OCEAN FREIGHT MARKET UPDATE

Transcription

1 DHL Global Forwarding, Freight OCEAN FREIGHT MARKET UPDATE October

2 Contents TOPIC OF THE MONTH Impact of Trade Tariffs HIGH LEVEL DEVELOPMENT MARKET OUTLOOK Freight Rates and Volume Development ECONOMIC OUTLOOK & DEMAND DEVELOPMENT CAPACITY DEVELOPMENT CARRIERS REGULATIONS? DID YOU KNOW? IMO 2020 Global Sulphur Limit Compliant Containership Fleet 2

3 Topic of the Month Impact of Trade Tariffs Apart from escalation magnitude, new trade barriers lead to workarounds among customers that have alternative choices What comes next? CN s announcement to take retaliatory tariff action against $60 billion of US goods, sharply escalating trade war as Trump administration considers imposing duties on virtually all CN imports (worth add. ~USD267) Apart from putting up barriers, CN is aiming to simplify clearance processes in general according to last week`s State Council meeting As CN cannot match US tariffs like-for-like, qualitative measures against US firms operating in China might to start kicking in How customers react Forward extra cost to customers or accept lower profit at least for the short term Re-source import supplies from alternative country and re-route exports (e.g. Chinese honey industry exporting into US via 3rd country) Re-locate production to other countries Stop business due to cost & margin pressure Tariffs on steel & aluminum products 0.6M (0.4% of global sea trade) TEU container trade Tariffs on China imports 0.5M (0.3%) TEU container trade Tariffs on US imports 0.1M (0.1%) TEU container trade Tariffs on US imports 0.4M (0.3%) TEU container trade New US/EU Agreement Cooperation towards zero tariffs Tariffs on China imports 5.4M (3.7%) TEU container trade Current NAFTA discussions Agreement between US & MX reached, discussions with CA continue. Decision likely end Sep Tariffs on US imports Further tariffs for goods worth $60bn as counter measure to latest US tariffs Effective as of: March Source: DPDHL Corporate Development, press articles, Seabury Consulting June July 6 July 25 August/ September September 24 DHL Global Forwarding OFR Market Update Oct2018 3

4 High Level Market Development Supply and Demand ECONOMIC OUTLOOK GDP GROWTH BY REGION 1) 2018F 2019F 2020F 2021F 2022F CAGR ( ) EURO 2.2% 2.0% 1.9% 1.8% 1.8% 1.8% MEA 3.5% 3.8% 3.9% 3.6% 3.5% 3.7% AMER 2.7% 2.8% 2.2% 1.9% 1.9% 2.0% ASPA 5.0% 4.9% 4.7% 4.8% 4.8% 4.7% DGF World 3.4% 3.3% 3.1% 3.0% 3.0% 3.0% DHL TRADE BAROMETER 6) Q1 '16 Q2 Q3 Q4 Q1 '17 Q2 Q3 Q4 Q1 '18 Ocean Global Q2 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% SUPPLY/DEMAND GROWTH (ANNUALIZED), IN % 2) Demand Growth % Supply Growth % F 2019F 2020F 2021F WORLD CONTAINER INDEX (WCI) 3) SHANGHAI CONTAINERIZED FREIGHT INDEX (SCFI) 4) 3,000 1,200 BUNKER PRICE INDEX 5) 1,000 2,500 2,000 1,500 1, , Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q ) real GDP, Global Insight, Copyright IHS, Q All rights reserved 2) Demand growth = Port-to-Port Container Traffic growth. Supply growth = Fleet Growth. Source: Drewry Maritime Research. 3) Shanghai Shipping Exchange, in USD/20ft container & USD/40ft ctnr for US routes, 15 routes from Shanghai. 4) Global Insight, Drewry, 5) Bunker Index, in USD/metric ton, Bunker Index MGO (BIX MGO) = avg. Global Bunker Price for marine gasoil (MGO) port prices; (BIX 380= avg. Global Bunker Price for all 380 centistoke (cst) port prices; both index published on the Bunker Index website., 6) DHL Global Trade Barometer Mar18, index value represents weighted average of current growth and upcoming two months of trade, a value at 50 is considered neutral, expanding above 50, and shrinking below BIX 380 BIX MGO 4

