OCEAN FREIGHT MARKET UPDATE

Transcription

1 DHL Global Forwarding, Freight OCEAN FREIGHT MARKET UPDATE December

2 Contents TOPIC OF THE MONTH Asia North Europe Capacity, 2017 HIGH LEVEL DEVELOPMENT MARKET OUTLOOK Freight Rates and Volume Development ECONOMIC OUTLOOK & DEMAND DEVELOPMENT CAPACITY DEVELOPMENT CARRIERS 2

3 Topic of the Month Asia North Europe Capacity, 2017 A S I A - N O R T H E U R O P E C A P A C I T Y G R O W T H T O H I T 1 1 % I N Q 4 After ten blanked October sailings for the Chinese National Day Golden Week holidays, only seven blanked sailings are currently scheduled for the months of November and December. The limited capacity cuts should remove any concerns about space shortages, even though demand has picked up very quickly after the October holidays in China. Capacity utilization has rebounded to 95% in the last week of October, with only a mild fall in that month despite the higher capacity on offer. Spot freight rates from the Far East to North Europe have rebounded in the past two weeks, as carriers pushed out a fresh round of rate increases after suffering a 33% drop since July this year. Source: Alphaliner 3

4 High Level Market Development Supply and Demand ECONOMIC OUTLOOK 1) GDP GROWTH BY REGION 2017F 2018F 2019F 2020F 2021F CAGR ( ) EURO 2.1% 1.9% 1.8% 1.8% 1.8% 1.8% MEA 3.0% 3.4% 3.7% 3.9% 4.0% 3.7% AMER 2.0% 2.6% 2.5% 2.3% 2.4% 2.5% ASPA 5.0% 4.8% 4.6% 4.5% 4.7% 4.7% WORLD CONTAINER INDEX (WCI) 2) Q1 15 Q2 Q3 Q1 16 Q2 Q3 Q1 17 Q2 Q3 SUPPLY VS DEMAND GROWTH 4) % Growth DGF World 3.1% 3.2% 3.1% 3.1% 3.2% 3.2% Demand Growth Supply Growth F 2018F 2019F Source: 1)real GDP, Global Insight, Copyright IHS, Q All rights reserved; 2) Drewry Container Forecaster Forecast global supply-demand balance; 3) Shanghai Shipping Exchange, in USD/20ft container and USD/40ft container for US routes, 15 routes from Shanghai, 4) Global Insight, Drewry, 5) Bunker Index, in USD/metric ton, Bunker Index MGO (BIX MGO) is the Average Global Bunker Price for all marine gasoil (MGO) port prices published on the Bunker Index website, Bunker Index 380 CST (BIX 380) is the Average Global Bunker Price for all 380 centistoke (cst) port prices published on the Bunker Index website SHANGHAI CONTAINERIZED FREIGHT INDEX (SCFI) 3) BUNKER PRICE INDEX 5) BIX 380 BIX MGO Q1 15 Q1 15 Q2 Q2 Q3 Q3 Q1 16 Q1 16 Q2 Q2 Q3 Q1 17 Q3 Q1 17 Q2 Q2 Q3 Q3 4

5 Market Outlook December 2017 Major Trades No major space constraint on any trade. 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 = = EURO = = MENAT = = SSA = = ASPA ASPA - = AMNO - + AMLA = + EURO = = MENAT = - OCEANIA = + KEY Strong Increase ++ Moderate Increase + No Change = Moderate Decline - Strong Decline - - Source: DGF 5

