Uncertain business environment High capex business model Rising fuel cost Environmental compliance Equipment
CHALLENGES
TRANS-PACIFIC
21 million TEU
ASIA-EUROPE
17 million TEU
TRANS-ATLANTIC
6 million TEU
INTRA-ASIA
56 million TEU (including Australia,
Indian Subcontinent and
Middle East)
OTHER TRADES
North-South :
24 million TEU
Intra-Regional:
16 million TEU
2010 WORLD CONTAINER FLOW
Worldwide: 140m TEU in 2010
CONTAINER TRAFFIC GROWTH
AVG: 12.4%
AVG 8.2%
-15%
-10%
-5%
0%
5%
10%
15%
20%1
98
11
98
21
98
31
98
41
98
51
98
61
98
71
98
81
98
91
99
01
99
11
99
21
99
31
99
41
99
51
99
61
99
71
99
81
99
92
00
02
00
12
00
22
00
32
00
42
00
52
00
62
00
72
00
82
00
92
01
0
Recessions
???
FREIGHT RATE LOWER THAN 1994
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
1Q
94
4Q
94
3Q
95
2Q
96
1Q
97
4Q
97
3Q
98
2Q
99
1Q
00
4Q
00
3Q
01
2Q
02
1Q
03
4Q
03
3Q
04
2Q
05
Q1
06
Q4
06
Q3
07
Q2
08
Q1
09
Q4
09
TPT EB AET WB TAT WB
IT Bubble
Financial Bubble
Vari
Fixed
Fixed
Var
COST REV REV COST
Loss
Cash
(-Cash)
Rate
Low fixed asset, Less capital When losing, close shop & run
Vari
Fixed
Loss
Cash
(-Cash)
Rate
Huge fixed asset, huge debt Even losing, cash is life & death
THE CASH FLOW TRAP
Most Businesses Carrier Businesses
FINANCIAL HEALTH CHECK
0
0.5
1
1.5
2
2.5
3
3.5
OO
IL
Mae
rsk
NO
L
Wan
Hai
Ever
gree
n
CSCL
MO
L G
rp
K L
ine
Grp
NYK
Grp
Hap
ag-L
loyd
CMA
CG
M
Zim
CSA
V
Cosc
o
Yang
Min
g
HM
M
Han
jin
Hor
izon
Z-Score
Healthy Zone
Caution Zone
Distress Zone
Source: Drewry FSI, Sept 2011
Z-score = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 1.0T5
T1 = (Cur Assets-Cur Liabilities) / Total Assets T2 = Retained Earnings / Total Assets T3 = Annual Earnings B4 Int & Tax / Total Assets T4 = Book Value of Equity / Total Liabilities T5 = Annual Sales / Total Assets
TP STRUCTURAL WITHDRAWAL
Structural VMS Service Name TEU/Week Eff Date
HJS, COSCO, PIL, WHL Central China-Long Beach Express (CLX) 4,200 10/11/11
Hainan POS, TS Lines China-US West Coast Express 3 (TP-3) 2,800 10/11/11
NWA Pacific Coast Express - PCE 4,700 10/11/11
HJS, WHL, COSCO Singapore-Japan-California service (SJX) 5,500 11/11/11
EMC Split UAM pendulum to PNW/FEM 5000 11/11/11
GA Transpacific / JCX (Japan China Express) 4,300 11/11/11
CKYH PSW 4 5000 11/11/11
Horizon Lines US-China service, Five Star Express (FSX) 2,800 11/11/11
GA SCE and SCE2 combine to combo 4,500 11/11/11
Grand China Super Pacific Express - SPX 2,700 11/11/11
CKYH (+MOL) AW4 and AW5 Suez services combine 5,770 11/25/11
All Announced 47,270
Over 10% of Transpacific Capacity Been Withdrawn Since Sept
TP AD HOC WITHDRAWALS
Ad hoc VMS Service Name TEU/Wk Week
MSC Eagle (PSW) 7,500 Wk 40/41
CKYH Calco-Y/PSW2/YPS (PSW) 4,300 Wk 40
CKYH (HJ) CAX - China America Express (PSW) 4,275 Wk 41
CSCL/EMC CPS/AAC - China (PSW) 8,500 Wk 41
PIL CTP - China Transpacific Australia (PSW) 1,600 Wk 41
Grand China Shipping SPX - Super Pacific Express (PSW) 2,700 Wk 41
CKYH + WHL SJX (PSW) 4,350 Wk 41
GA CCX (post China National Holiday) (PSW) 6,160 WK 42
CKYH Calco-C/PSW1/SCP (PSW) 3,500 Wk 42
NWA PCX- Pacific China Express (PSW) 6,500 Wk 43
EMC UAM (PNW) 5,500 Wk 40
CKYH PCN (PNW) 8,600 Wk 40
CSCL ANW (PNW) 3,000 Wk 41
CMA PEX3 (AWR) 5,500 Wk 40
GA SCE (post China National Holiday) - (AWR) 4,578 Wk 41
EMC/CSCL AUE2/AAE (AWR) 4,200 Wk 41
CKYH NATCO5/AW5 5,500 Wk 41
All Ad Hoc Withdrawals 86,263
CARRIERS IRRATIONAL BEHAVIORS
The environment is bad … let’s kill ourselves … the environment gets worse…
Five story high, weigh up to 2,500 tons
Burns about 5,000 ton of fuel/TP loop
1,000 times more powerful than a car !
