Logistics and Freight in United States: Container Shipping: Replay of 2009 Threatens As Carriers Face Twin Threats Of Declining Demand And Overcapacity

• Publication date: February 2012

BMI believes that the twin forces of overcapacity and declining volumes, on the back of slower economic growth in the main demand industry s of the US and eurozone, will force rates down once more, and carriers will once again face the prospect of further losses. While rates plunged in 2011 due to overcapacity, we believe that the threat of a drop off in demand could see a 2009 downturn scenario play out. In Twin Forces Of Overcapacity And Declin...

BMI believes that the twin forces of overcapacity and declining volumes, on the back of slower economic growth in the main demand industry s of the US and eurozone, will force rates down once more, and carriers will once again face the prospect of further losses. While rates plunged in 2011 due to overcapacity, we believe that the threat of a drop off in demand could see a 2009 downturn scenario play out. In Twin Forces Of Overcapacity And Declining Demand To Collide, Asia-Europe Trade Route Most Exposed we outline our view on how container rates will play out on the major trade routes of Asia-Europe and transpacific in 2012. The US, with its economy still in recovery mode, offers some respite for carriers, but the problem of overcapacity is likely to persist. Meanwhile, the recession-hit eurozone places downward pressure on rates on the Asia-Europe route, and with more mega vessels due online to further boost capacity in an already saturated industry, we fear rates on this route could mirror levels last seen in 2009. In Liner Strategies Indicate Carriers Preparing For The Worst we highlight the strategies that we believe the container segment will implement to weather the projected downturn in the container shipping segment in 2012. We highlight that while economic projections and newbuild data aid in understanding the supply and demand outlook for the segment, the true measure of just how tough the operating environment is is to look at the strategies implemented by shipping lines and gauge them against the measures used by carriers in the previous downturn. In What Is Wan Hai Lines Doing Right? we investigate how the shipping line is managing to turn a profit, despite the adverse operating climate. The firm 's tactics support BMI's views on emerging trade routes (ETRs) over developed trade routes (DTRs) and how a industry player that fails to follow the pack could in fact be the one to watch. In the second part of our analysis BMI highlights two other major threats that the market faces and must deal with now. In Asia-Europe Landbridge To Take Industry Share But Not Usurp Shipping we assess the risk a rail link between Asia and Europe poses to one of box shipping's main routes. In this tough operating climate, shipping lines face more than enough competition from their peers and now potentially have the risk of losing industry share to another freight mode. Finally, we investigate another threat to the segment in Container Shipping Must Meet The Green Challenge Now. We highlight the pressure being placed on the market over carbon emissions and although the segment once again managed to avoid being targeted in the latest round of UN climate change talks, the EU is starting to investigate ways it can regulate the segment . BMI notes that the container shipping segment has already started to make progress, by investing in more fuel-efficient ships and investigating other fuel options. We assert that more needs to be done on an market -wide basis, however, and that it is worth the shipping segment 's while to start making investments now. The more shipping lines can accomplish in cutting emissions by themselves, the less impetus there will be for outside intervention.

