1. Panama Canal Expansion Impact on Traffic and Transshipment Asaf Ashar National Ports & Waterways Initiative, USA Independent Consultant TOC Americas 2015 www.asafashar.com

2. “Traditional” T/S Forecast Model T/S = Regional Traffic x T/S Incidence Agree: Regional Traffic = f(Regional GDP)  No/Slow Growth But Assume: T/S Incidence = f(Ship Size, Port Constraints, Alliances)  Dramatic Growth Because Larger Ships  Fewer Services, Less Direct Call, Port Constraints; Alliances  Market Power to “Abandon” Ports So why T/S Incidence Worldwide is “Stuck” at 30%?

3. Actual Effect of Ship Size & Alliancing Direct Calls to More Regions (Baltic) and More Ports (Baltimore: Evergreen brings CKYH lines; MSC brings Maersk; G6 to follow? 2M: 799  1,036 port-pairs) Direct Calls at Adjacent Ports (Charleston + Savanna; Norfolk + Baltimore) Port Constraints? 9,300-TEU already in 42-ft Savanna; Near-Future deepening of US ports, Moin, Mariel, Veracruz… Forecast based on “Incidence” is too general! Need detailed analysis of Service Patterns My analysis focuses on Additional Traffic and T/S

4. Main Regional Service Patterns Cross-Canal Services (“Horizontal”) Asia / ECNA Asia / GCNA Cross-Canal Services (“Diagonal”) WCSA / Europe WCSA / ECNA Non-Canal Services (“Vertical”) ECSA / ECNA ECSA / GCNA Asia / WCSA “L” Asia / WCSA ”L” Ashar 2015 Consolidation: Parallel Intersection Global

5. Parallel: AWP Consolidation (CKYHE) 4,400 + 4,500 = 8,900 TEU 4,300 + 4,250 = 8,550 TEU AWH: 10 x 4,400 TEU AWC: 9 x 4,500 TEU AWY: 8 x 4,250 TEU AWS: 9 x 4,300 TEU Hanjin, Ashar 2015 Canal Traffic:Transshipment : “Abandon” Ports (Wilmington, Boston)? Add Ships (11), Speed (20k)? Add Ports (Halifax, Miami, NOLA, Jax, Mobile, Cartagena)? 24 Asia/N Am = 17 USWC+ 6 AWP + 2 AWS; 3 CCT Stops 4-51

6. Parallel: Eurosal Consolidation (HPL/CMA/HSD) 3,700 + 4,200 = 7,900 TEU 7,900 + 2,500 = 10,400 TEU Hapag Lloyd, Ashar 2015 SW1: 10 x 4,200 TEUSW2: 8 x 3,700 TEU SW3: 6 x 2,500 TEU Canal Traffic: Transshipment : “Abandon” Ports (Guayaquil, Paita)? Hubs in Panama or WCSA?

7. Intersection: Asia/ECNA + Asia/WCSA Massive T/S; but Add Time to Asia/Mexico and Asia/WCSA Different Line Groupings Limited/No Scale Economies Balancing Flows Difficult High Reefer Content Asia / WCSA Asia / ECNA Limited Prospects Canal Traffic:Transshipment : Feeder

8. Intersection & Global Consolidation Cross-Canal Services (“Horizontal”) Asia / ECNA Asia / GCNA Cross-Canal Services (“Diagonal”) WCSA / Europe WCSA / ECNA Non-Canal Services (“Vertical”) ECSA / ECNA ECSA / GCNA Asia / WCSA (“L”) Asia / WCSA ”L” Canal Traffic: Transshipment : Hapag Lloyd, Ashar 2015 Fourth Revolution

9. Summary Observations Regional GDP (Venezuela; Ecuador) – No Change T/S Parallel Consolidation -- Modest Growth T/S – AWP Diverts AWS/IM: Traffic UP; T/S No Change – Diagonal Services: Traffic No Change; T/S Up; WCSA Hubs? Intersection Consolidation -- Massive Growth T/S -- Long-Term (if ever) Special Factors – Alliance Concentration (2M/Moin; O3/Kingston) – Add/Eliminate Direct Calls (Cartagena, Houston, Veracruz, Moin, Mariel) – Add/Eliminate Specialized Services ( CKHYE AWT; CMA PEX2)

10. Contrarian Views “Double digit jump in Panama transshipment activity as a result of the opening of the expanded canal in 2016” (Drewry) “(Expansion) will boost the need and demand for transshipment and create opportunities for existing Caribbean hubs and the development of new ones” (World Bank) “Growth in transshipment is inevitable, competition will be tough, Panama is key, Go for it” (Worley Parsons) “(Expansion) increases Panama Canal’s traffic by 15-20% due to recovering Asia/N America trade, but will only result in small growth (5%) in regional transshipment“ (Ashar)

11. Thank You! Asaf Ashar National Ports & Waterways Initiative, USA Independent Consultant TOC Americas 2015 www.asafashar.com