THE ENGINE OF WORLD TRADE
BUNKER (HEAVY FUEL OIL)
Production
1-5 % Gas/LPG
25 % Gasoline
10 % Chemicals
10 % Kerosene
35 % Diesel
1-5 % Others
Pro
fit
Mar
gin
Low
High
High
$350
$400
$450
$500
$550
$600
$650
$700
$750
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11
Bu
nke
r P
rice
Cru
de
Oil
Pri
ce
WTI Brent SGP 380CST
BUNKER PRICE VS. CRUDE OIL INDEX
Decoupling Effect
CO2 emission
trading from 2013
Price of Heavy Fuel Oil {HFO} will
continue to rise in the long run (2.5% pa)
2020: SOx-limits for fuel
apply globally. MGO
demands a premium >
50% of Heavy Fuel Oil
CLEAN FUEL > HIGH PRICE
ENERGY EFFICIENCY DESIGN INDEX Adopted July 15th, 2011
EEDI = Environmental cost Benefit to Society
EEDI: IMO NEW STANDARDS
EVOLUTION OF EEDI FORMULA
Basic Concept:
MEPC 57/4/12
GHG-WG 1/2/1
MEPC 58/4
MEPC 58/4/35
MEPC 58/23
MEPC.1/Circ.681
wrefi
neff
i
MEiFMEieffeffAEFAE
neff
i
AEeffeff
nPTI
i
PTI
M
j
jAEFAEAE
nME
i
MEiFMEiMEi
M
j
j
fVCapacityf
SFCCPfSFCCPfPfSFCCPSFCCPf
111111
*
Ships will get more expensive
“Skysails” - wind-
powered cargo ships Container ships powered by sun,
wind, fuel cells = zero emissions!
Hydrodynamic and
Aerodynamic alternatives
Ballast free ships: no pollution
by foreign creatures and algae
FUTURE ECO TECHNOLOGIES
ENVIRONMENTAL SHIP DESIGN
Ballast Water
Noise Reduction
Alternate Power
Cargo Systems
Lightweight Material
Ship Systems
Hull/Propeller INT
Waste Handling
Emission to Air
HASMAT Storage
Fuel Systems
Decision Support
Discharge to Sea
Coating
Hull Form Design
MOVING TOWARDS AN EFFICIENT MODEL
Inefficiencies of current chassis model
Liners not good managing surface vehicles
Inefficiency of individual fleet ownership
Fixed cost vs. variable cost
Solutions to customers
Right equipment, right time, right place
Pools, leasing co, trucker/shipper chassis
Transitional pain
Confusion and uneasiness
More clarity and transparency needed
EXPANSION TO TAKE LARGER SHIPS
33.5 m
32.3 m
12.8 m 305 m
294 m
Existing Canal
427 m
49 m
366 m
55 m
18.3 m New Canal 2014
28 Days,$XXX
Norfolk
5 days $YYY
3 days $YYY
12 days, $XXX
$ VS TT: KEY IS TIME SENSITIVITY
Memphis
6 days $YYY
2 days $YYY
Atlanta
7 days $YYY
5 days $YYY
2 days $YYY
2 days $YYY
South China
Trade Off≈ Incremental Cost
Incremental TT
[($Xe+$Ye) - ($Xw+$Yw)]
[(TToe+TTi) - (TTow+TTi)] ≈
Long Beach
Chicago Columbus
pieces in a container
2008 2009 2010 2011 2012 2013
De
man
d
