Gene Seroka APL President, Americas March 7, 2013 Los Angeles, CA
Contents Economic Trends Market Dynamics Building a Sustainable Organization Integrated Partnerships 1
2 Economic Trends
Market Size & Growth Rate Overall Growth outlook is expected to be positive in 2013 for all trades. Asia Europe trade projected to be near stagnant. Intra Asia is anticipated to have the highest growth TRANS-ATLANTIC ASIA-EUROPE 2012 Size: 7.6 m TEU 2012 Size: 28.1 m TEU 2013 HH Growth: ~ 4.2% 2013 HH Growth: ~ -0.9% TRANS-PACIFIC 2012 Size: 21.8 m TEU 2013 HH Growth: ~ 4.1% INTRA-ASIA Est. 2012 size: 35.3 m TEU 2013 Overall Growth: ~ 4.3% LATIN-AMERICA 2012 Size: 14.4 m TEU 2013 HH Growth: ~ 2.8% Note: 1. Market size is based on GI Dec 2012. 2. TA, ASEU, and TP HH growth rate is based on Drewry CFQ Q4 2012, while IA and LTAM growth rate is based on GI Dec 2012 Source: GI Dec 2012, Drewry CFQ Q4 2012 3
Containerized trade has continued to grow in 2012 but at a more moderate pace Global GDP and Container Demand Growth 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 11.2% 4.8% 3.8% 2.3% 11.1% 2.9% 13.4% 3.6% 13.9% 4.9% 10.9% 4.6% 10.2% 5.3% 11.0% 5.4% 2.8% 4.0% -0.7% -9.9% 14.0% 5.2% 7.3% 3.8% 7.7% 3.2% 7.8% 3.9% -15.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F Global GDP Container Demand Growth Note: EIU data forecasts used for 2012 and 2013 Source: Drewry, Seabury, Clarksons, IMF WEO Sep2011/Jan 2012, EIU Global Forecasting 4
This is largely driven by slower global growth in 2012 due to uncertainties arising out of the European government debt issues GDP Growth 15.0% CAGR (2001-2007) 10.0% 5.0% 0.0% 8.2% 6.9% 3.2% 1.9% -0.8% India 8.0% China 11.2% Global 4.4% US 2.6% EU27 2.6% -5.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F EU27 US Global China India Source: IMF WEO Sep2011/Jan2012, EIU Global Forecasting 5
Consumption still positive in US and China while European consumers remain cautious Consumer Confidence Index Retail Y-o-Y Growth Rate US, China US China EU27 EU27 US China EU27 120 0 25 100 80 60 40 20 0-5 -10-15 -20-25 -30-35 20 15 10 5 0-5 -10-15 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Jan-07 Apr-07 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Dec-11 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Feb-12 Source: National Bureau of Statistics of China, U.S. Census Bureau, and Eurostat 6
Resulting in recent improvement in freight rates. However, rising bunker costs are offsetting some of the rate improvements SCFI Spot Rates Bunker Spot Rate ASEU USWC 800 3,000 2,500 2,000 1,500 1,000 500 0 Oct-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 700 600 500 400 300 200 100 0-100 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Source: Shanghai Containerized Freight Index (SCFI), Bunkerworld, UBS 7
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Oversupply will extend into 2013 due to orders of >8,000 TEU vessels during 2010 and 2011 Demand and Supply Growth Rate Forecast 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0-10.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F Demand Growth Supply Growth Source: Alphaliner, Drewry, Clarksons, Seabury, MDS 9
Lack of recent newbuild orders will result in diminishing deliveries from 2H 2013 Thousand TEU 550 Delivery peaked in 2Q 2012 2.5% 500 450 400 2.0% 350 300 1.5% 250 200 1.0% 150 100 0.5% 50 0 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 0.0% Scheduled Newbuild % of Global Fleet Source: MDS March2012 10
Vessel Delivery by Carrier Source: Alphaliner 11
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Challenging container shipping environment is forcing liners to manage capacity 13
14 Market Dynamics
Market Dynamics Significant industry losses have forced carriers to drastically reduce costs The formation of super consortia is enabling carriers to operate bigger ships at reduced slot costs MSC and CMA G6 Asia Eur & USEC Evergreen, CHKY, China Shipping, Zim Ambitious cost savings goals have been announced USD500 million USD400 million USD350 million USD300 million Carriers are more conscious of equipment matchback opportunities in order to reduce repositioning costs 15
Trade flows to/from Asia have shifted significantly. Shifting pattern in Asia is producing a significant increase in equipment repositioning as inbound flows are growing in countries other than China where the outbound demand is highest. Top EB countries are not growing their WB volumes as fast as other Asian countries, creating increasing mismatch of in/ out volumes in Asia North China South China Japan Vietnam UAE Malaysia US Exports growing to SEA, M East which need longer transit Repositioning Boxes need to be repositioned to major exporting regions e.g. North China This relatively recent shift in flow creates longer equipment turn, drives up repositioning cost to get the boxes to China where they are needed to support outbound demand, and increases the size of the equipment fleet carriers must have to service the market.increasing costs. 16
