Web: www.alphaliner.com E-mail: hjtan@liner-research.com Long Beach 27 February 2017
Not too long ago, in a galaxy very close to us Alphaliner Page 1
Alphaliner Page 2
Alphaliner Page 3
Alphaliner Page 4
Alphaliner Page 5
Protracted arms race continue in the new Alliance era 2017-2018 new containership deliveries continue at rapid pace Alphaliner Page 6
Focus on larger ships Scrapping and slippage not sufficient to curb fleet growth Over 80% of new capacity additions are of 8,000 teu and above Alphaliner Page 7
Before adjusting for scrapping (but incl. committed scrap sales) ALPHALINER 2017-2018 are critical years Total capacity to grow by 4% per year on average in 2017 & 2018 This comes on top of current idle capacity of 7% Difficult to rebalance supply to match demand with significant focus on large ship segments Over 150 ships of 10,000-22,000 teu due to be delivered in next 2 years Fleet as at : Jan 2016 31 Dec 2018 Change Nominal TEU No. TEU No. TEU Over 2 years 18,000-21,000 47 890,497 100 1,936,552 53 13,300-17,999 126 1,829,534 164 2,374,792 38 10,000-14,500 NPX 215 2,511,886 282 3,310,119 67 7,500-9,999 475 4,176,453 482 4,241,045 7 5,100-7,499 471 2,911,464 473 2,925,581 2 4,000-5,099 679 3,077,443 662 2,999,544-17 3,000-3,999 249 864,922 273 950,414 24 2,000-2,999 621 1,571,908 683 1,733,253 62 1,500-1,999 590 1,008,445 639 1,097,697 49 1,000-1,499 699 807,654 739 855,334 40 500-999 753 560,370 760 564,852 7 100-499 193 62,325 202 65,323 9 Adjusted Total (after scrapping) 5,118 20,272,901 5,153 21,941,795 Annualised CAGR 4.0% Adjusted for scrapping Alphaliner Page 8
New deliveries and cascading still too many ships in next 2 years Alphaliner Page 9
The inter-alliance arms race in 2017 2017 Deliveries < 3,000 3,000-6,000-10,000 10,000-18,000 TEU 6,000 TEU TEU TEU > 18,000 TEU Maersk - 7-4 7 MSC - - 3 12 4 HMM - - - - - 2M + H Total 0 7 3 16 11 CMA CGM/APL 5 - - 11 3 COSCO - - 4 2 - Evergreen 5 - - 5 OOCL - - - - 6 OCEAN Total 10 0 4 18 9 Hapag-Lloyd/UASC - - - 5 - K Line - - - - - MOL - - - - 5 NYK - - - 3 - Yang Ming - - - 2 - THE Total 0 0 0 10 5 Hamburg Sud - 4 - - - Zim - - - - - PIL - - - 2 - Wan Hai - - - - - SM Line - - - - - Independents Total 0 4 0 2 0 Alphaliner Page 10
Arms race to continue into 2018 2018 Deliveries < 3,000 3,000-6,000-10,000 10,000-18,000 TEU 6,000 TEU TEU TEU > 18,000 TEU Maersk - - - 5 4 MSC - - - 3 - HMM - - - - - 2M + H Total 0 0 0 8 4 CMA CGM/APL - 4-1 COSCO - - - 11 17 Evergreen 13 - - - 6 OOCL - - - - - OCEAN Total 13 4 0 12 23 Hapag-Lloyd/UASC - - - - - K Line - - - 5 - MOL - - - - 1 NYK - - - 3 - Yang Ming - - - 3 - THE Total 0 0 0 11 1 Hamburg Sud - 4 - - - Zim - - - - - PIL 1 - - 8 - Wan Hai 8 - - - - SM Line - - - - - Independents Total 9 4 0 8 0 Alphaliner Page 11
Arms race will only scale down in 2019 Projected deliveries in 2019 Projected deliveries in 2018 Projected deliveries in 2017 Current fleet - Feb 2017 Alphaliner Page 12
Destruction of Hanjin Shipping Hanjin Shipping could have been saved KDB/Korean Air failure to agree on emergency funding for $500 M would lead to losses of more than $5,000 M for all stakeholders Internal Korean conflict, not external threats, caused Hanjin s destruction Restructuring process poorly managed ego prevailed over common sense Implications of Hanjin Shipping failure - Risk of another major carrier bankruptcy is very low - Capacity restraint since Sep 2016 - No Asia-Europe/Asia-USEC capacity added - Only capacity increase on Asia-USWC (HMM/2M) - Capacity to return with new Alliance launch in April 2017 Alphaliner Page 13
