The Morning AfterMeeting the Challenges of Global Economic Change

AAPA Special Seminar for Members of Port Authority Governing Boardand CommissionsBoston, May 19, 2009Boston

Dr. Walter Kemmsies, Chief EconomistDr. Walter Kemmsies, Chief Economist

Moffat & Nichol Commercial Analysis Group

Keypoints

Near term: the economy will slowly climb out of the deep hole it dug• First quarter of 2009 is likely to be the worst of the global contraction, it gets less bad from there

• Unemployment trends are giving early indications of stabilization, but expect further increases in OECD

• Economic expansion is likely to begin by Q3-2009

• The US will lead, followed by Asia & LatAm (not in recession) and eventually Europe will be pulled along

• US household wealth has fallen to 2004 levels, expect limited spending on non-essential goods

• Inventory re-building will provide modest support for international container volumes

Medium term: a “w-shaped” recovery through 2011Medium term: a “w-shaped” recovery through 2011• Globally, government spending will be the main driver of growth

• Policymakers will walk a tightrope between inflation and recession

• US exports are likely to grow faster than exports

Long term: cautiously optimistic beyond 2011• Globalization is unlikely to reverse – most long term drivers of trade growth remain intact

• After 2012 maturing industrialized nations’ imports will grow faster than exports through the nextdecade, due to demographic trends

• Global trade outlook will improve if emerging markets policies focus on developing a middle clas

Twin Bubbles

Real Estate and Industrial Prices

$70

$90

$110

$130

$150

200

250

300

350

400

Pri

ce

pe

rB

arr

el

of

Oil

Ho

us

ea

nd

CR

BP

ric

eIn

de

x

Source: US Department of Energy, US Census Bureau, Reuters/CRB, Moffatt & Nichol

China impacted the world and US economy in several ways

Drove commodity prices up, particularly in advance of the Olympics

Policymakers feared deflation and policy interest rates at low levels, boosting house sales

-$10

$10

$30

$50

$70

0

50

100

150

200

19

91

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00

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Pri

ce

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of

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House Price Index CRB Metals Index Crude Oil Price

Inadequate Policy ResponseFederal Reserve Policy Interest Rate Target for Federal Funds

Source: Federal Reserve, Bureau of Economic Analysis, Moffatt & Nichol

Fed Funds policy interest rate target was kept at a high level for an unusually long period

European Central Bank raised its policy rate target… while the EU economy was in recession

Letting Lehman fail in September shredded what little confidence remained

FDIC Commissioner Sheila Bair’s mortgage solution was ignored

Large Banks Stalled Out

Commercial and Industrial Loans

Source: St Louis Federal Reserve, Moffatt & Nichol

Large banks haven’t intentionally increased their loan portfolio in over a year; smallbanks have had to carry the economy – this impacted car sales and foreign trade

Recently lending activity picked up a little

The Fed Is Making A Dramatic EffortAdjusted Monetary Base

Source: St Louis Federal Reserve, Moffatt & Nichol

0% Fed Funds interest rate target and a doubling of the Fed’s balance sheet have notreversed downward momentum in the economy

The US economy is in a “liquidity trap”

Consumers Are Not In Buying Mood

3,000

4,500

6,000

7,500

1,000

1,500

2,000

2,500In

dexed

:1970

=100

Ind

exed

:1970

=100

US Household Wealth, Income and Expenditures on Imported Goods

Consumer are not buying non-essential goods & services

People who bought houses between 2005 and 2007 are likely “underwater” on their mortgages

Declining value of retirement savings (Financials were 25% of the S&P 500 index, now closer to 5%)

As of April 2008 5.5 million jobs have been lost since the recession began in December 2007

Consumer sentiment has improved recently but readings are well below historical averages still

Each day, on average, 7,900 Americans turn 62, many of them may not be able to retire for years

