International Union of Marine Insurance (IUMI) Conference Singapore

Transcription

1 International Union of Marine Insurance (IUMI) Conference Singapore September 13, 2004 Address by NOL Group President and CEO, David Lim Growth, Interdependency and Convergence Challenges in the Container Shipping Industry

2 Introduction Shipping: Old and Risky Business Facing New Risks Page 2

3 Fundamental Global Changes The Global Economy And Its Challenges for the Shipping Industry Page 3

4 The Global Economy Dominance of Market Economies Page 4

5 Dominance of Market Economies Closed Economies Open Up Resources released Page 5

6 Dominance of Market Economies: Resources Released China has added 1.3 billion people into the global market (more than US, EU and Japan combined) Population (Source : EIU) China EU 25 EU m 1,400 US Japan US 290m China 1,295m Japan 127m 2003 Population (Million) 1,200 1, ,295m 127m 425m 290m 0 Data Source: EIU Page 6

7 Dominance of Market Economies Closed Economies Open Up Resources released New Demand created Page 7

8 Dominance of Market Economies: Purchasing Power Consumption increased with increased purchasing power Page 8

9 The Global Economy Dominance of Market Economies Globalisation of National Economies Page 9

10 Globalisation of National Economies Interdependence of economies around the world 2003 FDI and Export Figures US-Asia FDI: US$22.4bn Export: 3.6m TEU EU-Asia FDI: US$16.3bn Export: 2.9m TEU Asia-EU FDI: US$7.3bn Export: 6.3m TEU Asia-US FDI: US$13.4bn Export: 9.4m TEU Data Source: CEIC, US Government Export Portal, European Newswire, Global Insight Page 10

11 The Global Economy Dominance of Market Economies Globalisation of National Economies Increase in Volatility Page 11

12 Increase in Volatility Threats and risks magnified by globalisation Inter-dependency break in supply chain = stop work in factories and stores. Page 12

13 Increase in Volatility The nature of risks have also changed Sudden Contagious Massive New Page 13

14 The Global Economy Fundamental changes Growth in Resources and Markets Page 14

15 The Global Economy Fundamental changes Growth in Resources and Markets Interdependency Page 15

16 The Global Economy Fundamental changes Growth in Resources and Markets Interdependency Volatility Page 16

17 Challenges for Container Shipping Coping with Growth Complex Supply Chains New Strategies Page 17

18 Challenges for Container Shipping Coping with Growth Page 18

19 Coping with Growth: Increase in Demand World container traffic growth has been in excess of 8% p.a. over the past 20 years CAGR: 9.1% Page 19

20 Coping with Growth: Increase in Supply World containership orderbook is approximately 45% of fleet capacity as at July million TEU, ~ 45% of Total Fleet Page 20

21 Coping with Growth: Supply Delivery The current order book is spread over the next 3 to 4 years? Page 21

22 Coping with Growth: Congestion Major ports around the world are working at full capacity Page 22

23 Coping with Growth: Building Infrastructure NEEDED: GOVERNMENT LEADERSHIP Page 23

24 Coping with Growth: Building Infrastructure NEEDED: GOVERNMENT LEADERSHIP LOCAL environmental concerns Page 24

25 Coping with Growth: Building Infrastructure NEEDED: GOVERNMENT LEADERSHIP LOCAL environmental concerns NATIONAL infrastructure priorities Page 25

26 Coping with Growth: Building Infrastructure NEEDED: GOVERNMENT LEADERSHIP to find BALANCE between LOCAL environmental concerns and NATIONAL infrastructure priorities Page 26

27 Coping with Demand: Industry Leadership NEEDED: INDUSTRY LEADERSHIP Page 27

28 Coping with Demand: Industry Leadership NEEDED: INDUSTRY LEADERSHIP to improve LABOUR and MANAGEMENT relations Page 28

29 Coping with Demand: Industry Leadership NEEDED: INDUSTRY LEADERSHIP to improve LABOUR and MANAGEMENT relations CARRIER and SHIPPER cooperation Page 29

30 Coping with Demand: Industry Leadership NEEDED: INDUSTRY LEADERSHIP to improve LABOUR and MANAGEMENT relations and CARRIER and SHIPPER cooperation to increase PRODUCTIVITY Page 30

31 Challenges for Container Shipping Coping with Growth Complex Supply Chains Page 31

32 Complex Supply Chains Globalised Manufacturing Intermediate Goods Finished Goods Raw Materials Page 32

33 Complex Supply Chains Elements of an Integrated Supply Chain Ocean Transportation covers a small segment of the total supply chain Supplier & Vendor Management Consolidation Distribution International Ocean / Air Transportation Document Delivery Deconsolidation Distribution Domestic Multi-Modal Transportation Warehousing & DC s Delivery to Point-of-Sale Origin Services / Export Management Destination Services / Import Management Warehouse / D.C. Management International Freight Management Domestic Freight Management Page 33

34 Complex Supply Chains: Convergence Players converge to provide integrated services and solutions Freight Forwarder Integrated Service Provider Integrated Solutions Asset Based Transport Subsidiary Contract Logistics Provider Page 34

35 Challenges for Container Shipping Coping with Growth Complex Supply Chains New Strategies Page 35

36 New Strategies New Strategies Dealing with Cyclicality Page 36

37 New Strategies: Dealing with Cyclicality 110 Average Freight Rate* (1Q Q 2004) Source : Containerisation International (* weighted average freight rates in the Transpacific, Asia-Europe and Transatlantic trade lanes) Q 94 3Q 94 1Q 95 3Q 95 Freight Rate Index (1Q 1994 = 100) 1Q 96 3Q 96 1Q 97 3Q 97 1Q 98 3Q 98 1Q 99 3Q 99 1Q 00 3Q 00 1Q 01 3Q 01 1Q 02 3Q 02 1Q 03 3Q 03 1Q 04 Page 37

38 New Strategies: Dealing with Cyclicality Cyclicality: Reducing Fluctuations PRICE vs NON-PRICE Factors Service Integrity Integrated Services Global coverage Page 38

39 New Strategies New Strategies Dealing with Cyclicality Innovation and R&D Page 39

40 New Strategies: Innovation and R&D Real Value of Supply Chains Discount: = 1.5 Page 40

41 New Strategies: Innovation and R&D Real Value of Supply Chains Discounts vs Value Adding Discount: = 1.5 Value Adding: = 5 Page 41

42 New Strategies New Strategies Cyclicality Innovation and R&D Industry Standards Page 42

43 New Strategies: Industry Standards e.g: Rosettanet data and process integration Manufacturing Information Marketing Product Information Project Status Information Retailer Publisher Demand information Suppliers Manufacturer Supply information Distributor Technical Product Information Transportation Operator Corporate Reseller Financing Provider End User Financial Information Page 43

44 Conclusion Global Changes Growth: new resources and demand Page 44

45 Conclusion Global Changes Growth: new resources and demand Interdependence: threats and risks Page 45

46 Conclusion Global Changes Growth: new resources and demand Interdependence: threats and risks Challenges Convergence: servicing global players Page 46

47 Conclusion Global Changes Growth: new resources and demand Interdependence: threats and risks Challenges Convergence: servicing global players Infrastructure, Innovation, Standards: building foundations Page 47

48 Conclusion Global Changes Growth: new resources and demand Interdependence: threats and risks Challenges Convergence: servicing global players Infrastructure, Innovation, Standards: building foundations Towards sustainable profits and growth Page 48