container shipping market 2020 outlook · 2020-02-03 · maersk 2018 sustainabilityreport...

Container Shipping Market 2020 Outlook

Georgia Foreign Trade Conference (GFTC 2020)February 2-4, 2020

The Cloister, Sea Island, Georgia

E-mail: [email protected]

Containership Market Outlook Contents not to be reproduced without permission : [email protected]

GFTC 2020

To lead or not to lead

Page 1

Summary excerpt taken from Thinking Strategically: TheCompetitive Edge in Business, Politics, and Everyday Lifeby Avinash K. Dixit and Barry J. Nalebuff (1991)

After the first four races in the 1983 America’s Cupfinals, (the American sailboat) Liberty led 3-1 in thebest-of-seven series. Liberty got off to a 37-secondlead when (the Australian challenger) Australia IIjumped the gun and had to recross the starting line.

The Australian skipper tried to catch up by sailing wayover to the left of the course in the hopes of catching awind shift. Liberty’s skipper chose to keep to the right-hand side of the course.

Australia II’s gamble paid off as the wind shifted 5° inher favor and she won the race by one minute and 47seconds. She went on to win the next two races andwon the cup.


GFTC 2020

‘Follow the challenger’ strategy

Page 2

• Reversal of the ‘follow the leader’ strategy• The leader should imitate the strategy of the challenger

- even when the challenger is pursuing a poor strategy• When leading, the way to stay ahead is to play “monkey see, monkey do”

(under certain circumstances)


GFTC 2020

Lemmings effect in container shipping

Page 3

• The lemmings phenomenon is not new in shipping

• How have these manifested in carrier behaviour in terms of: Strategy on new ships orders IMO 2020/Scrubber strategy Digitalisation strategy Consolidation strategy Logistics integration strategy

a phenomenon wherein crowds exhibit a certain kind of behaviour for no reason other than the fact that a majority of their peers do so

Excerpt from Shipping Economics: Collected PapersBy S.G. Sturmey(1975)


GFTC 2020

How the landscape has changed – 1975 to 2020

Page 4

Sea-Land ServiceOverseas Containers Ltd

Hapag-LloydAmerican President Lines

United States LinesNippon Yusen Kaisha

Orient Overseas Container LineSeatrain Lines

American Export LinesAssociated Container Transportation

Mitsui OSK LinesKawasaki Kisen

MatsonEast Asiatic Co.

ZimYamashita Shinnihon Kisen

Ben LineNedlloyd

Maersk LineWilh. Wilhelmsen

Top 20 Carriers in 1975 0 10,000 20,000 30,000 40,000 50,000

Capacity Operated in TEU

• In 1975 – 6 out of Top 20 were American carriers inc. 3 in Top 5

• The only Asian carriers in Top 20 were Japanese (4 at that time) and 1 from Hong Kong (still part of UK)

• 3 carriers from UK• The largest carrier from Denmark is

not Maersk


GFTC 2020

Only 4 of the Top 20 remain as independent entities

Page 5

Sea-Land ServiceOverseas Containers Ltd

Hapag-LloydAmerican President Lines

United States LinesNippon Yusen Kaisha

Orient Overseas Container LineSeatrain Lines

American Export LinesAssociated Container Transportation

Mitsui OSK LinesKawasaki Kisen

MatsonEast Asiatic Co.

ZimYamashita Shinnihon Kisen

Ben LineNedlloyd

Maersk LineWilh. Wilhelmsen

Top 20 Carriers in 1975 0 10,000 20,000 30,000 40,000 50,000

Capacity Operated in TEU

1999 - acquired by Maersk

1997 - acquired by NOL1986 – filed for bankruptcy

1981 – filed for bankruptcy1977 – filed for bankruptcy

1986 - acquired by P&O. 2005 - acquired by Maersk

2018 – merged into ONE

2018 – merged into ONE2018 – merged into ONE

1988 – merged with Japan Line. 1991 - acquired by NYK

1991 – split between P&O and Blue Star

2018 – acquired by COSCO

1993 – acquired by Maersk

1991 – acquired by EAC1996 – merged with P&O. 2005 – acquired by Maersk

1993 – exit from liner trades


GFTC 2020

Repeating the same mistakes – last 50 years

Page 6

Recurring themes in this industry

• Overcapacity

• Shipping companies struggle to stay afloat

• Governments continue to prop up struggling lines

• Changing regulatory regimes– IMO 2020 Sulphur Cap– Ballast Water Management

Excerpt from Containerisation International Yearbook 1984


GFTC 2020

IMO 2020 – Scrubber take-up has surged

Page 7

• Significant increase in scrubber take-up rate : Up to 42% of total containership capacity will be scrubber-fitted

