AAPA Shifting Trade Patterns Ocean Carrier Issues and Perspectives January 2014
The Global Container Shipping Industry Over 400 companies Operating 4,974 ships (fully cellular) & 17.3M of capacity Top 20 continue to dominate the industry Profitability remains an elusive opportunity Source: Alphaliner; nceas.edu; Norbridge Analysis Page 1
Few carriers were able to achieve net profits during the first three quarters of 2013.. Millions of USD $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 -$200 -$400 -$600 Global Container Industry Net Profit/Loss by Carrier YTD 2013 (Q3) *Note: 2Q results for OOCL Source: Alphaliner Newsletters
The industry has incurred an estimated $7.3 billion in operating losses since 2009 Billions of USD $20 $15 $10 $5 $0 -$5 -$10 -$15 -$20 Global Container Shipping Industry Profit/Loss 2009-2012 -15.0 13.9-6.0-0.2 2009 2010 2011 2012 Note: 2012 Based on Alphaliner survey of operating results for 21 of the Top 30 carriers Source: Alphaliner
The global container industry: the profitability equation Scale economies + Increased Efficiency + Higher Utilization = Improved profitability
Container ships of 7,500 and greater represent two thirds of the vessels to be delivered between 2012 and 2016 Number of Vessels 6,000 5,000 4,000 3,000 2,000 1,000 0 2,966 296 739 475 326 162 160 CY2012 10,000-18,500 Cellular Container Fleet Projections 2012 & 2016 (Vessels) 176 7,500-9,999 48 5,100-7,499 58 4,000-5,099 3 3,000-3,999 58 <3000 3,024 299 797 523 502 322 CY2016 <3000 3,000-3,999 4,000-5,099 5,100-7,499 7,500-9,999 10,000-18,500 Source: Alphaliner; Norbridge Analysis Page 5
and 84 percent of on-order TEU capacity 25 Cellular Container Fleet Projections 2012 & 2016 (TEU Capacity) Millions of 20 15 10 5 0 4.2 1.0 3.3 2.9 2.8 2.1 2.3 CY2012 10,000-18,500 1.6 7,500-9,999 0.3 5,100-7,499 0.3 4,000-5,099 0.0 3,000-3,999 0.1 <3000 4.3 1.0 3.6 3.2 4.4 4.3 CY2016 <3000 3,000-3,999 4,000-5,099 5,100-7,499 7,500-9,999 10,000-18,500 Source: Alphaliner; Norbridge Analysis Page 6
The largest vessel strings calling the Atlantic and Pacific coasts have increased significantly between 2010 and 2014 Largest Average Vessels Deployed on Container Services Calling North America January 2010 vs. January 2014 Coast Year Service Name Vessel Avg. TEU Capacity Count MSC/CMA CGM - S Atlantic, MX & 2010 Atlantic Gulf/Victory Bridge 7 6,237 2014 MSC - Golden Gate Service 7 8,580 2010 Maersk Line/Safmarine - TP6/AE 6 14 9,556 Pacific MSC/CMA CGM -- 2014 ANL/Delmas/Maersk Line/US Lines - 7 12,416 Pearl River Express MSC/CMA CGM - S Atlantic, MX & 2010 Gulf Gulf/Victory Bridge 7 6,237 2014 MSC - S Atlantic/Mexico/Gulf 4 6,306 Source: Blue Water Data; Norbridge Analysis Page 7
As of 2012, the United States had not returned to 2007 peak historical total container volumes Compound Annual Growth Rate 12% 10% 8% 6% 4% 2% 0% -2% -4% North American Container Traffic Growth 2007-2012 USWC US US Gulf Mexico Canada USEC -3-2 -1 0 1 2 3 2007-2012 Container Traffic Growth (Millions of ) Source: JOC PIERS Data; Norbridge Analysis Page 8
Eight of the top 10 global carriers participate in alliances P3 Alliance G6 Alliance #10 #11 #12 #1 #2 #3 CKYH Alliance #17 All Other #7 #6 #15 #16 #18 #19 #4 #20 #5 #8 #9 Note 1: Ranking based on total current and on-order capacity Source: Alphaliner Page 9 #14 #13