0

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500

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Ind

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=100

Ind

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:1970

=100

Household Net Worth Personal Income Import Goods - Right

Source: Federal Reserve, Bureau of Economic Analysis, Moffatt & Nichol

10

12

14

16

18

20

22

Mill

ions

ofV

ehic

les

US Auto Sales Fell To A 27-year Low

Monthly Sales Of Passenger Cars And Light Trucks At An Annual Rate

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2

4

6

8

1967

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1971

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1987

1989

1991

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1995

1997

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2009

Mill

ions

ofV

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les

Recession US Vehicle Sales US Vehicle Sales (12 MMA)

Source: Wards Automotive, Department of Commerce, NBER, Moffatt & Nichol

2001-2007 was the first economic expansion period where auto sales declined

Outlook is more uncertain than when the Chrysler Loan Guarantee Act of 1980 was passed

Democratic lawmakers have proposed a cash-for-guzzlers bill that would provide vouchersof up to $4,500 to people who trade in cars and trucks for new, more fuel-efficient vehicles

Substantial rebates and 0% financing keptauto sales high during the 2001 recession,similar to the house market

US Consumer Spending Drives Global Growth

US Consumer Spending and Global Real GDP Growth

4%

5%

6%

7%

8%

9%

Source: World Trade Organization, US Bureau of Economic Analysis, Moffatt & Nichol

The quality of the global economy’s recovery depends on consumer spending; US consumers inparticular

For now the world economy is being stabilized by increases in government spending in many countries

-2%

-1%

0%

1%

2%

3%

1951

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1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Global GDP US Consumer Spending

Goods Trade

The World Economy Fell Into The US Sinkhole

Source: St Louis Federal Reserve, Census Bureau, Moffatt & Nichol

Were it not for strong export growth, the US economy would have fallen into a recessionsooner than December 2007

Collapse of large banks deprived the foreign trade sector of the financing it requires

Services Trade

Inventories Are Declining But Inventories-Sales Ratio Peaked

Inventory Growth Rates

4%

6%

8%

10%

12%

14%Y

earo

nY

earG

row

thR

ate

1.20

1.25

1.30

1.35

1.40

1.45

1.50

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Source: US Census Bureau; Moffatt& Nichol

Inventory-to-Sales Ratio

Source: US Department of Commerce, Moffatt & Nichol

-6%

-4%

-2%

0%

2%

4%

1960

1962

1964

1966

1968

1970

1972

1974

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1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

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2010

Yearo

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row

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ate

Recessions All Inventories Retail Inventories

December 2007

2007-Q4 to 2009-Q1 is the longest period of falling inventories since World War 2

Large Stocks Of Unsold Cars Around The WorldSheerness (UK) Long Beach

Source: The Guardian (UK)

Tokyo Port Newark (NJ)

Early Signs of Labor Market StabilizationYear-on-year Unemployment Claims

0%

20%

40%

60%

80%

100%

120%

140%

20%

40%

60%

80%

100%

120%

Unemployment insurance claim filings provide better information on labor marketconditions than the rate of unemployment which lags economic recoveries

Growth in new unemployment insurance claims tends to lead continuing claims

Historically a peak in new claims followed by a decline in continuing claims has beena reliable indicator of recovery

New claims have been declining since early March; the auto sector’s bankruptcy willtemporarily stop the decline

Source: Bureau of Labor Statistics, Moffatt & Nichol

-60%

-40%

-20%

19

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08

20

09

20

10

Recession Recession

-20%

0%

20%

Ja

n-0

7

Fe

b-0

7

Ma

r-0

7

Ap

r-0

7

Ma

y-0

7

Ju

n-0

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Au

g-0

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Oc

t-0

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v-0

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De

c-0

7

Ja

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8

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r-0

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Ap

r-0

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Ma

y-0

8

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n-0

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Ju

l-0

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Au

g-0

8

Se

p-0

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Oc

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De

c-0

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9

Container Volumes Recovering From A 7-year Low

Monthly Int’l Container Volumes (in TEUs); 7 Of The Largest US Ports

1,500,000

2,000,000

2,500,000

3,000,000

Source: Various port authorities, Moffatt & Nichol

In February and March container volumes at these ports were running at 2002 levels,having fallen 21.6% from their level in Q1-2008

