Cascading Down in Container Shipping

Transcription

1 Cascading Down in Container Shipping Results of the 7th Maritime Trend Barometer 2012 Hamburg, December 2012

2 2 Content INTRODUCTION 3 SURVEY FINDINGS 4 CONCLUSION 10 CONTACT 10 DISCLAIMER 11

3 3 INTRODUCTION The increasing growth in big container ships on the world s seas continues. According to industry platform Alphaliner, over 50 ships with a minimum capacity of 10,000 standard containers (TEU) were delivered in the year 2012 alone. This development is expected to peak in This is when the shipping company Maersk will take delivery of its first 18,000 TEU ships. They will be the world's biggest container freighters. A total of 20 ships of this type have been ordered. These new ships will continue to fuel the cascading down effect, which has visibly intensified since Nearly all the new big container ships will run on the main Asia-Europe route. However, they will t operate in addition to smaller ships that have been employed on these routes to date but will force them to move to other, lower-volume routes. This, in turn, will trigger the same cascading down effect How are the world s leading liner and charter shipping companies reacting to this trend? UniCredit s 7th Maritime Trend Barometer focuses on this theme. The survey was carried out in summer/autumn 2012 on an anymous basis. The answers are representative of shipowners who own over a third of the world's container fleet.

4 4 SURVEY FINDINGS 1.1 THE KEY DRIVERS OF THE CASCADING DOWN EFFECT ARE (Multiple answers possible) % 75% % 2 Ecomy of scale (OPEX) Bunker price Freight volume increase 8% Relatively favourable building costs, compared to smaller ships Environmental regulations Nearly all participants (92 per cent) consider that ecomies of scale and/or the (relatively) lower operating expenditure (OPEX) for large ships are the main reason for the cascading down trend. Ather key reason closely connected with this (75 per cent) is the continuing rise in the bunker price. Surprisingly, only a quarter of the people surveyed quoted increased cargo volumes as a reason for using ships with larger capacities. 1.2 WHAT ARE THE MOST IMPORTANT EFFECTS ON THE CONTAINER SHIPPING LINES? % 84% 8% 8% Market consolidation by 5 33% 42% 42% 16% Increased slot sharing Intensified cooperation e.g. alliances Closure of services Company withdrawals prefer t to say Slot sharing (i.e. agreements between shipping lines which may also be competitors on sharing the use of ships) and intensified alliances and cooperations are named by 83 and 84 per cent of respondents respectively when asked about the results of the cascading effect. Consolidation among shipping companies will therefore continue. Asked whether shipping companies might even be forced to withdraw from the market or from certain areas in the foreseeable future, there was clear answer. Opinions on this are divided: 42 per cent of respondents assume that some shipping companies will give up while exactly the same percentage does t expect this to happen.

5 5 Intensifying of hub-and-spoke operations 33% 42% prefer t to say 25% Investment in larger tonnage prefer t to say 66% Charter strategy: less chartering 33% 67% Nor does any clear answer emerge in response to the question whether hub-and-spoke systems will increasingly be used. This system involves the concept of a main port, favoured only a few years ago by shipping lines in conjunction with the use of big tonnage ships: these only have to call in at one or two ports per region. Here, the cargo is distributed by feeder ships. This makes it possible to achieve faster turnaround times for big container ships. 42 per cent of respondents think that there will be an increase in hub-and-spoke systems, 33 per cent are t sure. In contrast, two thirds of respondents are certain that the liner shipping companies will invest in bigger ships in future. The cascading effect will therefore continue. At the same time shipping companies will apparently make greater use of their own tonnage: two thirds of the respondents expect a reduction in charter operations.

6 6 1.3 WHICH REGION STANDS TO PROFIT MOST FROM EXPANSION OF THE HUB-AND-SPOKE SYSTEM? (Multiple answers possible) North America Central America 8% South America Africa North Range Mediterranean 33% prefer t to say 58% The uncertainty voiced in the previous section about the future of the hub-and-spoke system is reflected again here. Well over half of those surveyed (58 per cent) do t want to commit themselves to one specific region in which this system could expand. If they do commit themselves, one third of respondents expect this to affect the Mediterranean region. 1.4 HOW WILL THE FOLLOWING BIG NAMES IN SHIPPING DEVELOP IN THE INDIVIDUAL SHIPPING AREAS IN FUTURE COMPARED WITH TODAY? Capacity in TEU Asia to South America West rotation Intra Asia Asia-Afria East Coast actual future Europe- South America Europe- North America In this section questions were asked about the average size of container ships w and in future (by cargo capacity in TEU) on five key routes worldwide. Asia-Europe trade was specifically omitted, since the trend for ships of up to 18,000 TEU there as of 2013 is well kwn and documented. The analysis shows a clear trend for bigger ships on all shipping routes. Respondents expect that for the first time the big container ships deployed on the Asia-South America routes (west rotation) as well as between Europe and South America will average over 6,000 TEU. They see the growth rate in size (by TEU capacity) at well over 1, with the most striking increases in TEU capacity expected for inner-asian routes (23 per cent) and between Asia and the east coast of Africa (27 per cent).

