Blair Morris – GM Commercial 9 August 2016 Supply chain collaboration – Global freight solutions Blair Morris – GM Commercial 9 August 2016

New Zealand’s ocean freight challenge NZ SHIPPING – Global context  6 M TEU 22 M TEU 24 M TEU Global main trade flows 1 M TEU NZ main trade flows (NZ westbound) 0.2 M TEU NZ secondary trade flows (NZ eastbound) 0.4 M TEU  Data source: Kotahi estimates based on FIGS and industry analysis  Bigger ship Bigger ship

Impacts on NZ services coming? IDLE CONTAINERSHIP (units idle breakdown by size range >1,000 TEU) Circa 1.6 M TEU idle vessel capacity… now higher than during GFC! 2016: Demand growth 1.8%; Supply growth 4.3%.... 0.85 M TEU capacity still coming! Shipping lines already in the red, some only hanging in due to low bunker and charter rates Parallels to GFC situation. Small change e.g. fuel will be tipping point Expect further rapid industry consolidation AVERAGE CARRIER* OPERATING MARGINS BY QUARTER (%) AFTER GFC TODAY Impacts on NZ services coming? 2009 2010 2015 2016

Kotahi works together with exporters, importers and industry partners to create a sustainable export supply chain, and drive greater efficiency for customers and partners.

Kotahi = Collaboration Our greatest strength lies in collaboration, not competition JOSEPH RAIN, Author & entrepreneur Coming together is a beginning, staying together is progress, and working together is success. HENRY FORD

Kotahi capacity management benefit Ensures efficient sustainable service in all market conditions. SMOOTHING DEMAND TO ENSURE EXPORTER SPACE AVAILABILITY Overall capacity Kotahi space requirement   Small exporter space requirement WEEK

Larger ships are the future for NZ exporters CONTAINERSHIP COST PER TEU SLOT MILE J..PLM, Cents/TEU mile -26% TEU Costs per TEU Capacity in TEU MARITIME SHIPPING TRANSHIPMENT INLAND TRANSPORTATION

Enhanced Maersk Line Triple Star, 9500 TEU Fast transit to North Asia Greater range of connections over China ports Uniquely high proportion of refrigeration plugs Fuel efficient 22% carbon reduction per container Stable capacity with more flexibility

Building an efficient supply chain through collaboration AUCKLAND TAURANGA KEY Imports  Export Efficient big ship routing Matched north/south freight flows Intermodal network (Savill Drive IFH) PALMERSTON NORTH Fully developed deep water port  Domestic Rail

Supply chain collaboration

Cold storage VGM impact on cold chain How far can we push landside model? Ocean freight technology and equipment

Key points Ocean freight volatility = exporters need to take control of our future  We’re on the journey = building a collaborative supply chain Larger ships arrive = keeping NZ competitive on the world stage ? Watch out? Over investment in landside and port infrastructure

We’re on the journey… …stay in touch.