Scrubbers ordered (est.) 1,086 ships 10.04 MteuDelivered/Ongoing 390 ships 3.42 MteuNewbuildings due 191 ships 1.59 MteuRetrofits planned 505 ships 5.03 Mteu

Total Fleet (Jan 2020) 5,350 ships 23.63 MteuOrderbook 327 ships 2.17Mteu

LNG fuelled ordered 38 ships 0.42 MteuDelivered/Converted 9 ships 0.02 MteuNewbuildings due 33 ships 0.51 MteuConversions planned 5 ships 0.03 Mteu

% of current fleet with scrubber/LNG engines (as at Feb 2020)

•Scrubbers (estimated)• 20.3% of total units• 42.5% of total TEU capacity

• LNG fuel• 0.9% of total units• 2.4% of total TEU capacity

(Data as at 1 Feb 2020)


GFTC 2020

IMO 2020 – Breakdown by Main Carriers

Page 8

Maersk 2017 Sustainability Report

“Position established on the use of low-sulphur fuels and NOT scrubber technology.”

Maersk 2018 Sustainability Report

“Invested in scrubbers on a share of our vessels. Scrubber technology is a lessextensive element of our sulphur cap fuel sourcing strategy, the vast majority of our container vessels will comply using low sulphur fuels. In 2017, we publicly stated that we would not rely on this technology, but for the time being we need to secure that we are not overly reliant on a single means of compliance.”

44% 73%

13% 45%

14% 0%

76% 36%

60% 89%

0% 13%

0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000

MaerskMSC

COSCOCMA CGM

Hapag-LloydONE

EvergreenYang Ming

PILHMM

ZimWan Hai

TEU Expected Fleet end 2021

Scrubber fitted


GFTC 2020

IMO 2020 – High LSFO price spread

Page 9

• Current LSFO price spread $200-$250 per ton – down fron a peak of $300-$370 in early Jan

• Spread is expected to narrow but significant uncertainty remains

-

100

200

300

400

500

600

700

800

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec-

19

Jan-

20

Rotterdam Bunker Price : MGO, IFO380 and VLSFO $/ton

VLSFO spread Rotterdam0.5% VLSFO RotterdamIFO380 RotterdamMGO Rotterdam

-

100

200

300

400

500

600

700

800

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec-

19

Jan-

20

Singapore Bunker Price : MGO, IFO380 and VLSFO $/ton

VLSFO spread Singapore0.5% VLSFO SingaporeIFO380 SingaporeMGO Singapore


GFTC 2020

IMO 2020 – Scrubber retrofits surged

Page 10

• Number of ships being retrofitted has surged since July 2019• Up to 110 ships (1 million TEU) on average have been taken out of circulation• Average retrofit time ~60 days (vs expected 45 days)

0102030405060708090

100110120

Jan

2018

Feb

2018

Mar

201

8Ap

r 201

8M

ay 2

018

Jun

2018

Jul 2

018

Aug

2018

Sep

2018

Oct

201

8N

ov 2

018

Dec

2018

Jan

2019

Feb

2019

Mar

201

9Ap

r 201

9M

ay 2

019

Jun

2019

Jul 2

019

Aug

2019

Sep

2019

Oct

201

9N

ov 2

019

Dec

2019

Jan

2020

Feb

2020

No.

of s

hips

und

ergo

ing

retr

ofit

Breakdown by size range >15,000 TEU10,000-15,000 TEU5,100-10,000 TEU<5,100 TEU


GFTC 2020

Increase in inactive capacity – scrubber bonus

Page 11

• Rise in inactive capacity has brought down the effective capacity growth rate • But return of scrubber fitted ships in 2H 2020 will push up the effective supply growth

-5%

0%

5%

10%

15%

18

19

20

21

22

23

24

25

2015

2016

2017

2018

2019

2020

2021

% C

hang

e (Y

ear-

on-y

ear)

Tota

l Cap

acity

in T

EU M

illio

ns

Forecasts

Total fleet growth vs Effective fleet growth : 2015-2020(F) Projected active fleet

