U.S Export Market Update

Transcription

1 U.S Export Market Update Robert F. Sappio Senior Vice President Pan-American Trade, APL JOC TPM, Long Beach, CA March 1, 2010 Page 1

2 Agenda Trade Growth Drivers of Surging Exports US Terminal & Intermodal Services Direct to Customer Rotterdam Export-Import New York Mismatch Los Angeles Vessel Capacity Port-to to-port Service Asia Intermodal & Integrated Feeder Services Chiwan Hong Kong Shanghai Port-to to-port Service Los Angeles Eastbound Westbound Algebra A Path Forward for Carriers and Shippers Page 2

3 2009 Trade Growth

4 World Containerized Trade Outlook Global containerized trade continues to slow down in 2009; possible to start recovering in 2010 Intra-Asia Global Asia-Europe (HH) Containerized Trade Growth F 2010F 7.3% 6.5% 4.4% 4.7% 4.0% 2.2% -0.7% -3.6% Global Trade Growth Morgan Stanley (Sep) -9.0% - Drewry (Sep) -10.3% 2.4% Clarkson (Nov) -9.3% 3.5% Deutsche Bank (Aug) -6.6% 7.1% Transpacific Trade Growth PIERS (Dec) -15.4% 15.8% Drewry (Sep) -14.9% 4.0% Clarkson (Nov) -14.8% 2.5% Asia-US (HH) -10.0% -9.0% -14.8% -14.8% Asia Europe Trade Growth Drewry (Sep) -14.8% 2.2% Clarkson (Nov) -16.6% 0.5% Citi (Sep) -15.0% 4.0% Note: Based on analysts forecast and Global Insight & JOC data, SLM estimates Page 4

5 Transpacific Westbound Market Volume 2009 Full year West Coast market volume declined 5% while East Coast volume increased 10% Strong volume growth was seen during last few months of 2009 resulting in full year volume almost at same level as 2008 Total Market Volume Growth 2009 Vs West East Jan (29%) (24%) Feb (32%) (20%) Mar (11%) (2%) Apr (11%) 7% Volume Growth (YoY) 2009 YoY growth at -0.3% May (10%) 8% Jun (2%) 8% Jul (11%) 6% Aug (4%) 13% Sep 4% 25% Oct 7% 31% Nov 29% 44% Dec 30% 44% FY (5%) 10% Source: PIERS, dry statistics Page 5

6 Transpacific Eastbound Market Volume Volume Growth (YoY) YTD market volume to West Coast & East Coast were down 16% and 13% respectively Rate of volume decline to both West and East Coast has slowed to a single digit decline in October & November with December reverting back to positive growth of 2% Source: PIERS, dry statistics Total Market Volume Growth 2009 Vs West East Jan (16%) (13%) Feb (42%) (17%) Mar (9%) (22%) Apr (23%) (14%) May (26%) (16%) Jun (19%) (16%) Jul (12%) (13%) Aug (18%) (16%) Sep (13%) (9%) Oct (8%) (8%) Nov (4%) (6%) Dec 3% 1% FY (16%) (13%) Page 6

7 Demand Forecast in the Transpacific Trade Westbound Year APL PIERS Drewry Clarkson Eastbound Year APL PIERS Drewry Clarkson Figures in percentages Source: PIERS, Drewry 4Q 09, Clarkson 4q 09, EIU Jan 10, analyst reports, company researches Forecast in shades Page 7

8 Trade Mismatch / Imbalance TP Eastbound TP Westbound million Teu million Teu TSA Average 1 REV/F WTSA Average 1 REV/F 1. Average of Q4, 2009 $2,706 $1,707 Page 8

9 Drivers of Surging U.S. Exports

10 Weakening U.S. Dollar The U.S. dollar has been depreciating against most currencies U.S. Dollar Index (against major currencies) Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan Page 10 Source: Federal Reserve Dollar Index

11 Economic Outlook Selected Economic Indicators (% Growth) GDP Growth (%) F 2010F 2011F World United States Asia excluding Japan China India Japan United States F 2010F 2011F Consumer Price Inflation Unemployment Rate PCE Gross Fixed Investment Global economic activity has picked up steam in the second half of 2009, on the back of fading inventory reductions and an aggressive fiscal and monetary stimulus increasingly have an impact Most major countries appear to have moved out of recession in the third quarter of 2009 and some, notably China and India, continue to surprise on the upside. However, strength of recovery will be weak In U.S., growth is expected to slow over the course of 2010 as the impact from fiscal stimulus and the inventory cycle begin to fade Source : EIU, Blue Chip Economic Indicators and analyst reports Page 11