February declined 16.5% decline from January, March was 23.7% higher than February

Inventory re-building should provide support soon

0

500,000

1,000,000

Jan-0

7

Feb-0

7

Mar-

07

Apr-

07

May-0

7

Jun-0

7

Jul-07

Aug-0

7

Sep-0

7

Oct-07

Nov-0

7

Dec

-07

Jan-0

8

Feb-0

8

Mar-

08

Apr-

08

May-0

8

Jun-0

8

Jul-08

Aug-0

8

Sep-0

8

Oct-08

Nov-0

8

Dec

-08

Jan-0

9

Feb-0

9

Mar-

09

Apr-

09

May-0

9

Jun-0

9

Import Export Empty Total Total Loaded

Economic Outlook for Major Trade Lane Economies

0%

2%

4%

6%

8%

10%

12%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Real GDP Growth By Transpacific Trade Lane

-10%

-8%

-6%

-4%

-2% 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

US Europe NortAsia South Asia South East Asia

Near term is weak due to US and Europe; both are deploying stimulating policies

As the recovery begins, inflation will begin to rise, forcing the Fed to start tightening again

Look for “all clear” in 2012 after a second slowdown in the US in 2011

Long term outlook is more robust due to Emerging Markets trends

World trade patterns will change due to the changing relative size of emerging and matureeconomies over the forecast horizon

Source: International Monetary Fund, US Department of Commerce, Moffatt & Nichol

“W-shaped” recovery in the USwith risk of recession in 2011

300

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8000

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ort

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eport

ing

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PVolu

me

Indexes

NAFTA andMaastricht Treaty

Global recession,China enters WTO

NAFTA andMaastricht Treaty

Global recession,China enters WTO

Global Trade Has Exceeded GDP Growth

Cyclical Drivers

Trade has grownfaster than GDP

Macro shocks havenot impacted trends

Structural Drivers ofHigh Growth

Containerization;lowers freight cost

World Trade and GDP Volume Indexes

0

100

200

0

1000

2000

3000

1950

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ort

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de

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GD

PVolu

me

Indexes

Int'l Ports Reporting TEU Volumes (right axis) Manufactured Exports Volume Real GDP

Oil shocks andglobal recessionsOil shocks andglobal recessions

Data indexed to 100 in 1950

Source: World Trade Organization, World Bank, Moffatt & Nichol

lowers freight cost

Trade Agreements;lowers trade costs

World Wide Web;allows globalization

Demographics; drivesoff-shoring

Real Exports Real GDP Export to GDP Growth

Period CAGR CAGR Ratio

1950 - 2008 7.6% 3.8% 2.0

1980 - 2008 6.3% 2.8% 2.3

1998 - 2008 6.7% 3.0% 2.2

Containerization of Trade Continues To Increase

Shares of Non-fuel US Imports and Exports Arriving on Container Vessels

50%

60%

70%

80%

90%

100%

Percentage of total weight

Source: US Census Bureau, Moffatt & Nichol

Both import and export goods could see further containerization

The USDA has championed containerization of agricultural exports to improve thecompetitiveness of US product

0%

10%

20%

30%

40%

Jan-0

3

Mar-

03

May-0

3

Jul-03

Sep-0

3

Nov-0

3

Jan-0

4

Mar-

04

May-0

4

Jul-04

Sep-0

4

Nov-0

4

Jan-0

5

Mar-

05

May-0

5

Jul-05

Sep-0

5

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5

Jan-0

6

Mar-

06

May-0

6

Jul-06

Sep-0

6

Nov-0

6

Jan-0

7

Mar-

07

May-0

7

Jul-07

Sep-0

7

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7

Jan-0

8

Mar-

08

May-0

8

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Sep-0

8

Nov-0

8

Jan-0

9

Imports Exports

Trade Barriers

FTAs negotiated globally Approximately 300

FTAs negotiated since 2002 in Asia-Pacific 119

Percentage of world trade occurring through FTAs 50%

Countries with which China is negotiating or has proposed FTAs 28

EU FTAs 21

US FTAs 10

Free Trade Agreements Around The World

Source: Business Roundtable (2007), Moffatt & Nichol

US FTAs 10

Doha Issues

US, Europe to remove domestic subsidies and import tariffs for agricultural goods