Capacity Increases Across the Board from April 2017 US West Coast and North Europe will see largest capacity increases Estimated weekly capacity in TEU (Jun 2017) 0 20,000 40,000 60,000 80,000 100,000 120,000 FE-WCNA FE-ECNA 14 weekly sailings (incl EX1 CMA CGM/APL only) (9 PSW/5 PNW) 5 weekly sailings (3 PSW/2 PNW) 11 weekly sailings (8 PSW/3 PNW) 8 weekly sailings (HMM/SM/Zim/PIL/WHL/Matson) (6 PSW/2 PNW) 7 weekly sailings (6 Panama/1 Suez) 5 weekly sailings (4 Panama/1 Suez) 5 weekly sailings (3 Panama/2 Suez) 2 weekly sailings (Zim) (1 Panama/1 Suez) FE-WCNA 4.9% (3.9%) FE-ECNA 2.1% (9.6%) FE-N. Eur FE-Med 6 weekly sailings 6 weekly sailings 5 weekly sailings No non-alliance service on FE-N.Eur route 5 weekly sailings 4 weekly sailings 3 weekly sailings 1 weekly sailing (Zim) OCEAN Alliance 2M THE Alliance Others Alphaliner FE-N. Eur 3.8% (7.4%) FE-Med 1.2% (5.5%) Estimated capacity increase 2017 vs 2016 (Peak Season Deployment) (vs current Feb 2017) Page 14
2009 2010 2011 2012 2013 2014 2015 2016 2017 $/FEU ALPHALINER Transpacific Trade 2 year cycles Rate cycle expected to persist as long as over-capacity remains Larger capacity additions on FE-USWC & smaller capacity increase on FE-USEC expected in 2017 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 SCFI Shanghai to USWC & USEC 2010 Restocking led recovery Capacity & equipment shortage USEC USWC 2012 Capacity constraint Departure of the niche carriers 2014 USWC port labour Port congestion 2016 Hanjin bankruptcy Flight to safety Alphaliner Page 15
Peace is not upon us Predictions of market stability and sustainable rate increases still premature No signs that carriers have curbed market share ambitions High capacity utilisation since September could be reversed in coming months, with revamped Alliance network and capacity additions by independent carriers Actions of several non-alliance carriers eg HMM, SM Line and Zim could trigger rate instability Consolidation process still incomplete Japanese consolidation will take 18 months to complete Current alliance structure still unstable Low likelihood of another major carrier failure government support remains New capacity additions will add further pressure in low growth environment Alphaliner Page 16
PSW - 26 weekly services vs 25 PSW services in 2016 Estimated weekly capacity increase of 11.8% Estimated weekly capacity in 0 20,000 40,000 60,000 80,000 100,000 FE-WCNA FE-ECNA FE-N. Eur FE-Med Estimated capacity subject to changes OCEAN Alliance 2M THE Alliance Others Alphaliner Page 17
PNW - 12 weekly services vs 13 PNW services in 2016 Estimated weekly capacity reduction of 8.0% FE-WCNA Estimated weekly capacity 0 20,000 40,000 60,000 80,000 100, FE-ECNA FE-N. Eur FE-Med OCEAN Alliance 2M THE Alliance Others Estimated capacity subject to changes Overall USWC (PSW+PNW) no. of weekly services remain unchanged 38 But capacity expected to increase by 4.9% Alphaliner Page 18
All-water USEC - 19 weekly services vs 21 Asia-USEC/USGC services in 2016 But average vessel size to increase from 6,700 teu to 7,600 teu Estimated weekly capacity increase of 2.1% Estimated weekly capacity in T 0 20,000 40,000 60,000 80,000 100,000 FE-WCNA FE-ECNA FE-N. Eur FE-Med Estimated capacity subject to changes OCEAN Alliance 2M THE Alliance Others Alphaliner Page 19
End Please send any queries to hjtan@liner-research.com Alphaliner clients include the following: - Shipping lines - Investment Banks - Ports Alphaliner