Container Shipping Market Outlook BLANK SLIDE Web: www.alphaliner.com  E-mail: hjtan@liner-research.com

One year after Hanjin Did we learn any lessons? Immediate aftermath Start of new Alliances Idle fleet reached record high Post-Hanjin era Hanjin capacity was not immediately replaced Capacity discipline did not last long All of the ex-Hanjin ships returned to service by Sep. Only 6 out of 102 ships scrapped New round of vessel orders? End of capacity discipline? BLANK SLIDE

Post-Hanjin era has only just begun And we are right back where we started Immediate aftermath Start of new Alliances Post-Hanjin era Rates recover on capacity constraint Carriers unable to raise rates despite strong peak season demand BLANK SLIDE

Strong demand growth has reduced surplus capacity Demand growth has exceeded supply growth in 2016 and 2017 But still need to clear 2018 hurdle before supply overhang is fully cleared BLANK SLIDE

While capacity overhang remains Excess demand growth has been met through reduction in idle fleet Growth in active fleet has exceeded growth in overall fleet in 2017 Effective capacity is growing at twice the pace of nominal fleet growth (9% vs 4%) BLANK SLIDE

2018 supply growth remains a concern 1.30 million TEU due in 2017 (1.02 m TEU delivered YTD) 1.70 million TEU due for delivery in 2018 Deferrals will be limited, with 80% of deliveries > 10,000 TEU BLANK SLIDE

Fight for market share has not ended Pressure on the smaller carriers who will struggle to maintain market share Hapag-Lloyd ONE Yang Ming How will Maersk react? While independents continue to struggle HMM Zim BLANK SLIDE

Low orderbook ratio has already started to reverse Orderbook reached a low of 2.50 million TEU in August 12.1% of total fleet – the lowest ratio in industry’s history But 0.50 million TEU has been added since September Orderbook could rise again – owners eyeing 2020 emissions rule BLANK SLIDE

Debunking the myth of capacity discipline Hanjin Shipping Carrier consolidation Low orderbook Balance of supply and demand But despite all these ‘positive’ developments … spot rates are down 52% to USEC and 38% to USWC since January BLANK SLIDE

Discipline does not last in presence of surplus capacity Void sailings have been replaced by extra loaders Total capacity on Transpacific route is up 7% year-on-year No winter withdrawals announced so far … Rapid introduction of > 10,000 teu ships set to continue (from 0% to 26% in 5 years) Total capacity deployed on FE-North America route BLANK SLIDE

Transpacific Trade – 2 year cycles Rate cycle expected to persist as long as over-capacity remains Capacity additions will impede further rate recovery 2014 USWC port labour Port congestion 2012 Capacity constraint Departure of the niche carriers 2010 Restocking led recovery Capacity & equipment shortage 2016 Hanjin bankruptcy Flight to safety BLANK SLIDE

Failure to curb capacity increases will pull down 2018 rates New ships due in next 15 months 5,000-10,000 TEU 10,000-15,000 TEU 18,000-22,000 TEU 12 19 13 2 5 3 6 7 11 9* 10 BLANK SLIDE

What have we learnt since Hanjin? Positive developments consolidation moves have reduced number of global carriers freight rates have been more stable upturn in trade growth slowdown in new vessel orders But have we really learnt the lessons from Hanjin? Hanjin bankruptcy did not mark turning point for industry Continued government support for under-performing carriers Price competition remains intense Carriers still eyeing market share gains Scrapping activity slowed New vessel ordering has returned 2018 hurdle needs to be cleared Over 1.5 million TEU to be delivered Idle fleet – supply overhang of at least 0.35 million TEU to be carried over BLANK SLIDE

End Please send any queries to hjtan@liner-research.com Alphaliner clients include the following: - Shipping lines - Investment Banks - Ports BLANK SLIDE