Inactive capacity Active (employed) capacityYoY % Change in total capacity YoY % Change in active capacity


GFTC 2020

Demand still growing – but at a slower pace

Page 12

• 2019 global demand growth est. at 2.5% (vs 5.2% in 2018) - pace has continued to slow• 2020 demand growth expected to remain slow at 2.2%

-15%

-10%

-5%

0%

5%

10%

15%

20%

(F)4

Q19

3Q19

2Q19

1Q19

4Q18

3Q18

2Q18

1Q18

4Q17

3Q17

2Q17

1Q17

4Q16

3Q16

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

1Q08

Alphaliner Global Ports Survey - Growth by Quarter : 2008-2019


GFTC 2020

-15%

-10%

-5%

0%

5%

10%

15%

20%

(F)4

Q19

3Q19

2Q19

1Q19

4Q18

3Q18

2Q18

1Q18

4Q17

3Q17

2Q17

1Q17

4Q16

3Q16

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

1Q08

Alphaliner Global Ports Survey - Growth by Quarter : 2008-2019

Effective supply growth has also slowed

Page 13

Vs Growth in Effective Supply

Note : Effective capacity excludes idle containership capacity

• Effective capacity growth has slowed in 4Q 2019 – mainly due to scrubber bonus• Capacity management by carriers – mainly using blank sailings

-15%

-10%

-5%

0%

5%

10%

15%

20%

Chan

ge in

act

ive

capa

city


GFTC 2020

Supply/Demand still main driver for freight rates

Page 14

• Rate weakness in 2019 only mitigated through capacity management• But mixed success in securing IMO 2020 bunker surcharge

-15%

-10%

-5%

0%

5%

10%

15%

20%

(F)4

Q19

3Q19

2Q19

1Q19

4Q18

3Q18

2Q18

1Q18

4Q17

3Q17

2Q17

1Q17

4Q16

3Q16

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

1Q08

Alphaliner Global Ports Survey - Growth by Quarter : 2008-2019 Vs Growth in Effective Supply

-15%

-10%

-5%

0%

5%

10%

15%

20%

Chan

ge in

act

ive

capa

city

Vs Freight Rate Index

CCFI

Inde

x (J

an 1

998=

1,00

0)

SCFI

Inde

x (O

ct 2

009=

1,00

0)


GFTC 2020

Getting past the supply hurdle

Page 15

0

50,000

100,000

150,000

200,000

250,000

300,000

2010

Jan Jul

2011

Jan Jul

2012

Jan Jul

2013

Jan Jul

2014

Jan Jul

2015

Jan Jul

2016

Jan Jul

2017

Jan Jul

2018

Jan Jul

2019

Jan Jul

2020

Jan Jul

2021

Jan Jul

TEU

Containership Deliveries by Month 2010-2021

TEU Delivered To be delivered (Forecasts)

• 1.06 m TEU in 2019• 1.11 m TEU in 2020• 0.86 m TEU in 2021


GFTC 2020

Top 12 Carriers – Managing capacity growth is key

Page 16

0 100,000 200,000 300,000 400,000 500,000 600,000

APM-MaerskMSC

COSCOCMA CGM

Hapag-LloydONE

EvergreenYang Ming

PILHMM

ZimWan Hai

Total capacity in TEU

Newbuildings to be delivered in 2020Retrofits ongoing/waiting (Jan 2020)


GFTC 2020

Getting past the supply hurdle

Page 17


GFTC 2020

New vessel orders – A new wave is expected

Page 18

• A new wave of new ship orders are expected – focus remains on large size 24,000 teu• Hapag-Lloyd/ONE – will have to order new ships soon

0 5 10 15 20 25 30 35 40

Maersk

MSC

CMA CGM

COSCO/OOCL

Evergreen

Hapag-Lloyd

ONE

Yang Ming

HMM

2MO

CEAN

Alli

ance

THE

Allia

nce

No. of >18,000 teu ships by year of delivery

Year of delivery

Pre-2018 2018 2019 2020 2021 2022


GFTC 2020

End Please send any queries to [email protected]

© Alphaliner Page 19

Alphaliner clients include the following:

- Shipping lines - Investment Banks - Ports

container shipping market 2020 outlook · 2020-02-03 · maersk 2018 sustainabilityreport...

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