Latin America to remove tariffs on imported manufactured goods

Asia to protect intellectual property rights

Negotiations in 2008 saw agreement on 18 out of 20 issues, eventual agreement maytake several more years

The US will have to engage in more FTAs, particularly with Latin America, if it wants toretain influence on the global economy

Information & Communication Technology

Revenues (millions) Of Two Major Enterprise Software Vendors

€7,500

€10,000

€12,500

$15,000

$20,000

$25,000

1997-2008 AverageGrowth of 13%

120+ Countries

Source: Company websites, Moffatt & Nichol

Globalization = Global organization of production and distribution

This requires a global network such as the Internet and enterprise software so thatmanagers around the world can access real time information

€0

€2,500

€5,000

$-

$5,000

$10,000

1990

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2004

2005

2006

2007

2008

Oracle SAP

1990-2008 AverageGrowth of 19.4%

90+ Countries

The US Population is Aging

20%

25%

30%

35%

Proportion Of Retirement Age

Source: Census Bureau, Moffatt & Nichol

0%

5%

10%

15%

1940 1950 1960 1970 1980 1990 2000 2010E 2020E 2030E

% over 65 % over 55

On average 7,800 Americans will turn 62 everyday in 2009

Older Populations Spend More On Services

Proportion Of Consumer Spending On Goods And Services

40%

50%

60%

70%

80%

90%

100%

1982 is the crossover

0%

10%

20%

30%

40%

1947

1949

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1971

1973

1975

1977

1979

1981

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1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

Percent Goods Percent Services

Source: Bureau of Economic Analysis, Moffatt & Nichol

Given the demographic projections, demand for services will continue to growfaster than the demand for goods.

Manufactured goods industries have relatively less pricing power than the servicesector

US is Less Manufacturing-Intensive

50%

60%

70%

80%

90%

100%

Proportion Of Labor Force Employed In Services And Non-Services Sectors

Goods: Manufacturing, Construction, Natural Resources & Mining

Services: Transport & Utilities, Information Services, Financial Activities,Professional and Business Services, Education and Health Services,Leisure & Hospitality, Other Services, Government

Source: Bureau of Labor Statistics, Moffatt & Nichol

0%

10%

20%

30%

40%

195

0

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2

195

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8

Service Non-service Manufacturing

Manufacturing Industry Wage Comparisons

$30,000

$40,000

$50,000

$60,000

Manufacturing Wage Comparisons in US Dollars At Prevailing Exchange Rates

Source: UN-ILO, Business Monitor, Moffatt & Nichol

Wages are rising in China but remain a fraction of US, EU and Japanese levels

Low wages in Central and South America indicate they are prime locations formanufacturing “near-sourcing”

Companies that outsource are able to service maturing markets more cheaply andgain access to growing markets

$-

$10,000

$20,000

Globalization Is About Profits Not Just CostsInternational Burden Ratio Comparison

10

15

20

25

Pe

rce

nt

of

Po

pu

lati

on

Ag

e6

5o

rG

rea

ter

in2

00

5

Source: UN, US Census Bureau, Moffatt & Nichol

Younger populations in Asia explains, at least in part, why wages are lower there

Asian markets have higher growth prospects than mature industrialized nations

To serve younger markets with less buying power, costs must be kept low by locating closer towhere the sales occur

Thanks to containerization and Free Trade Agreements outsourcing firms can still serve matureindustrialized economies