12 Export Import Mismatch

13 Surging Westbound Volumes Annual volume of containerized exports to Asia doubled (+105%) from 1999 through 2008 while 2009 registered -0.3% growth as the recession hit. Last four months of 2009 saw volume bounce back strongly with a 21% growth over same period in 2008 U.S. Container Export (million TEUs), to Asia Market Growth (YoY) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% Source: PIERS 16% % forecast forecast 13% 9% 7% 8% 4% 6% 5% 4% -1% -2% p Market Volume Market Growth Volume (in million Teu) Page 13

14 Softening Eastbound Trade U.S. containerized import growth reflects significant softening in recent years registering the deepest decline in 2009 U.S. Container Import (million TEUs), from Asia Market Growth (YoY) 25% 20% 15% 10% 5% 0% -5% -10% 12% 14% 0% 20% 10% 15% 14% 12% 1% forecast forecast -8% -15% 7% Volume (in million Teu) -15% -20% p Market Volume Market Growth Source: PIERS Page 14

15 US EC & WC Container Volume Growth The imbalance in export-import growth has put tremendous pressure on empty box requirements US-Asia WC Trade Volume Growth, US-Asia EC Trade Volume Growth, % 15% 10% 5% 13% 4% 12% 10% 12% 7% 16% 6% 25% 20% 15% 10% 21% 9% 20% 8% 18% 11% 10% 9% 8% 0% -5% -10% -15% Import Export -2% -11% -5% 5% 0% -5% -10% Import Export 1% 4% -20% -16% % -12% Source: PIERS Page 15

16 Export Import Mismatch within the U.S. Existing mismatch between exporting & importing states is getting worse as WB volumes surge Corn growing regions Legend Major Inbound DCs/ Warehouses Wheat growing regions Major Outbound Agricultural/ Manufacturing Sites Page 16

17 Export Import Mismatch also in Asia Mismatch in Asia is worsening at a significant pace, requiring purchase of additional boxes and increasing cost of repositioning back to feed EB demand zones Top EB countries are not growing their WB volumes as fast as other Asian countries, creating increasing mismatch of in/ out volumes in Asia North China South China Japan Thailand Indonesia India US Exports growing to SEA, S Asia which need longer transit Repositioning Repositioning Boxes need to be repositioned to major exporting regions e.g. North China Page 17

18 Rate Trends & Differential with EB rate $4,500 EB WB $4,000 Gross Revenue Per Feu $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 Jan 05 $2,502 Dec 05 $2,633 Dec 06 $2,378 Dec 07 $2,300 Dec 08 $1,674 Dec 09 $989 $500 $ WB rate trend shows a flat line from 2005 until 2008 when rates went up and peaked in last quarter of The start of 2009 saw rates start to decline with the Q4 showing some recovery. The differential between WB rate & EB rate currently stands at $1,000. Page 18

19 Shortage of Vessel Capacity

20 Industry Loss a in 2009 & 2010 a. Drewry s prediction The industry will lose another $7.2 billion in 2010, following an estimated loss of $22.0 billion loss in 2009 Nearly $15 billion had been raised as of the end of November 2009, through: Equity & share issues ($8 billion) Bond issues ($3 billion) Government guarantees and other measures ($3 billion) Cash outflow in 2010 Operating loss ($3 billion) Capital investment ($10 billion on new ships/deliveries that cannot be cancelled) Even if the industry can secure the same amount of fresh cash in 2010 as it received from shareholders and from bondholders in 2009, it will not be sufficient to cover its cash needs Carriers need to raise another $4 billion of cash in 2010 from other sources (other than equity/share and bond issues) This requires companies to sell assets 1 to raise cash Source: Drewry January OOIL sold its property division for $2.2 billion at the beginning of 2010 Page 20

