Indonesia Shipping Industry Update Quarter 3 2012

• Publication date: July 2012
• Report size: 134 pages

Includes 3 FREE quarterly updates BMI View: Still A Bright Spot We have trimmed our growth projections for Indonesia in 2012 and 2013, but only marginally so. BMI's view is that the slowdown in the global economy, and in Chinese growth which will for the first time in the last decade come in at under 8%, will have a knock-on effect on Indonesia. On the other hand, the country's domestic economy is in fairly rude health, with consum...

Includes 3 FREE quarterly updates

BMI View: Still A Bright Spot We have trimmed our growth projections for Indonesia in 2012 and 2013, but only marginally so. BMI's view is that the slowdown in the global economy, and in Chinese growth which will for the first time in the last decade come in at under 8%, will have a knock-on effect on Indonesia. On the other hand, the country's domestic economy is in fairly rude health, with consumer spending looking solid and investment also performing well as the government and the private segment begin to tackle the often postponed need to grow and update infrastructure. BMI now expects the Indonesian economy to grow by 5.8% in 2012 (down from 5.9% in our last quarterly report); our outlook is for Gross Domestic Product growth of 6.2% in 2013 (was 6.3%). In the five years to 2016 we expect growth to average 6.2% per year, confirming the country as a regional outperformer.
As far as market specific factors are concerned, we continue to think that the key to sustainable growth is investment in port infrastructure, including road and rail links in the hinterland areas. We are therefore encouraged that after many delays, Indonesia Port Corporation II (IPC) has announced that it will invest US Dollar 2.47bn to develop an extension of the Tanjung Priok port in North Jakarta, the country's largest port. Of this, US Dollar 1.38bn will be invested in container terminal infrastructure with the aim of more than tripling annual capacity from 5mn twenty-foot equivalent units (TEUs) to 18mn TEUs upon completion in 2023.

Headline Market Data
- 2012 Tanjung Priok total tonnage projection to grow 5.6% to 49.736mn tonnes, with average growth of 5.7% expected over our projection period to 2016.
- 2012 Palembang total tonnage projection to grow 3.6% to 10.595mn tonnes, with average growth of 4.1% over our projection period.
- 2012 Tanjung Priok container throughput projection to grow 4.3% to 6.046mn TEUs, with average growth of 9.3% over our projection period.
- 2012 Palembang container throughput projection to grow 5.7% to 91,736TEUs, with average growth of 6.2% over our projection period.
Key Market Trends At Last! Investment Commitment For 'New Priok' After years of delays Indonesia's main port is finally in line for investment to update its facilities and grow its capacity, allowing it to keep up with, and con tribute to, the country's economic growth. Indonesia Port Corporation II announced that it will invest US Dollar 2.47bn to develop an extension of the Tanjung Priok port in North Jakarta. US Dollar 1.38bn will be invested in container terminal infrastructure with the aim of more than tripling annual capacity from 5mn TEUs to 18mn TEUs upon completion in 2023. A further US Dollar 730mn will be spent on construction of a new petroleum product terminal and US Dollar 305mn on toll roads, a power station and an industrial area. The project is being carried out under the Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI), a 10-year initiative intended to realise high, sustainable economic growth over the next decade.
Trouble Ahead? Government Bans Unprocessed Mineral Ore Exports The government's attempt to get mining industry players to do more refining and processing inside Indonesia could create problems for shipping firms . Regulation Number 7 banned unprocessed exports effective from early May, with exceptions allowed only when certain criteria are met. The new situation means that shipping industry players with long-term charters to haul mineral ores could find themselves in difficulty, either with mining industry players seeking to declare force majeure or in the worst case with the government seeking to detain vessels suspected of carrying banned cargo.
Maersk Line Bullish About Indonesia Danish shipping group Maersk Line was looking to grow in Indonesia, Vietnam and Myanamar (Burma), three shipping industry s which would outperform world growth trends, said top executives in the firm . Regional head Thomas Riber Knudsen said that Southeast Asia was characterised by strong growth and greater business optimism than in Europe; the region had a population of over 500mn people, and generally good infrastructure. Maersk had high expectations for MCC Transport, its intra-Asian freight carrier. The industry in South East Asia is characterised by strong competition, with 30-40 niche players from Bangladesh to eastern Russia, so MCC is trying to offer higher reliability, lower costs and better quality to its customers.