Collectively, the three emerging global shipping alliances carried an estimated 70 percent of total U.S. loaded container traffic between 2005 & 2012 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% USEC Loaded Container Traffic by Carrier/Alliance 2005-2012 28% 17% 20% 25% 28% 34% 25% 26% 22% 35% 30% 11% 29% 3% 19% 49% US USWC USEC US Gulf P3 Alliance G6 Alliance CKYH Alliance All Other Source: JOC PIERS Data; Norbridge Analysis Page 10
The three largest alliances account for 52 percent of the projected world fleet and 69 percent (operational & on order) of its projected capacity Current and On-Order Container Vessels (Ships) Q4 2013 Current and On-Order Container Vessel Capacity () Q4 2013 48% 30% P3 G6 31% 38% P3 G6 CKYH CKYH 9% 13% All Other 13% 18% All Other Total Vessels: 5,221 Total TEU Capacity: 19.5M Source: Alphaliner Top 100 Data; Norbridge Analysis Page 11
P3 Alliance Overview Source: Lloyd s List Intelligence Page 12
Example of P3 Service Changes MSC North Europe USEC / Gulf Service Profile MSC North Europe USEC/US Gulf Services Service Name MSC - North Atlantic MSC - South Atlantic/Mexico/Gulf P3-North Atlantic P3 - South Atlantic/Mexico/Gulf P3 - Atlantic/Gulf Port Rotation Current MSC Services Bremerhaven, Felixstowe, Rotterdam, Antwerp, Le Havre, NY, Boston, Philly, Baltimore, Norfolk, NY, Bremerhaven Antwerp, Rotterdam, Le Havre, Charleston, Freeport, Verazcruz, Altamira, Houston, NOLA, Mobile, Freeport, Savannah, Charleston-Antwerp Proposed P3 Services Bremerhaven, Felixstowe, Rotterdam, Antwerp, Le Havre, NY, Baltimore, Norfolk, NY, Bremerhaven Antwerp, Rotterdam, Bremerhaven, Le Havre, Charleston, Freeport, Miami, Veracruz, Altamira, Miami, Savannah, Charleston, Antwerp Antwerp, Rotterdam, Felixstowe, Bremerhaven, Le Havre, NY, Charleston, Savannah, Houston, NOLA, Mobile, Freeport, Norfolk, Le Havre # Vessels and Avg. Vessel Size 5 x 4,544 4 x 6,306 5 x 4,400 6 x 8,400 6 x 8,400 Source: BlueWater Data; Norbridge Analysis
Example of P3 Service Changes Maersk Service Profile Number of Services 14 12 10 8 6 4 2 0 Current Maersk Services vs. Proposed P3 Services 4 13 7 Asia-Europe Transpacific Transatlantic 10 3 5 Current Maersk Services Proposed P3 Services Source: Maersk Website; Norbridge Analysis
Evolving alliances structures could provide the path to significant consolidation Carriers 1. Maersk 2. MSC 3. CMA-CGM 4. Evergreen 5. COSCO 6. Hapag-Lloyd 7. Hanjin 8. APL 9. China Shipping 10. Mitsui OSK 11. OOCL 12. Hamburg Sud 13. NYK 14. Yangming 15. PIL 16. K Line 17. Zim 18. Hyundai 19. UASC TODAY Maersk CMA-CGM/ MSC Grand Alliance NWA CKYH Med Consol. P3 G6 CKYH Future Alliance? 15 FUTURE Max Consol. P3 G3-7? CKYH+?
Shifting Trade Pattern Implications Asia via Panama Fewer strings 6,500-7,500 vessels Expanded feeder networks WCSA NCSA USG US Atlantic Asia via Suez Incremental strings 8,000-9,000 vessels Significant interline NEA SEA ISC ME Med Some Atlantic Coast deployment segmentation
Shifting Network Implications Port consolidation or expansion? Terminal rationalization-a vexing problem in many major gateway ports Inland operations Intermodal rail Inland CYs Equipment
AAPA Shifting Trade Patterns Ocean Carrier Issues and Perspectives January 2014