21 Bunker Price Rising Again $780 $680 After falling below $250 per MT in December 2008, bunker price has started gaining lost ground - rising by about 105% over the Dec 08 low $748 Jul 08 Platts Bunker Price / MT $580 $480 $380 $280 $180 May $136 Jan H to 2010 Jan Monthly Bunker Price $173 Jan 03 $175 Jan 04 $228 Jan 05 $343 Jan 06 $295 Jan 07 $246 Dec 08 $486 Jan 08 $269 Jan 09 $505 Jan 10 $80 Jan Page

22 Laid Up Vessels 000 TEU Laid Up Vessels as of Feb 10 1,600 1,400 1,418 1,310 1,310 1,300 1,315 1,240 1,219 1,280 1,310 1,340 1,279 1,310 1,298 1,352 1,413 1,430 1,480 1,510 1,440 1,370 1,200 1, As of 0 No. of idle begin mid vessels Apr Apr Tonnage as % of total fleet begin 511 May 09 mid 511 May 09 begin 533 Jun 09 mid 517 Jun 09 beg mid beg mid beg Jul 09 Jul 09 Aug Aug Sep mid 528 Sep 09 beg 548 Oct 09 mid beg Oct Nov mid beg beg Nov Dec Jan mid 562 Jan 10 beg 532 Feb 10 Non-operating owner s share of total idle fleet size 27% 31% 37% 42% 37% 45% 48% 46% 36% 45% 45% n.a. 50% 50% 48%. n.a. n.a. 44%. 46%. 46%. Note: Non-operating owner s info for certain period not available from Alphaliner reports Source: AXS Alphaliner Page 22

23 Idle Container Fleet Eases but Remains High The idle containership fleet fell to 9.9% as carriers slow steaming operations and Lunar New Year extra loaders absorbed some excess capacity Idle Fleet Percentages & Teu count (in million) of the cellular fleet Early Dec % 1.52m Mid Dec % 1.48m Beginning of Jan % 1.37m As at Feb % 1.30m Top 10 Carriers Idle Fleet Source: Alphaliner, data as at Feb 15, 2010 NOO: non-operating owners Page 23

24 Eastbound Westbound Algebra

25 A 4,000 TEU ship may only have a carrying capacity of 3,139 TEUs Factor Nominal capacity Weight of cargo Containers vary in height Description Theoretical maximum number of empty TEUs a ship can physically accommodate in perfect conditions Cargo weight differs based on the type of commodity shipped Cargo weight differs by trade Many ships not designed to carry high-cube containers without displacing some lift capacity Certain routes have line of sight height limitations 4,000 TEUs Lose 522 TEUs (3,478) Lose 139 TEUs (3,339) Ship design Most vessels have locked in 20 foot slots making full use of available slots difficult Lose 100 TEUs (3,239) Empty containers Page 25 Stack weight and stability limitations impact profile for loaded containers Lose 100 TEUs (3,139) Page 25

26 Deadweight Issues on Westbound Heavier cargo on westbound constrains the number of boxes that can go on a ship before it hits deadweight limits Transpacific Eastbound Vs. Transpacific Westbound Average Cargo Weight = 10.3 MT 40 Eastbound cargo is generally lighter than westbound thus eastbound vessels can carry a full complement of loaded containers, while staying within vessel capacity weight limits. Average Cargo Weight = 21.3 MT Westbound cargo is heavier than eastbound fewer loaded containers can be carried without exceeding vessel capacity weight limits. Westbound vessels will reach their deadweight capacity before reaching their container carrying capacity. Vessel space is optimized by carrying empty containers back to Asia. Page 26

27 Path Forward for Carriers and Shippers

28 Fundamental Changes Impacting Westbound The weak US Dollar is making US exports very competitive Strong demand for agricultural products and Reefer commodities in foreign markets Migration from Bulk to Containerization continues due to Increasing imports of base commodities in Asia Some carriers curtailing their inland network due to substantial increase in truck/ rail costs High fuel costs affecting domestic re-positioning. Mismatch of imports vs. exports locations Carriers allocation of space based on yield and equipment flows Overbooked ships on all export trades No material growth in capacity will likely take place until Eastbound demand growth rebounds.space for U.S. exports will continue to be tight Strength in Westbound Growth and strong demand for U.S. products will continue Rates and level of Fuel recovery will continue to need to increase to cover raising cost Page 28