Alphaliner demand - Oct11 5.8% -8.6% 14.0% 7.6% 6.9% 7.8%
Clarkson demand - Aug11 4.3% -9.1% 12.6% 9.0% 8.9%
CreditSuisse - May11 4.1% -9.4% 12.1% 8.2% 8.6% 8.3%
Drewry demand - Oct11 5.1% -10.9% 15.3% 7.2% 7.4% 7.7%
Macquarie - Sep11 4.2% -8.8% 10.3% 9.0% 7.9% 8.3%
Morgan Stanley - Aug11 4.6% -10.9% 15.0% 6.0% 6.0%
Nomura Equity - Oct 11 5.4% -9.3% 13.4% 7.7% 8.3% 8.2%
Goldman Sachs Research - Jul11 4.1% -9.6% 13.0% 9.5% 10.3% 9.2%
Average Demand 4.7% -9.6% 13.2% 8.0% 8.0% 8.3%
2008 2009 2010 2011 2012 2013
Sup
ply
Alphaliner supply - Oct11 13.2% 5.5% 9.2% 8.4% 8.7% 10.1%
Clarkson supply - Aug11 (#2) 10.8% 4.9% 8.2% 7.8% 8.0%
CreditSuisse - May11 10.8% 5.2% 8.3% 7.8% 7.3% 6.9%
Drewry supply - Oct11 (#3) 10.5% 4.0% 6.5% 6.7% 9.5% 8.9%
Macquarie - Sep11 11.0% 5.0% 8.3% 8.0% 8.1% 7.7%
Morgan Stanley - Aug11 12.0% 5.0% 9.3% 9.8% 8.6% 8.7%
Nomura Equity - Oct 11 12.7% 6.1% 9.3% 7.9% 7.8% 5.3%
Goldman Sachs Research - Jul11 12.7% 6.0% 9.6% 10.4% 9.7% 10.4%
Average Supply 11.7% 5.2% 8.6% 8.4% 8.5% 8.3%
OCTOBER SUPPLY DEMAND FORECAST
Due to fuel inefficiencies, older ships will retire early
TAKEAWAYS
Liner industry is under EXTREME pressure
Unstable space supply expected
Clarity of Commitment, true partners critical
Close communication key to a good fit
Napier
YokohamaOsakaPusan
QingdaoShanghaiXiamen
ChiwanHong Kong
SingaporePort Kelang
BrisbaneSydney
Melbourne
Kaohsiung
Auckland
Tauranga
Nelson
Lyttelton
WellingtonBell Bay
Adeliade
Fremantle
OsakaPusanQingdao
Shanghai
Xiamen
Hong Kong
Singapore
Port Kelang
Kaohsiung
Bangkok
Laem Chabang
Jebel Ali
Ningbo
Belawan
ChittagongCulcatta
Haldia
Cebu
Fuzhou
Pasia Gudang
Cochin
Nhava Sheva
Bandar Abbas
Karachi
Mundra
Dalian
Haikou
Zhanjiang
JakartaMerak
OsakaPusanQingdao
Shanghai
Xiamen
Hong Kong
Singapore
Port Kelang
Kaohsiung
Bangkok
Laem Chabang
Jebel Ali
Ningbo
Belawan
ChittagongCulcatta
Haldia
Cebu
Fuzhou
Pasia Gudang
Cochin
Nhava Sheva
Bandar Abbas
Karachi
Mundra
Dalian
Haikou
Zhanjiang
JakartaMerak
Halifax
New York
Norfolk
SavannahLong Beach
Oakland
Seattle
Vancouver
Los Angeles
Singapore
Leam Chabang
Pusan
DalianTiajin
QingdaoSendai
TokyoYokohama
ShanghaiNingbo
Xiamen
ShekouChiwan
Hong Kong
Yantian
NagoyaKobe
KaohsiungHalifax
New York
Norfolk
SavannahLong Beach
Oakland
Seattle
Vancouver
Los Angeles
Singapore
Leam Chabang
Pusan
DalianTiajin
QingdaoSendai
TokyoYokohama
ShanghaiNingbo
Xiamen
ShekouChiwan
