tpm asia 2012 alphaliner

Container Shipping 2013 Market Outlook

Web: www.alphaliner.com E-mail: [email protected]

The worldwide reference in liner shipping

Shenzhen, 17 October 2012

ALPHALINER Containership Market Outlook www.alphaliner.com – the worldwide reference in liner shipping © Alphaliner 1999-2012 – Contents not to be reproduced without permission

TPM Asia : October 2012

Carriers remain trapped with surplus capacity

© Alphaliner Page 1

New deliveries

Return of chartered tonnage

Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven

Idling of surplus capacity

Rates return to breakeven

Idle capacity re-activated The surplus

capacity trap may last to

2014



Capacity overhang remains


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven



Idle capacity re-activated

• Capacity overhang from 2009 crisis has not been cleared

• Over-supply most severe and prolonged in history



Rate volatility in 2012 unprecedented


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• Jan-May 2012 saw sharpest rise in CCFI (+52%)

• But index dropped by 9% since May

• Compression of shipping cycles • Previous cycles last 4-6 years • Current cycles 12-18 months



Compression of the shipping cycle


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• Variance of CCFI rates in 2012 highest since 1998

• High volatility due to capacity overhang • Excess capacity returns with each

recovery • Idling/slow steaming/charter redeliveries

are only temporary solutions



Compressed shipping cycle will continue in 2013


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• Lows more severe – limited only by carriers’ capacity to stomach losses

• Highs will be short-lived

• Rate trend show long-term decline

0

200

400

600

800

1,000

1,200

1,400

1,600

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

CCFI

Inde

x (J

an 1

998=

1,00

0)

CCFI

0

200

400

600

800

1,000

1,200

1,400

1,600

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

CCFI

Inde

x (J

an 1

998=

1,00

0)

FO $/tonCCFIFuel Adjusted Freight Index

• Trend even more apparent if fuel adjusted rate index



Significant new vessel deliveries due in 2013


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• 40% are new ships of over 10,000 teu

• Driven by need to lower unit costs

• Orders have not stopped

• 1.05 million TEU already delivered YTD • 1.41 million TEU to be delivered in 2012 • 1.77 million TEU due in 2013



Idle capacity remains at 6%


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• Surplus capacity of between 500,000 teu and 1,000,000 teu

• Too much capacity reactivated in 2011 and 2012

• About 6% of total fleet are expected to be idle by end 2012



Scrapping has increased but still insufficient


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• 242,000 teu scrapped YTD • Average age of scrapped ships at all time low

• But new ships outpacing scrapping by 4-to-1 (teu)



Chartered tonnage returned


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• 85% of idle tonnage are chartered ships

• Burden of idling being shifted to charter owners

• 500,000 teu or 6% of charter tonnage currently unemployed



Chartered tonnage returned


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• But mismatch in charter returns (mainly 1,000-5,000 teu ships) vs new deliveries (8,000 teu and above)

• Return of charter tonnage is not enough to overcome pressure from new capacity influx



Charter rates remain depressed


New deliveries


Scrapping increases

Charter rates drop

Surplus Capacity

Rates fall below

breakeven




• Depressed charter rates will continue in 2013

• Carriers continue to take on new charters, with low charter rates

• Capacity can return on short notice



Carriers unable to break the vicious cycle in 2013



Scrapping increases

Surplus Capacity

Rates fall below

breakeven




The surplus capacity trap

Carriers’ market share

ambitions

Weakening Demand



Growth is slowing



ambitions

Weakening Demand

• Demand growth at 4-6% in 2012-2013 • Vs capacity growth of 9% in 2013



Weak headhaul volumes pose significant challenge



ambitions

Weakening Demand

• FE-Europe volume expected to shrink by -4.2% in 2012 • FE-US volume growth still weak at 1.5% • The two main trades will come under greatest capacity pressure



Average load factors weak



ambitions

Weakening Demand

• Average load factor on FE-Europe only 85% • Average load factor on FE-US at 91%

• Capacity reductions are necessary but difficult to implement

60%

65%

70%

75%

80%

85%

90%

95%

100%

Jan-

10Ap

r-10

Jul-1

0O

ct-1

0Ja

n-11

Apr-

11Ju

l-11

Oct

-11

Jan-

12Ap

r-12

Jul-1

2O

ct-1

2

Average vessel load factor FE-Europe route (Source : Shanghai Shipping Exchange)

