TRANS-PACIFIC CONTAINER TRADE OUTLOOK By Mario O. Moreno, Economist PIERS Maritime Research March 2010

Presentation  A brief assessment of the U.S. economic recovery and its impact on Trans-pacific container trade  Forecasts for total containerized U.S. imports and exports, and U.S. container trade with Southeast Asia and Northeast Asia (China, Japan, Korea, Hong Kong, Taiwan) for  Latent risks to the Trans-pacific container trade rebound during the forecast period 2

The Asia-Pacific Region will Experience a Stronger Recovery than the U.S. The IMF recently upgraded its forecast for U.S. GDP and said the U.S. will expand 2.7% this year, slowing down to 2.4% in ASEA-5: Indonesia, Malaysia, Philippines, Thailand, Vietnam. 3

A Sustainable U.S. Economic Recovery … or Is It? Retail sales excluding autos up 4.6% from a year ago The business inventory to sales ratio is down at

Cont’d Inflation remains subdued. Last year, overall consumer prices slipped 0.4%. As of January 2010, year-on-year overall CPI is at 2.7% and Core CPI is at 1.5%. The ISM index rose sharply in January 2010, driven by a red-hot pace of new orders. 5

Forecast: Total U.S. Imports in TEUs U.S. total imports in TEUs are expected to grow 9.1% in 2010 mainly due to inventory re- stocking. In 2011, imports growth is expected to be lesser due to fading stimulus and distressing consumer spending. U.S. total imports in TEUs are expected to grow 9.1% in 2010 mainly due to inventory re- stocking. In 2011, imports growth is expected to be lesser due to fading stimulus and distressing consumer spending. 6

Forecast: Total U.S. Imports in TEUs (Quarterly) Total containerized U.S. imports ended at 3,830,000 TEUs in the 4 th quarter of 2009, accounting for a drop of only 5% over the same quarter in

Forecast: Total U.S. Exports in TEUs Containerized U.S. exports are expected to grow 7.3% in 2010 due to a stronger economic recovery in the Asia-Pacific region and to lower prospects of a significant appreciation of the U.S. dollar. 8

Forecast: U.S. – Northeast Asia Trade in TEUs [China, Japan, Korea, Hong Kong, Taiwan] The exports growth projection for 2010 is based partially on the ability of China thus far to avert a major recession and partially on income expectations. 9

Forecast: U.S. – Southeast Asia Trade in TEUs [Vietnam, Indonesia, Thailand, Singapore, Philippines, Malaysia] Without a doubt, Indonesia and Vietnam are the standout performers and will continue to thrive in 2010 and Exports 10

Top 5 Commodities: Northeast Asia [China, Japan, Korea, Hong Kong, Taiwan] Top 5 U.S. import commodities from Northeast Asia Furniture decreased -19% in the 3 rd quarter of 2009 over the same quarter a year ago Top 5 U.S. export commodities to Northeast Asia Paper & paperboard surged 9.8% in the 3 rd quarter of 2009 over the same quarter a year ago 11

U.S. Exports of “Grains & Flour prods” to Southeast Asia will Remain Strong From January through September of 09 the U.S. exported 65,917 TEUs of the mentioned commodity, which translates into a 19% increase over the full previous year. 2009*: January through September

What Could Go Wrong?  Inflation and property bubbles in Asia  Tightening monetary policy too fast  Tensions in U.S. – China trade relations  Enduring pullback of the American consumer 13

A Jobless Recovery We have lost over 8 million jobs since the recession began. In fact, there are over 1 million discouraged workers who are not even considered in the national unemployment rate calculation 14

The Over-extended American Consumer Foreclosures and job losses have prompted more people to resort to bankruptcy protection in Housing market still fragile. 21% 120% 32% 15

New Frugality A high saving rate suggests consumers are changing their spending patterns and are trying to steady their finances. U.S. consumer credit fell for the 11 th straight month, indicating consumer spending will be restrained by a combination of tightened standards for credit and Americans reluctant to take on more debt until hiring picks up. 16

TRANS-PACIFIC CONTAINER TRADE OUTLOOK By Mario O. Moreno, Economist PIERS Maritime Research March