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Beyond the Storm - the Industry Our Customers Should Ask For

Beyond the Storm - the Industry Our Customers Should Ask For. Trans-Pacific Maritime Conference March 1, 2010 Eivind D. Kolding – CEO Maersk Line. Beyond the Storm - the Industry Our Customers Should Ask For. Current situation – weathering the storm 2010 – uncertain and fragile

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Beyond the Storm - the Industry Our Customers Should Ask For

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  1. Beyond the Storm- the Industry Our Customers Should Ask For Trans-Pacific Maritime ConferenceMarch 1, 2010Eivind D. Kolding – CEO Maersk Line

  2. Beyond the Storm- the Industry Our Customers Should Ask For • Current situation – weathering the storm • 2010 – uncertain and fragile • Long term – the industry our customers should ask for

  3. The worst crisis in the history of container shipping is not over GDP growth Trade growth GDP growth multiplier x 2.3 x 2.9 x 3.8 Source: Annual and quarterly reports

  4. Rates have been significantly impacted Source: Drewry

  5. Supply grows, but less than earlier expected CAGR 11% CAGR 8% Source: AXS Alphaliner

  6. Supply and demand balance deteriorates …and remains fragile due to the idle fleet readily available for injection Supply and demand balance developments 2009 2010 • Supply growth adjusted for cancellations, scrapping and delays -6% -8% • Slow steaming +5% +2% • Demand growth -13%+4% • Idle fleet (Supply overhang) +11% ? • Net developments -3% -2% Source: Maersk Line estimate

  7. Current supply and demand balance remains fragile 105 100 Strong Strong 95 Weak Weak 90 85 80 75 70 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2009 2010 Balance net idle and slow steaming Source: Maersk Line estimate Slide no. 7

  8. Beyond the Storm- the Industry Our Customers Deserve • Current situation – weathering the storm • 2010 – uncertain and fragile • Long term – the industry our customers should ask for Department Slide no. 8 Slide no. 8

  9. Recently, global volumes have picked up… Global Import Volumes Index (2000=100), seasonality adjusted Source: Reuters Ecowin

  10. Driven mainly by US imports followed by the Euro Area… Import Volumes Retail Sales +13% +1% +3% +1% …but apparently restocking is the driver as underlying demand has not yet picked up Source: Reuters Ecowin

  11. Improving consumer confidence indicates some recovery in consumer spending Core Retail Sales (Volume year-on-year % change) >>>>>>>>>>>>>> Consumer Expectations (Index 1985=100) <<<<<<<<<<<<< Source: Reuters Ecowin Slide no. 11

  12. Full recovery in Asian import volumes is rebalancing trades … Source: Reuters Ecowin Slide no. 12

  13. % Industry remains fragmented with no signs of consolidation Source: AXS Alphaliner

  14. Charter owners are faced with historically low rates Charter rates in USD 1,000/day Source: Clarckson Research Services

  15. Charter owners have significant new build commitments Orderbook Source: Clarckson Research Services

  16. Main trends for 2010 Managed supply side Slow demand recovery Rate increases remain fragile Break-even at best Continued financial distress Diminishing risk of defaults Reduced likelihood of consolidation Non-operating owners will be severely affected and casualties may happen

  17. Beyond the Storm- the Industry Our Customers should ask for • Current situation – weathering the storm • 2010 – uncertain and fragile • Long term – the industry our customers should ask for Slide no. 17

  18. 8 Logistics cost is only a small portion of the total cost structure for a typical retailer… Percent 100.0 Sales 75.2 Cost of goods sold Gross margin 24.8 12.0 Store cost 3.2 Logistic Central cost 4.6 EBIT 5.0 Source: McKinsey Team analysis Slide no. 18

  19. Retail value shirt: USD 30 • Ocean transport cost: USD 0.25 • Transport cost is 0.85% of the retail price • Retail value of flatscreen TV: USD 750 • Ocean transport cost: USD 15 • Transport cost is 2% of the retail price • Commodity value of grain: USD 192/ton • Ocean transport cost: USD 76/ton • Transport cost is 40% of the value Transportation cost is insignificant part of the retail value Source: Maersk Line esimate

  20. Customers should ask forreduced volatility Hong Kong – Los Angeles container rate benchmark for FCLs Why gamble by chasing short term savings instead of ensuring long term stability and partnerships? Source: Drewry Slide no. 20

  21. Customers should ask forless waste in the industry and reduced uncertainty • Downfall is evenly spread across customer segments, but forwarders tend to have a higher downfall ratio Source: Maersk Line Slide no. 21

  22. Customers should ask forhigher reliability In comparison, the parcel industry claims to deliver more than 90% reliability Reliability above 95% would allow our customers to reduce inventory buffer by 60% Source: Drewry Q4 2009 schedule reliability Slide no. 22

  23. Customers should ask forone-click-shipping- in an old industry and old habits WWW Slide no. 23

  24. Customers should ask for better environmental performance Air(Boeing 747-400) Truck (Global average) Rail Diesel Rail Electric(Global average) Ocean(Avg. ML vessels) CO2 (g/ton km) Source: NTM Slide no. 24

  25. Ocean transport accounts for a very small portion of the carbon footprint of retail goods Shipping one pair of shoes 3700 g CO2 370 g CO2 Hong Kong Rotterdam Store Home 18,600 km 20 km Source: NTM

  26. But we should set ambitious targets for ourselves and the industry… …which is why I believe that slow steaming is here to stay Maersk Linetarget

  27. Time is right for customers to demand a new, efficient, less volatile and sustainable industry

  28. Questions?

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