0

5

Ja

pa

n

Ita

ly

Ge

rma

ny

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ain

Be

lgiu

m

Fra

nc

e

Ne

the

rla

nd

s

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na

da

US

Ho

ng

Ko

ng

Ta

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n

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uth

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rea

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ga

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Ch

ina

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ail

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d

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on

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ia

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ia

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lays

ia

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ilip

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in2

00

5

Plenty of Outsourcing Left

70

80

90

100

110

120

130Food Manufacturing

Misc Manufacturing

Nonmetallic Mineral Products

Plastic and Rubber Products

Wood Products

Beverage & Tobacco Products

Machinery

Motor Vehicles and Parts

Ranked in order of decline

Dec-90 = 100

12 Month Moving Average

US Manufacturing Employment Trends By Industry

Source: U.S. Bureau of Labor Statistics, Moffatt & Nichol

10

20

30

40

50

60

70

19

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10

Furniture

Printing and related support

Petroleum and coal products

Paper and Paper Products

Electrical Equipment and Appliances

Computer and Electronic Products

Textiles

Leather and Allied Products

Apparel

Autos and housing-related sectors have lagged other industries in terms of outsourcing due tostrong demand for their products until a few years ago

Overall, there is a lot of outsourcing still to be done – many industries lag the leaders

Similar expectations have been expressed by analysts at the US Dept of Labor

Eventually The US Will Have To Balance Its Trade

US Goods and Services Trade Balance

-$400

-$200

$00

$200

$400

$B

illi

on

s

Given recent problems in the US financial sector and rising competition from other regions, it isunlikely that the service sector will ever offset the goods trade deficit

The US will have to start selling goods, likely capital and not labor intensive ones, or the dollar willhave to decline a lot

Source: US Department of Commerce, Moffatt & Nichol

-$1,000

-$800

-$600

-$400

1970 1975 1980 1985 1990 1995 2000 2005 2010

$B

illi

on

s

Service Surplus Goods Deficit

Global Trade: Commodities Lag Manufactured Goods

Manufacturedgoods and non-agricultural productstrade have grownfaster than GDP

Agriculturalproducts trade haslagged GDP andother products

900

1,100

1,300

1,500

1,700

1,900

3,000

4,000

5,000

6,000

World Trade and GDP Volume Indexes

Source: World Trade Organization, World Bank, Moffatt & Nichol

Gap betweenmanufactured goodsand other productstrade must narrow

Bulk commoditytrade depends onmanufactured goodstrade and otherstructural factors

100

300

500

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900

19

50

19

52

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2,000

Agricultural Products Fuels and Mining Products Real GDP Manufactured Goods (right axis)

CAGRs Manufactured Agricultural Fuels and Mining RealPeriod Goods Products Products GDP

1950-2006 7.6% 3.6% 4.2% 3.8%1980-2006 6.3% 3.0% 2.6% 2.8%1995-2006 6.9% 3.7% 3.2% 3.0%

Globalization Begins

Commodity Containerization

15,000

20,000

25,000

30,000

Th

ou

sa

nd

Me

tric

To

ns

6%

8%

10%

12%

Pe

rce

nt

Co

nta

ine

rize

d

Soybean Exports and Percent Containerized

5,000

10,000

2003 2004 2005 2006 2007 2008

Th

ou

sa

nd

Me

tric

To

ns

0%

2%

4% Pe

rce

nt

Co

nta

ine

rize

d

Soybean Exports Containerization Rate

Source: US Census Bureau, Moffatt & Nichol

Agricultural products are capital, not labor intensive, and have a rising technology content

These factors and USDA efforts has contributed to containerization of agricultural exports

Containerization could see agricultural exports increase in some ports

150

200

250

300

Co

nta

ine

rTr

ade

Inte

nsi

ty(G

ate

way

TEU

Vo

lum

e/

'00

0C

apit

a)

S. Korea

UK

Chile

Taiwan

Italy

Scandinavia

Israel

N. Europe

Greece

Arabia

ANZ

USA

Canada

Production

Economies

Service

Economies

Low Container Trade Intensity in Emerging MarketsInternational Comparison of Gateway Container Trade Intensity

0

50

100

0 10 20 30 40 50 60 70

Co

nta

ine

rTr

ade

Inte

nsi

ty(G

ate

way

TEU

Vo

lum

e/

'00

0C

apit

a)

