q

04

1Q

05

3Q

05

1Q

06

3Q

06

1Q

07

3Q

07

1Q

08

3Q

08

National Savings Rate4-quarter moving average, through 4Q08

-20%

-10%

0%

10%

20%

1Q

04

3Q

04

1Q

05

3Q

05

1Q

06

3Q

06

1Q

07

3Q

07

1Q

08

3Q

08

Household Net Worth

YoY% , quarterly through 4Q08

Assessin

g th

e S

tate

of H

ou

seh

old

s

ForecastForecast

61\ Numbers in parenthesis are our estimated likelihood for each event.

Source: Bureau of Economic Analysis, Eurostat, MergeGlobal analysis and estimates

3.0%

4.5%

3.5%

2.5%

1.5%1.0%

-1.5%

-3.8%

-6.2%

-0.5%

2.8%

0.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

4.5%

3.5%

2.5%1.8%

-1.2%

2.1%

-1.5%

-4.0%

-6.2%

-0.5%

2.8%

0.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

4.5%

3.5%

2.0%

1.0%

-0.2%-1.0%

-2.2%

-4.5%

-6.2%

-0.5%

2.8%

0.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

2.5%

1.5%1.0%

0.0%

-0.5%-1.0%

-2.5%

-5.0%

-6.2%

-0.5%

2.8%

0.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

U.S. Quarterly Real GDP Growth Under Four Different Scenarios: 1Q08-4Q10FSeasonally adjusted at annual rates (SAAR)\1

Upside Surprise (15%) False Start (20%)

Slow Recovery (40%) New Normal (25%)

Forecast Forecast

Highly volatile periods are best analyzed as "shapes" rather than point

estimates

1.8%

1.5%

0.5%

0.0%

-0.5%

-1.5%

-3.4%

-5.8%

-1.1%

-0.4%

2.1%1.0%

Europe

Near-te

rm M

acro

eco

no

mic

Scen

ario

s

7

A significant portion of the U.S. fiscal stimulus package is ―back-end weighted‖

and mid- to long-term focused—the real stimulus to the world economy will come

from the collapse of commodity prices

Key Points

Source: Wall Street Journal, IMF, MergeGlobal analysis

Planning and executing expenditures for $790

billion (as approved by U.S. legislators)

necessarily carries with it a time lag that could

be longer than the time it takes for the economy

to bounce back ―on its own‖

Moreover, by our count, at least a fifth of the

package is devoted to long-term research and

development (R&D) and infrastructure projects,

the impact of which is unlikely to be felt before

the end of 2009

In reality, the true stimulus to the world

economy will likely come from the share-of-

wallet impact of falling commodity prices almost

across the board—notably oil

Wal-Mart (with February same-store sales up

5.1% year-over-year) has already started

showing ―glimmers of hope‖ towards what we

expect to be a consumer-led recovery

9%

R&D and

non-maintenance

infrastructure

20%

38%

Tax credits

and tax relief

Aid to individuals

and states32%

Other

U.S. 2009 Fiscal Stimulus Package Breakdown

Total Package: $787 Billion

50

75

100

125

150 Ja

n-0

8

Feb

-08

Mar

-08

Ap

r-0

8

May

-08

Jun

-08

Jul-

08

Au

g-0

8

Sep

-08

Oct

-08

No

v-0

8

Dec

-08

Jan

-09

Feb

-09

World Commodity Prices: January 2008 – February 2009January 2008 = 100

Commodity food and beverage

Commodity fuel

Agricultural raw materials

Commodity metals

Th

e ―

Real‖

Eco

no

mic

Stim

ulu

s

8

(Production) markets in Asia are primarily driven by external demand

Key Points

Source: Bureau of Economic Analysis, Eurostat, IMF, MergeGlobal analysis and estimates

As the manufacturing epicenter of the

world economy, Asia directly

responds to demand changes in the

main consumption markets of North

America and Europe (up or down)

The bulk of Intra-Asian freight flows

are associated with the transportation

of components and subassemblies

feeding (primarily Chinese) export-

oriented factories

Recent commentary of a ―decoupling‖

of Asian economies from Western

markets is, we believe, premature

The ―shape‖ of recovery in North

America and Europe over the next 12-

24 months will thus be the primary

driver for trade and broader economic

activity in Asia

0%

2%

4%

6%

8%

10%

12%

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Developing Asia

Industrialized Asia

EU27

US

Annual Real GDP Growth by Area: 1999-2008

Asia

Resp

on

ds to

Exte

rnal D

em

an

d

-10%

-5%

0%

5%

10%

15%

20%

25%

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Westbound Asia-Europe

Eastbound Transpacific

Intra-Asia

Containerized Sea Freight Annual Volume Growth by Trade: 1999-2008

9

We expect a restoration of absolute ―peak‖ demand levels by 2012 in

North America and Europe

Vo

lum

e F

ore

cast in

Key F

ron

thau

lTra

des

1\ Under our ―Slow Recovery‖ scenario.