Hong Kong
Yantian
NagoyaKobe
Kaohsiung
La Havre
Rotterdam
HamburgSouthamptonThamesport
Fos
Zeebrugge
Bremerhaven
Barcelona
Genoa
AmsterdamAntwerp
DamiettaJeddah
Jebel Ali
SalalahShanghai
Ningbo
KaohsuingShekou
Singapore
Port Kelang
KobeNagoya
Shimizu
Tokyo
Dalian
QingdaoTianjin
PusanKwangyang
Gioia Tauro
YantianXiamen
ChiwanHong Kong
Colombo Laem Chabang
*Fro AEX service, only Asia-Europe
related are shown
La Havre
Rotterdam
HamburgSouthamptonThamesport
Fos
Zeebrugge
Bremerhaven
Barcelona
Genoa
AmsterdamAntwerp
DamiettaJeddah
Jebel Ali
SalalahShanghai
Ningbo
KaohsuingShekou
Singapore
Port Kelang
KobeNagoya
Shimizu
Tokyo
Dalian
QingdaoTianjin
PusanKwangyang
Gioia Tauro
YantianXiamen
ChiwanHong Kong
Colombo Laem Chabang
*Fro AEX service, only Asia-Europe
related are shown
Serving over 70.000
destinations worldwide
Shanghai
Shenyang
Dalian
Beijing
Xingang
Qingdao
LianyungangLanzhou Zhenzhou
Xi’an
Chengdu
Chongqing
Changsha
Jiujiang
Wuhan
Hefei
BengbuWuhu
NanjingZhenjiang
Zhangjiagang
YangzhouNantong
Ningbo
Wenzhou
Fuzhou
Xiamen
ShantouShenzhenHong KongChiwan
Zhuhai
Haikou
Jiangmen
Zhongshan
Zhangjiang
Foshan
Beihai
Nanning
LanshiHuangpu
Taiping
Hangzhou
Panyu
Shunde
Kunming
ShekouYantianNansha
Harbin
Changchun
Yanji
Shanghai
Shenyang
Dalian
Beijing
Xingang
Qingdao
LianyungangLanzhou Zhenzhou
Xi’an
Chengdu
Chongqing
Changsha
Jiujiang
Wuhan
Hefei
BengbuWuhu
NanjingZhenjiang
Zhangjiagang
YangzhouNantong
Ningbo
Wenzhou
Fuzhou
Xiamen
ShantouShenzhenHong KongChiwan
Zhuhai
Haikou
Jiangmen
Zhongshan
Zhangjiang
Foshan
Beihai
Nanning
LanshiHuangpu
Taiping
Hangzhou
Panyu
Shunde
Kunming
Shanghai
Shenyang
Dalian
Beijing
Xingang
Qingdao
LianyungangLanzhou Zhenzhou
Xi’an
Chengdu
Chongqing
Changsha
Jiujiang
Wuhan
Hefei
BengbuWuhu
NanjingZhenjiang
Zhangjiagang
YangzhouNantong
Ningbo
Wenzhou
Fuzhou
Xiamen
ShantouShenzhenHong KongChiwan
Zhuhai
Haikou
Jiangmen
Zhongshan
Zhangjiang
Foshan
Beihai
Nanning
LanshiHuangpu
Taiping
Hangzhou
Panyu
Shunde
Shanghai
Shenyang
Dalian
Beijing
Xingang
Qingdao
LianyungangLanzhou Zhenzhou
Xi’an
Chengdu
Chongqing
Changsha
Jiujiang
Wuhan
Hefei
BengbuWuhu
NanjingZhenjiang
Zhangjiagang
YangzhouNantong
Ningbo
Wenzhou
Fuzhou
Xiamen
ShantouShenzhenHong KongChiwan
Zhuhai
Haikou
Jiangmen
Zhongshan
Zhangjiang
Foshan
Beihai
Nanning
LanshiHuangpu
Taiping
Hangzhou
Panyu
Shunde
Kunming
ShekouYantianNansha
Harbin
Changchun
Yanji
OOCL’S GLOBAL COVERAGE