TRANS-PACIFIC CONTAINER TRADE OUTLOOK 2010-2011

By Mario O. Moreno, Economistmmoreno@piers.comPIERS Maritime Research

March 2010

2

Presentation

A brief assessment of the U.S. economic recovery and its impact on Trans-pacific container trade

Forecasts for total containerized U.S. imports and exports, and U.S. container trade with Southeast Asia and Northeast Asia (China, Japan, Korea, Hong Kong, Taiwan) for 2010-11

Latent risks to the Trans-pacific container trade rebound during the forecast period

3

The Asia-Pacific Region will Experience a Stronger Recovery than the U.S.

The IMF recently upgraded its forecast for U.S. GDP and said the U.S. will expand 2.7% this year, slowing down to 2.4% in 2011.

ASEA-5: Indonesia, Malaysia, Philippines, Thailand, Vietnam.

2007 2008 2009 (e) 2010 (f) 2011 (f)

U.S. 2.14 0.4 -2.4 2.7 2.4

ASEA-5 6.3 4.7 1.3 4.7 5.3

China 13 9.6 8.7 10 9.7

India 9.4 7.3 5.6 7.7 7.8

-3.0

-1.0

1.0

3.0

5.0

7.0

9.0

11.0

13.0

GDP: U.S., ASEA-5, China, India

Y/Y

perc

ent

change

Source: IMF

e: estimatef: forecast

4

A Sustainable U.S. Economic Recovery … or Is It?

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

Inventory to Sales ratio 1.26

Inventory to Sales RatioSource:Census Bu-reau

Dec-0

7

Mar-0

8

Jun-

08

Sep-

08

Dec-0

8

Mar-0

9

Jun-

09

Sep-

09

Dec-0

9$260,000

$270,000

$280,000

$290,000

$300,000

$310,000

$320,000

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Retail Sales less autos

RS exc autos % Change

In $

millions

% c

hange f

rom

a y

ear

ago

Source: Census Bu-reau

Retail sales excluding autos up 4.6% from a year ago

The business inventory to sales ratio is down at 1.26

5

Cont’d

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Consumer Price Index

Core CPI CPI

% c

hange f

rom

a y

ear

ago

Source: BLS

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Index 58.4

ISM Manufacturing IndexSource: ISM

Inflation remains subdued. Last year, overall consumer prices slipped 0.4%. As of January 2010, year-on-year overall CPI is at 2.7% and Core CPI is at 1.5%.

The ISM index rose sharply in January 2010, driven by a red-hot pace of new orders.

6

Forecast: Total U.S. Imports in TEUs

U.S. total imports in TEUs are expected to grow 9.1% in 2010 mainly due to inventory re-stocking.

In 2011, imports growth is expected to be lesser due to fading stimulus and distressing consumer spending.

2006 2007 2008 2009(e)

2010(f)

2011(f)

2006 2007 2008 2009(e)

2010(f)

2011(f)

Imports

18576313.29

18476451.65

17091763.14

14508078.84

15829036.9085446

16807923.3504997

% change

0.0719038265376061

-0.00500000000000001

-0.07

5

-0.15116544735613

3

0.0910498270041524

0.0618411876610584

1,000,000

5,000,000

9,000,000

13,000,000

17,000,000

-17.5%-12.5%-7.5%-2.5%2.5%7.5%12.5%

Containerized U.S. imports

TEU

s

Y/Y percent change

Source: PIERS

7

Forecast: Total U.S. Imports in TEUs (Quarterly)

Total containerized U.S. imports ended at 3,830,000 TEUs in the 4th quarter of 2009, accounting for a drop of only 5% over the same quarter in 2008.

09 Q1

09 Q2

09 Q3

09 Q4

10 Q1

10 Q2

10 Q3

10 Q4

09 Q1

09 Q2

09 Q3

09 Q4

10 Q1

10 Q2

10 Q3

10 Q4

Imports

3281557.98

3509874.04

3885836.82

3830810

3672772.99999999

4047214

4146908.71783975

3962141.19070486

% change

-0.208199014062924

-0.193484353193496

-0.148296486042202

-0.0501369971970618

0.11921624496179

0.153093801622578

0.0671855021024143

0.0342828776955428

250,000

1,250,000

2,250,000

3,250,000

4,250,000

-22.5%

-12.5%

-2.5%

7.5%

17.5%

Containerized U.S. imports

TEU

s

Q/Q

percent change

Source: PIERS

8

Forecast: Total U.S. Exports in TEUs

Containerized U.S. exports are expected to grow 7.3% in 2010 due to a stronger economic recovery in the Asia-Pacific region and to lower prospects of a significant appreciation of the U.S. dollar.

2006 2007 2008 2009(e)

2010(f)

2011(f)

2006 2007 2008 2009(e)

2010(f)

2011(f)

Exports

9113624.49

10776281.06

11361070.36

10376664

11130766

11766492

% change

0.0534937454196085

0.182

0.054

-0.08

7

0.073

0.0574109271599828

1,000,000 3,000,000 5,000,000 7,000,000 9,000,000

11,000,000 13,000,000

-12.5%-7.5%-2.5%2.5%7.5%12.5%17.5%

Containerized U.S. exports

TEU

s

Y/Y percent change

Source: PIERS

9

Forecast: U.S. – Northeast Asia Trade in TEUs[China, Japan, Korea, Hong Kong, Taiwan]

The exports growth projection for 2010 is based partially on the ability of China thus far to avert a major recession and partially on income expectations.

