Global container shipping market · 4,0. 4 . 4 . 0 . 1,000 . Container Shipping Lines (3)....
Transcript of Global container shipping market · 4,0. 4 . 4 . 0 . 1,000 . Container Shipping Lines (3)....
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Global container shipping market with a particular focus on intermodalism Intermodal Asia
March 2014
Tina Liu Country Manager – China [email protected]
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Agenda
Container shipping market fundamentals
Container shipping freight rate
European Intermodalism
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Industry fragmentation is high
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4
0
1,000 Container Shipping Lines (3) Shipbuilding (1)
2,000
3,000 Cruise Lines (2)
4,000
5,000
10,000
0 5 10 Highly Competitive (less than 100)
15 20 Unconcentrated (100-1,000)
25 30 Modest Concentration (1,000-1,800)
50 High Concentration (greater than 1,800)
Even Competition: all competitors have equal market share No. Competitors
Wide Body Aircraft Manufacturing
International Express Package (4)
1. Source: UBS Global Shipbuilding reports May-09, 2. Source: Natixis, Carnival report Sep-09, 3. Source: Drewry, Containerisation International, 4. Source: RBC, Fedex report Aug-09
Herfindahl–Hirschman Index (HHI)
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Economics is challenging
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Factor Effect
Economies of scale Structural overcapacity
Perishability Push for short run contribution – rate erosion
High operational gearing Push for short run contribution – rate erosion
Fragmented industry
Continuous battle for share, linked to drive for economies
of scale. Very strong role of intermediaries (Forwarders
NVOCC)
Inelastic demand curve Falling rates have a limited effect on overall demand
• Lines are profitable only when, by chance, demand exceeds supply
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Current state of the market
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• Fragile earnings, Carrier are burning cash – this cannot last much longer Industry finances
• Low newbuilding prices prompting new ordering • Finance available through lessors and new entrants
Newbuild prices and finance
• Consolidation needed; but aversion to M&A • Time to revisit historical structures? Rethink co-
operation agreements? Way forward
• Drive for operating economies of scale through larger ships is resulting in overcapacity
• Slow demand growth • Supply – demand equilibrium pushed back
Supply demand equilibrium
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? Questioning the cyclicality
Shipping Market Cycle
Optimism Supports New
Orders Supply
Exceeds Demand / Trade Growth Slows
Over Supplied Market
Freight Rates Drop
Vessel Demand Drops
Fleet Growth Slows/Trade
Recovers
Demand-Supply Realign
Freight Rates Recover
Demand For New Tonnage
? ?
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Containerships keep getting bigger
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Teu
Average Ship Size Average Newbuilding Largest Ship
Orderbook by size range (% of teu capacity)
9% 7%
3%
29% 45%
7% 0-4,000 TEU
4-6,000 TEU
6-8,000 TEU
8-10,000 TEU
>12,000 TEU
10-12,000 TEU
Recent orders split per vessel size (total teu)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000To
tal t
eu
< 8,000 teu 8,000 teu+
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Race to lower costs, upsizing the fleet
• Significant unit cost savings by EEEs can not be ignored • Drewry’s analysis suggests fuel costs/teu are already 34% lower than a typical 13,100 teu vessel • Ship operating costs lower by an impressive 11% • Combined cost savings together are a massive 30% cheaper than 13,100 teu ships on a round
voyage basis
Savings in slot cost per teu indexed to 8k teu vessel
Source: Drewry Maritime Advisors, Drewry Maritime Research
-7% -16% -19% -21%
-26% -30%
8k 10k
12k
13k
14k
16k
18k
600650700750800850900950
1,0001,050
USD
/teu
RV Slot cost at 85% Utilisation
• The rush to order vessels over 16,000 teu for deployment between Asia and Northern Europe will continue to gain momentum
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How will be the major players stacked by end 2016?
