International Trade Symposium
CONTAINER TRADE FLOWS AND
TRADE LANE CHANGES
Norfolk VA May 9, 2013
Today’s Speaker
2
Hayes H. Howard
CEO, BlueWater Reporting
Agenda
Introduction – About BlueWater Reporting
Changing Trade Lanes & Shipping Patterns
The Mega Vessel Era Is Upon Us
Changing Carrier Alliances/Emergence of the G6
Panama Canal Expansion/Suez Canal Growth
Carrier Financials & Financing
Q&A
IMF forecasts 3.3% growth for 2013
4
Output,
Prices
and
Jobs
5
Today’s Market – Changing Trade Lanes
6
-10%
-5%
0%
5%
10%
15%
20%
-10% -5% 0% 5% 10% 15% 20%
Import Growth
Export growth
USA
China
JapanEastern & Central Europe
Taiwan
South Korea
East Africa
South Asia
Levant & Caucasus
Gulf
South America
Central America
Caribbean
Western Europe
Russia
South East AsiaAustralasia
West Africa
South Africa
North Africa
Stronger exports
Stronger exports & above global average
Stronger imports & above global average
Stronger imports
Weighted Average
export growth: 2.86%
Weighted Average
import growth:
3.16%
Source: Seabury Cargo Advisory.
Today’s Market – Changing Trade Lanes
7
Ocean Trade Growth 2012
Source: Seabury Cargo Advisory.
Total international ocean trade growth 2.6%
-6
2
15
-3
1
4
6
162 16
14 4
-2
30
11
-7
13
3
-2
-3
Containerized Trade Projections 2013
8
From Containerization International, March 2013
Today’s Market – Overcapacity
9
• Endemic overcapacity likely to persist for through 2013 at least.– Eastbound transpacific capacity
rose around 7.5 percent in 2012.– Westbound Asia–Europe
capacity rose around 3 percent in 2012.
• Weakened demand on traditional key trades—Transpacific and Asia-Europe.
• No sizable trades where carriers can retreat to recapture revenue growth.
Mega-Vessel Era
• Carriers consistently seeking to improve their economy of scale.
• Persistent investment in larger ships to achieve lower per-slot operating costs.
• Means ports have to be able to handle larger vessels and more cargo than ever before.
• Larger vessels will likely make fewer calls, going to “bus stop” rotations.
Mega-Vessel Era – Deliveries ‘13-15
11Source: Clarkson Research Services
5%10%
19%2%
3%
11%
22%
32%
12%8%
13%
27%
23%
29%
15%
14%
8% 9%26%
5% 5%
0%
20%
40%
60%
80%
100%
Delivery 2013 - Approx 1.7 milTEU
Delivery 2014 - Approx 1.1 milTEU
Delivery 2015 - Approx 0.6 milTEU
Less than 4,800
4,800-7,019
8,000-9,700
10,000-12,600
13,000-14,000
16,000-16,020
18000
Changing Carrier Alliances
12
The “G6” and other new partnerships
Circle sizes represent comparative sizes of the carriers by
capacity. Bands represent new alliances/co-operations.
Maersk Line
MSC
CMA-CGM
Grand Alliance:
Hapag Lloyd, OOCL, NYK
New World Alliance:
APL, Hyundai,
MOL
Evergreen
Green Alliance:
Cosco, Hanjin, “K”Line, Yang
Ming
Carrier Alliance Share
13
Alliance share includes Services operated by Alliances and services with an alliance carrier as a dominate operator, plus services operated by Maersk Line, MSC, CMA CGM and Evergreen Line
Changing Carrier Alliances – Net Impacts
14
• More control by fewer decision makers.
• Greater choice for shippers.
• Potential for improved service levels – remains TBD.
• Probably higher rates – also TBD.
Managing Capacity
Carriers are becoming more efficient at constraining capacity as new ships come on line. But can also quickly increase capacity if demand warrants.
Carriers exercise greater level over control over capacity and ultimately rate levels.
15
Asia to North America 4/1/2012 4/1/2013 Increase
Vessel Count 434 487 12%
Vessel TEUs 2,462,942 2,659,127 8%
Average Vessel Size 5,675 5,460 -4%
Weekly Vessel Capacity 316,952 328,415 3.60%
Weekly Available Capacity 297,850 305,852 2.60%
Managing Capacity or Not
Carriers are becoming more efficient at constraining capacity as new ships come on line. But can also quickly increase capacity if demand warrants.
Carriers exercise greater level over control over capacity and ultimately rate levels.
16
Asia to North America 5/1/2012 5/1/2013 Increase
Vessel Count 436 487 12%
Vessel TEUs 2,507,972 2,782532 11%
Average Vessel Size 5,752 5,714 -1%
Weekly Vessel Capacity 316,952 346,575 9%
Weekly Available Capacity 298,997 322,265 8%
• Panama Canal expansion completion delayed until 2015.
• East Coast ports have been focusing on meeting a 2015 deadline to handle larger ships.
• ACP claims max vessel capacity through the Canal could be 14K TEU – more likely 8-10K vessels will transit the canal.
• Canal tolls will likely increase significantly with unknown impact on shipper’s rates.
• More likely extra capacity through the Canal will have largest impact on rates.
17
Panama Canal Expansion
Challenges to Panama Routes Today
18
• Carriers claim Panama services are unattractive /unprofitable.
• Mega-vessels call the US West Coast – not the East.
• Bunker fuel prices double while Panamax vessels are inefficient –“double whammy”.
• Canal tolls have increased steadily – 2X since 2005.
Panama/Suez – Transit Comparison
19
Norfolk via Panama Norfolk via Suez
Nautical Miles Days Nautical Miles Days
Singapore 9,873 24 12,692 No services
Yantian 11,489 27 11,250 29
Shanghai 12,164 34 10,671 26
Busan 12,495 No services 10,222 24
Tokyo 12,902 No services 9,882 23
Showing fastest direct transit time
Growing Suez Share Asia to East Coast
North American Trade
20
Where Are The Profits?
21
• Top publicly-traded lines lost nearly $6 billion in 2011. Only two in the black.
• The industry has lost money from operations over 5 years to 2012.
• In general carriers suffering from weak cash flow, high debt loads.
• Industry probably in the black for 2012, but results vary widely:
• In the black: CMA-CGM, Maersk, OOCL, China Shipping, etc.
• In the red: COSCO, APL, Zim, etc.
Liner Profitability 2007-2011
22
Source: American Shipper research
Carrier Margins Suffer in 2011
23
Source: American Shipper research
Altman Z-Score for Ocean Carriers
24
2.66 2.64
1.45
2.06
1.43
-
0.50
1.00
1.50
2.00
2.50
3.00
FQ4 2007 FQ4 2008 FQ4 2009 FQ4 2010 FQ4 2011
Source: Capital IQ, analysis by AlixPartners
Severe Distress
Moderate Distress
Thank you for your attention. I would
like to take your questions now.
For more information, you can contact
me at:
25
Q&A
Hayes [email protected]