Ocean freight in 2018 challenges for BCOs

Transcription

1 Ocean freight in 2018 challenges for BCOs JOC Container Trade Europe conference Philip Damas, Director Head of Drewry Supply Chain Advisors September 18, 2017

2 Agenda Drewry Challenge 1: fewer ocean carriers Challenge 2: less spare capacity, less reliable frequency? Challenge 3: higher contract freight rates Implications and conclusions 2

3 Drewry 3 Our research provides the robust analysis and balanced opinion those within shipping, finance and logistics need to make informed business decisions. The range of titles and reports we publish keep our clients up to date on every key maritime sector, from dry bulk to chemicals and from LPG to ferries, with detailed analysis and insightful commentary on past, present and future sector performance. Our Maritime Advisors offer a wealth of experience across the maritime sectors and lead the industry in their respective areas of specialisation. Our sector expertise covers; ports, bulk shipping, liner shipping, shipyards, ferry and RoRo, technical ship management. Our combination of deep sector understanding, technical expertise and market leading insight enables us to be confident in our actions and ability to deliver the right results for our clients. We focus on advising users of international multi-modal transport services, taking our extensive understanding of the industry and applying it to all stages of the supply chain. Through our supply chain research catalogue and industry knowledge, we offer a range of procurement support services that empower importers and exporters, providing them with the tools, resources and tailored advice they need to more effectively manage their transport service provider and international supply chains. Combining our market- leading resources with seasoned sector expertise and commercial awareness we are now able to offer a highly differentiated and comprehensive Investment Research Service to prospective investors in publically listed maritime and shipping companies. Our service covers a range of report formats, supporting resources and sector orientated webinars aimed at providing our clients with the most complete picture of the organisations under coverage as is possible.

4 Carrier Consolidation Super-Cycle of Fewer carrier options; loss of relationships Transaction completion date CMA CGM (8.3%) NOL (2.1%) CMA CGM (10.4%) September 2016 COSCO (4.9%) CSCL (4.3%) Cosco Shipping (9.2%) October 2016 Hapag-Lloyd (4.2%) UASC (2.6%) Hapag-Lloyd (6.8%) May 2017 Maersk (15.7%) Hamburg Süd (2.7%) Maersk (18.4%) Completion pending Cosco Shipping (9.2%) OOCL (3.3%) Cosco Shipping (12.5%) Completion pending MOL (2.6%) NYK (2.9%) K-Line (1.9%) Ocean Network Express (7.5%) Completion pending Hanjin shipping (2.6%) Bankrupt August Note - Percentages within brackets represent capacity market share Source: Drewry Maritime Financial Research ()

5 Less spare capacity? Carriers manage their capacity more tightly Asia-North Europe westbound and eastbound load factors (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1Q Q Q Q Q Q Q Q Q Q Q 2017 Eastbound Westbound 5 Source: Drewry s Container Forecaster ()

6 Lower reliability of frequency of sailings Carrier missed sailings can take out 3% of capacity Number of containership missed sailings, by month Asia-Med Asia-North Europe 6 Source: Drewry s Container Forecaster ()

7 Higher contract freight rates Contract rate deflation has reversed Recent trend: On average, 3Q 17 Asia-Europe and transpacific rates are 39% higher than a year ago Based on contract freight rate data from BCOs in the Drewry Benchmarking Club Based on US$3 billion of freight spend Source: Drewry Benchmarking Club 15% 10% 5% 0% -5% -10% -15% -20% -25% % change quarter-on-quarter 9% 7% 3% 4% -3% -6% -5% -3% -18% -19% 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 7

8 Example of new BCO strategy with e-sourcing Switch from global NVO contract to direct carrier contracts Client objectives and expectations Smooth transition to direct carrier contracts using good incumbent providers; Strict evaluation of providers capabilities, costs and services through optimisation; Thorough financial risk assessment of providers; Competitive quality and service to improve predictability; Best possible service at the lowest possible cost. Drewry s e-sourcing Ocean Freight Solution (esofs ) Results Achieved Finals and awards resulted in reduced costs of about 13% when comparing the final round to round 1. The process from planning to award of contracts took 3 months, as planned. Direct carrier contracts were secured. Risk mitigation measures were implemented. For the 2 major tradelanes, a market advantage of 9% and 16% were secured for the customer. 8

9 Implications for BCOs & shippers More adverse business environment; control what you can Today s business environment is starkly different for BCOs fewer carrier options, spare capacity, possibly less reliable frequency of sailings, rising rates New objectives: cost avoidance, risk avoidance improved trade-off between cost and service Last year s contract strategy will simply not work as a blueprint for the forthcoming annual ocean tender; need to re-think your contract negotiation strategy By incorporating benchmarking and e-sourcing best practices in your tender management process, rate increases can be mitigated #JusteBidIt! 9 Use of big data and optimisation in tender technology can also help find the best combination of bids

10 Thank you! Philip Damas UK INDIA SINGAPORE CHINA Christopher Street London EC2A 2BS United Kingdom 209 Vipul Square Sushant Lok - 1 Gurgaon India #13-02 Tower Fifteen 15 Hoe Chiang Road Singapore Unit D01, Level 10, Shinmay Union Square Tower 2, 506 Shangcheng Road Pudong, Shanghai T T T T