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Market Situation - June 2011

In the container transportation industry, the year 2010 finished on a declining trend in margins and a growing seasonal overcapacity. Additionally, there was an increasing economic uncertainty, particularly because of events in northern Africa and the Middle East, as well as in some economies in Europe. Oil prices continued highly volatile. Nevertheless, in the container transportation industry, there was a moderate optimism for the 2011 outlook, based on a growing demand for transportation and a controlled fleet expansion. With respect to the world containership fleet capacity, it has grown 8.5% compared to June 2010 and is expected to grow 9.5% during this year. Shipbuilding orders as of June 30, 2011 were 30% - or 4.37 million Teu ­ of the world operating containership fleet, compared to 28.3%, or 3.87 million Teu a year ago. Slower activity in the US and Europe affected the optimism in the industry after the first months of the year 2011. In Europe, cargo demand has been significantly lower than expected as a consequence of the severe crisis in Greece and the concerns about Spain, Ireland, Portugal and Italy's ability to manage their high debt levels. Additionally, lower growth ratios, high unemployment rates and uncertainty about further deterioration of the US economy affected the imported volumes in that region. Lately, the downgrading of USA's credit rating for the first time in history and the discussions about the levels of public debt of that country, have increased the risks of a new global recession in the coming months. Finally, the recovery of Japan after the earthquake has been difficult.

Spot and Futures SCFI Shanghai/NW Europe (Q3 2010 - Q3 2011)

Clearly the world economy is facing a delicate scenario and the shipping industry has not been isolated from these effects. Current market conditions are far more negative and volatile than those observed in March 2011, making difficult to forecast any changes or significant improvement in the next months.

01-Oct-2010 1650

1.525 1.500 1450 1-Jan-2011 1.350

1250

USD / TEU

1050 1-Abr-2011

SCFI Futures Q3 2011: Expected vs. Real - $725 US$/Teu

850

1-Jul-2011 800

Q4-2010

650 1-Oct-10 1-Jan-11

Q1-2011

1-Apr-11

Q2-2011

1-Jul-11

Spot

Q3-2011

1-Oct-11

Futures

1-Jan-12

The above graph shows the evolution of freight rates for the main route of container cargo worldwide, between China and Northern Europe, as well as the evolution of the forward curve of the SCFI index at the beginning of each quarter. As presented in the graph, the market was expecting a strong recovery in freight rates (and demand) for the second half of the year. Future markets were anticipating an important recovery in the third quarter of 2011. At the beginning of January 2011, freight rates for that quarter were forecasted at US$1,500/Teu, then at the beginning of April 2011, and despite the relevant decrease of the index in the first quarter, futures market were still forecasting a strong recovery in

rates to levels near US$1,350/Teu, evidencing optimism about the performance of the cargo demand and the world economy. Nevertheless, current index rates are near US$ 833/Teu. ¿What can explain this situation? Certainly the expected volumes for cargo transportation have been lower than expected in the market. The growing economic problems in Europe and USA continue to generate uncertainties, delaying shipments and limiting consumption and investment in the majority of the developed economies.

Consequently, the demand for cargo transportation has been lower than expected for which the industry was prepared by receiving new container vessels. This created an overcapacity in the majority of the worlds shipping routes, reducing freight rates and preventing companies to recover the sharp increases in costs, particularly oil. Operational margins for the industry have been seriously affected. Together with lower asset utilization, the fall in freight rates and higher costs of fuel are severely affecting the shipping lines.

The above graph compares the evolution of a freight rate index from Shanghai (China) to the main shipping destinations, and the cost of the IFO 380 Rotterdam Barges fuel in USD/TON, similar to those used by vessels. It can be easily appreciated the significant decline of the margins since last quarter of 2010.

SCFI Rate indexes from China to Diferent Markets (US$ / Teu)

Q2 2010 Europe Mediterranean US West Coast US East Coast Persian gulf & Red Sea Aust/New Zealand East/West Africa South Africa South America West Japan East Japan Southeast Asia Korea Taiwan Hong Kong Index 1.869 1.849 1.219 1.765 979 1.257 2.228 1.488 2.148 297 297 330 201 296 96 1.279 Q3 2010 1.826 1.807 1.350 2.024 1.177 921 2.376 1.496 2.230 314 314 393 180 255 141 1.320 Q4 2010 1.474 1.415 1.055 1.700 831 1.020 1.942 1.170 1.819 310 310 226 156 214 132 1.066 Q1 2011 1.216 1.135 911 1.520 780 815 1.675 962 1.338 319 320 162 166 202 134 904 Q2 2011 906 941 862 1.542 933 764 1.780 860 1.199 362 364 219 214 230 164 830 30-Jun-11 821 949 826 1.557 1.015 670 2.004 879 1.611 337 337 224 229 217 167 823

Bunker reference price (US$ / Ton)