5 Market Outlook October 2018 Major Trades Multiple blank sailings announced for 1 st half October will impact space situation EXPORT REGION IMPORT REGION CAPACITY RATE EURO AMNO = + AMLA = + ASPA = -- MENAT = -- SSA = = EXPORT REGION IMPORT REGION CAPACITY RATE AMLA AMNO = + ASPA + + EURO + + MENAT = = SSA AMNO AMLA = + ASPA - = ASPA ASPA - = AMNO - = EURO + = AMLA = + MENAT = = EURO - = SSA = + MENAT = = KEY Strong Increase ++ Moderate Increase + No Change = Moderate Decline - Strong Decline - - OCEANIA = + Source: DGF 5

6 Market Outlook October 2018 Ocean Freight Rates Major Trades Market outlook on smaller trades available in the back-up O C E A N F R E I G H T R A T E S O U T L O O K ASPA EURO EURO ASPA & MEA Carriers have started an intensive blank sailing program to stabilize the market in October. The typhoon season is still affecting the productivity in the Asian ports, especially at Shanghai/Ningbo. Market is further softening overall ASPA AMLA ASPA AMNO EURO AMNO ASPA MENAT ASPA ASPA AMNO EURO Rate remain strong to Mexico and WCSA, while ECSA rates have declined. Space is expected to be tight for Mexico & WCSA until after China Golden Week. Multiple blanks sailing are expected during the same period as well. Blank sailings across all alliances from wk This is expected to result in a tight space situation through 1st half of Oct. Slight reductions on spot rates in October compared to September. Ocean rates are strong and still increasing; inland carriages in US remain problematic Rates remain stable. No huge increase on FAK. Tight vessel utilization is expected after Golden Week. Congestion is reported for Kuwait Port due to crane problem. Some carriers have implemented Congestion Surcharge of USD50 per TEU into Israel with effect 15 Oct Multiple blank sailings have been planned with the China Golden Week. Delays continue at both Manila (N) and (S) port due to the recent bad weather. Some carriers have announced a rate increase for October to Europe ( Hapag, EISU, YML, Cosco ) and CMA CGM to the MED. Source: DGF 6

7 Economic Outlook & Demand Development Risks from protectionism and emerging-market stress EURO AMNO EURO is experiencing an underlying slowdown in 18 and cools down to 2.0% growth. Despite higher energy prices & base effects, inflation outlook is almost unchanged to previous forecast, indicating that rising input costs are not being passed on to consumer prices, suggesting a squeeze on profit margin. Aided by fiscal stimulus of tax cuts & spending increases, supportive financial conditions, strength in employment, income, & wealth & elevated consumer & business sentiment, real GDP growth in the US is expected to remain near 3.0% average in H2 18. By this measure, GDP has surpassed potential. With interest rates & inflation rising, & support to growth from fiscal stimulus peaking and then diminishing early next year, HIS Market expect real GDP growth to slow form 2.9% this year to 2.7% next year and 2.0% in ASPA Outlook on solid feet for 2018 and remains unchanged at 5.0%. Impact of the trade tensions with the US on CN has been limited so far. Exports forecast downgrade was due to corrections in JP s & KR s outlook. Downward market pressure has weakened CN s currency, but CN government will likely prevent any sharp or persistent renminbi depreciation. EMERGING MARKETS Emerging market equities are in bear territory. ZA is in a recession & TR is headed there. AR has been forced to raise interest rates to 60% (more than double the rate at the beginning of the year) to support its crashing currency. DEMAND DEVELOPMENT Export growth forecast for 2018 has decreased, driven by downward revision in major economies, but still remains above the average range of 3.3% of the past 10 years. Expansion pace of Global Manufacturing PMI has been declining since January. Source: IHS Markit Global Executive Summary, IHS Purchasing Manager Index Manufacturing, a PMI at 50 is considered neutral, expanding above 50, and business shrinking below 50. 7

