GUIDE: Latest Ocean Freight Trends

Transcription

1 GUIDE: Latest Ocean Freight Trends January 2014

2 Introduction The ocean freight industry is going through some changes. With fleet-overcapacity, poor market demands, and the potential alliance of the top three ocean carriers, the battle for freight will continue to increase. The objective for carriers will be to to keep fleet utilization rates at industry benchmarks. Guide to the Latest Ocean Freight Developments 2

3 Trend 1 Lower costs from new larger vessels The new 18,000 Twenty-Foot Equivalent Units (TEU) vessels of Mearsk have approximately 30% lower operating cost as compared to the large 13,100 TEU vessels which currently operate. According to Drewry Marine Consulting Group the cost will lower from $418/TEU to $294/TEU. The Panama Canal expansion will also have an effect when it opens The New Panama Canal allows vessel size to increase from 5,000 TEU to 13,100 TEU. This will have a massive reduction in operating cost of approximately 50%. Note: Operating cost do not include Port and Channel fee s. Operating cost are based on the industry standard of Slow Steaming. Guide to the Latest Ocean Freight Developments 3

4 Trend 2 Container fleet capacity is far above market demand and continues to grow In the last two years the fleet capacity did grow about 15% more than the market demand. Also for the near future the economic figure do not suggest any change. The ordering of larger vessels (10,000-18,000 TEU) continues, while scrapping of vessels in the range of 3,000-5,000 TEU increases. The main drivers will be found in the significant saving of operational cost and the falling shipyard prices (-25%) which need new orders. Guide to the Latest Ocean Freight Developments 4

5 Trend 3 Revived carrier battles for market share especially on the Asia-Europe trade lane The top threee ocean carriers (Maersk Line, MSC, and CMA CGM) have expressed their plans for a new P3 alliance. If the P3 alliance gets final approval from competitive authorities it is expected to start operations in the 2nd quarter of Together, the three carriers already have a dominant position on the Asia- Europe trade lanes. Analysts conclude that the other two alliances (G6 and CKYH) need to merge to maintain competitive conditions. Compared to January 2013, the current spot rates did go down significantly. The general rate increases (GRI) announced by the carriers did not succeed. The only exception was the big rate upturn in July 2013 for the trade Asia-India and Asia West Coast South America tradelanes. It is uncertain if this rate upturn will be sustainable. On the Asia-Europe tradelanes (the indicator for the global ocean freight market), Q3 is a period with increasing volumes. Carriers were able to implement their GRI in July and August and pushed up the rates with about 2.6% above breakeven levels. Third quarter 2013 showed that the rates are dropping sharply. Guide to the Latest Ocean Freight Developments 5

6 Trend 4 Current market rates are below breakeven and all carriers are reporting losses The average operating margin of 17 ocean carriers indicate that the losses from 2013 Q1 (-3.5%) are lowering. Over the 2013 Q2 period, the CCFI freight index shows an average rate reduction of -5.1% while the volume increased about +7%. This resulted in an overall small loss for the carriers for Q2 of around -1%. Guide to the Latest Ocean Freight Developments 6

7 Trend 5 Market needs and vessel availability continuously drive network adoption Relocation of vessels from the Asia-Europe tradelane to other tradelanes will continue as the new arrivals of >14,000 TEU have a limited number of ports in which they can access and loops on which they can operate. Over the last 18 months, the United States-East Coast (USEC) port upgrade to meet the New Panamax vessel standards did make massive steps forwards. The Obama-administration accelerated the feasibility studies from an average of 10 years to a maximum of three years. At this moment, the New Panamax vessels can enter the Norfork and Baltimore ports while the New York Bayonne Bridge lifting will be completed by the end of 2015 enabling the large vessels to reach the container terminals. The oversupply of large vessels and fact that the small <5,000 TEU vessels are cost inefficient (the current Panamax size) already resulted in Mearsk decision to serve Asia-USEC only with the 8,000 TEU vessels through the Suez Channel (8,000 TEU is the maximum size for the loop along the USEC). Guide to the Latest Ocean Freight Developments 7

8 Appendix Panamax (Vessel Type B) - Economies of scale rapidly pushed for the construction of larger containerships in the 1980s. The larger the number of containers being carried the lower the costs per TEU. The process became a virtuous circle compounding larger volumes and lower costs. The size limit of the Panama Canal, which came to be known as the panamax standard, was achieved in 1985 with a capacity of about 4,000 TEUs. Once this limit was achieved, a decade passed before a new generation of containerships was designed. At the same time panamax container ship designs were evolving to take maximum advantage of the limitation in beam (Panamax Max). The original dimensions of the Panama Canal, built by the US Army Corps of Engineers, are similar to the dimensions of the US Inland Waterways locks, resulting in a narrow and long ship design. New Panamax (Vessel Type D) - Refers to ships designed to fit exactly in the locks of the expanded Panama Canal, expected to open in 2014, and which confers capacity of about 12,500 TEU. Like its Panamax counterparts, New Panamax ships will compose a specific ship class able to effectively service the Americas and the Caribbean, either from Europe or from Asia. Vessel Types Guide to the Latest Ocean Freight Developments 8

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