Source: MergeGlobal analysis and estimates

3.2

6.3

’08

0.9

1.6

3.1

6.0

’09

1.0

1.7

3.1

6.1

’10

1.1

1.8

3.3

6.5

’11

1.2

2.0

3.4

7.0

’12

1.2

2.1

3.6

7.3

’13

1.3

2.1

3.7

7.6

’14

0.8

1.1

2.3

4.4

’02

0.9

1.2

2.5

4.9

’03

1.0

1.4

2.8

5.6

’04

1.0

1.7

3.1

6.1

’05

3.4

1.9

3.3

6.8

’06

1.1

1.9

Primary

Food

1.1

Intermediate

Consumer

8.8%

4.8%

6.8

’07

1.0

1.7

Industrial

Eastbound Transpacific Containerized Volumes: 2002-2014\1

Millions of FEU

Forecast

Consumer

12.6%

6.8%

1.7

4.7

’04

0.8

1.5

1.8

5.1

’05

1.0

1.7

2.0

5.7

’06

1.1

2.1

2.4

6.8

’07

1.11.2

2.2

2.8

1.4

2.6

7.4

’12

1.3

3.6

9.2

2.4

3.2

8.4

’14

Primary

’13

2.1

2.5

6.9

’08

1.1

2.0

2.4

6.6

’09

1.0

2.0

2.4

6.6

’10

1.1

Food

2.5

6.8

’11

0.6

1.1

1.3

3.8

’02

2.0

1.3

1.5

4.3

’03

0.8

1.4

Industrial

Intermediate

0.7

Westbound Asia-Europe Containerized Volumes: 2002-2014\1

Millions of FEU

Forecast

Underlying U.S. GDP Growth

Projection

2.6%

3.5%3.1%3.0%

1.0%

-2.8%

’09 ’10 ’11 ’12 ’13 ’14

3.4%

2.5%2.8%

1.8%

0.5%

-2.5%

’09 ’10 ’11 ’12 ’13 ’14

Underlying EU27 GDP Growth

Projection

Peak

Peak

10

We expect global flows to rebound in the 2011-2014 period

Glo

bal V

olu

me F

ore

cast

1\ Under our ―Slow Recovery‖ scenario.

Source: MergeGlobal analysis and estimates

World’s Intercontinental and Intra-Asian Containerized Sea Freight Traffic: 1998-2017\1

Millions of FEU

Forecast

8379

7673

68

6358

5553555450

4642

3936

333330

28

’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17

9.2%

7.7%

5.7%

-3.6% 2.9% 5.6% 8.0% 8.5% 7.1% 4.2% 3.9%2.5% 5.4%

Annual %

11

The global volume distribution by trade lane suggests that ―North-South‖ and

―South-South‖ lanes cannot make up for contractions in the Big 3 (AS, NA, EU) in ’09

(not to mention that many of those lanes are themselves connected to the Big 3)

Lan

e V

olu

me D

istrib

utio

n

Source: MergeGlobal analysis and estimates

1.2 1.0 6.93.2 1.6 1.5

EU->NA

1.4 1.0 1.03.46.36.9

NA->AS NA->EUAS->NA EU->ASAS->EU All other

To-From AS, NA and EU: 64%

AS

ME

NA

LA

LA

NA

EU

ME

LA

EU

World’s Intercontinental Sea Freight Traffic by Lane: 2008Millions of FEU

12

World trade has consistently recovered after global downturns in

economic activity over the past 35+ years

Tra

de G

row

th, G

DP

Gro

wth

an

d G

lob

aliz

atio

n

Source: IMF, MergeGlobal analysis

-4

-2

0

2

4

6

8

10

12

14

19

70

19

71

19

72

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

World Trade Volume

World Real GDP

An

nu

al P

erc

en

t C

han

ge (

%)

Trade Avg.

GDP Avg.

Real World GDP and Trade Growth: 1970-2007

Key Points

Global trade has recovered from economic contractions in the past and will do so again this time around (most likely within the

next 18-24 months)

Claims of a ―reversal‖ of globalization are overblown, in our view:

– Deep international linkages are difficult to reverse

– Shippers’ supply chain design and implementation decisions typically carry long-term implications

– Asian economies have based their export-led growth models over the decades not only on labor cost arbitrage but,

crucially, on a highly capable production base