8 Capacity Development 1/2 C A P A C I T Y D E V E L O P M E N T After over six years of legal proceedings and commitment to additional environmental mitigation measures, the Senate of the city of Hamburg (Germany s largest port) finally obtained the final plan approval of the long-delayed Elbe River deepening project. The tender of dredging works is prepared and it is planned to start works in Overall the project is designed to increase the permissible vessel draft in Hamburg by one meter. Currently, large-scale container services from the Far East can not have Hamburg as a first port of call without discharging some cargo at another port first. In addition to increased depth, the dredging program will also widen the fairway so that large inbound and outbound ships can pass with fewer restrictions and bigger safety margins. It is expected that it will take up to 18 months to complete the project, but depth improvements will already become gradually available as deepening works progress. Hamburg will invest and estimated EUR 600M in the project to maintain its competitive edge in the European Northern Range. More carriers are adding transpacific capacity to relieve the space crunch and take advantage of the strongly increased spot freight rates on this trade. HMM increased the capacity on its transpacific service PS1 by 35% in the first three weeks of September. The capacity increase was achieved by swapping three 6,350 TEU ships with larger ships of TEU taken from the China-India Express Service. CMA CGM also added two high capacity extra loaders (9,953 TEU CMA CGM BUTTERFLY and 8,465 TEU CMA CGM MELISANDE) in September. Maersk added two more extra loaders making an ad-hoc USWC trip in September. They follow two extra loaders deployed by Maersk in August. Evergreen also introduced larger tonnage on the transpacific by replacing one 6,332 TEU vessel with a larger 11,037 TEU ship. Evergreen plans to keep this ad-hoc arrangement until November to give the carrier a short term capacity boost on the transpacific. Maersk and MSC will suspend their joint Asia North Europe AE-2/Swan service from end September. This service is one of the largest loops operated on the Asia North Europe route and its suspension will remove an average of 19,250 TEU or 6.8% of the current weekly capacity on this trade. Both carriers stated that the suspended AE-2/Swan service will resume when demand picks up. However, exact timing for reintroduction has been left open. Maersk and MSC will temporarily adjust the rotation of some other Asia North Europe loops to ensure that all ports calls of the AE-2/Swan service remain covered directly. Source: Alphaliner, carriers 8

9 Capacity Development 2/2 C A P A C I T Y D E V E L O P M E N T OCEAN Alliance and THE Alliance are to merge their Med-USEC weekly services into a single joint weekly service. The OAL TAT1 service, run with six vessels of 4,3000-5,300 TEU, and THE Alliance AL6 service, run with five vessels of 4,500 TEU, will be combined into a single weekly service employing six ships of 8,500 TEU. The members of the two alliances (except Evergreen) have formed the MED/USEC Vessel Sharing Agreement to formally organize their cooperation. The rotation of the new service has not been unveiled yet, but the scope of the VSA covers France, Italy, Malta, Morocco, Spain and the US ports in the Atlantic coast range. The injection of larger ships will lead to a reduction of the costs per slot while retaining a similar weekly capacity. Source: Alphaliner, carriers 9

