Shipping Industry Trends & Impacts on the Supply Chain. Larry Kvidera Port of Tacoma September 9-10, 2013

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Shipping Industry Trends & Impacts on the Supply Chain Larry Kvidera Port of Tacoma September 9-10, 2013

Port of Tacoma A Global Gateway Alaska Korea Japan Hong Kong Shanghai Taiwan Hawaii Europe Singapore Manzanillo Oceania S America

Carrier Services Yang Ming Line Evergreen Line Wallenius Wilhelmsen Line International Container Carriers APL Evergreen Line Hanjin Shipping Co Hamburg Sud Hapag-Lloyd Hyundai Merchant Marine K Line Scheduled Carrier Services Yang Ming Line Mitsui OSK Line NYK Line OOCL US Lines COSCO ZIM Domestic Carriers Horizon Lines Totem Ocean Trailer Express Breakbulk Carriers World Logistics Wallenius Wilhelmsen Line

2012 Cargo Activity Breakbulk = 259,915 Short Tons (+68.4%) Rail Lifts = 439,760 (+29.7%) Total Tonnage = 18,534,288 ST (+3.7%) Containers = 1,711,134 TEUs (+15.9%) Autos = 148,239 Units (-8.7%) Source: Internal Port Statistics Logs = 66,405,210 Board Feet (-36.0%) Grain = 4,804,265 Short Tons (-19.0%)

U.S. Container Port Rankings 2013 July YTD Rank Port TEUs (,000s) 1 Los Angeles 2,226 2 Long Beach 1,939 3 New York/New Jersey 1,571 4 Savannah, GA 631 5 Norfolk 498 6 Oakland 453 7 Tacoma 400 8 Charleston 376 9 Houston 372 10 Seattle 334 Source: Datamyne (International foreign full TEUS)

Port of Tacoma Export Commodities Oil Seeds 18% Articles of Wood 14% Other 29% Wood Pulp 8% Paper 6% General Cargo 3% Animal Feed 6% Preparations of Vegetables & Fruits 5% Plastics 4% Vegetables & Roots 4% Fruits & Nuts 3% Port of Tacoma Containerized Wood Exports 42,862 TEUs Jan July 2013 Top 5 Wood Export Commodities 4407- Wood Sawn or Chipped 4403- Wood in the Rough 4415- Pallets of Wood 4418- Wood for Carpentry 4408- Veneer Sheets Top 5 as % of TOTAL WOOD EXPORTS 42,196 TEUs 98% Source: PIERS

Trends and Implications Supply Chain The New Normal Market Conditions Slow economic growth in the US and worldwide; long and protracted recovery period Overcapacity (vessel capacity and terminal acreage) Depressed and volatile freight rates Impact on Carriers = Increased competition = Financial hardship Industry Response: Control costs (downsizing, operational consolidation, etc.) Increase productivity; maximize efficiency, economies of scale and IT/automation solutions Rationalization of carriers and terminal operators Capital investments to prepare for larger vessels

Trends and Implications Big Ships and the Cascade Effect TEU dwt LOA feet/meters Breath feet/meters Draft feet/meters Containers rows across Triple E Class 2013 18,270 TEU 200,000 1312 400m 194 59m 52.5 16m 23 CMA CGM Marco Polo 2012 16,020 TEU 180,000 1299 396m 176 53.6m 53 16m 21 Emma Maersk 2006 15,500 TEU 175,000 1302 397m 184 56m 53 16m 22 Gudrun Maersk 2005 9,500 TEU 115,700 1204 367m 140 42.8m 49 15m 17 Sovereign Maersk 1997 8,200 TEU 105,000 1138 347m 140 42.8m 48 14.5m 17 Regina Maersk 1996 7,403 TEU 90,500 1043 318m 140 42.8m 48 14.5m 17 NYK Altar 1994 4,953 TEU 63,000 984 300m 122 37.1m 43 13m 15 President Truman 1988 4,538 TEU 55,500 902 275m 129 39.4m 41 12.5m 16

