Perfect Storm to Calmer Seas, The Timeline for Global Shipping Recovery A Joint Webcast from IHS Global Insight and Lloyd s Register-Fairplay Research
Introducing the IHS Global Insight and Lloyd s Register-Fairplay Research Partnership Chris Holling IHS Global Insight Vice President, Consulting Services
A New Partnership Upon IHS acquisition of Global Insight in October 28, Lloyd s Register- Fairplay Research and IHS Global Insight are now a part of IHS. IHS Global Insight: Is the world leader in economic and financial analysis, forecasting, and market intelligence, covering hundreds of industries and over 2 countries. Our Global Commerce & Transport practice provides demand-based insight and forecasts on international commodity trade and independent analysis of the global commerce and transport industries. Lloyds Register-Fairplay Research: Is ISO certified for the provision of information services for the shipping industry including the provision of global on-line maritime asset tracking. LRF is the only organization to provide comprehensive details of the current world merchant fleet. Lloyd's Register-Fairplay Research undertakes market analysis covering a range of maritime sectors and subjects covering legal, ecology, technology, and many more.
Together We Create More for You The partnership between IHS Global Insight and Lloyd s Register-Fairplay Research enables us to deliver complete endto-end analysis, covering both demand and supply of the international maritime industry Together, we can answer questions such as: When will maritime supply stop outpacing demand? What ocean routes are used by certain ship types and how will this change in the future? What impact will declining international trade demand have on the ship building industry? And many more!
Demand Focus: IHS Global Insight Estimating and forecasting the movement of commodities and manufactured goods around the world World Container Trade Volume Down 5.8% in 29 2 (Percent Change in Volume of Container Trade, in TEUs) 15 1 5 21 22 23 24 25 26 27 28 29 21 211 212 213 214-5 -1
Demand Focus: IHS Global Insight Views at the global, all commodity level down to specific ports, commodities, and modes
Supply Focus: Lloyd s Register-Fairplay Measuring and forecasting the global shipping fleet and tracking vessel movements around the world
Supply Focus: Lloyd s Register-Fairplay Real time vessel movements LA/Long Beach
Unprecdented Demand-Supply Imbalances Supply and Demand Analysis points to significant fleet over capacity with little prospect for demand growth to absorb the capacity. Seaborne trade filled containers, million teu 24 22 2 18 16 14 12 1 8 6 4 2 Supply Container Fleet Capacity (right scale) Lloyd's Register-Fairplay Forecast as of 29-4 Demand Filled Container Trade (left scale) IHS Global Insight 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 2 15 1 5 Container carrier fleet million teu
Featured Speakers Paul Bingham IHS Global Insight Managing Director, Global Commerce and Transportation Group Christopher Pålsson Lloyd's Register-Fairplay Research Manager and Senior Consultant Niklas Bengtsson Lloyd's Register-Fairplay Research Project Manager and Senior Consultant
Perfect Storm to Calmer Seas, The Timeline for Global Shipping Recovery Paul Bingham IHS Global Insight Managing Director, International Global Commerce and Transportation Group
The Great Recession Has Reduced the Value and Volume of Global Shipping Demand North America, Europe, and Japan have all seen trade decline Export-led growth of emerging markets like China has fallen Financial crisis has limited trade on top of drop in consumption However A Great Depression-style protectionist trade war is unlikely Huge fiscal and monetary stimulation will help to boost traded goods consumption, though trade prices remain weakened Currency exchange rates also affects import prices, export competitiveness and trade growth Base line world macro economic forecast: Deep recession in 29, modest recovery in 21, and a broader rebound in 211
The Business Cycle is Not Dead: The World Economy Recovers Starting in 21 8 (Percent change for the world economy) 6 4 2-2 -4 198 1984 1988 1992 1996 2 24 28 212 Real GDP Industrial Production
Economic Performance Varies by Region Developed Country Economies Are Shrinking 1 (Real GDP, percent change) 8 6 4 2-2 -4 North America Western Europe Japan Other Americas Emerging Europe Mideast- N. Africa Sub- Saharan Africa Other Asia- Pacific 27 28 29 21