10 Carriers C A R R I E R S COSCO Shipping s container shipping business posted a net loss of $25M in 1H 2018, compared to a net profit of $147M in the same period last year. Operating margin (Core EBIT after deduction for subsidies) slipped to 0.6%, compared to 3.1% 1H The deterioration in earnings was due mainly to weak freight rates, which fell by 2.5% on COSCOS s international routes and by 7.5% on its domestic routes. Total liftings increased by 12.4% to MTEU in 1H 2018, compared to 1H CMA CGM has reported operating profits of $67M in Q2, 2018, a deterioration from the $88M posted in Q1, 2018 and the $472M reported in Q2, The carrier managed to return a positive net profit of $23M during the quarter thanks to a foreign exchange gain of $123M during Q2 due to the appreciation of the USD against the Euro. Net profits would have been negative in the absence of this adjustment. CMA CGM expects Q3, 2018 results to be significantly improved from its first two quarters, but operating margins will still remain lower than last year. The deterioration in the Q2 results was due to an increase in bunker costs, which carriers were unable to pass on to shippers. Average revenue in the Q2 was -2.0% lower compared to the same quarter last year while operating costs per TEU increased by 6.6%. CMA CGM s container lifting's increased by 9.6% to a record of 5.2MTEU in Q2, 2018, due to capacity growth in its OCEAN Alliance network, as well as the launch of new services and upgraded, with significant gains on the Middle East and Africa trades. PIL has reported a net loss of -$141M in 1H 2018, compared to a net profit of $11M 1H PIL s shipping operations accounted for $1,251M or 56% of the Group s total turnover in the 1H Shipping revenue increased by 2% while container liftings increased by 5% during the period, with average rates falling due to severe market competition. Shipping expenses increased by 17% due mainly to the increase in bunker price, resulting in the significant drop in operating margins. Maersk has opted for a unified brand name, Sealand A Maersk Company, to market the services currently offered by Seago Line (Intra Europe trades), MCC Transport (Intra-Far East trades) and SeaLand (Intra-Americas). The rebranding is aimed to reduce complexity towards customers thanks to a simpler brand identity. The three regional carriers are to continue their activities and operations unchanged as only the companies names are changed. The rebranding will be effective from 1 Oct 2018 : MCC Transport to become Sealand Asia A Maersk Company, SeaLand to become Sealand Americas A Maersk Company and Seago Line to become Sealand Europe & Med A Maersk Company. Sealand A Maersk Company will operate independently from Maersk and the existing structure of three teams in three locations reporting to their regional CEOs will remain unchanged. Source: Alphaliner, Seabury, carriers 10

11 Regulations R E G U L A T I O N S Malaysia: Ocean Freight New Implement for 6-Digit HS Code Effective 01 October 2018 The Royal Malaysian Customs Department (RMCD) has issued a directive on the requirement to provide 6-Digit HS Code of the product/commodity for every shipment and to be submitted in the manifest. The RMCD circular is directed at importation of Ocean shipments only and applicable to all sea-ports in Malaysia for all shipment with arrival at Malaysian ports from 01 October Malaysia: Sales & Service Tax (SST) Rate Changes to Replace Goods & Service Tax (GST) Percent Effective 01 September 2018 All ancillary charges which previously rated as GST zero percent is now SST zero percent effective 01 September The exception goes to Warehouse Management Services where it will attract SST 6 percent. Link to the official government circular and FAQ Mexico: Regulation for Trucking Services in Mexico As of 27 August 2018, a new regulation which establishes the driving times and breaks for drivers of federal motor transport services has become mandatory for federal transports in the country. As a result of this regulation, pick-up and deliveries are expected to be delayed. DGF Mexico encourages that the impact on pick-up and delivery time to be considered while scheduling shipments. You can find the standard in Spanish in the following Link: Source: DHL 11

12 Did you know? IMO 2020 Global Sulphur Limit Compliant Containership Fleet The majority of containership owners still appears undecided on how to achieve compliance with the new IMO 2020 regulation. Interest in LNG propulsion remains limited so far due to high upfront investments and uncertainties regarding the yet unproven gas bunkering infrastructure. Interest in exhaust gas cleaning systems, known as scrubbers, has picked up significantly in recent months. Despite investment costs of 5-10m USD per ship, the relatively short payback period for scrubbers has proven sufficiently attractive for some ship-owners. Still, the total number of scrubber-fitted vessels will remain at a fraction of the global container fleet of more than ships. Therefore, the vast majority of these will need to switch to low-sulphur fuel, with operators facing higher fuel bills as a result. Source: Alphaliner 12