Income (GDP $'000 USD / Capita)

S. Asia

China

Peru

UKJapan

S. Africa

Taiwan

Brazil

Colombia

EcuadorPhilippin

Argentina

Turkey

Uruguay

Greece

Iberia

Source: Moffatt & Nichol research; IMF

N. Africa

Canada

Country Groups

S.E. Asia: Vietnam, Thailand, Malaysia,Indonesia, Singapore,

Brunei, Papua New Guinea

S. Asia: India, Pakistan, Bangladesh

N. Europe: Germany, France, Netherlands,

Belgium

Scandinavia: Sweden, Norway, Finland, Denmark

Iberia: Spain, PortugalN. Africa: Morocco, Libya, Algeria, Tunisia, Egypt

Arabia: UAE, Saudi Arabia, Oman, Yemen

ANZ: Australia & New Zealand

Central America: Mexico, Guatemala, Honduras,

El Salvador, Costa Rica, Nicaragua, Belize

SE AsiaCentral America

Developing

Economies

Source: International Monetary Fund, AAPA, Containerisation International, Moffatt & Nichol research

As per capita incomes rise in developing economies and they invest in transportation infrastructure,the trade intensity of these economies will catch up with those of more developed economies

For countries like Peru, with about 30 containers of foreign trade per 1,000 people, to close the gapwith the US, which has 140 containers per 1,000 people, its volumes would have to grow 20% for thebetter part of a decade.

US Model Forecasts (ex-currency effects)Quantitative Container Volume Forecasts By Trade Lane

Region Trade Lane TEUs % Share TEUs CAGR % Share TEUs CAGR % Share

Asia North 15,898,225 55.1% 20,574,386 4.4% 56.0% 48,265,744 6.4% 62.4%

South 874,738 3.0% 1,330,994 7.2% 3.6% 3,530,335 8.1% 4.6%

Southeast 2,389,386 8.3% 3,133,379 4.6% 8.5% 6,662,599 5.9% 8.6%

Europe, Med, Mid East Europe 3,178,820 11.0% 3,707,059 2.6% 10.1% 5,134,082 2.7% 6.6%

Mediterranean 1,539,226 5.3% 1,912,035 3.7% 5.2% 3,298,762 4.3% 4.3%

Mid East 298,108 1.0% 418,704 5.8% 1.1% 709,140 4.9% 0.9%

Cent Am & Carib Cent Am 1,099,513 3.8% 1,286,995 2.7% 3.5% 2,086,809 3.6% 2.7%

Caribbean 1,587,302 5.5% 1,870,879 2.8% 5.1% 2,650,789 2.9% 3.4%

South America EC South Am 731,300 2.5% 863,748 2.8% 2.4% 1,736,982 4.9% 2.2%

WC South Am 488,787 1.7% 638,010 4.5% 1.7% 1,265,227 5.4% 1.6%

2007 2013 2025

Infrastructure investment has and will continue to contribute more to volume growth than domesticeconomic growth; trade growth is driving many regions’ economies

Long term loaded container volume growth forecasts are more conservative than in 2007 but stillabove GDP growth forecasts

Forecasts could be exceeded if

US export growth increases (may depend on currency, among other things)

Emerging markets accelerate the development of a middle class

Source: PIERS, Moffatt & Nichol

WC South Am 488,787 1.7% 638,010 4.5% 1.7% 1,265,227 5.4% 1.6%

Africa EC Africa 29,811 0.1% 48,301 8.4% 0.1% 123,807 8.2% 0.2%

WC Africa 106,255 0.4% 186,557 9.8% 0.5% 543,247 9.5% 0.7%

S Africa 99,789 0.3% 134,049 5.0% 0.4% 259,004 5.4% 0.3%

Other Austr - New Zealand 331,668 1.1% 381,313 2.4% 1.0% 650,742 3.8% 0.8%

Mexico 106,756 0.4% 142,835 5.0% 0.4% 285,006 5.6% 0.4%

Canada 12,187 0.0% 14,916 3.4% 0.0% 29,327 5.0% 0.0%

Other 93,549 0.3% 104,977 1.9% 0.3% 176,795 3.6% 0.2%

Total 28,865,420 100.0% 36,749,137 4.1% 100.0% 77,408,396 5.6% 100.0%

US Volume Trend ForecastsHistorical And Forecast US International Container Volumes (TEUs) By Type