6 Market outlook on smaller trades available in the back-up Market Outlook December 2017 Ocean Freight Rates Major Trades 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 ASPA AMLA ASPA AMNO EURO AMNO ASPA MENAT ASPA ASPA AMNO EURO Source: DGF Overall space situation is manageable and carriers have announced a GRI for 1 st and 15 th DEC Second half of December is expected to show stronger liftings. Capacity is sufficient to cater all North European exports, no pre-christmas space shortage despite current blank sailings. By that, no rate hikes or reductions but horizontal movement only. 25% reduction in capacity from Asia to ECSA on Week 46. Do not foresee any permanent injection of capacity into Brazil & Argentina. We expect the demand and supply in the ECSA to be balance. We do acknowledge that during the holiday season we will see the cargo volume reduced (which is a normal trend coupled with blank sailing) however overall the demand and supply in the market is balance and we do not expect the QTR 4 rates to drop too much. Carrier plans to impose GRI on 01 Dec 2017 at USD750 per TEU to WCSA/MX. Spot market continue to be under pressure in Nov but expect moderate increase from Dec 1st GRI. Overall space situation is manageable as most carriers are in the low 90% utilization. Space utilization expected to improve 2nd half of Jan prior to China CNY holidays. Rates are stable and vessels are well utilized. MSK introduce a new service 12/12 Colombia Express calling Newark, Charleston, Rotterdam & Felixstowe. Market into EMED/Middle East has been pretty quiet in November, and carriers have also drop rates in order to get more cargo onboard. Carriers is now trying to impose another round of GRI into EMED w.e.f 01 Dec Current operational situation in Durban has not improved significantly since the storm during October. Conditions have been further affected by poor weather and strong winds, as well as equipment breakdowns alongside the quay. All indications are that the current status quo in terms of limited productivity and berthing delays will remain as is until the end of Space into INCCU is expected to be tight in view of the winter draft restrictions. This has also resulted in berthing congestion. A blank sailing (AS1 APL service) has been planned in the first week of Dec, to Pakistan. Several carriers have announced the reshuffling or introduction of new Intra-Asia or IPBC services. Unchanged and stable 6

7 Economic Outlook & Demand Development 3. 2 % : B E S T G L O B A L G R O W T H R A T E I N S E V E N Y E A R S EURO Y/Y GDP growth is at 2.5% - nicely above the more usual %. More into detail, Germany, Spain show robust expansion (Q/Q GDP growth at 0.8% both), so do Austria (0.6%), France and Italy (0.5%). Growth is led by better labor market, low inflation, and consumer spending. With a better access to credit, firms are also increasing their investments. AMER US: The effects of the recent hurricans are now shrruged off. 3.0% growth in Q3 hurricanes subtracted 0.5 points. US economy is looking strong, as the growth also reduces unemployment below 4%. ASPA EMERGING MARKETS DEMAND DEVELOPMENT JP: Solid, yet slower growth (+0.3% Q/Q) compared to most.consumption tax is planned to rise (and possibly slow demand) as of October CN: Growth is holding up thanks to government stimulus, at 6.5% est. for FY2017 High-impact/low probability risks (North Korea) could undermine this positive momentum. Emerging markets are out of their two-year growth slump, performing with a GDP growth estimated around 5% this year. World PMI is up 0.1 point, at 54.0, showing a continued economic expansion, as high as that of August, which was the highest since March 15 European PMI increased 0.4 points to 58.5 in October. Developed markets PMI is up at 55.0, its highest point since April 2015, with the four largest economies sharing similar performance. In emerging economies, it is down at 51.5, the weakest reading in a year. BR (especially its service industry) and RU are severely hit. Source: Global Executive Summary, IHS Markit, Sep The Purchase Manager Index is an IHS proprietary metric that polls purchasing managers to understand if they are to order more or less in the future, hence giving a representative estimation of the global business sentiment. Assessed monthly, a PMI at 50 is considered neutral, expanding above 50, and shows business shrinking below 50. 7

