Volatility in Container Shipping

Transcription

1 Volatility in Container Shipping TPM Asia 2013, Shenzhen Simon Heaney Research Manager Drewry Supply Chain Advisors October 2013

2 2 Agenda 1. Volatility in container shipping s DNA 2. Recent container freight rate trends 3. Impact on container services 4. How can carriers and shippers protect themselves from volatility? 5. What chance stability?

3 Volatility in container shipping s DNA 3 Liner shipping is a cyclical industry; cycles driven by cash balances and utilisation Demand for new tonnage Optimism supports orders Supply exceeds demand / trade growth slows Estimated carrier industry EBIT profit/loss 1Q09-2Q13 Freight rates recover Over tonnaging Demand and Supply realign Freight rates drop Fleet growth slows / trade recovers Demand for vessels drops Source: Drewry s Container Forecaster

4 Recent Container Freight Rate Trends Historic volatility in the World Container Index, assessed by Drewry 4 2,400 2,200 World Container Index Composite Index 10 Container freight rate volatility has increased for three primary reasons: 2,000 1,800 1,600 1,400 Jan-13 Mar-13 May-13 Jul-13 Sep-13 5 Macroeconomic & geopolitical uncertainty Step change in ship size Carrier market behaviour WCI Composite Index 52-Week Hvol (right axis) World Container Index Shanghai to Rotterdam $3, $2, $2,400 $2, $1,600 5 $1,200 $800 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Shanghai-Rotterdam (US$/40 ft container) 52-Week Hvol (right axis) Estimated average E/W unit rates versus spot market (1Q12=100) Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Estimated average unit rate, East/West container market WCI Index (quarterly average) Sources: Drewry Maritime Research, World Container Index assessed by Drewry (

5 Missed sailings only scratching the surface Estimated monthly capacity reductions from missed voyages and impact on trade utilisation Asia to North Europe 6% 5% 4% 3% 2% 1% Asia to Mediterranean 7% 6% 5% 4% 3% 2% 1% 0 Oct-12 Jan-13 Apr-13 Jul-13 Capacity reduction ('000 teu) Load factor gain (percentage points) 0 Oct-12 Jan-13 Apr-13 Jul-13 Capacity reduction ('000 teu) Load factor gain (percentage points) Asia to WCNA 7% 6% 5% 4% 3% 2% 1% Asia to ECNA 4% 3% 3% 2% 2% 1% 1% 0 Oct-12 Jan-13 Apr-13 Jul-13 Capacity reduction ('000 teu) 0 Oct-12 Jan-13 Apr-13 Jul-13 Capacity reduction ('000 teu) Load factor gain (percentage points) Source: Drewry Maritime Research

6 6 Containership reliability weakening slightly Drewry containership on-time reliability 1Q08-2Q % 7 65% 6 55% 5 45% 4 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11 3Q12 2Q13 On-time reliability of P3 carriers Containership reliability down in 2Q13 Dropped for two consecutive quarters Asia trades hit by Hong Kong strike Not all carriers are the same Wide gaps between most and least reliable carriers VSAs are grouping carrier results and lessening differentiation P3 Network to raise standards Maersk expected to enforce high reliability on partners 2 Risks Shippers need to keep eye on carrier partnerships to avoid putting all eggs in one basket Source: Drewry Carrier Performance Insight

7 Shippers need to stay vigilant with market intelligence 7

8 '000 teu Container Market Balance Global supply/demand balance 8 22, ,000 18,000 16,000 14,000 12, , Effective capacity Global S/D Index RH axis (100 = equilibrium) Physical market index RH axis 80 Note: Effective capacity allows for deadweight, high cube and slow steaming adjustments; Physical market index allows for estimated Idling activity Source: Drewry s Container Forecaster Global supply/demand balance will not reach equilibrium until 2016 Carriers will be forced to cull services & use more short term capacity management Expect more missed sailings Expect more frequent GRI attempts Source: Drewry s Container Forecaster 8

9 Freight Rate Forecast East-West & Global Trades Weighted freight rates and supply/demand index comparison on East-West trades 1,600 East-West rates may rise slightly in 2014 Weak market but capacity management Forecast for 2014 of +3% rise East-West supply/demand index 900 Weighted East/West freight rate including fuel charges ($ per teu, right axis) Weighted East/West freight rate excluding fuel charges ($ per teu, right axis) Source: Drewry s Container Forecaster 1,500 1,400 1,300 1,200 1,100 1,000 Global rates to rise at slower pace 2H 2013 seeing price war on some North-South routes Forecast for % rise in all-in rates Freight rate volatility to continue Carrier short term behaviour Skipped sailings & frequent GRIs 2 Risks Rate hikes Carrier debt risk less worrying than in 2009/10 No risk of capacity shortages on the horizon, but frequent skipped sailings

10 10 Conclusions Container freight rate volatility not new, but very high currently Overcapacity & weak demand is driving container freight rates down Carriers are reacting by adjusting capacity and pooling resources Shippers need to remain vigilant and gather market intelligence Global & East-West freight rates will remain under pressure Volatility to remain without longer term carrier-shipper partnerships

11 11 Drewry was founded in 1970 as a provider of independent information and advice to the global maritime industry. Since then we have worked with over 4,000 clients in more than 100 countries. We are privately owned with research and advisory teams in London, Delhi, Singapore and Shanghai. Check out Drewry s new Container Freight Rate Insight web site at UK Office Drewry Christopher Street London EC2A 2BS,United Kingdom Telephone: +44 (0) India Office Drewry 209 Vipul Square, Sushant Lok-1 Gurgaon , India Telephone: /32 Singapore Office Drewry 5 Shenton Way #33-02, UIC Building, Singapore Telephone: / Shanghai, China Drewry 555, 5th floor Standard Chartered Tower 201 Shi Ji Avenue, Pudong District Tel: +86 (0) supplychains@drewry.co.uk