Drewry Supply Chain Advisors

Transcription

1 Container shipping - market trends and contract risks. Multimodal 2011 Conference, Birmingham 6 April

2 Agenda 1. Container shipping market trends If container freight was a car Global demand Asia-Europe demand Global ship supply Asia-Europe ship supply Supply and demand balance 2. Contract and execution risks Complex drivers of freight rates Cost volatility Fuel risk Counter-party risk Capacity risk Freight rates 2

3 Container shipping market trends If container freight was a car Price 20K 14K 21K 19K (-30%) (+50%) (-10%) Availability Within a week You can get 3 Just wait Within a week in store today your turn

4 Container shipping market trends Source: Unmasking Freight Rates report (March 2011)

5 Container shipping market trends Global demand 15% Global loaded container traffic (% change) 10% 5% 0% % -10% Global container traffic bounced back in 2010 and will continue to increase by 8% to 9% in the next few years.

6 Container shipping market trends Asia-Europe demand 25% Asia-to-North Europe container traffic (% change) 20% 15% 10% 5% 0% -5% % -15% Asia-to-Europe container traffic slowed down, but growth continues million TEU shipped 2011F forecast +0.6 million TEU shipped

7 Container shipping market trends Purchasing managers indices Source: Drewry Freight Shipper Insight

8 Container shipping market trends Global supply, orderbook as of March 2011

9 Container shipping market trends Global ship supply, increases in capacity 1.4 Annual increase in global ship capacity (million TEU-slots)

10 Container shipping market trends Asia-Europe supply container service options 31 services Asia to Europe Only 20 call UK Only 5 have UK as first call UK is being sidelined There are service choices to be made between carriers Carriers have absorbed capacity by slow steaming and using additional ships A 10 th ship adds 3.5 days to transit time Who pays rates not cheap anymore Ships are getting bigger 18,000teu compared current average of 7.900teu Fewer port calls means increasing concentration on Rotterdam/Hamburg

11 Container shipping market trends Asia-Europe supply additional services Service name / carriers Starting Weekly capacity Annual capacity (nominal TEU) (nominal TEU) NE6 / CKYH alliance April 10,000 TEU 520k TEU Evergreen/Zim/CSCL April 8,700 TEU 450k TEU MSC? New loop? 14,000/12,500 teu ships awaiting delivery?? CMA CGM 5 x 11,388 teu ships awaiting delivery?? Maersk 5 x 13,092 teu ships awaiting delivery / new AE6 loop?

12 Container shipping market trends Supply and demand balance and freight rates $1, $1,550 $1,500 $1,450 $1,400 $1,350 $1,300 $1, Average eastwest freight rate ($/teu) Global supplydemand index $1,200 $1, $1,

13 Contract and execution risks Complex drivers of freight rates A wide range of issues have contributed to the pricing volatility of the industry. Some of the major issues include: Supply/demand s influence on rates; The influence of the orderbook; New rate hedging possibilities; Shipper-carrier relations; Carrier profitability and mind-set. Source: Unmasking Freight Rates report from Drewry Maritime Research

14 Contract and execution risks Cost and freight rate volatility Economic cycles and seasonality affect prices as well as liner industry inability to match long term supply with short term demand. Serious procurement strategies essential to minimise already high impact on landed cost unpredictability even for SMEs. Big changes going on in shipping with sizes of ships, reduced service levels, UK port calling and patchy reliability. Source: Drewry Container Forecaster

15 Contract and execution risks Fuel risk 1,800 1,600 Development of average east-west freight rates (including surcharges) and average bunker surcharges (in $/TEU) from ,400 1,200 1, Rate incl BAF BAF per TEU Bunker per tonne 0

16 Contract and execution risks Fuel risk Asia-Europe Bunker Adjustment Factors Source: Drewry Freight Shipper Insight

17 Contract and execution risks Counter-party risk Shipping contracts are commonly abused by either party. 2010: most carriers walked away from rate and capacity agreements and forced unilateral price increases Questions: Is your carrier contract an exchange of s or a proper contract? Do your carrier contracts have real teeth? Can your carriers walk away from the contract? Can you ensure service/capacity guarantees from carriers? In financial jargon, there is a major counter-party risk with current shipping contracts.

18 Contract and execution risks Capacity risk Enough ship capacity? supply/demand balance, idle ships, new ships Enough containers? container production, carriers prepared Predictable services / continuity of services? sustainability of services? Carrier performance / capacity allocations? No roll-overs? carriers go after the highest-paying cargo unless there are strict reciprocal commitments

19 Contract and execution risks Capacity risk 5000 Global production of maritime containers (000's teu) F 2012F

20 Conclusions - Cost volatility remains a big issue - Container traffic has recovered and is growing, production indices are positive - Capacity of ships due to be delivered this year is large and is mainly for the Asian trades (ships of more than 7,000teu) - UK port calls are being side-lined - Slow-steaming will continue supply-demand not strong, but market will harden in 2012/13 - Fuel surcharges already at $700 Asia-Europe and will rise further - Fewer issues with capacity and container equipment shortages - Many complex drivers of freight rates plus cyclical effects need to minimise high impact on landed cost unpredictability

21 Drewry Supply Chains Advisors A division of Drewry Philip Damas Division Director supplychains@drewry.co.uk 21