8 Capacity Development C A P A C I T Y D E V E L O P M E N T With 7.7% growth in Q3 17 Global container volumes grew at their fastest pace since Alphaliner has therefore adjusted its full year growth estimate upwards to 6.4% All regions posted improved year-on-year growth, led by strong volume growth of 10% in Latin America which in turn could lead to a major revamp of Asia-South America services. Chinese ports also posted an impressive 9.3% growth and North American ports recorded 8.7% growth. However total effective capacity growth has outpaced the growth in demand, reaching 8.1% at the end of September, due to combined effects of new ship deliveries and a reduction in the idle fleet. THE Alliance carriers plan to void only one Far East-North Europe sailing in Nov & Dec mirrors the OCEAN Alliance and 2M Alliance s current schedules that only show a single void sailing by each alliance, that also coincides with the scheduled arrival during the Christmas holiday period in Europe. Latest annual growth of 3.5% of the containership fleet is at the slowest pace of growth since This is mainly due to the period between Aug16 and Feb17 when total fleet actually marginally shrunk. However, growth rate has resumed since Mar17 and is expected to continue. MSC has started to upgrade its weekly service of North Europe to NCSA & WCSA by replacing some of the TEU ships with larger to TEU ships. Source: Alphaliner, carriers 8

9 Carriers (1/2) C A R R I E R S Maersk s Q3 earnings dropped compared to that of Q2, falling from $364 M to $254 M. They do represent a significant improvement over Q3 2016, during whch the carrier posted a $-159 M loss. The setback is mostly due to the cyber-attack that hit the carrier at the end of June, causing lower volumes and capacity utilization on top of the costs involved to resolve the cybercrime (an estimated $ M according to the carrier, up from the $ M initially announced). The carrier forecasts lowe earnings in 17. Maers also re-iterated that it «has currently no plans for new orders of vessels». COSCO Shipping Holdings will issue new shares to raise up to RMB 12.9 Bn (USD1.95 Bn) that will be used to finance a newbuilding program for 20 containerships that were ordered in 2014 & COSCO Shipping will conditionally subscribe to 50% of the new shares, while the remaining 50% will be offered to up to 9 specific target investors. COSCO Shipping is wholly owned by the Chinese state. Thus the move means a direct cash injection by the Chinese government. COSCO Shipping s shares in COSOC Shipping Holdings will increase to 46.22%. COSCO Shipping Holdings reported a net profit of RMB 872m (USD131 m) in Q3 17. Results were supported by RMB 567 (USD85 m) of government subsidies, adding to some RMB 388 m (USD66 m) that were already paid in H1 17. Total container liftings increase 23% in Q3 17 to 5.5 mteu, while average rates increased by 9%. OOCL reports improvements in average freight rates (+4.5% vs. Q3 17) and total liftings (5.0% Q3 17 vs Q2 17). OOCL does not provide quarter earnings updates. The acquisition of OOCL by COSCO Shipping was cleared on 23 Oct by the US anti-trust authorities and COSOC Shipping shareholders approved the transaction on 16 Oct. Japanese carriers Q3 17 results were all positive, although all three lines expect their results to trend lower in the next 2 quarters. K Line reported a lower ordinary income due to rate reductions on Asia-Europe & TP trades. Although MOL and NYK highlighted weakening rates on these two key trades, both of them managed to produce improved ordinary income performance compared to Q2 17. MOL even recorded its 1 st profitable quarter following 25 consecutive negative quarters. Source: Alphaliner, carriers 9

10 Carriers (2/2) C A R R I E R S On 7 Nov China s Ministry of Commerce has approved Maersk s proposed acquisition of Hamburg Süd. The approval is subject to several conditions all concerning the Far East-ECSA and Far East-WCSA routes and are expected to radically alter the existing service structures. Hapag-Lloyd posts a significantly improved net profit of EUR54 in Q3 17, with an EBIT margin of 6.5%. Results were boosted by strong liftings which grew by 44% due o the inclusion of UASC in May this year. Total volumes growth on a pro-forma basis including UASC volumes from 2016 would still have increased by 6.5%. Average freight rates also increased by 3.7% (9.0% on a pro-forma basis). Yang Ming returns to profit in Q2 17, with core operating profits reaching TWD 1.5bn (USD50 m) and net profit of TW1.26 bn (USD42 m) driven by 11.1% higher liftings and 15.8% higher freight rates as imputed by Alphaliner. CMA CGM chooses LNG propulsion for the nine TEU ships it has ordered earlier this year making CMA CGM the first shipping company to equip such giant containerships with this type of motorisation. The large LNG tanks required for deep-sea long-haul trading will need a large amount of space. Alphaliner estimates that half a hold/one 40ft bay will needed for the tanks. Gas propulsion also relies on a LNG-bunkering infrastructure that does not exist yet. HMM has continued its rehabilitation with its best quarterly result since Q1 15. Its container shipping operations recorded a third quarter operating loss of KRW bn (USD 5.7m) with operating margins of -0.6%. The lower operating loss was achieved on 41% higher liftings to reach a new quarterly record of 1.05 mteu. Newcomer SM Line s container shipping operations remain in the read in Q3 17. Despite the negative operating results it is continuing to expand rapidly and plans entry into the Middle East and Pakistan and eying a new service to the US East Coast in CMA CGM has posted the best operating margin amongst the main carriers in Q3 17 with operating income reaching USD 568m on revenue of USD 5 702m for an operating margin of 10%, making it the best quarter since the integration of APL in Jun 16. Liftings increase by 11.6% while average revenue decreased by 14.4% per TEU. Source: Alphaliner, carriers 10