IFO 380 RTM Price 443 432 474 564 634

Source: SCFI & Bloomberg

The recovery of freight rates in main routes is uncertain yet. The table above shows the Shanghai Composite Freight Index (SCFI) for the main routes from China to the rest of the World. It can be seen that in some relevant routes there has been some recovery in recent weeks, such as services to Brazil, South Africa and the Persian Gulf, where CSAV operates. Even though these are promissory signs for the industry and for CSAV, it cannot be assured that this trend will continue and accelerate, considering the rise of economic uncertainty after the downgrading of the credit rating of USA and new concerns of a global recession. The combination of lower freight rates and higher oil prices seen in recent months have produced that freight rates per Teu, excluding cost of oil, have declined to levels absolutely insufficient and similar to those seen during the crisis of 2009. When comparing the absolute variation of the SCFI index and the cost of oil (IFO 380 RTM), prices fell from US$ 838/ Teu in the third quarter of 2010 to only US$ 196 / Teu in the second quarter of 2011. During the crisis of 2009 the industry overcame the difficult scenario by suspending services and laying-up vessels. The laid-up vessels, which reached 12% of the world fleet by then, reduced the capacity and balanced the demand and the offer of space in containerships. Even though this may happen again, currently laid-up vessels are at very low levels (nearly 0.8%). The services suspension and associations between shipping lines, as CSAV has been doing recently, may accelerate the process. As said before, the worlds containership fleet capacity is expected to grow 9.5% during this year, while the orderbook is estimated to be around 30% of the world's total containership fleet, a much lower ratio compared to the one registered before the crisis which started after the year 2008. The slow steaming of ships has continued in operation, which has contributed to reduce the overcapacity generated during the crisis of 2009. Fuel continues to show a sustained growth in its price, despite some recent observed corrections. The previous table shows the evolution of IFO 380 Rotterdam Barges price, similar to those used by the shipping industry, which has risen in more than US$ 200 per ton in the last twelve months. This relevant increase in the main component of costs for the industry, added to the sharp decline in freight rates has affected profitability severely. The Company has also been affected by these negative market trends, impacting the results of its main routes. The lower volumes transported was accompanied by relevant declines in freight rates and increases in cost of fuel. This can easily be observed in the industry; on the route calling in US (Asia to US West coast), where freight rates fell 36% between the third quarter of 2010 and the second quarter of 2011, while costs of oil rose in more than 45% during the same period. Next month's are those of the high season and even though freight rates have stop their declining trend ­ some have even shown a slight recovery ­ margins are still insufficient. CSAV As consequence of the negative results registered by the Company and the higher volatility of the market, CSAV has decided to redesign its commercial strategy to strengthen relevant markets for the Company, to reduce volatility, to increase profitability, to reduce costs and to grow in line with the industry in those routes where CSAV has commercial presence. The implementation of this strategy has allowed CSAV to eliminate or reduce significantly the exposure to trades considered non strategic. For this purposes, a revision of the complete portfolio of services was made, identifying those to be suspended and those where CSAV is strong, where long term attractiveness made convenient to enter into alliances with other global carriers. These initiatives were:

· Services suspension. The two services between Asia and the US were suspended: The AMEX service and the ASIAM service, in March and May respectively. In June, the Mare Nostrum service was suspended, linking China and the Mediterranean. · Alliances with other Carriers. CSAV has agreed to operate jointly from August, September and October 2011 in the following routes: o Asia-Africa o South America-Europe o Asia-Brazil o India-Europe This suspension of services and alliances with other carriers will reduce significantly the exposure and the volatility of CSAV's results. During the first quarter of 2011 the restructured routes represented approximately 60% of operational losses (operational margin less administrative expenses), although these trades represented only 30% of the total volume transported in that period. These measures would revert a large proportion of the losses being posted this year, if market conditions were to be repeated next year. CSAV will be able to focus on its commercial strategy of clients and cargo segmentation. The exposure to markets, where commercial efforts and costs to obtain cargo were very high, will be reduced. Simultaneously, CSAV will be benefited from scale economies by operating jointly larger vessels, which are more efficient in fuel consumption, as well as allowing important savings in operational costs. The benefits of these measures will only be reflected in financial statements published some quarters further in the future. Certainly, the above measures imply costs of implementation, which as opposed as the benefits, will be reflected in the next financial statements of CSAV. These restructuring costs will be presented in the account "Gain (Loss) From Discontinued Operations "and will increase in coming quarters. These costs will be by far smaller than the losses that would have been registered if no suspension neither association were implemented. The Company will continue developing actively the program of operational and commercial efficiency started in 2009, but simultaneously analyzing specific programs of costs improvements and operational efficiencies in all its services. With respect to the quality of service for its clients, i.e. the schedule integrity, the Company has reached very satisfactory results during 2011, by being among the top three companies worldwide. This success reflects the compromise of CSAV of consistently improving the quality of the service for its clients. The new strategy implemented in 2011 will reduce the operated capacity of CSAV significantly towards the end of the year (as of June, the capacity already dropped 7%). For the third quarter, the improvements coming from alliances with other carriers and the announced service suspensions should not have a relevant effect in the results of the company. Although there are some slight and specific improvements in freight rates, the general market conditions for the industry have not changed; consequently the results for the Company will continue to be negative, which make us foresee that results for the whole year 2011 will be significant losses.

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