Shipping Ultimately Depends on Goods Demand Underlying consumption demand is fundamental to shipping Globally-integrated international supply chains have developed to provide efficiencies of scale but have increased the interdependencies between economies in good times and bad The increased importance of trade to countries economies has increased their vulnerability to external forces Financial markets are critical to the facilitation of ocean trade Globalization of markets has not reversed in recession but protectionism and trade finance can affect recovery of trade
World Trade Still Grows Over the Long Term; A Drop in 29 Due to Lower Demand & Prices 45 (World imports, percent of GDP) 4 35 3 25 2 15 198 1985 199 1995 2 25 21 215 22 225 23 235 Long-term trend towards increased trade will return with recovery next year
Long-term U.S. Dollar Exchange Rate Decline Boosts U.S. Export Competitiveness; Increases Imported Goods Prices (Real Trade-Weighted Dollar Index, 2=1.) 1976 198 1984 1988 1992 1996 2 24 28 212 Major Trading Partners Other Important Trading Partners
Value of World Goods Trade Drops Sharply in 29 2 (Percent Change in Real Value of Merchandise Trade) 15 1 5 21 22 23 24 25 26 27 28 29 21 211 212 213 214-5 -1
World Seaborne Tonnage Falls 2.8% in 29 14 (Percent Change in Tonnage of World Sea Trade) 12 1 8 6 4 2-2 23 24 25 26 27 28 29 21 211 212 213 214-4
World Container Trade Volume Down 5.8% in 29 2 (Percent Change in Volume of Container Trade, in TEUs) 15 1 5 21 22 23 24 25 26 27 28 29 21 211 212 213 214-5 -1
East West Container Trade Volumes Up in 21 2% (Percent Change in Volume of Container Trade, in TEUs) 15% 1% 5% % -5% 23 24 25 26 27 28 29 21 211 212 213-1% -15% -2% US-Asia US-Europe
China Export Growth has Slowed Most with United States (Merchandise exports 6-month moving average, percent change from year earlier) 5 4 3 2 1 2 21 22 23 24 25 26 27 28 Total Asia Europe U.S.
Implications for Global Ocean Shipping Demand In the short run, shippers are operating close to survival mode, under pressure to minimize costs and inventory Long-term, rebounding and increasing trade brings trade volume back, with some accelerated changes in geography of sourcing The pace of trade growth will be affected by the total delivered costs for the goods as well as remaining impediments to trade Long-term trade growth will be influenced by environmental, energy, security, safety, labor, and infrastructure factors as translated into costs and transportation service quality
Thank you! Paul Bingham Managing Director - International Global Commerce and Transportation paul.bingham@ihsglobalinsight.com + 1 22.481.9216
When Will the Shipping Recession Turn to Smoother Waters? Christopher Pålsson Lloyd's Register-Fairplay Research Manager and Senior Consultant Niklas Bengtsson Lloyd's Register-Fairplay Research Project Manager and Senior Consultant
Agenda Status report Freight and charter rates Indicators Ship supply Fleet development 29 213 Container carriers Vehicle roro carriers Oil tankers Dry bulk carriers Ways to decrease supply The turning point
Ocean Freight Rate Indices LRFR indices 25=1 3 25 2 15 Tanker: crude Tanker: product Bulker: iron ore Container: FEast-Europe 1 5 2 21 22 23 24 25 26 27 28 29 Sources: Maritime Research, Federal Statistics Office Germany, LRFR
Time Charter Indices Container Time Charter Rates, Harpex Index 2,5 2, 1,5 1, Panamax 4-51TEU, 12-48 mo Panamax 3-4TEU, 12-48 mo Feeder 1-1299TEU, 3-24 mo Feeder 75-1TEU, 3-24 mo 5 Source: HarperPetersen 2 21 22 23 24 25 26 27 28 29
Port Activity Indicators 18 16 14 Index Jan. 27=1 12 week rolling average 12 1 8 6 Crude Bulker Container Vehicle roro 4 2 26 27 28 29 Week
New Ship Ordering Indicator Newbuilding orders per month, ARMA3 number of ships 7,2 6 Annualised Contracting, >1, Gt no of Ships. 6, 4,8 3,6 2,4 1,2 Updated: 29-4-7 5 4 3 2 1 Monthly Contracting, number of Ships. 21 22 23 24 25 26 27 28-9 Annualised 3 month average Monthly Contracting (Right axis)
211 Supply of Ships 2, 1,8 1,6 1,4 1,2 1, 8 6 4 Total World fleet, million dwt, 196-2 196 1963 1966 1969 1972 1975 1978 1981 1984 1987 199 1993 1996 1999 22 25 28 29-4 Tanker Bulker & GC Container & Roro Passenger Misc. Forecast
The Orderbook Dwt 7 Forecast 6 29-213 213-35 M dwt Orderbook, End of Year, Million Dwt 5 4 3 2 1 1969 1973 1977 1981 1985 1989 1993 1997 21 25 29 213 29-3 Tanker Bulker & GC Container & Roro Passenger Misc
Cancellations per Month Percent of orderbooks based on number of ships 1% Cancellations vs orderbook, numbers, per cent 9% 8% 7% 6% 5% 4% 3% 2% 1% 12 full year 21 221 28 33F 29 23F 21 % 2 21 22 23 24 25 26 27 28 29 21 Forecast Actual 6m average
Removals Total World, removals, million dwt, 1978-5 45 4 35 3 25 2 15 1 5 Forecast 1978 1981 1984 1987 199 1993 1996 1999 22 25 28 211 29-4 Tanker Bulker & GC Container & Roro Passenger Misc.
