SHIPPING WATCH 2017 TOC AMSTERDAM JUNE Andrew Penfold. Director - Global Maritime

Transcription

1 SHIPPING WATCH 2017 TOC AMSTERDAM JUNE 2017 Andrew Penfold Director - Global Maritime

2 CONTENT 2 Overview shipping market developments Supply/demand balances Ship sizes and cascading Alliances terminal implications Other terminal factors increasing pressures

3 Container market overview key perspectives... Global containership supply v demand million TEUs Alphaliner charter index Source: Alphaliner Source: Alphaliner Some improvement as demand picks up Structural imbalance too much large tonnage Still massive over-capacity and a large fleet remains to be delivered at least to 2019 Freight rates are very low and the charter market is on its knees Sustained growth needed to absorb capacity Is this likely?

4 Macro economic outlook where are we going? 4 World Trade, Industrial Production, and Manufacturing PMI (three-month average; annualized per cent change) Macro economic outlook is highly uncertain Chinese pressures have been mounting for some time. IMF projections are suspect Demand remains fairly weak high political risks Very difficult to finance some projects in this situation Ma ufacturi g PMI (deviatio s from 50) I dustria productio Wor d trade vo umes 0.90 Source: IMF, 2016 (Oct) World GDP Projections - IMF F 2018F 2021F US Euro Area China Developing Asia Latin America/Caribbean Middle East Sub-Saharan Africa World Source: IMF, 2017 (Jan) Most recent data from IMF stresses slowdown in US but some Euro recovery volatility in both Looks shaky for southern Europe and especially for China significant revision to forecast anticipated Anticipate reduction in China GDP forecasts to %?

5 Container fleet developments The role of 10,000TEU+ vessels has increased dramatically, driven by scale economies and competitive pressures. Massive ordering for ULCS and New Panamax vessels. 5 Transpacific and Asia-Europe trades cannot absorb all of this tonnage - cascade effect onto other trades. Development of new broad beam 8,000-10,000TEU vessels for North-South trading, particularly in Africa and South America. The overall effect will be further concentration and greater transshipment activity. New generation container feeder vessels to 4000TEU+? All high volume container terminals will look like this in the future

6 Container fleet development ship size revolution 6 Design Development of Large Containerships TEUs Length overall (m) Beam (m) Maximum draught* (m) China Shipping and MSC confirmed current orders to be extended to 19,000TEU. MOL Triumph of 20,170TEU is the largest vessel ever built and deployed in May Expect other lines to follow Maersk Line, CMA CGM, UASC all committed to larger tonnage. Noted Required berth depth (m)* First generation: ,100 Second generation: , Panamax: , Post-panamax: , Fifth generation: ,400-8, Super post-panamax: 1997-> 8,000-11, Ultra large container ships: 2006-> 14, New-panamax: , Triple E-Class 18, CSCL 18,400 Class 18, MOL Triumph 20, Ship cascading will continue to secondary trade lanes in Africa. World Container Fleet Development ('000TEUs) <4000TEU TEU TEU 10,000TEU+ Fully cellular containership fleet expanded to >16m TEU. Focus remains on larger vessels 8,000TEU+ sector up by 10.8%. Trend for bigger ships well established since ,000TEU+ ships in service. Almost all major lines committed to ULCS.

7 Container fleet development ship size revolution PORT CONCENTRATION Terminals have to meet needs of larger ships. Potential fewer ports of call. TRANSSHIPMENT 7 Intensifying in key locations. Hub & Spoke, Relay/Interlining used. ALLIANCES/ CONSOLIDATION Individual lines lack overall traffic to successfully utilise bigger ships cost-effective hence alliances. New Alliances groups: Ocean Alliance, The Alliance & 2M will all continue in major trade lanes. Fewer viable alternatives for customers on main trade lanes.