7 7 1.5 WHAT ARE THE CRUCIAL OPERATIONAL CHALLENGES FACING LINER SHIPPING COMPANIES IN VIEW OF THE CASCADING EFFECT? 33% Inadequate port infrastructure Size of vessels employed differ from trade requirements Prefer t to say 5 50 per cent of shipowners are aware that the ships they employ are t really tailored to the requirements of their individual shipping routes. Judging by the answers to the previous questions, this can only mean that the units are too big. At least a third of respondents confirm that today s port infrastructures are inadequate for the ships that are deployed. 2.1 WILL THE CASCADING EFFECT LEAD TO A DECLINE IN ORDERS FOR NEW SHIPS? 33% 5 I am t sure/i don t kw Half the survey participants expect orders for new ships to decline due to the cascading effects. This will largely be due to overcapacities generated by the use of bigger ships. Only one third of respondents do t expect a reduction in orders for new ships.

8 8 2.2 WHICH DIMENSIONS WILL MAINLY BE AFFECTED BY THE DECLINE IN ORDERS? (Multiple answers possible) % 5 58% 33% 33% 1 8,000 TEU 9,000 TEU 6,500 TEU 5,500 TEU 3,000 TEU 4,000 TEU 2,000 TEU 3,000 TEU 1,000 TEU 2,000 TEU 500 TEU 725 TEU Approximately half of respondents in each case (42 to 58 per cent) think that the entire range of 2,000 TEU to 6,500 TEU ships will be affected by declining orders for new ships. However, only a third see the 500 to 2,000 TEU ship range, which includes the feeder ships, jeopardised by the reduction in new shipbuilding orders. The outlook is far more positive for the class with a capacity of 8,000 to 9,000 TEU: only 17 per cent of respondents see a drop in new orders here. 2.3 WHICH DIMENSIONS WILL MAINLY BE AFFECTED BY THE DECLINE IN CHARTER ACTIVITIES? (Multiple answers possible) % 42% % 33% 2 1 8% 8,000 TEU 9,000 TEU 6,500 TEU 5,500 TEU 3,000 TEU 4,000 TEU 2,000 TEU 3,000 TEU 1,000 TEU 2,000 TEU 500 TEU 725 TEU The answers here paint a very similar picture to the previous question. The larger classes continue to be attractive for the charter market as do, with slight restrictions, feeder ships up to 2,000 TEU. As many as 50 per cent of survey participants expect a massive decline in mid-size ships.

9 9 3.1 WILL SLOW STEAMING BECOME THE NEW SERVICE SPEED IN SHIPPING LINE SERVICES? 8% 92% I am t sure/i don t kw Almost all (92 per cent) respondents assume that slow steaming, meaning a speed of under 20 kts, will establish itself as the new service speed. Only eight percent think otherwise. It can be assumed that these shipowners will be willing, if necessary, to raise the average speed of their ships again at short tice. 3.2 WILL ALL NEW SHIPS BE DESIGNED FOR A SLOW STEAMING SPEED? 10 I am t sure/i don t kw New ships of all sizes will be optimized for slow steaming speeds in future. This is the conviction of all participants in the survey. Independently of this statement, some new ships today are netheless able to achieve higher speeds. 3.3 WILL THE LONG-TERM REDUCTION IN SERVICE SPEED AFFECT ENGINE SYSTEMS? 8% 25% prefer t to say 67% Two thirds of respondents do t fear that the main engines could be damaged as a result of being throttled for slow steaming. Only a quarter anticipate technical problems as a result of reduced engine speeds.

10 10 CONCLUSION The shipping companies that UniCredit surveyed hope that the use of bigger ships that travel more slowly will enable them to get their rising costs under control. This applies t only to the Asia-Europe route, on which it is virtually traditional to deploy the world s biggest container carriers, but also to all key routes worldwide. The cascading down effect is spawning reduced demand for charter business and a decline in orders for new ships, above all in the 2,000 TEU to 6,500 TEU class. The shipowners surveyed by UniCredit are convinced that cascading down will result in market consolidation above all on the shipping line side. This will include the increase in slot sharing activities, more intensive cooperation and the building of new alliances. Respondents are as yet uncertain as to whether some shipping companies will withdraw from (sub)markets. In a subsidiary question, the 7th Maritime Trend Barometer addresses ather trend: almost all participants state that slow steaming has become the new standard speed on all trades. The high-speed routes with speeds of up to 25 kts that were common only a few years ago on the Asia-Europe and USA-Europe routes longer exist. Likewise, all respondents are sure that ships built w and in the future will all be designed for far lower service speeds than only five years ago. The latest designs/sizes of ships, however provide the flexibility to increase speeds if required. CONTACT Joachim Flecks Research Global Shipping Tel joachim.flecks@unicreditgroup.de