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38
32
24 21
19 19
15 15 12
10 10 10 9 6 5 4
0
10
20
30
40
50
60
70
No. of ULCCs per carrier by end 2016
* Zim order cancelled
Source: Drewry’s Container Forecaster
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Liner shipping market structure
Many ships and shipowners
• Around 400 container shipping companies and 5,100 container ships worldwide
But concentration
• Top 20 container lines account for over 80% of the market
And alliances
• Effectively just 3 major global carrier alliances now
…but market still highly competitive as alliances are operational only, not commercial
0
200
400
600
800
1,000
1,200
1,400
Mae
rsk
Line
MS
CC
MA-
CG
MC
OS
CO
Eve
rgre
enC
SC
LH
apag
-Llo
ydH
anjin
OO
CL
APL
NY
KK
-Lin
eM
OL
Yan
g M
ing
UA
SC PIL
Ham
burg
-Sud
.W
an H
aiZi
mH
MM
Total owned fleet ('000 teu) Orderbook ('000 teu)
Owned fleet size by carrier, July 2013 (excludes leased and chartered vessels)
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Recent Container Freight Rate Trends Europe & US Imports from Asia (US$ per 40ft)
$800
$1,300
$1,800
$2,300
$2,800
$3,300
$3,800
Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13
US$
per
40f
t Con
tain
er
Shanghai-Rotterdam Hong Kong-Los Angeles
Source: Drewry’s Container Freight Rate Insight (www.drewry.co.uk/cfri) & World Container Index (www.worldcontainerindex.com)
Market share rate wars
Fundamentals weaken
Capacity & GRI initiatives
Capacity & GRI initiatives
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Recent Container Freight Rate Trends Europe & US Exports to Asia (US$ per 40ft)
$400
$500
$600
$700
$800
$900
$1,000
$1,100
Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13
US$
per
40f
t Con
tain
er
Rotterdam-Shanghai Los Angeles-Shanghai
Source: Drewry’s World Container Index (www.worldcontainerindex.com)
Market share rate wars
Capacity & GRI initiatives
Volume growth supports rates
Weaker volume reduces rates
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Recent Container Freight Rate Trends Intra-Asia (US$ per 40ft)
$800
$850
$900
$950
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul 13 Oct 13
USD
/40f
t
Drewry's China-Japan Benchmark Drewry's Intra-Asia Index
Source: Drewry’s Container Freight Rate Insight (www.drewry.co.uk/cfri)
Overcapacity reduces rates
Low volatility of rates
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Benchmarking Shipping Costs Drewry’s Benchmarking Club
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Chinese brands’ ambition
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Is intermodal critical in the overall supply chain?
Order/manufacture period Pre-ship Ocean Transit Port Dwell Delivery
Supply Chain Time
45 days 5 days 28 days 4 days 2 days
2/84 days 2/39 days
Supply Chain Landed Cost (€ per 40ft of Toys Asia - Munich)
Manufactured cost Pre-ship Ocean Transit Port Dwell Delivery
€545 €98,000 €193 €1,643 €348
€545/€100,729 i.e. 0.54% €545/€2729 i.e. 20.0%
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Europe – A population not always close to the ports
• European population 739 million consumers (GDP per capita: USD 32 thousand)
• 60% approx of population more than 250k away from main ports
• Importance of Rhine corridor through South Germany to Switzerland for population and economic activity
• Other clusters also need competitive access.
Asia-Europe main port - 250km radius
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Intermodal forms of transport Barge important out of Rotterdam/Antwerp, Rail in Germany. Feeders & Ferries to Scandinavia, Ireland
Rail
Truck
Barge
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Road network – E-Routes
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Intermodal International Rail Network
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The inland waterways/barge network
35% of inland cargo from Rotterdam/Antwerp
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Because of these networks European Ports compete intermodally for the inland hinterland by…
Ocean Services – Price – Transit times – Frequency – Origin Port Coverage – Carrier operational efficiency (e.g. handling rates and berth slots)
Inland – Transport Coverage – Cost – Reliability – Frequency – Transit – Information Systems – Fiscal Arrangements (Duty/VAT)
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Does adding an inland terminal open up the market ?
“…60% of EU Purchasing within 500
kilometres of the terminal….”
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Overlapping multiple terminal footprints
Footprint defined by local transport costs. Prime costs often similar.