13 B A C K - UP 13

14 Market Outlook October 2018 Ocean Freight Rates Additional Trades (1/2) O C E A N F R E I G H T R A T E S O U T L O O K EURO AMLA EURO SSA AMNO MENAT AMNO SSA AMNO AMLA AMLA Exports AMNO ASPA Capacity remains challenging. Pre-notice of bookings have to be considered at between 2-3 weeks. Further rate increases are coming for Q4 by some carriers, subj. to EBAF. Rates remain stable and space is available. Rates in the market are stable. Space continues to be an issue especially from US Gulf Coast and USEC but not as bad as earlier this year. Bookings are now out about 2 weeks. Rates to South Africa and West Africa will increase in October. Capacity is stable and space available. Hamburg Sud joined the direct service from USA to South Africa in August (Direct Service is currently shared by Maersk/Safmarine/MSC). Capacity to WCSA continues to be very tight. GRI s pending to WCSA and Fuel rising slightly. Roll over and space constraints affecting entire region. MX/BR/SAWC region facing port omissions and backlogs (Market Restructuring, BR Strike backlog, Weather). Serious congestion being faced in T/Shipment ports like CTG, BUN and MIT. Shippers are strongly urged to provide forecasts 6-8 weeks out. Carriers suspending service temporarily on trades effected by congestion. GRI s and Emergency Fuel surcharges announced daily on all trade. F/Time/Drop off conditions coming with a cost. FMC is currently reviewing proposal from carriers to remove one of two direct services for USA to Oceania trade. The proposal (if approved) would go into effect during Q4 and would remove PNW loop, while stretching the PSW string to include those ports in one call. Source: DGF 14

15 Market Outlook October 2018 Ocean Freight Rates Additional Trades (2/2) O C E A N F R E I G H T R A T E S O U T L O O K EURO MED - AMNO EUR MED AMLA EURO MED ASPA EURO MED MENAT EURO MED SSA ASPA-SPAC Slight rate increases depending on the service Unchanged / stable Slight reductions / stable Slight reductions / stable Unchanged / stable Alliances have planned blank sailings in October. Space is expected to be tight during the Oceania traditional peak season. Recovery is expected to be during end of October at earliest for China export. South East Asia on the other hand is at its peak and situation will persist till end of Dec Source: DGF 15

16 Market Outlook Volume Outlook in Main Trade Lanes, 2018 Estimate & 2019/22 Growth Forecast in % 2018e, in mteu 2019e-2022e CAGR, in % N O R T H A M E R I C A I n c l. M E X I C O 4.0 mteu +3.0% F A R E A S T 8.1 mteu +2.5% N O R T H A M E R I C A I n c l. M E X I C O 2.1 mteu +3.4% 12.8 mteu +2.3% 19.0 mteu +2.8% 2.0 mteu +5.6% 1.5 mteu +3.6% L A T I N A M E R I C A 1.6 mteu +4.7% 1.8 mteu +3.5% E U R O P E I n c l. M E D 7.3 mteu +2.7% I N T R A A S I A excl. Oceania 1.7 mteu +4.3% 4.1 mteu +4.4% L A T I N A M E R I C A 41.6 mteu +4.8% G L O B A L C O N T A I N E R T R A D E e m T E U % C A G R 2019e- 2022e Mid-term growth is mainly driven by Asian tradelanes. Source: Seabury Jun18 update 16

17 Drewry s Altman Z-Score as of 1 Sep 2018 Company Period Period Ended Units Net Sales EBIT Assets Book Value Liabilities Total Current of Equity Total Current Retained Earnings Z-Score AP Moller-Maersk 3 months 31. Mrz 18 million US$ 9' '639 21'794 34'313 27'326 10'127 29' OOIL 1) Annual 31. Dez 17 million US$ 6' '069 2'965 4'683 5'387 1'380 4' CMA CGM 3 months 31. Mrz 18 million US$ 5' '713 5'545 5'575 14'138 5'526 5' Wan Hai 3 months 31. Mrz 18 million NT$ 14' '753 23'665 33'705 39'048 19'566 12' NYK group 3 months 30. Jun 18 billion Yen ' ' Hapag-Lloyd Holding 6 months 30. Jun 18 million euro 5' '998 2'268 6'146 8'851 3'115 3' Evergreen Marine Corp 3 months 31. Mrz 18 million NT$ 36' '599 57'390 65' '754 45'021 12' K Line group 3 months 30. Jun 18 billion Yen ' China Cosco 2) 3 months 31. Mrz 18 million RMB 21' '359 34'792 43'356 86'003 40'728 9' MOL group 6 months 30. Jun 18 billion Yen ' ' Pacific International Lines Annual 31. Dez 17 million US$ 4' '107 1'471 1'906 4'201 2'068 1' Yang Ming 3 months 31. Mrz 18 million NT$ 31'035-2' '908 25'968 24' '587 50'022-3' Zim 3 months 31. Mrz 18 million US$ ' ' ' Hyundai Merchant Marine 3 months 31. Mrz 18 billion Won 1' '399 1' ' ' The Z-Score is a statistical analysis to predict a company s probability of failure in the next two years, using data from the company s financial statement. Z-Score 2.99 = company is safe ; Z-Score between 1.8 and 2.99 = exercise caution ( grey zone ); Z-Score 1.8 = Higher risk of the company going bankrupt ( distress zone ) Source: Drewry Sea & Air Shipper Insight Aug 2018, 1) parent of OOCL, 2) parent of Cosco Container Lines; Z-score is calculated as follows: T1 = (Current Assets - Current Liabilities) / Total Assets, T2 = Retained Earnings / Total Assets, T3 = Annualized EBIT / Total Assets, T4 = Book Value of Equity / Total Liabilities, T5 = Annualized Sales / Total Assets, Z-score bankruptcy rating = 1.2*T *T *T *T *T5 17

