Tom BOARDLEYCMA CGM (UK)

Perspectives on International Container Freight Dynamicsand Expectations for Impacts on the Cotton Supply Chain

CMA CGM GROUP KEY FIGURES

Ranking : 3rd worldwide

Turnover 07

Teus 07

Vessels

Slots available

Services

Staff Worldwide

Staff France

Offices Worldwide

Ports of call

11.8 billion us dollars

7,7 million teus

395

940,000 teus

200

16 000

4 200

650

400

Summary

Part I: Global Shipping EnvironmentPart II: Impacts on the Cotton Chain

Supply

MAIN TRADE ANALYSIS2007 - VOLUME FULL TEUS (‘000)

EB 14 350 / +1,6%

WB 6 257 / +15,9%EB 2 088 +14,1%

WB 2 352-2,4%EB 4 218

+5,4%WB 4 272

+23,1%

EB 1 032+5,8%

WB 9 101+16,6%

Volume growth 2007 = Volume growth 2007 = ++ 12% 12% �� 141,5 million 141,5 million teusteusDrewryDrewry Container Container ForecasterForecaster junejune 20082008

MAIN TRADE ANALYSISFORECAST 2008 - VOLUME FULL TEUS (‘000)

EB 14 347 / +0%

WB 7 098 / +13,4%EB 2 392 +14,6%

WB 2 290-2,6%EB 4 192

-0,6%WB 4 909

+14,9%

EB 1 011-2,1%

WB 9 922+9%

Volume growth forecast 2008 = Volume growth forecast 2008 = ++ 9,1% 9,1% �� 154,4 million teus154,4 million teusDrewryDrewry Container Container ForecasterForecaster junejune 20082008

WORLD CONTAINER TRADE ACTIVITY

0

100

200

300

400

500

600

700

2004 2005 2006 2007 2009Estimation

2008Estimation

Million Teus

World Total Container Handling

World Full Container Traffic

361,4397,6

439,5

494,4

539,9588

+14,9%+10%

+10,5%

+12,5%

+9,2%

+8,9%

105

+14,5%

115,2

+9,7%

126,4

+9,8%

141,5

+12%

154,4

+9,1%

167,8

+8,7%

Thousand of TEUS

Source: CMA CGM Datas

CMA CGM: NUMBER OF CONTAINERS CARRIED

7000

6000

5000

4000

3000

2000

1000

0

16151900

2300

2800

3900

5200

6000

2000 2001 2002 2003 2004 2005 2006 2007 2008

7700

x 5

9000

Source: AXS-Alphaliner Septembere 2008

TOP 10: MAIN CARRIERS – Dtatic Capacity / share of tradecapacity

1.Maersk Line –Denmark 2 000 000 16 %

2.MSC – Switzerland 1 300 000 10 %

3.CMA CGM – France 960 000 7.6 %

4.Evergreen – Taïwan 630 000 5.3 %

5.Hapag Lloyd – Germany 500 000 4.2 %

6.COSCO– China 450 000 3.7 %

7.CSCL – China 430 000 3.7 %

8.APL - Singapore 430 000 3.7 %

9.NYK – Japan 410 000 3.2 %

10.MOL –Japan 360 000 3.0 %

WHAT NEXT: CONSOLIDATION ?

� Increase in vessel sizes

� Technological evolutions

� Environment contraints

� Fuel cost

� End of conference system

MAIN RECENT EVOLUTION OF THE INDUSTRY

1956….début de la Conteneurisation

CMA CGM13 300 Evp

Delivery 2009 / 2010

Dimensions

Lenght h.t. : 365 m

width : 51,20 m

Gross weight: 132 800 tons

Speed: 24,1 knots

365m

VESSEL SIZE GIGANTISM

60%

FUEL COST: THE NEW DRIVER

BUNKER CONSUMPTION VERSUS SPEED

> A FULL TANK ON 01/01/2007 :> 10 000 tons @ $ 250 / ton = $ 2 500 000

> A FULL TANK TODAY :> 10 000 tons @ $ 582 / ton = $ 5 820 000 *

• Houston september average / price as per Bunker World)

MEASURES TAKEN BY SHIPPING COMPANIES TO REDUCE COST:

> Reduction of speed of vessels : 24 knots to 19 knots. > Most lines deploy 1 additionnal vessel on services : hence increasing

rotations and transit time.