2006 2007 2008 2009 (e) 2010 (f) 2011 (f)

Exports 0.086 0.141 0.036 -0.0142265500307

256

0.0873167517009

505

0.0770323602062

951

Imports 0.096 0.012 -0.0840000000000

001

-0.1581262863131

93

0.1269554700685

41

0.0782576860439

892

-17.5%

-12.5%

-7.5%

-2.5%

2.5%

7.5%

12.5%

17.5%

U.S. – Northeast Asia Container Trade

Y/Y

perc

ent

change

Source: PIERS

Exports

Imports

10

Forecast: U.S. – Southeast Asia Trade in TEUs

[Vietnam, Indonesia, Thailand, Singapore, Philippines, Malaysia]

Without a doubt, Indonesia and Vietnam are the standout performers and will continue to thrive in 2010 and 2011.

2006 2007 2008 2009 (e) 2010 (f) 2011 (f)

Exports 0.009 0.352 0.193 -0.0810652294126

118

0.0566999325762

048

0.0625438338102

289

Imports 0.051 -0.0060000000000

0001

-0.042 -0.1106817222340

12

0.1256578283657

11

0.0947627835988

037

-15.0%

-5.0%

5.0%

15.0%

25.0%

35.0%

U.S. – Southeast Asia Container Trade

Y/Y

perc

ent

change

Source: PIERS

Imports

Exports

11

Top 5 Commodities: Northeast Asia[China, Japan, Korea, Hong Kong, Taiwan]

FURNITURE

TOYS

FOOTWEAR

WOMEN'S&INFANTWEAR

PLASTIC PRODS, MISC

247,124

145,164

97,263

77,857

74,765

TEUsPIERS2009 Q3

PAPER&PAPERBOARD

MIXED METAL SCRAP

PET&ANIMAL FEEDS

GRAINS&FLOUR PRODS

METAL SCRAP,FERROUS,PIG

IRON

289,887

92,676

57,948

53,875

51,005

TEUsPIERS2009 Q3

Top 5 U.S. import commodities from Northeast Asia

Furniture decreased -19% in the 3rd quarter of 2009 over the same quarter a year ago

Top 5 U.S. export commodities to Northeast Asia

Paper & paperboard surged 9.8% in the 3rd quarter of 2009 over the same quarter a year ago

12

U.S. Exports of “Grains & Flour prods” to Southeast Asia will Remain Strong

From January through September of 09 the U.S. exported 65,917 TEUs of the mentioned commodity, which translates into a 19% increase over the full previous year.

2009*: January through September 2009

2004 2005 2006 2007 2008 2009* 2004 2005 2006 2007 2008 2009*

TEUs

15620

9438.56

15780.8599999999

46117.97

55291.68

65917.16

% change

0.395230847285644

-0.395738796414855

0.671956315370144

1.92239903275233

0.198918339207039

0.192171408067181

5,00015,00025,00035,00045,00055,00065,000

-75.0%-25.0%25.0%75.0%125.0%175.0%225.0%

U.S. exports of “grains & flour prods” to Southeast Asia

TEU

s

Y/Y percent change

Source: PIERS

13

What Could Go Wrong?

Inflation and property bubbles in Asia

Tightening monetary policy too fast

Tensions in U.S. – China trade relations

Enduring pullback of the American consumer

14

A Jobless Recovery

We have lost over 8 million jobs since the recession began. In fact, there are over 1 million discouraged workers who are not even considered in the national unemployment rate calculation

-1000

-800

-600

-400

-200

0

200

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

Nonfarm Payrolls: Monthly and Yearly Change

Monthly Yearly %

Thousands,

month

ly c

hange

% C

hange y

ear

ago

Gain of 64,000

Loss of -150,000

Source: BLS

15

The Over-extended American Consumer

2006 2007 2008 20090

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6 Personal Bankruptcy Filings 1.41

Personal Bankruptcy Fil-ings

In m

illio

ns

Source: American Bankruptcy In-stitute

2007 2008 20090

0.5

1

1.5

2

2.5

3

Foreclosures 2.8

Foreclosures

In m

illions

Source: Realty-Trac

Foreclosures and job losses have prompted more people to resort to bankruptcy protection in 2009.Housing market still fragile.

21%

120% 32%

16

New Frugality

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

PS (Monthly %) 4.8

Personal Saving Rate

PS a

s a %

of

Dis

posa

ble

Inco

me

Source:Census Bureau

Dec-0

7

Mar-0

8

Jun-

08

Sep-

08

Dec-0

8

Mar-0

9

Jun-

09

Sep-

09

Dec-0

9

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Consumer Credit Outstand-ing

Monthly change % Change

In $

billions

% c

hange f

rom

a y

ear

ago

Source:Federal Reserve

A high saving rate suggests consumers are changing their spending patterns and are trying to steady their finances.

U.S. consumer credit fell for the 11th straight month, indicating consumer spending will be restrained by a combination of tightened standards for credit and Americans reluctant to take on more debt until hiring picks up.

TRANS-PACIFIC CONTAINER TRADE OUTLOOK 2010-2011

By Mario O. Moreno, Economistmmoreno@piers.comPIERS Maritime Research

March 2010

www.piers.com