11 B A C K - UP 11

12 Market Outlook December 2017 Ocean Freight Rates Additional Trades (1/2) Ocean Freight Rates Outlook EURO AMLA EURO SSA AMNO MENAT AMNO SSA AMNO AMLA AMLA Exports another rate increase will materialize in December to the South American East Coast. Carriers are reporting well utilized to full vessels. unchanged stable, well utilized vessels. Space to South Africa is tight due to upcoming Christmas / Summer Holidays in South Africa in addition to severe problems in POD Durban due to less capacity (cranes damaged after storm) and therefore heavy delays in berthings. Situation shall improve end of December. Alternatively carriers are using POD Cape Town and Port Elizabeth / Coega for oncarriages into South African hinterland. No major changes this month. Space to M.East is still tight from USEC & USGC Ports. Current rates will stay the same until end of No Space issues or service changes on USA to South & West Africa services Rates are stable with no increase/decrease expected until new year or in the first quarter of 2018 Capacity remains stable but full forcing upward pressure on rates. US-WCSA under most stress w/full capacity. Vessels booked 2-3 weeks out. Rates from SAEC continue to rise as fruit season begins and capacity is cut to EURO by 15% Space issues continue in Brazil, WCSA and Mexico Equipment deficits affecting conditions in Colombia Numerous surcharges and fees being imposed Source: DGF 12

13 Market Outlook December 2017 Ocean Freight Rates Additional Trades (2/2) Freight Rates Outlook EURO MED - AMNO EUR MED AMLA EURO MED ASPA EURO MED MENAT EURO MED SSA ASPA-SPAC Unchanged/Stable Unchanged/Stable Stable/some slight reductions can occur depending on the provider Stable/some slight reductions can occur depending on the provider Unchanged/Stable Market is still very full but seems to be slowing down very slight in early December. Demand for space in January will be high again. Source: DGF 13

14 Carriers Drewry s Altman Z-Score as at August 17 Company Period Period End Unit Net Sales EBIT Asset Total Asset Current Book Value of Equity Liabilities Total Liabilities Current Retainted Earnings AP Moller-Maersk 6 months 30-Jun-17 mn US$ OOIL (parent of OOCL) 6 months 30-Jun-17 mn US$ CMA CGM 3 months 31-Mar-17 mn US$ ,812 5,940 5, Wan Hai 6 months 30-Jun-17 mn NT$ K Line Group 3 months 30-Jun-17 bn Yen NYK Group 3 months 30-Jun-17 bn Yen Hapag-Lloyd Holding 3 months 31-Mar-17 mn EUR Pacific International Lines Annual 30-Dec-15 mn US$ Evergreen Marine Corp 6 months 30-Jun-17 mn NT$ MOL Group 3 months 30-Jun-17 bn Yen , , China Cosco 1) 3 months 31-Mar-17 mn RMB Yang Ming 6 months 30-Jun-17 million NT$ Hyundai Merchant Marine 6 months 30-Jun-17 bn Won Zim 3 months 31-Mar-17 mn US$ Slight improvement in all carrier results, as most of them are now stretched over a shorter period of time. HMM now scores a positive 0.35, whilst OOIL went back to the grey zone (scoring above 2.00). Hapag-Lloyd is marginally down vs. their annual results published in March. Again, none of the carriers manage to reach the > 2.99 safe zone. The Z-score is a statistical analysis to predict a company s probability of failure in the next 2 years, using data from the company s financial statement. A Z-score 2.99 company is safe. A Z-score between 1.8 and 2.99 exercise caution ( grey zone ). A Z-score 1.8 higher risk of the company going bankrupt ( distress zone ). All indications based on these financial figures only. Source: Drewry Sea & Air Shipper Insight, June 2017; 1) 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 Z-Score 14