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The Three Models of Intermodal Provision
Carrier MSC,CMA-CGM
Strategic Objective: Minimisation of container fleet inland costs/port coverage Method of Operation: Use third party terminals and depots Contracted out train operations
Rail/Barge Operator Transfracht, Naviland
IFB, BCTN Strategic Objective: Profit from rail/barge freight operations Method of Operation: Often own/control inland terminals Train operations
Port/Terminal HHLA, Barcelona
ECT/EGS Strategic Objective: Extension of port hinterland to gain cargo volume Method of Operation: Sometimes acquire inland terminals Contracted out train operations
Forwarders Block Bookings etc.
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Relative costs and performance
Hamburg
Rotterdam
Frankfurt
Basel
€ Service per week
861
497
-
0.5
1
-
na
26
-
€ Service per week
1424
802
-
1
1.5
-
na
14
-
Hamburg to Basel
Hamburg to Frankfurt
€ Service per week
1239
1066
715.
1
1
4
na
26
8
Rotterdam to Basel
€ Service per week
795
724
480
0.5
-
2
na
-
6
Rotterdam to Frankfurt
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End-Customer supply chain thinking
Cost is always the headline factor But….
Supply Chain architecture and practice items…
Simple
Visible
Track-able
Integrated whole supply chain
Reliability
Time cost
Risk
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Key future developments
• Rotterdam/Antwerp increased barge/rail modal share to reduce local congestion
• Rail/barge links to Central Europe and Southern. Germany
• Hamburg/Bremerhaven rail to Poland & Central Europe
• Adriatic/Med rail links to Southern Germany & Central Europe
• Spain rail to Southern France
• South France rail to North Europe
N-Europe transit times from Asia similar or better than West Med ports & larger ships means lower slot costs. Mediterranean
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If you want to get involved, areas to look out for
Traditional routings not always cheaper than new intermodal routings. Choose the right destination port not the traditional one
If selling ‘delivered’ terms then choosing right inland mode critical for cost and product reliability
Behaviours
Headline price always the most important initial consideration.
Reliability of service a critical choice factor. Service Frequency is essential to flexibility.
Final door delivery from inland terminal is important. Inland transit times (within limits) are less critical.
Next day delivery is accepted norm on shorter routes.
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Drewry background
Drewry has over 40 years’ experience within the maritime sector, employing over 90 specialists across our offices in London, India and Singapore. Offering research reports and consultancy services, our ability to assess the market and give our clients the knowledge to make critical decisions sets us apart from others. Our brand is renowned for its quality, with analysis that brings clarity to markets and enables us and our clients to stand above the competition. Drewry’s bespoke consultancy service has its foundations in our research, but it is defined by our breath of expertise, sector adaptability and international capabilities. Our services extend from the provision of data and information to large assignments calling for a broad mix of disciplines. Typical commissions encompass strategic planning; market research; forecasting; management consultancy; feasibility studies and project evaluation. Since the founding of the company in 1970, Drewry has evolved into one of the world’s leading international maritime consultancy and publishing organisations. Today, Drewry reports are sold in more than 90 countries and consultancy services commissioned by clients from over 70 countries. Over four decades, Drewry has built an extensive data library on trades, shipping costs, ship prices, fleets and freight rates. Sophisticated forecasting systems project trade flows, ship demand and supply, freight rates, costs and prices. The company’s people include experienced market analysts, economists and financial planners who have had high-level exposure to the maritime industry. Drewry is also able to call on the services and expertise of a number of freelance consultants for projects requiring specialist knowledge.
Drewry is a highly experienced, respected and well established sector expert
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Contact
Head Office – UK Drewry Shipping Consultants Ltd 15-17 Christopher Street London EC2A 2BS, United Kingdom t: +44 (0)20 7538 0191 e: [email protected]
India Office Drewry Maritime Services Private Limited 209 Vipul Square, Sushant Lok-1 Gurgaon, Haryana-122002, India t: +91 124 497 4979 e: [email protected]
Singapore Office Drewry Maritime Services (Asia) Pte, Ltd. 15 Hoe Chiang Road #13-02 Tower fifteen Singapore 089316 t: +65 6220 9890 e: [email protected]
Shanghai Office 555, 5th floor Standard Chartered Tower, 201 Shi Ji Avenue, Pudong District, Shanghai, China 200120 t: +86 (0)21 6182 6759 e: [email protected]
Tina Liu
Country Manager - China [email protected]