Trends and Implications Strategic Alliances & Partnerships - Carriers Carrier Alliances Global Market Share by Capacity P3 Maersk, MSC, CMA-CGM G6 Grand Alliance + New World Alliance CKYH the Green Alliance Vessel Sharing United Arab Shipping China Shipping Evergreen CKYH Grand Alliance ZIM Cooperative Agreements Transpacific Stabilization Agreement 13 of top 20 carriers belong to an alliance

Nominal Weekly Export Capacity Trends and Implications - Service & Equipment Availability - Vessel Puget Sound Ports to Asia 100,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 50,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Average Vessel Size Weekly Nominal TEUs Average Vessel Size Source: Blue Water Reporting

Trends & Implications - Operational Efficiencies

Trends and Implications The Panama Canal

Meldford, Nova Scotia (Prince Rupert of the East): 1.5 M TEU (2.5 M expanded). US Midwest is target via Suez. Maher Terminals will complete by 2013. Over 26 M TEU New Capacity Planned at East Coast/Gulf Ports New York: 52 depth by 2012. $1B committed to Bayonne Bridge solution for biggest ships. Norfolk: current projects to expand to 3M TEU. New proposed Craney Island Terminal 2.5M TEU. Private APMT 1M TEU (2M expansion). All 56 depth. Charleston: Proposed new 1.3M TEU terminal. 45 deep. Mobile: New Terminal and ICTF. 800,000 TEU Jasper County: Proposed $500m, 1800 acre, 48 depth. Savannah: Terminal improvements to expand capacity to 6.5 Million TEU. 48 channel deepening project. Houston: Bayport Terminal $1.4 billion project. 2.3 M TEU. Jacksonville: 2 new container terminals. 2 Million TEU. Dredging to 45

Trends and Implications The Panama Canal Much of the cargo diversion has already taken place Labor uncertainty and cost of supply chain disruptions promote a gateway diversification strategy Railroads will seek to remain price competitive to retain market share once the Canal opens Shippers will weigh inventory carrying cost and supply chain flexibility against transit time Panama canal transit costs and all-water routings post-canal opening are still unknown

2003 2004 2005 2006 2007 2008 2009 2,010 2011 Trends and Implications Transloading 70% Transloading % in PNW Origins W/O NWC 60% 50% 40% 30% 20% 10% 0% Transloading % ISO Intact %

Trends and Implications Transloading Near-Terminal Transload Facilities 1. PCC Logistics (Alexander Ave) 2. MacMillan Piper (Taylor Way) 3. Carlile Transportation OCT APMT 11 14 15 12 13 T-7 5 TOTE Husky SIM Yard 8 9 1 6 10 16 17 2 WUT 7 3 EB1 19 PCT 4 20 18 4. Arrow Reload 5. Wolseley Pacific 6. D&B Trucking 7. K-Pac Tacoma* 8. Morgan Trucking 9. Horizon Lines 10. MacMillan Piper (Milwaukee Way) 11. PCC Logistics (E 11 th St) 12. PCC Logistics (Portland Ave) 13. TriPak Inc. 14. Truck Rail Inc. & Quality Transport Inc. 15. Tacoma Transload 16. Lineage Logistics Tacoma* 17. Americold* 18. Omega Morgan Inc. 19. Apex Cold Storage* 20. Plastic Express Transload Facilities w/direct Rail Access *Cold Storage Facilities Offering Transload Services

Environmental Stewardship NW Ports Clean Air Strategy Objective: Reduce diesel emissions and greenhouse gases Port Partners Cleaner Engines Cleaner Fuels Retrofits Electrification Public Agencies 2015 Performance Target: New EPA/IMO Fuel Standards reduces ship emission by over 90% Tier 4 Cargo Handing Equipment reduces diesel emissions by 85%

Clean Truck Program Goals Maximum Truck Age is Model Year 1994 By 2015 80% to be 2007 or newer engine models Public and private partnership effort Trucking Companies National Retail Associations & BCOs Container Terminal Lessees & Operators Public agencies Cost-effective for Beneficial Cargo Owners 98% of vehicles already in compliance Over 6,000 local registered truck drivers Over 30 local truck companies Features Market Driven Non-regulatory Fee-free Approach Industry Support Public & Private Partners

Thank You Larry Kvidera (253) 428-8650 lkvidera@portoftacoma.com