11 11 DISCLAIMER This publication is presented to you by: Corporate & Investment Banking UniCredit Bank AG Arabellastr. 12 D Munich The information in this publication is based on carefully selected sources believed to be reliable. However we do t make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without tice. Any investments presented in this report may be unsuitable for the investor depending on his or her specific investment objectives and financial position. Any reports provided herein are provided for general information purposes only and cant substitute the obtaining of independent financial advice. Private investors should obtain the advice of their banker/broker about any investments concerned prior to making them. Nothing in this publication is intended to create contractual obligations. Corporate & Investment Banking of UniCredit consists of UniCredit Bank AG, Munich, UniCredit Bank Austria AG, Vienna, UniCredit S.p.A., Rome and other members of the UniCredit. UniCredit Bank AG is regulated by the German Financial Supervisory Authority (BaFin), UniCredit Bank Austria AG is regulated by the Austrian Financial Market Authority (FMA) and UniCredit S.p.A. is regulated by both the Banca d'italia and the Commissione Nazionale per le Società e la Borsa (CONSOB). Note to UK Residents: In the United Kingdom, this publication is being communicated on a confidential basis only to clients of Corporate & Investment Banking of UniCredit (acting through UniCredit Bank AG, London Branch) who (i) have professional experience in matters relating to investments being investment professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ( FPO ); and/or (ii) are falling within Article 49(2) (a) (d) ( high net worth companies, unincorporated associations etc. ) of the FPO (or, to the extent that this publication relates to an unregulated collective scheme, to professional investors as defined in Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 and/or (iii) to whom it may be lawful to communicate it, other than private investors (all such persons being referred to as Relevant Persons ). This publication is only directed at Relevant Persons and any investment or investment activity to which this publication relates is only available to Relevant Persons or will be engaged in only with Relevant Persons. Solicitations resulting from this publication will only be responded to if the person concerned is a Relevant Person. Other persons should t rely or act upon this publication or any of its contents. The information provided herein (including any report set out herein) does t constitute a solicitation to buy or an offer to sell any securities. The information in this publication is based on carefully selected sources believed to be reliable but we do t make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without tice. We and/or any other entity of Corporate & Investment Banking of UniCredit may from time to time with respect to securities mentioned in this publication (i) take a long or short position and buy or sell such securities; (ii) act as investment bankers and/or commercial bankers for issuers of such securities; (iii) be represented on the board of any issuers of such securities; (iv) engage in market making of such securities; (v) have a consulting relationship with any issuer. Any investments discussed or recommended in any report provided herein may be unsuitable for investors depending on their specific investment objectives and financial position. Any information provided herein is provided for general information purposes only and cant substitute the obtaining of independent financial advice. UniCredit Bank AG, London Branch is regulated by the Financial Services Authority for the conduct of business in the UK as well as by BaFin, Germany. Notwithstanding the above, if this publication relates to securities subject to the Prospectus Directive (2005) it is sent to you on the basis that you are a Qualified Investor for the purposes of the directive or any relevant implementing legislation of a European Ecomic Area ( EEA ) Member State which has implemented the Prospectus Directive and it must t be given to any person who is t a Qualified Investor. By being in receipt of this publication you undertake that you will only offer or sell the securities described in this publication in circumstances which do t require the production of a prospectus under Article 3 of the Prospectus Directive or any relevant implementing legislation of an EEA Member State which has implemented the Prospectus Directive. Note to US Residents: The information provided herein or contained in any report provided herein is intended solely for institutional clients of Corporate & Investment Banking of UniCredit acting through UniCredit Bank AG, New York Branch and UniCredit Capital Markets LLC (together UniCredit ) in the United States, and may t be used or relied upon by any other person for any purpose. It does t constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other US federal or state securities laws, rules or regulations. Investments in securities discussed herein may be unsuitable for investors, depending on their specific investment objectives, risk tolerance and financial position. In jurisdictions where UniCredit is t registered or licensed to trade in securities, commodities or other financial products, any transaction may be effected only in accordance with applicable laws and legislation, which may vary from jurisdiction to jurisdiction and may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements. All information contained herein is based on carefully selected sources believed to be reliable, but UniCredit makes representations as to its accuracy or completeness. Any opinions contained herein reflect UniCredit s judgement as of the original date of publication, without regard to the date on which you may receive such information, and are subject to change without tice. UniCredit may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in any report provided herein. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should t be taken as an indication or guarantee of further performance, and representation or warranty, express or implied, is made regarding future performance. We and/or any other entity of Corporate & Investment Banking of UniCredit may from time to time, with respect to any securities discussed herein: (i) take a long or short position and buy or sell such securities; (ii) act as investment and/or commercial bankers for issuers of such securities; (iii) be represented on the board of such issuers; (iv) engage in market-making of such securities; and (v) act as a paid consultant or adviser to any issuer. The information contained in any report provided herein may include forward-looking statements within the meaning of US federal securities laws that are subject to risks and uncertainties. Factors that could cause a company s actual results and financial condition to differ from its expectations include, without limitation: Political uncertainty, changes in ecomic conditions that adversely affect the level of demand for the company s products or services, changes in foreign exchange markets, changes in international and domestic financial markets, competitive environments and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Corporate & Investment Banking UniCredit Bank AG, Munich as of December 13, 2012

12 12 Corporate & Investment Banking UniCredit Bank AG Global Shipping Neuer Wall 64 D Hamburg In cooperation with BONUM news + marketing GmbH