Matt CoxPresident,Matson

Today’s Presentation

• About Matson

• Matson as a Jones Act Carrier: Challenges in D.C., Hawaii, Guam

• Expanding Beyond Jones Act Markets

• The Role of the Ports of Los Angeles and Long Beach in World Trade

About Matson

• Serving the Pacific since 1882

• Evolved with the industry:– from sail to diesel powered

vessels

• Survived two world wars, enormous changes

• Historical ties to Southern California date back to 1926

Matson and the Development of Tourism in Hawaii

• Matson’s “white ships,” Waikiki hotels helped make Hawaii a world class tourist attraction

• Artwork and memorabilia from era still popular today

Matson & Containerization

• Containerization is an American innovation:– Sea-Land in the Atlantic, Matson in the

Pacific (1950s)

– Matson featured in Smithsonian exhibit “Transforming the Waterfront”

• Matson’s Wilmington facility:

early 1960s

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Matson Today

• Similar to most ocean carriers:– Ocean services

– Logistics

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OCEAN SERVICES & LOGISTICS

Mainland Offices

Pacific Offices

Terminal Locations

MIL Offices

Matson and the Jones Act

Challenge in D.C.

• Nearly 100 newly elected members of Congress

• Lost several longstanding and vocal Jones Act supporters

• Need to build positive awareness of the contributions made by U.S. maritime industry

• MCTF renamed American Maritime Partnership – “AMP”

• AMP’s board represents all elements of U.S. maritime industry – geographically dispersed

• Objective to preserve existing laws, level playing field

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Matson and the Jones Act

PricewaterhouseCoopers Study

• 40,000-plus vessels in our domestic fleet

• Half million jobs related to American domestic maritime industry

• $100.3 billion in annual economic impact

• $29 billion annually in labor compensation

• Over $11 billion paid in taxes each year

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Matson and the Jones Act

Focus Groups

• Average citizen believes Jones Act delivers three securities to our nation:– Economic security

– National security

– Homeland security

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Matson’s Domestic Ocean Services

• Core market is Hawaii, served continuously for 129 years

• Domestic services include Guam, Micronesia

• Carrier that specializes in serving island economies

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Matson’s Domestic Ocean Services: Hawaii

• Matson is the service leader in Hawaii, rate stability

• Recent recession third major down cycle in 30 years

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Matson’s Domestic Ocean Services: Hawaii

• Volumes expected to grow modestly for the first time since 2005• Most of Hawaii’s key economic measures expected to improve: job creation, construction, tourism• Service volumes still far below historical highs

Hawaii Service Container Trend AnnualizedCombined Westbound and Eastbound

175,000

165,000

155,000

145,000

135,000

125,000

2006 2007 2008 2009 2010

2010

Matson’s Domestic Ocean Services: Guam

• Similar to Hawaii• Difference is upcoming Guam military buildup– 8,000 Marines and their families from Okinawa

to Guam over the next five years, beginning in 2010 – All military and dependents, approx. 20,000 new residents– 12% increase in population

• Volumes expected to increase in late 2011

Matson’s Domestic Logistics Services

• Spans continental U.S.

• Services include highway, intermodal, warehousing/distribution

• Non-asset based business, Matson does not own trucks/trains

• Customers include major manufacturers and retailers, as well as Matson and international carriers

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Expanding Beyond Jones Act Markets: Matson’s China Service

• China – Long Beach Express launched in 2006

• Weekly service from Xiamen, Ningbo and Shanghai to Long Beach

• Service benefits: on time arrivals, fast transit times

• Dedicated Long Beach facility key feature: Sunday arrival, Monday availability

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Expanding Beyond Jones Act Markets: Matson’s China Service

2009: • U.S. demand dropped precipitously• Carriers strived to maintain market position• Severe pressure on freight rates• Nearly all carriers lost hundreds of millions,

Matson made modest profit (benefited from having revenue in both westbound and eastbound lanes)

2010:– Favorable market conditions– Strong peak season rates– Increased volumes– Matson’s profits for ocean services up by 70

percent

Expanding Beyond Jones Act Markets: Matson’s China Service

• Added second string in 2010• New offices, personnel in Hong

Kong, Shenzhen (Yantian terminal), staff additions in Shanghai

• Chartered foreign-flag ships sailing directly from Long Beach to China

• Building new westbound service17

Expanding Beyond Jones Act Markets: Matson’s China Service

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$3,000

$2,500

$2,000

$1,500

$1,000

$500

$0

Apr 09

May

09

Jun 0

9

Jul 0

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Aug 09

Sep 0

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Oct 0

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Nov 09

Dec 0

9

Jan 1

0

Feb 1

0

Mar

10

Apr 10

May

10

Jun 1

0

Jul 1

0

Aug 10

Sep 1

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Oct 1

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Nov 10

Dec 1

0

Jan 1

1

Feb 1

1

Mar

11

Apr 11

May

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Shanghai Containerized Freight Index (SCFI): Apr 2009 - May 2011 to U.S. West Coast Base Ports$/FEU SCFI Data

• 2011 environment more challenging (added capacity in trade, rising fuel costs, rate pressure)

Expanding Beyond Jones Act Markets: Matson’s China Service

• Leveraging logistics expertise in China– Working with China

customers in Shanghai, Hong Kong, Shenzhen, Xiamen and Ningbo

– Working with importers to provide origin consolidation and other value added services

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The Role of the Ports of Los Angeles and Long Beach in World Trade

• Environmental stewardship role in commerce

• Green port initiatives

The Role of the Ports of Los Angeles and Long Beach in World Trade

• Matson, SSAT and Port of Long Beach moving forward with cold ironing

– Scheduled for summer 2011

The Role of the Ports of Los Angeles and Long Beach in World Trade

• Strong and vital port infrastructure on West Coast high priority

• Southern California hub for majority of shippers

• Quickly earning reputation as the most expensive gateway, lengthy menu of add-on costs

The Role of the Ports of Los Angeles and Long Beach in World Trade

• Carriers and shippers want to maximize economies of supply chain

• Growth in Mexican and Canadian infrastructure

• Panama Canal expansion five years away

• Ports should focus on remaining competitive and “value added”

• Shippers looking for new options for discretionary cargo

The Role of the Ports of Los Angeles and Long Beach in World Trade

• How can this trend be slowed or reversed?– Collaborative effort of all stakeholders:

ports, carriers, terminal operators, labor unions, rail operators, truckers and environmental constituencies

• Not an easy task

• Essential that parties miti-gate costs and complexityof transportation system

• Everyone’s best interestto ensure region remain vital gateway

The Role of the Ports of Los Angeles and Long Beach in World Trade

• Measure D – concern that funds historically used for port purposes will be diverted to other city projects or initiatives

– The City should acknowledge that the Port operates in a very competitive

commercial environment

• Retirement of Dick Steinke

– Successor must demonstrate comparable leadership as advocate for economic and environmental port issues, not political appointment

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Q&A