Container Shipping 2010 Outlook Tufton oceanic hedge Fund

An equity investor’s view on container shipping in 2010 Tufton oceanic hedge fund  The container shipping industry is turning around  Full year volume growth could reach double digit  Trans-Pacific may come as close to black as ever since 2006  Asia-Europe may peak out this year with significant downside risk by year end

Turned around in spot market Tufton oceanic hedge fund Trans-Pacific Operating Profit Margin: close to profit Asia-Europe Operating Profit Margin: highly profitable Source: Tufton estimates  Key assumptions  Based on simple base port-to-base port model  Freight rates based on Shanghai Shipping Exchange’s CCFI and SCFI releases  Average spot 380cst bunker price at Singapore for the period  Utilization from 75% to 95% for AE head haul and 80% to 95% for TP head haul

Low base assures volume growth Tufton oceanic hedge fund  We think volume could grow up to 10%  Both US and Euro zone turned into growth in 2010, after contraction in 2009, as per IMF  Drawing a line from January level, volume at major Chinese ports would grow 11-12% Y/Y Throughput at principal Chinese ports Source: Ministry of Communication, China; Tufton estimates Million TEU

Two signals to be bullish on Trans-Pacific this summer Tufton oceanic hedge fund US retail sales Y/Y growth: passing the valley of death Wholesalers’ inventory/sale ratio: record low on low denominator Source: US Census Bureau

Trans-Pacific contract rates could be up Tufton oceanic hedge fund  +ve Spot TP WB rates up 21% versus 2009 average  +ve US retail sale volume would be up 2.4% Y/Y in 2010 if December volume maintained  -ve 10% unemployment in US key drag  Capacity correlation with capacity growth broken on cargo draught and capacity discipline US retail sale growth versus TP WB ratesCapacity growth versus TP WB rates Source: US Census Bureau, CI and Tufton estimates Source: Clarkson, CI and Tufton estimates

Asia-Europe may be peaking Tufton oceanic hedge fund CCFI Asia-Europe Westbound rates: as good as 2007 peak Euro zone retail sales growth Y/Y: narrowing decline Source: Bloomberg Source: Shanghai Shipping Exchange

Too good is no good: return of idle ships Tufton oceanic hedge fund  Existing operators launching new service  New ventures entering on low charter rates and high box rates Contex 2500TEU: TCE rate up 16% YTD Source: Hamburg Shipbrokers’ Association US$ per day

European sovereign risks stands high Tufton oceanic hedge fund Greece CDS ratePortugal CDS rate France CDS rateSpain CDS rate Source: Bloomberg

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Container Shipping 2010 Outlook Tufton oceanic hedge Fund