29 Solutions Work in Progress Both shippers & carriers need to work hand-in-hand to begin to alleviate the current situation Better demand forecast & planning Shippers-Carriers Working Closely Shippers commitment to real bookings Adequate coverage of increasing costs Re-configuring vessel networks Carriers commitment to space & equipment Page 29

30 Thank You Page 30

31 Appendix Page 31

32 TAED Total Market Volume YOY Change Full Year 2008 to 2009 change = -24% YOY % Change 0% -5% -5% -10% -8% -15% -15% -13% -20% -25% -25% -23% -30% -35% -28% -29% -32% -32% -32% -34% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Page 32

33 TAWD Total Market Volume YOY Change Full Year 2008 to 2009 change = -19% YOY % Change 0% -5% -10% -11% -7% -15% -14% -16% -20% -18% -18% -25% -22% -24% -20% -25% -22% -30% -28% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Page 33

34 Export Import Mismatch within U.S. There is a significant mismatch between import & export flows equipment ends up in different locations than where growing export demand is Corn growing regions Source: PIERS YoY Growth Year via USEC % (4.6% ) Inbound % (12.1%) Outbound % 9.1% Im b alan ce 47% 4 5% 32 % via USWC (6.2%) (12.5%) Inbound (10.8%) (15.9%) Outbound % (5.3% ) Im b alan ce 61% 5 4% 48 % Wheat growing regions Page 34

35 Deadweight Issues on WB Note: Composition of top 10 commodities Shifting cargo mix towards heavier cargo such as waste paper and scrap is putting pressure on WB ship space -0.9%% W ASTEPAPER, 16% W ASTEPAPER, 15% + 2.2% W ASTEPAPER, 18% + 1.4% SCRAP-IRON/STEEL, 8% SCRAP-IRON/STEEL, 9% flat SCRAP-IRON/STEEL, 9% RESINS, 4% RESINS, 4% HAY PRODUCTS, 4% HAY PRODUCTS, 3% GRAINS/FLOUR, 3% GRAINS/FLOUR, 4% LUM BER/TIM BER/LOGS, 4% LUM BER/TIM BER/LOGS, 3% WOODPULP, 3% WOODPULP, 3% CHEMICALS NOS, 3% CHEMICALS NOS, 3% SOYBEANS, 4% SOYBEANS, 4% + 1.3% RESINS, 5% HAY PRODUCTS, 4% GRAINS/FLOUR, 4% LUM BER/TIM BER/LOGS, 3% WOODPULP, 3% CHEMICALS NOS, 3% SOYBEANS, 3% COTTON-RAW, 3% COTTON-RAW, 3% COTTON-RAW, 2% Source: PIERS Page 35

36 TSA Carriers West Coast Revenue per Feu Trend $3,000 $2,500 $2,500 $2,626 $2,416 $2,348 $2,338 $2,310 (Jun 08) $2,254 $2,093 Rev/F (excl BAF) dropped $763 $500 $400 $300 Rev/F (excl BAF) $2,000 $1,500 $1,000 $500 $127 ($211) ($68) ($10) ($28) ($56) ($160) $1,905 ($188) $1,601 $1,314 $78 $87 $1,392 $1,479 $9 $1,488 $1,454 ($34) $37 $1,491 $200 $100 $0 ($100) ($200) Rev/F Change (Vs. Prior Period) ($304) ($287) ($300) $0 May-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jan-09 Apr-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 ($400) Source: TSA data Change from Prior Period (Right Axis) REV/F, net of BAF, (Left Axis) Page 36

37 TSA Carriers East Coast Revenue per Feu Trend $4,500 $4,000 (Jun 08) $3,784 $3,892 $3,834 $3,836 $3,864 $3,875 $3,848 $3,880 $3,476 Rev/F (excl BAF) declined $1,206 $600 $400 Rev/F (excl BAF) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $108 ($58) $2 $28 $11 ($27) $32 ($404) $3,258 ($217) $2,623 $46 $56 $2 $2,669 $2,727 $2,725 $2,642 ($14) ($71) $2,656 $200 $0 ($200) ($400) Rev/F Change (Vs. Prior Period) $500 ($635) ($600) $0 May-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jan-09 Apr-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 ($800) Source: TSA data Change from Prior Period (Right Axis) REV/F, net of BAF, (Left Axis) Page 37