8 Industry trends ship size revolution PRIMARY TRADE Much larger vessels on Primary trade and also larger vessels deployed on Secondary deepsea trades where port capacity permits. SECONDARY TRADE This is driven by an excess of vessels displaced from primary deepsea trades cascading to the secondary trades. 8 DEMAND Actual demand at present seldom justifies these much larger vessels but it s a fact of life. ORDERS With ongoing orders of ever larger vessels the cascading effect will continue FEEDERS This will also push of larger vessels into the feeder sector

9 Industry trends ship size revolution 8,000 TEU to 14,000 TEU 14,000 TEU to 18,000 TEU 18,000 TEU to 22,000 TEU 9 E Class Maersk: 397m, 22 rows, 16m Triple E Maersk: 400m, 23 rows, 16m 22,500 TEU: 400m, 24 rows, 420m, 23 rows? 16m? Ports around the world were sized to accommodate the E class Maersk by providing 16m of draft. Cranes were upgraded to 22 rows Cranes were extended to 23 rows No change required for berth or channel drafts Could be a step too far? Berth length should be able to accommodate but cranes would need 24 rows and deeper draft Ports have accommodated as the i creases ere i creme ta. The ext size of co tai er vesse s cou d resu t i sig ifica t capacity redu da cies.

10 Cascade effect e.g. Africa Vessel size increase on the main arterial lanes has resulted in a displacement of the vessels that were historically dominant on the Asia-Europe routes, i.e. 6,000-8,500TEU capacity vessels to secondary routes. 10 Services such as the Africa Express operated by MSC, are now operated by vessels of up to 8,500TEU capacity and serving the Indian Ocean and both South and West Africa from Asia via the Cape of Good Hope instead of the Suez Canal. These effectively replacing services that transship in Algeciras with hubs in the Indian Ocean, South and West Africa. Displacement of 2,500TEU vessels by 3,500-4,300TEU vessels on FE-SAF-WAF services as a result of new cooperation. All high volume container terminals will look like this in the future When more services of this type are introduced, there will be a likely increase in the average size of vessels handled particularly in the ports in Sub-Saharan Africa and the Indian Ocean region.

11 Impact on the port business Current shipping market outlook remains weak imbalance of supply and demand to Alliances will see consolidation of demand much larger consignment sizes 11 All major east-west ports will need to upgrade access to largest vessels to remain competitive Emphasis on expanding and improving existing terminals greenfield projects financing problematic Impact of new Panamax dimensions on ports still to work through Possibility of even larger vessels Cascading to continue and accelerate Continued pressures on stevedoring revenues from lines Ports in North-South trades must upgrade to handle cascaded vessels Much tougher e viro me t ith co ce tratio of termi a i vestme t i fe er, much arger, orga isatio s

12 Some key specific issues for lines and ports FOR THE LINES How is it possible to compete against mega-carriers? Specifically, the Chinese dragon Cosco (including China Shipping and OOCL?). CUSTOMER SERVICE How can this be maintained / improved. Takeover of niche players may lift load factors, but can the local networks upon which service quality depends survive this consolidation? 12 AUTOMATION TERMINAL/ LINE INTEGRATION Is automation the panacea for terminals? No, customer service is the key driver we often see conventional terminals being more responsive to line needs. Does integration of lines and terminals still make sense? Yes, but it depends how it is done. Lines don t need another cost centre, how is the focus on service levels maintained especially for third party customers?

13 How do we apply all this? We are working on various port (and shipping) investment deals currently totalling around USD2.3bn in value. So the market is still there 13 The focus has changed. Ten years ago there was a scramble for port investment, even second-tier prospects could be reasonably sure of significant underlying growth not now.supply/demand balances Risk analysis on key assumptions is key to bankability. Although money is (relatively) cheap, investors are very selective. Counter party risk is a key issue now. The role of the consultant in this market quantify and realistically assess risk. Provide in-depth local market knowledge and comfort for investors.

14 Conclusion & Take-Aways Macro-economic & political risks: Outlook very unclear wide range of possible scenarios will make funding for development difficult to secure Danger of protectionism a direct threat to trade and port volumes Continued over-capacity 14 Industry risks (and opportunities): Ship size increases remains major driving force Alliances consolidate much larger demand packages Cascading of larger vessels pressures smaller terminals Need for terminal productivity improvements and automation

15 Commercial experience worldwide maritime projects ports

16 Thank you! ANDREW PENFOLD Director Global Maritime WSP wsp.com WSP House, 70 Chancery Lane, London, WC2A 1AF, UK