80,000,000

100,000,000

120,000,000

140,000,000

Source: AAPA, MarAd, PIERS, Moffatt & Nichol

Lots of ifs, ands or buts, e.g., last slide, not all empties are the same, should be interval estimates

TEUs per capita are forecast to reach unprecedented levels

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Total Loaded Imports Exports Total

Southern & Coastal Regions Benefit More From Demographic Trends

Source: US Census Bureau, Moffatt & Nichol

US population is moving to urban, coastal and Southern locations

Its not just baby boomers retiring to the south, but also younger people to work inthose growing markets

Regional Movement of Containers 2008 vs 2007

Direction 2007 4th Qtr 2008 4th Qtr Change GrowthNW => NE 13,475 10,088 -3,387 -25.1%

NW => MW 128,343 111,631 -16,712 -13.0%

NW => SC 3,087 2,982 -105 -3.4%

NW => SE 5,084 3,918 -1,166 -22.9%

NW Totals 149,989 128,619 -21,370 -14.2%

SW => NE 47,924 40,275 -7,649 -16.0%

SW => MW 291,262 281,927 -9,335 -3.2%

SW => SC 207,699 201,556 -6,143 -3.0%

SW => SE 121,852 108,470 -13,382 -11.0%

SW Totals 668,737 632,228 -36,509 -5.5%

WC => NE 61,399 50,363 -11,036 -18.0%

Economic weakness is not sufficient to explain these trends

All-water is gaining share at the expense of rail, this may have more to do with costs

However, there has been substantial investment in freight logistics infrastructuresuch as distribution centers and rail freight corridors

Source: IANA, Moffatt & Nichol

WC => NE 61,399 50,363 -11,036 -18.0%

WC => MW 419,605 393,558 -26,047 -6.2%

WC => SC 210,786 204,538 -6,248 -3.0%

WC => SE 126,936 112,388 -14,548 -11.5%

WC Totals 818,726 760,847 -57,879 -7.1%

Notes:SouthEast - AL FL GA MS NC SC TN SouthCentral - TX, NM, OK, AK & LA SouthWest - CA, NV & AZ NorthWest - OR & WAMidWest - IL, IN, IA, KY, KS, MI, MN, MO, OH & WI NorthEast - CT, DC, DE, ME, MD, MA, NH, NJ, NY, PA, RI, VT, VA & WV

Ports Face Intense Competition For Market Share

30%

40%

50%

60%

70%

Regional Shares of Ports’ Total International Container Volumes

All water shift may already be begining in advance of completion of the Panama Canal’sexpansion

Many ports will likely end up serving only their regional economies

Lowest cost/greatest efficiency is needed to compete

Diversifying cargo base may be the best way to drive growth

Source: AAPA, Moffatt & Nichol

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PNW PSW EastCoast Gulf Coast

Summary

Near term: the economy will slowly climb out of the deep hole it dug

Medium term: a “w-shaped” recovery through 2011

Container volume recover to previous peak levels by 2011

Transportation industry to remain intensely competitive

Long term: cautiously optimistic beyond 2011Long term: cautiously optimistic beyond 2011

Container volumes back to trend levels by 2015

Contact details:

Walter Kemmsies

Ph: +1 212 768 7454wkemmsies@moffattnichol.com

Oil Price Trends Have Not Been Correlated With“Globalization”

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Real Manufactured Exports Average WTI Price Real Average WTI Price

1950 = 100

Estimated average declared value of contents of a TEU is $50,000

At $100 per barrel of crude oil, fuel accounted for almost half of the $2,500cost of shipping a container from China to the U.S. West Coast and backempty.