18 Topic of the Month Top 12 Carriers by Operated Capacity (in Mil. TEU), December After triggering regulatory approval processes in 23 jurisdictions, Maersk finally aquired Hamburg Süd. Over the next five months, Maerk will terminate some of Hamburg Süd s overlapping services on certain trades APM- Maersk, Hamburg Süd MSC COSCO, OOCL CMA CGM, Mercosul Hapag-Lloyd ONE (NYK, MOL, K Line) Evergreen Yang Ming PIL Zim HMM Wan Hai Source: Alphaliner, incl. pending mergers 18

19 Acronyms and Explanations 2M - Carrier Alliance: Maersk / MSC AMLA - Latin America AMNO - North America AR - Argentina ASPA - AsiaPacific BR - Brazil CAGR - Compound Annual Growth Rate CENAC - Central Amercia and Caribbean CKYHE - Carrier Alliance: Cosco, K-Line, YangMing, Hanjin and Evergreen CNC - CNC Line (Cheng Lie Navigation Co. Ltd.) DG - Dangerous Goods DWT - Dead Weight Tonnage EB - Eastbound ECSA - East Coast South America EGLV - Evergreen Marine Corp EURO - Europe FMC - US Federal Marine Commission G6 - Carrier Alliance: APL, Hapag Lloyd, Hyundai, MOL, NYK and OOCL GRI - General Rate Increase HJS - Hanjin Shipping HMM - Hyundai HL - Hapag -Lloyd HSUD - Hamburg Süd HWS - Heavy Weight Surcharge IA - Intra Asia IPBC - India Pakistan Bangladesh Colombo IPI - Inland Point Intermodal ISC - Indian Sub Continent MENAT - Middle East and North Africa ML - Maersk Line mn - Millions MoM - Month-on-Month NOO - Non-operating (vessel) owners Ocean 3 - Carrier Alliance: CMA, UASC, China Shipping OCRS - Operational Cost Recovery surcharge OOCL - Orient Overseas Container Line OWS - Overweight Surcharge PH - Philippines PNW - Pacific North West Ppt. - Percentage points PSW - Pacific South West RR(I) - Rate Restoration SAEC - South America East Coast SAWC - South America West Coast SOLAS - Safety of Life at Sea SPRC - South People s Republic of China South China SSA - Sub-Saharan Africa SSL - Steam Ship Line T - Thousands TEU - Twenty foot equivalent unit (20 container) TP - Trans Pacific TSA - Trans Pacific Stabilization Agreement ULCS - Ultra Large Container Ship USGC - US Gulf Coast US FMC - US Federal Maritime Commission USEC - US East Coast USWC - US West Coast VGM - Verified Gross Mass VLCS - Very Large Container Ship VSA - Vessel Sharing Agreement WB - Westbound WCSA - West Coast South America WHL - Wan Hai YML - Yang Ming Line YoY - Year-on-Year YTD - Year-to-Date 19