60%

65%

70%

75%

80%

85%

90%

95%

100%

Jan-

10Ap

r-10

Jul-1

0O

ct-1

0Ja

n-11

Apr-

11Ju

l-11

Oct

-11

Jan-

12Ap

r-12

Jul-1

2O

ct-1

2

Average vessel load factor FE-US route (Source : Shanghai Shipping Exchange)



Carriers unable to curb appetite for capacity



ambitions

Weakening Demand

• 19 of Top 21 carriers have new capacity coming in next 15 months • Only UASC/Zim are without new capacity

0 50,000 100,000 150,000 200,000

APLAPM-Maersk

MSCEvergreen

Hamburg SüdHapag-Lloyd

COSCONCSCL

Hanjin ShgOOCLMOL

Yang MingPIL

CMA CGMNYK Line

HMMWan Hai

K LineCSAV

ZimUASC

New Vessel Deliveries Oct 2012-Dec 2013 (TEU)



Carriers unable to curb appetite for capacity



ambitions

Weakening Demand

• Top 21 carriers – capacity growth of 7.4% p.a. over 2008-2012 period • A single carrier is enough to break capacity discipline and trigger a rate war

7%

12%

9%

10%

2%

6%

6%

7%

11%

8%

5%

10

%

-1%

10

%

4%

4%

2%

13%

19

%

-2%

7%

0.00

0.50

1.00

1.50

2.00

2.50

3.00

APM

-Mae

rsk

MSC

CMA

CGM

COSC

ON

Ever

gree

nHa

pag-

Lloy

dAP

LCS

CLHa

njin

Shg

MO

LO

OCL

Ham

burg

Süd

NYK

Lin

eHM

MK

Line

Yang

Min

gZi

m PIL

UAS

CCS

AVW

an H

ai

Cap

acity

Ope

rate

d in

TEY

Mill

ions

Sep-08 Sep-12 CAGR 2008-2012



Excessive competition will remain



ambitions

Weakening Demand

• 20 main carriers in FE-US and 19 main carriers in FE-Europe • No indication of carrier exits in 2013 • Formation of alliances (MSC-CMA CGM, G6, CKYH ++) has reduced impetus for

carrier consolidation

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

MaerskMSC

CMA CGMCOSCO

EvergreenCSCL

Hanjin ShgHapag-Lloyd

HMMOOCLUASCMOL

NYK LineAPL

K LineZim

Yang MingWan Hai

PIL

0 10,000 20,000 30,000

MaerskHanjin Shg

COSCOEvergreen

MSCHapag-Lloyd

APLCMA CGM

K LineYang Ming

HMMOOCLMOLNYK

CSCLZim

Wan HaiPIL

MatsonUASC

Weekly capacity share by carrier (Oct 2012) FE-Europe FE-North America



Carriers have limited options to curb growth



ambitions

Weakening Demand

• Slow steaming, return of chartered tonnage and idling are only temporary solutions • Scrapping & curbing new orders are more permanent solutions • But capacity curbs have been ineffective so far

-15%

-10%

-5%

0%

5%

10%

15%

20%

10

11

12

13

14

15

16

17

2009Jan

2010Jan

2011Jan

2012Jan

% C

hang

e (Y

ear-

on-y

ear)

Tota

l Cel

lula

r Cap

acity

in T

EU M

illio

ns

Capacity absorbed by ESS/SSS Idle capacityEffective Capacity YoY % change in Fleet CapacityYoY % change in Effective Capacity

Slow steaming absorbed 6% of fleet Potential for further slow steaming

~4%



Predictions for 2013


• Rate volatility will continue • Supply overhang will continue to dictate rates cycle in 2013 • NVO rates will be less volatile than 2012 - 3Q base rates 28% higher than 2011 • BCO rates will rise in 2013 but quantum probably lower than carrier targets

• Carriers will continue to shoot themselves in the foot

• Carrier discipline only when suffering from losses or when utilisation levels are high

• Nov GRI on FE-Europe will be followed by rate undercutting if load factors remain weak

• None of the main carriers will exit the market • Excessive competitive will continue • Predictions of industry consolidation are premature



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