Container Shipping 2015 Market Outlook 2nd China Shipping Innovation Conference 9 January 2015 Shanghai Container Shipping 2015 Market Outlook BLANK SLIDE Web: www.alphaliner.com  E-mail: hjtan@liner-research.com

Evolution of container ships – the first 60 years Sixth & seventh generation Ultra Large containerships & wide-beam eco-ships Fifth generation Very Large containerships Fourth generation Post Panamax containerships Third generation Panamax containerships Second generation Cellular containerships First generation Converted and semi-container ships BLANK SLIDE

New vessel deliveries expected to reach new record 2015 containership deliveries will be at a record high 2014 deliveries reached 1.465m TEU - almost a new record (6.3% growth) But 2015 deliveries expected to exceed 1.80m TEU (7.9% growth net of scrapping) >10,000 teu vessels make up over half (64%) of planned deliveries Slippage will be minimal in 2015 (most slippage in < 5,100 teu size or 12% of planned deliveries) BLANK SLIDE

Scrapping rate slowing Scrapping peaked in 1H 2014 (290,000 teu) but have slowed in 2H 2014 (98,000 teu) Initial projection of 500,000 teu to be scrapped in 2014 Final scraps reached only 388,000 teu - lower than the 442,000 teu scrapped in 2013 2015 scrapping level expected to be lower than 2014 China’s scrapping subsidies will have limited impact in 2015 BLANK SLIDE

Idle fleet Idle containership fleet at 3 year low at 200,000 teu Lowest idle level since 2011 at 1.1% of total fleet Driven by high scrapping rate & higher demand on E-W/Intra-Asia trades Recent port congestion issues have also led to higher demand for ships Low idle fleet will reduce scrap rate But limited impact on charter rates BLANK SLIDE

Freight market link to charter market broken down Pre-2009 : freight rate index closely correlated to charter index Post-2009 : correlation has broken down due to supply overhang Freight market recovery will precede charter market recovery BLANK SLIDE

Demand & Supply remain imbalanced Demand growth recovering 2014 (f) at 4.9% vs 3.0% in 2013 (based on top 30 ports volume) But recovery is also imbalanced with some sectors very weak (eg South America) and uncertain (eg Eurozone) But supply growth continues to trend above demand 2014 gross supply growth at 6.3% But active supply growth (adjusted for idle capacity) was 10.0% Rates currently sustained partly due to port congestion issues especially in US West Coast Impact of extra slow steaming is low since 2013, could be reversed with low bunker prices BLANK SLIDE

Slow steaming as capacity management tool Total capacity absorbed by slow steaming is estimated at 1.3 million TEU or 7% of current fleet With bunker prices at $300/ton, slow steaming is no longer a cost saving strategy But reversal of slow steaming will take time BLANK SLIDE

Main issues in 2015 – Record supply growth/New Alliances & Impact of lower fuel price CKYHE Alliance launched G6 coverage extended Impact of lower bunker price? Supply overhang worsens Freight rates crash G6 formed by GA/NWA carriers P3 Network announced Fresh round of ULCS vessel orders P3 Network rejected by China 2M Alliance announced Ocean 3 announced 2M & O3 launched FE-Europe services rationalised Another round of ULCS vessel orders New 18K vessels delivered ‘Daily Maersk’ launched BLANK SLIDE Service rationalisation options limited Maersk orders ‘Triple-E’ ships What happens to freight and charter rates? 2011 2012 2013 2014 2015

No evidence that Alliances lead to market stability 2015 Global Alliances 2M Maersk MSC CKYHE COSCO K Line Yang Ming Hanjin Evergreen G6 APL Hapag-Lloyd HMM MOL NYK OOCL O3 CMA CGM CSCL UASC (Hamburg Sud) Haven’t we seen these before? Past Alliances proved to be fundamentally unstable. Can the new alliances last? 1985 Alliances/Consortiums TRIO OCL Ben Line Hapag-Lloyd MOL NYK TRIO OCL Ben Line Hapag-Lloyd MOL NYK ScanDutch Nedlloyd CGM EAC Brostrom MISC ScanDutch Nedlloyd CGM EAC Brostrom MISC ACE K Line OOCL NOL FBS KSC Choyang ACE K Line OOCL NOL FBS KSC Choyang Independents Maersk Evergreen COSCO Yang Ming Independents Maersk Evergreen COSCO Yang Ming BLANK SLIDE Acquired by other carriers Exit liner business

2015 deliveries by carrier BLANK SLIDE

End Please send any queries to hjtan@liner-research.com Alphaliner clients include the following top shipping lines : BLANK SLIDE