> BUNKER SAVING :> 1 000 tons @ $ 582 = $ 582 000

> ADDITIONAL COST OF :> $ 5 238 000 – $ 2 500 000 = $ 2 780 000

Example based on fuel cost only, not including charterign cost

CARRIERS CANNOT ABSORB THIS BILL ALONE !

1New Services

2Bigger ships

3Terminals

4Land

Transportation

SHIPPING COMPANY MAIN CHALLENGES

KINGSTON

MALTE

KHOR FAKKAN

PORT KELANG

LE HAVRE

A MIX OF DIRECT AND RELAY SERVICESINTER CONNECTION AROUND FIVE STRATEGIC HUBS

A COMPLETE NETWORK OF EAST / WEST + NORTH / SOUTH LINES

AN EXAMPLE OF GLOBAL COVERAGE : CMA CGM CHOICE

Still growing … at a slower pace

2008 : + 4,3 % (forecast)2008 : + 6 % (forecast)

2009 : + 5,4 % (forecast)2009 : + 7 % (forecast)

2007 : + 9,5 %2007 : + 9,5 %

�WORLD CONTAINER TRADE GROWTH in teus�WORLD TRADE GROWTH

Total world trade growth is expected to slow down in 2008.

US housing market continues to show no signs of recovery, with financial market

erosion and increasing energy & food prices. High price of oil remains one of biggest

obstacles to sustaining the pace of world economic growth.

Global insight – june 2008

Seaborne trade by service type

�Containerized trade grows faster than other seaborne trades and gains some of the

lost market share from liquid bulk trade.

Global Insight june 2008

Shares of total sea trade in 2008 (% tons)

Dry bulk 38%

Container 13%

General Cargo / neo bulk 5%

Tanker 44%

Will cotton take advantage of increasing capacities?

> KEY LANES FOR COTTON TRAFFIC>USWC TO FAR EAST

>USEC/USGC TO FAR EAST

>BRAZIL TO FAR EAST

>WEST AFRICA TO FAR EAST

>SOUTH/EAST AFRICA TO FAR EAST

>EAST MED TO FAR EAST

> INDIA TO FAR EAST

Where are big vessels being deployed?

Markets supported by a steady growth:

> ASIA TO EUROPE TRADE

> ASIA TO USWC TRADE

Limits to deployment of bigger vessels on other tradelanes

> Operationnal issues:

> Port capacity: draft; space on quays, local limitations…

> Bigger vessel are over Panamax (over 5100 teus)

> Mid size vessels from 2800 to 4400 teus will be redeployed on secondary

lanes (West Africa, Brazil, East Med)

> Future developments will be dictated by market trends in emerging

markets. For example:

> Asia to West Africa trade is a fast growing market

> CMA CGM invest in Sao Tome – future HUB for West African Trade

> Cotton exports will benefit of these additionnal capacities.

A weaker dollar, generalisation of container freight: the competition to cotton

> US exports have increased by 20% this year: equipment in the USA has been a major issue for shipping companies. Small

exporters, scrap and grain have become serious competitors to

cotton trade.

Today, East bound Transatlantic (ex USA to Europe/East Med) is

the strong leg.

> Generalisation of commodities shipped in containers: sugar, waste paper, wood pulp, tobacco, cashew nuts, coffee, scrap,

grains…

The rising demand for equipment

> The rise is sustained by the development of containers floatcapacity.

> CMA CGM estimates a progression of 200 000 teus of its fleetcapacity per year.

> The cost of a container has increased by 50% in less than a yearfollowing the rise of steel price !!!

Increasing costs: the Bunker Adjustement Factor

> We have seen that this rising cost cannot be supported anymore by shipping

companies.

> Even low paying lanes are expected to participate : the strong leg can not bear

the burden of the round trip…

Optimisation of vessels and equipment turnover

> Main challenge for shipping companies is to optimise space on bigger vessels entering the fleet. They need to sail full on stronglanes!

> Equipment turnover is therefore of vital importance: containers need to be where they are expected for exports as soon as possible.

> A question is rising: are shipping companies ready to absorb the repositioning cost of empty to meet demand quickly?

> As long as revenue generated by commodities allow shipping companies to cover cost of repositionning, the answer is NO.

THANK YOU FOR YOUR ATTENTION