15 Market Outlook Volume Outlook in Main Trade Lanes, 2017 Estimate & Growth Forecast 2017/20 in % 2017e, in mteu 2017e-2021e CAGR, in % N O R T H A M E R I C A I n c l. M E X I C O 3.5 mteu +1.2% F A R E A S T N O R T H A M E R I C A 7.6 mteu +0.7% I n c l. M E X I C O 1.7 mteu +0.9% 11.9 mteu +1.6% 15.8 mteu +0.9% 3.5 mteu +1.3% 2.0 mteu +0.7% L A T I N A M E R I C A 1.7 mteu +1.3% 0.2 mteu +3.0% E U R O P E I n c l. M E D 7.0 mteu +0.9% I N T R A A S I A excl. Oceania 7.0 mteu +0.9% 4.5 mteu +2.8% L A T I N A M E R I C A 35.1 mteu +3.1% 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 2017e- 2020e Mid-term growth is mainly driven by Asian tradelanes. Source: Drewry 15

16 Global Capacity Development all Trades Highest scrapping level ever [TTEU] Average age % Idling remains high [TTEU] 1, % ,359 1,324 Returning capacity well absorbed by demand 602 (May 2017) Net capacity growth remains low Net capacity growth 2017E 7.7% -1.8% 2.7% -3.3% Apr 17 YTD Scheduled Post-ponements capacity growth Scrapping Net capacity growth Very few deliveries expected post Orders placed by year [TEU m] Vessel deliveries by year [TEU m] ,300 TEU % Source: Alphaliner (May 2017), carrier views Apr17 YTD E 16

17 Carrier Mergers, Acquisitions and Alliances China Shipping Cosco OOCL TBC Evergreen M E R G E R S A N D A Q U I S I T I O N S APL CMA CGM Hapag Lloyd United Arab Shipping Hyundai Merchant Marine Hamburg Süd Maersk Line MSC K Line MOL NYK CHINA COSCO SHIPPING EVER GREEN CMA CGM HAPAG-LLOYD/UASC HYUNDAI MERCHANT MARINE MAERSK LINE MSC OCEAN NETWORK EXPRESS (ONE) Yang Ming YANG MING Hanjin Shipping Bankrupt A L L I A N C E S F O R M E R A L L I A N C E S P R E S E N T A L L I A N C E S 2M MAERSK LINE MSC OCEAN 3 CMA CGM CHINA SHIPPING UNITED ARAB SHIPPING COMPANY 2M MAERSK LINE MSC HMM (strategic cooperation) OCEAN ALLIANCE OOCL CMA CGM CHINA COSCO SHIPPING EVERGREEN G6 HAPAG-LLOYD MOL NYK APL HYUNDAI MERCHANT MARINE OOCL CKYHE COSCO EVERGREEN HANJIN SHPPING K-LINE YANG MING THE ALLIANCE HAPAG-LLOYD/UASC ONE YANG MING Source: Carriers 17

18 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 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 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 mn - Millions MoM - Month-on-Month NOO - Non-operating (vessel) owners Ocean 3 - Carrier Alliance: CMA, UASC, China Shipping OCRS - Operational Cost Recovery surcharge 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 YML - Yang Ming Line YoY - Year-on-Year YTD - Year-to-Date 18