Container Carrier Fleet (Register data) 2. 1.8 Orderbook 5.8M teu = 47% fleet 2 Container Carrier Deliveries, MTEU 1.6 1.4 1.2 1..8.6.4 13% pa 24-28 16 12 8 4 Container Carrier Fleet Development, MTEU.2. 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removed Orderbook Cancelled Fleet Development
Container Carrier Fleet Forecast 2.5 2 24-28 28 Fleet growth 13 % yearly FORECAST 29-213 213 Removals 95k teu (+421%) Cancellations Container Carrier Deliveries, MTEU 2. 1.5 1..5 9.3% forecast 29-213 16 12 8 4 Container Carrier Fleet Development, MTEU 9% vs orderbook. 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removal Forecast Removed Late Deliveries Delivery Forecast New Order Moved Cancellations Fleet Development
Supply/Demand Containers Seaborne container trade 24 Forecast as of 29-4 2 New, more complex systems lead to more transports of empties. The market is supply driven, thus seems the gap larger than what is expected. Seaborne trade filled containers, million teu 22 2 18 16 14 12 1 8 6 4 2 Source: Trade forecaster, IHS Global Insight Source: Trade forecaster, IHS Global Insight 15 1 5 Container carrier fleet million teu 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Seaborne transported container Container carrier fleet
Vehicle Carrier Fleet (register data).5 Orderbook 1.2M ceu = 38% fleet 5 Vehicle Carrier Deliveries, MCEU.4.3.2.1 9.3% pa 24-28 4 3 2 1 Vehicle Carrier Fleet Development, MCEU. 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removed Orderbook Cancelled Fleet Development
Vehicle Carrier Fleet Forecast 24-28 28 Fleet growth 9.3 % yearly FORECAST 29-213 213 Vehicle Carrier Deliveries, MCEU Removals 647k ceu (+1,575%).5.4.3.2.1 5.3% forecast 29-213 5 4 3 2 1 Vehicle Carrier Fleet Development, MCEU. 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removal Forecast Removed Late Deliveries Delivery Forecast New Order Moved Cancellations Fleet Development
Vehicle Carrier, Supply vs Demand The Asia Indicator The Asian indicator illustrates the base demand for vehicle carriers capacity over time. Light vehicle production reduced with sales, million vehicles 15. 13.5 12. 1.5 9. 7.5 6. 4.5 3. 1.5 Forecast as of 29-4 -32% +15% +18% Source: Light vehicle, IHS Global Insight: AutoInsight Source: Light vehicle, IHS Global Insight: AutoInsight 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5 Vehicle carrier fleet Million CEU. 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213. Asia (Production - Sales) Vehicle carriers
Oil Tanker Fleet Orderbook 6 55 134M dwt = 37% fleet 6 55 5 5 Oil Tanker Deliveries, MDwt 45 4 35 3 25 2 15 5.1% pa 24-28 45 4 35 3 25 2 15 Oil Tanker Fleet Development, MDwt 1 1 5 5 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removed Orderbook Cancelled Fleet Development
Oil Tanker Fleet Forecast 6 55 5 6.% forecast 29-213 6 55 5 24-28 28 Fleet growth 5.1 % yearly FORECAST 29-213 213 Removals 66M dwt (+6%) Oil Tanker Deliveries, MDwt 45 4 35 3 25 2 15 1 5 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removal Forecast Removed Late Deliveries Delivery Forecast New Order Moved Cancellations Fleet Development 45 4 35 3 25 2 15 1 5 Oil Tanker Fleet Development, MDwt
