Reefer market overview Trans-Pacific Maritime Conference Philip Damas Director, Drewry Supply Chain Advisors supplychains@drewry.co.uk Long Beach, March 5th, 2013

Agenda Resilient demand despite economic problems Import patterns have changed in the past decade Decline in specialised reefer fleet Expansion of container reefer capacity Increase in containerised market share The $1,500/reefer 40ft GRI of January 2013 Fewer options for shippers Conclusions and Q&A

1. Resilient demand despite economic problems Growth in seaborne reefer volumes vs global GDP Worldwide seaborne trade of perishable reefer cargoes increased by 4% in 2011 (numbers for 2012 not available, yet): Average historical of about 3% Some commodity sectors growing faster Not just a small market Drewry forecasts continued growth of 4.5% a year in next few years: Will there be sufficient capacity? W/w seaborne perishable reefer trade increased by 25 million tonnes between 2001 and 2011 – this is a CAGR of 3.4%. Highest growth in w/w trade of reefer commodities been in the exotic fruit category (pineapples, kiwi, avocadoes) – but this still accounts for relatively small volumes. Meat – a large volume category - has also experienced substantial growth in volumes. Growth continued in 2011 despite economic slowdown: +4% (to 91 million tonnes). Volume for 2012 is not known, yet. Source: Drewry’s Reefer Shipping Market Review & Forecast 2012/2013

2. Import patterns have changed in the past decade Distribution of global trade in perishables by import region in 2001 Distribution of global trade in perishables by import region in 2011 Imports patterns have changed considerably during the past decade. Western Europe as an importer has declined from 47% to 39% of global trade in perishables. Eastern Europe, by contrast, has increased considerably – with tonnage more than doubling in absolute terms (area shown in blue). North America (area in green) has been stable. The Middle East has seen significant growth, too Source: Drewry’s Reefer Shipping Market Review & Forecast 2012/2013

3. Decline in specialised reefer fleet Age profile of specialised reefer fleet for 100,000+ cft (no of vessels) Specialised reefer vessels being scrapped: 39 scrapped in 2011 74 scrapped in 2012 Specialised reefer vessels’ age profile: Ships are getting old New ships delivered: zero! 74 vessels scrapped in 2-12 – the highest ever. The specialised reefer fleet has shrunk to record lows The fleet has aged and is now 26 years old on average. Source: Drewry’s Reefer Shipping Market Review & Forecast 2012/2013

3. Decline in specialised reefer fleet (continued) The specialised reefer fleet (100,000+ cft) during 2001-2011 10 years of decline for the specialised reefer fleet … progressively shrinking fleet This chart shows the decline of the specialised reefer fleet in number of ships and in capacity. The immediate future of the specialised reefer fleet is one of a progressively shrinking fleet. Source: Drewry’s Reefer Shipping Market Review & Forecast 2012/2013

4. Expansion of container reefer capacity Global reefer container capacity is increasing: Up 8% in 2011 Estimated increase of 6% in 2012 Global containership fleet can carry about 1.3 million 40ft reefer containers (about 17% of total containership capacity). The containership fleet has an average age of about 11 years and is expanding. Ie this is the reverse picture of what is happening in the specialised reefer fleet. This chart shows you the increase in the number and value of the global box fleet (actual containers). It increased by 13% in 2011 and by an estimated 7% in 2012. The global box fleet totals about only 2 million TEU, but it represents a very large and increasing investment by carriers (total value of about US$20 billion). This is expensive equipment. Source: Drewry’s Reefer Shipping Market Review & Forecast 2012/2013

5. Increase in containerised market share Containers are winning the battle Container reefer fleet: Up to 91% of world reefer capacity and growing Specialised reefer fleet: Down to 9% of world reefer capacity – supply reduced Having seen the opposite trends of the specialised reefer fleet and the container reefer fleet, there is only 1 possible conclusion: Containers are currently winning the battle for market share (91% ie about 83 million tonnes (or 5 million TEUs a year?) Specialised reefer fleet now carries only about 9% of the total seaborne reefer martket

6. The $1,500/reefer 40ft GRI of January 2013 “Maersk Line Chief Executive Officer Soren Skou said Tuesday at a refrigerated logistics conference in Antwerp that his company plans to hike reefer rates by roughly 30% on a global basis from Jan 1, 2013.” Drewry benchmarking of actual increase in reefer freight rates: Varied considerably between routes, varied between carriers Up to 33% increase between November 2011 and February 2013 Drewry reefer container freight rate benchmarks (Nov 2012=100) The new CEO of Maersk, Soren Skou, announced a big GRI last September 2012 due to become effective In January. Skou said that, in the last seven years, reefer rates failed to keep pace with inflation, much less bunker costs. He said reefer rates have risen 2% annually, while inflation has grown at 4% and bunker costs 18%. The implicit threat was that Maersk would stop investing in reefer containers unless prices were increases. Drewry’s own freight rate benchmarks for reefer container shipments showed that price increases of 30% have been implemented on some, but not all, routes – as the chart above shows. I have spoken to reefer shippers who told me that certain carriers took a “take it or leave it” negotiating position and others were more flexible, but rates have indeed seen increases.

7. Fewer options for shippers Specialised reefer ships are full Box carriers less willing/able to invest Capacity bottleneck, repeat of January 2013 GRI? Comment on above There is a view that shippers have caused this situation by responding to opportunistic, rate-cutting box carriers and deserting the specialised reefer shipping lines… Only to find themselves dependent on the decision of a few major box carriers. but… Major reefer shippers have huge negotiating power over shipping lines

8. Conclusions Worldwide seaborne trade of perishable reefer cargoes is a growing market Import patterns have changed in the past decade Very fast decline in the specialised reefer fleet Expansion of the reefer containership fleet and box fleet Containers now dominate reefer shipping Impact of $1,500/FEU GRI What is to stop it happening again in future years? Worldwide seaborne trade of perishable reefer cargoes is a growing market, even in times of weak economic growth Import patterns have changed in the past decade – Eastern Europe, Middle East are becoming important importers Very fast decline in the specialised reefer fleet – record demolitions, no new ships So far, continued expansion of the reefer containership fleet and box fleet Containers now dominate reefer shipping Impact of $1,500/FEU GRI   Question: What is to stop it happening year after year?

Thank you. Any questions? Philip Damas damas@drewry.co.uk