liner paradise: a new erabipc.kr/2020/pt/session_1/presentation_ws1-1_tim-power.pdf · 2020. 11....
TRANSCRIPT
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Liner Paradise: a new eraBIPC 2020
20th October, 2020
Tim PowerManaging Director, Drewry
PRIVATE & CONFIDENTIAL
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2009 and 2020: compare and contrast
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Freight rates: 2008-10
In 2009, freight rates collapsed on the Asia – Europe trade and fell by 32% on the Transpacific trade
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500
1,000
1,500
2,000
2,500
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Headhaul rates 2008-10
Transpac EB Asia Europe WB
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Spot the difference
Asia – Europe rates rose sharply in Q4 2019 before eroding to Q2 2020 and recovering. Transpacific rates were stable and are now rising rapidly
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
$2,600
$2,800
World Container Index - Assessed by Drewry$ per 40 ft container
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Container shipping fundamentals
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Liner fundamentals
Factor Effect Comments
Economies of scale Structural overcapacity Lines always build bigger vessels to exploit economies of scale. This leads to continual overcapacity
Perishability Push for short-run contribution – rate erosionUnused capacity cannot be stored. Lines cut rates in order
to boost utilisation
High operational gearing Push for short-run contribution – rate erosionLines’ networks represent a high fixed cost burden. The
logical response is to maximise utilisation
Commoditised service offering
Limited differentiation of product; price competition Price is the principal competitive weapon
Fragmented industryNo coordination of capacity
development, intense competition
Too many carriers and no dominant carriers to establish market stability
Inelastic demand curve Falling rates have a limited effect on demand
Seafreight is a negligible element in the landed cost of manufactured goods and makes no difference to end
market demand
The liner industry has been unable to make sustainable profits…
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Liner fundamentals
…but it could, with two changes. Have these changes happened?
Factor Effect Change? Comment
Economies of scale Structural overcapacity Economies of scale run out
Lines will build to match demand not to chase economies of scale.
Pursuit of share is less important
Perishability Push for short-run contribution –rate erosion No Unchanged
High operational gearing Push for short-run contribution –rate erosion No Unchanged
Commoditised service offering
Limited differentiation of product; price competition Unlikely Unchanged
Fragmented industry No coordination of capacity development, intense competitionIndustry
consolidation
A small number of large carriers is able to match capacity to demand and
promote increased tariffs
Inelastic demand curve Falling rates have a limited effect on demand NoRising rates have a
limited effect on demand, supporting profitability
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Changes
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Economies of scale: vessel sizes
0
5,000
10,000
15,000
20,000
25,000
19921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020
Averageship size
Maxship size
Maximum vessel sizes have rocketed since 2005
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Economies of scale: costs
Scope for vessel economies of scale in 2009 was large; now looks much less. Total system costs show no economies of scale.
-30.00%
-25.00%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
8,000 10,400 14,857 17,333 20,800
Liner % Ports and terminals % Combined %
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Market concentration: lines
Substantial increase in market concentration since 2016, 50% at the level of Top 5.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Containership fleet share (%)
Top 3
Top 5
Top 10
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Market concentration: alliances
The concentration of major lines into the three alliances on the main East – West trades has created the structure for effective capacity management
Shipping Lines Previous Alliances 2016 Shipping Lines NewAlliance
MaerskP3 Alliance (denied) 2M Alliance
Maersk2M Alliance (with
mergers)MSC MSC
CSCLCSCL / UASC Ocean 3
Hamburg Süd
UASC CMA CGM
Ocean Alliance (with mergers)
NYK Line
Grand Alliance
G6 Alliance
COSCO
OOCL CSCL
Hapag-Lloyd OOCL
NOL
New World Alliance
Evergreen
MOL NOL
APL APL
Hyundai Hapag-Lloyd
THE Alliance (with mergers)
COSCO
CKYH AllianceCKYHE Alliance
UASC
K-Line Yang Ming
Yang Ming MOL
Hanjin NYK Line
Evergreen Independent K-Line
HMM
Hamburg Süd Independent Independent Hanjin
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Liner growth rate
GDP multiplier has declined steadily since 2000 and is no longer a driver of container volume growth. Long term outlook growth is modest with downside risks
0
2
4
6
8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Estimated teu to GDP multiplier with 5-year averages, 2000-2020
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Conclusions
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Conclusion
• Scope for economies of scale is now limited. The liner arms race will abate
• Concentration at the company level and in major alliances has created the conditions in which capacity can be matched effectively to demand
• Stable utilisation will promote higher rates and margins
• Likely changes in trade patterns pose significant risks to growth in deep-sea liner trades
• Low growth should make lines more cautious about capacity expansion
Fundamentals have improved but demand growth outlook is uncertain
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슬라이드 번호 1슬라이드 번호 2Freight rates: 2008-10Spot the difference슬라이드 번호 5Liner fundamentalsLiner fundamentals슬라이드 번호 8Economies of scale: vessel sizesEconomies of scale: costs Market concentration: linesMarket concentration: alliancesLiner growth rate슬라이드 번호 14Conclusion슬라이드 번호 16