Supply/Demand Crude Oil The red line is measured in tonnes and not in ton-miles. Sourcing of oil is key. Seaborne trade crude oil, million tonnes 3, 2,75 2,5 2,25 2, 1,75 1,5 1,25 1, 75 Forecast as of 29-4 Source: Trade forecaster, IHS Global Insight 45 4 35 3 25 2 15 1 Crude oil tanker fleet million dwt 5 25 Source: Trade forecaster, IHS Global Insight 5 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Seaborne crude oil transport Crude oil tanker fleet
Bulk Carrier Fleet (register data) 125 Orderbook 291M dwt = 69% fleet 75 1 6 Bulker Deliveries, MDwt 75 5 6.6% pa 24-28 45 3 Bulker Fleet Development, MDwt 25 15 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removed Orderbook Cancelled Fleet Development
Bulk Carrier Fleet Forecast 24-28 28 Fleet growth 6.6 % yearly FORECAST 29-213 213 Removals 79M dwt (+39%) Bulker Deliveries, MDwt 125 1 75 5 25 1.2% forecast 29-213 75 6 45 3 15 Bulker Fleet Development, MDwt Cancellations 9% vs orderbook 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 In Service Removal Forecast Removed Late Deliveries Delivery Forecast New Order Moved Cancellations Fleet Development
Supply/Demand Bulk Carriers The red line is measured in tonnes and not in ton-miles. Given increased transport distance for iron ore the gap looks worse than foreseen. Seaborne transport of Ore, coal and scrap, million tonnes 2,8 2,4 2, 1,6 1,2 8 4 Forecast as of 29-4 Source: Trade forecaster, IHS Global Insight Source: Trade forecaster, IHS Global Insight 7 6 5 4 3 2 1 Bulk carrier fleet million dwt 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Seaborne ore, coal and scrap Bulker
Ways to Decrease Supply Scrapping Already included in forecast Scrap capacity bottleneck Conversion Slow steaming Rerouting Due to slow steaming New networks/routes Avoid pirates Avoid canal charges Idle Warm or cold lay-up Maintenance & repairs
Turning Point For a sustainable business operation Container Average annual net fleet capacity growth 29-213: 8.9% Consolidation continues cash is King! Time for containerization of new cars? Average annual demand growth 29-213: 4.% Turning point: Mid-21, but only to modest earnings at best Vehicle Average annual net fleet capacity growth 29-213: 5.3% Vehicle carriers (and terminals) under threat from containerization Average annual demand growth 29-213: 2.9% Turning point: Late-21 for cars, earlier for project cargoes Bulker Average annual net fleet capacity growth 29-213: 1.2% Infra-structure investments in China, M East, S America Average annual demand growth 29-213: 1.8% Turning point: Beyond 21 Tanker Average annual net fleet capacity growth 29-213: 6.2% Average annual demand growth 29-213: 1.8% Turning point: 4Q-9
Thank you Christopher Pålsson Lloyd's Register-Fairplay Research Manager and Senior Consultant Niklas Bengtsson Lloyd's Register-Fairplay Research Project Manager and Senior Consultant research@lrfairplay.com +46 31 74 433
Question and Answer To ask a question, please type your question in the Ask a Question box within the Webcast system and then click Send
For More Information Diana Wyman, IHS Global Insight, Business Development Director, Americas, Asia: +1 22 481 9265, diana.wyman@ihsglobalinsight.com Ian Creates, IHS Global Insight, Business Development Director, EMEA: +44 2 7452 5192, ian.creates@ihsglobalinsight.com Christopher Pålsson, Lloyd s Register-Fairplay Research, Manager and Senior Consultant: +46 31 74 433, chris.palsson@lrfairplay.com