World Containerized Trade Outlook World containerized trade estimated to have moderate growth this year. TP growth is expected to pick up in 2013 Containerized Trade Growth Intra-Asia Global -4.2% -7.1% 17.2% 16.0% 15.3% 15.0% 9.3% 8.3% 8.4% 6.9% 6.8% 6.7% 6.4% 5.9% 5.5% 4.9% 0.4% 2.4% Global Trade Growth 2011 2012 2013 Alphaliner (Mar 20, 2012) 7.7% 6.5% 7.5% Clarksons (Feb 21, 2012) 7.9% 7.7% 8.3% Drewry (Dec 22, 2011) 6.5% 5.4% - JP Morgan (Nov 29, 2011) 6.4% 4.5% 6.3% Global Insights (Sep 30, 2011) 6.9% 6.8% 6.7% Transpacific HH Trade Growth 2011 2012 2013 Clarksons (Feb 21, 2012) -0.4% 4.2% 6.1% Alphaliner* (Jan 10, 2012) -0.8% 4.6% 5.1% Drewry (Dec 22, 2011) 0.4% 3.1% PIERS (Dec 2, 2011) 0.2% 2.7% 4.9% Transpacific (HH) Asia-Europe (HH) -13.9% -15.1% 2009 2010 2011 2012E 2013E Asia-Europe HH Trade Growth 2011 2012 2013 Clarksons** (Feb 21, 2012) 3.3% 2.8% 6.1% Alphaliner* (Jan 10, 2012) 2.8% 1.5% 6.3% Drewry (Dec 22, 2011) 3.9% 2.0% - 17 Source: Equity analysts, shipping consultants Note: *Alphaliner TP is FE-US, ASEU is FE-Europe **Clarksons growth is Far East to Europe
Panama Canal Expansion: Update Larger vessels with increased deadweight Provide the capability to serve USEC from Asia Post Panamax trade patterns expected to shift, benefiting Atlantic Coast Ports Upgraded infrastructure is required to increase capacity and efficiently move products for global import and export customers 18
19 Building a Sustainable Organization
NOL Efficiency Leadership Program Gaining the Edge Q4 2011 through 2012 Efficiency Leadership Program Challenging the way we do business today $500 Million Goal Driving for smarter ways to accomplish our tasks Discerning and meeting customer needs more effectively NOL s unique strengths Deep customer outreach Innovation Double-stack trains Post-panamax vessels Ocean guarantee Supply-chain products Recent strategic investments Re-modeling our IT: Completed SAP Finance module Modernizing our fleet: Invested in 34 large modern containerships (US$4 billion in last 4 years) 20
Fleet Renewal Building a modern and cost-competitive fleet, six 10,000 TEU vessels already delivered in 2012 Note: 5 out of the 10 x 14,000 TEU vessels for delivery between 2013 and 2014 will be chartered out to MOL
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Service Options: Investing in our Network New CGG Facility 43 Acres Container Capacity: 1,600 Stalls, 400 Decked Gates: 4 Inbound/3 Outbound M&R: 19,000 Sq. Ft. Shop 10 Bay Chassis/ Container Repair 700 Gate moves daily Fleet Expansion 34 Vessels ordered Delivery between Q4 2011 and 2014 Best fuel efficiency in the industry 10x14,000 TEU Vessels Productivity Improvements at GGS Crane Backreach Opens up more traffic lanes under the hook Better traffic flow, increased efficiency Future growth Increased safety 23
Chassis Divestiture - What is APL doing APL started phasing out its container chassis fleet in 2012 and will conclude by 2014. By relying on providers who specialize in chassis management, this will ensure that equipment is deployed more efficiently. In August 2012, APL began a pilot program at terminals in Denver and Salt Lake City. 24
APL s Carbon Reduction Statement APL s 2015 goal is to reduce greenhouse gas emissions associated with cargo transportation and handling to 30% below 2009 emissions levels. 25
Container Shipping & Emissions Shipping is the most environmental friendly and energy efficient form of transportation 26
Continued Environmental Initiatives Eco-responsible operations for a sustainable future Enforcement of Emission Control Area (ECA) Speed Optimization, schedule, weather routing and best practices to reduce CO 2 emissions Low Sulphur Fuel Cold Ironing Seawater Scrubber Ballast Water Treatment Environmentally friendly paint on ship hulls Voluntary Speed Reduction in Southern California waters to reduce emissions Eliminating drayage thru on-dock rail Received Premier Marine Environment Award 27 27
APL New Builds - Environmental Features 28
Value Chain Origin services Our value chain Destination services Warehouse Land Consol Terminals Container shipping Terminals Deconsol Land Warehouse Visibility NOL s container shipping and logistics businesses form a value chain which offers customers reliable, time-definite and costeffective services from origin to destination. As supply chains become more complex, our total value chain proposition offers strong advantages for customers. 29 29
Industry Awards (2012) Asian Freight & Supply Chain Awards Best Shipping Line for Transpacific Seatrade Asia Awards The Environmental Protection Award Hamburg Media (Logistics Week & Log.India) Best Shipping Line Award Port of Los Angeles and Long Beach Clean Air Action Plan Award Export Industry Award Top Container Shipping Line Port Metro Vancouver Blue Circle Award United States Coast Guard Marine Environmental Protection Award Logistics Management Quest for Quality Award Ocean Carrier Port of Seattle Green Gateway Partners Award - Gold 30
31 Integrated Partnerships
Integrated Partnerships Collaboration Planning Building a Sustainable Organization Cost Efficiency Innovation 32
Thank You