Key Risks To Outlook
The main downside risk is a sharper-than-anticipated slowdown in global growth, with Indonesia particularly influenced by the Chinese economy, which is having a slower year than usual. If the global economy fares worse than expected, the Indonesian ports and shipping segment will feel the pinch through reduced trade levels. However, it has to be stressed that this is a smaller risk than in many other countries; based on a strong domestic economy, Indonesia was able to remain on a growth path throughout the 2009 recession. If anything, we see the economy remaining resilient in 2012.
A second downside risk to our outlook is the possibility that some of the current projects to grow port capacity might suffer a high-profile setback, such as a legal dispute or allegations of corruption. Any such development might damage the gradual improvement in investor perceptions of Indonesia that has taken place over the last few years. More specifically, it would lead to delays in the much-needed drive for modernisation.

Maritime Transport Industry in Indonesia

Executive Summary . 5
Industry SWOT Analysis . 8
Indonesia Shipping SWOT . 8
Indonesia Political Environment and Risk Analysis .. 9
Indonesia Economic Environment and Risk Analysis . 10
Indonesia Business Environment SWOT .. 11
World Overview – Container Shipping 12
Executive Summary: Rate Decline Risk, Threat Of Another Year Of Losses 12
Slowing Demand A Major Threat To Freight Rates . 13
Carriers Thinking Outside Box On Overcapacity, Can Rate War Be Avoided? ... 19
Lines Must Tackle High Bunker Prices To Avoid Impact On 2012 Bottom Line .. 24
Evergreen's Order Raises Questions For Future Of Box Fleet Expansions . 27
World Overview – Dry Bulk Shipping .. 33
Executive Summary: Rates Struggling To Recover From 25-Year Low ... 33
Bleak Demand Outlook Gives Cause For Concern .. 34
Lines Withhold Payments As Shipping Struggles In Depressed Industry ... 36
Vale's Valemax Woes Continue, Vessel Values And Demand Plunging ... 38
Orders Continue As Lines Take Advantage Of Bargain Basement Prices 42
Record Dry Bulk Scrapping Levels No Match For World Fleet .. 45
World Overview – Liquid Bulk Shipping . 47
Executive Summary: Bearish View Maintained Despite Market Optimism 47
Will Increased Asian Crude Imports Offset Excess Tonnage? . 48
More Pain For US Tanker Operators Despite Investor Confidence 52
2012 Political Impact On Crude Oil Shipping Emanating From Iran . 54
Tanker Operators Scrap In Desperate Attempt To Shore Up Rates . 58
Tanker Pools To Grow As Operators Seek Safety In Numbers . 60
Industry Trends And Developments 62
Indonesia Container Shipping Industry Overview 65

Market Projection ... 71
Port of Jakarta .. 71
Port of Palembang 73
Data : Major Port Data, from 2008 to 2016 75
Trade 76
Data Trade Overview, from 2008 to 2016 .. 76
Data : Key Trade Indicators, from 2008 to 2016 . 76
Data : Indonesia’s Main Import Partners, from 2002 to 2009 (US$mn).. 77
Data : Indonesia’s Main Export Partners, from 2002 to 2009 (US$mn).. 77
Company Profiles ... 78
Samudera Shipping Line .. 78
Trada Maritime (TRAM) .. 80
Maersk Line . 82
Mediterranean Shipping Firms (MSC) ... 88
CMA CGM ... 92
COSCO Container Lines Firms Limited (COSCON).. 97
Hapag-Lloyd ...102
Evergreen Line ...106
APL .110
China Shipping Container Line (CSCL) .116
Hanjin Shipping (Container Operations) 121
Mitsui OSK Lines (MOL) (Container).125
Demographic Outlook .. 130
Data : Indonesia's Population By Age Group, 1990-2020 ('000) 131
Data : Indonesia's Population By Age Group, 1990-2020 (% of total) ..132
Data : Indonesia's Key Population Ratios, 1990-2020 ..133
Data : Indonesia's Rural And Urban Population, 1990-2020 .133