Logistics And Freight Industry in Europe

Executive Summary.. 5
Industry Trend Analysis . 6
Twin Forces Of Overcapacity and Declining Demand To Collide, Asia-Europe Trade
Route Most Exposed. 6
Uptick To Draw To A Close. 6
Overcapacity Remains An Issue And Will Only Be Compounded By New Mega Vessel Fleet 6
CHART Rate Uptick Coming To An End..6
SCFI: Europe (Base Port) USD per TEU
CHART Increase Just A Blip...6
USWC (Base Port) per FEU w-o-w % Change
Adding The Same Again6
Container Orderbook Delivery Dates
2011 Or 2009 Rate Repeat On The Cards? 7
Recession In Eurozone Dries Up Demand 7
CHART Throughput Growth To Slow..7
Port of Shanghai Container Throughput (TEU) and y-o-y Growth (%)
CHART End of 2008 Revisited7
European Consumer Sentiment
CHART Dropping Down Once More.7
Suez Canal Throughput Container Ship Net Tonne % chg y-o-y
US Looking Brighter But Downside Risks Persist..... 8
Asia-Europe Operators Must Prepare For 2009 Replay... 8
CHART US Demand Outlook Looking Brighter...8
Thomson Reuters/ University of Michigan
Consumer Sentiment Index
CHART Boxes Ticking Up....8
Port of Los Angeles Container Throughput % chg y-o-y
Liner Strategies Indicate Carriers Preparing For The Worst 9
Rate Increases: Keep Trying But They Won’t Stick.... 9
Slow-steaming: Rolling Out On New Routes . 9
Route Cuts: Decreasing Exposure- Reluctantly... 9
CHART Increase Drive..9
Carriers Asia-Europe Rate Increase Strategy For Q112
Emerging Routes Over Developed.... 10
Alliances Offer Hope, But Only Consolidation Will Solve Market Woes.. 10
Idle Fleet Set To Expand... 10
CHART Emerging Over Developed10
SCFI Index % Change (US$ per TEU/FEU) (January 20 2011- January 20 2012)
CHART Joining Up..10
Asia-Europe Liner Alliances Overview
Scrapping: Getting Bigger And Younger..11
Deferring The Problem To Another Time..11
CHART More Ships Idle...11
Idle Container Ship Fleet Capacity (TEU)
CHART Plenty Of Scrapping Candidates.....11
Current Container Fleet By Age
CHART Larger Vessels Ru le The Waves.11
Current Container Fleet By Size Breakdown
Cancelling Vessels: The Shipbuilders Worst Nightmare..... 12
CHART Deferring Or Cancelling An Option?..12
Top Ten Container Line’s Orderbook (TEU)
Business Monitor International Ltd 3
special report
What Is Wan Hai Lines Doing Right?... 13
Wan Hai Lines Leads The Pack.... 13
Long Term ETR Exposure. 13
CHART Wan Hai Lines Outperforms...13
Container Lines Q311 Profit/ Loss (US$mn)
CHART Intra-Asia Heavy.13
Wan Hai Lines Container Routes
Majors Turn Their Focus To The Emerging... 14
Keeping It Small..... 14
Straying From The Crowd. 14
CHART Big Fleet Small Vessels....14
Wan Hai Lines’ Fleet Overview
Securing Its Foothold Now..... 15
CHART Offering The Full Service.15
Wan Hai Lines Terminal Operations
Asia-Europe Landbridge To Take Industry Share But Not Usurp Shipping. 16
The Timing Could Not Be Worse . 16
Speed Remit And Cost Ensures Shipping Remains Favourable ... 16
Railway Network Needs Work ..... 16
CHART The Rival Routes.16
Asia-Europe Sea and Rail Routes
Volumes Up ..... 17
Majors Back The Project .. 17
Solving The Backhaul Problem ... 17
CHART Investment Needed.. 17
Emerging Europe Rail Infrastructure (ranked out of 142)
CHART Gauge Change 17
Rail Gauges On Asia-Europe Landbridge Route
CHART Big Name Operators And Clients Lend Their Support 17
Asia-Europe Landbridge Operators and Clients
CHART Backhaul Shortfall..... 17
Asia-Europe Container Shipments January-November 2011 (TEU)
Catering For Specific Needs .. 18
Container Shipping Must Meet The Green Challenge Now..... 19
Slow Steaming And New Vessel Designs Are Only A Starting Point ... 19
Other Fuel Options- The Long Term Plan ..... 19
CHART Decreasing Speed and Emissions....19
Maersk Triple E-Type CO2 Emissions Decrease Compared To Vessel Speed (Knots)
Ports Opt For The Carrot Option, But How Long Until The Stick Appears? ... 20
CHART Investing In Other Fuel Options.20
Developments Underway
CHART Price Volatility...20
Bloomberg Weighted Average 380cST Bunker Fuel Price (US$/metric tonne)
Outside Intervention Comes A Step Closer . 21
CHART China Needs To Commit.21
Top Ten Container Ports Co2 Emissions Decrease Initiatives
Still The Greenest Transport . 22
CHART It’s All Relative...22
Different Transport Modes’ Grams of CO2 Emitted By Transporting 1 Ton of Goods 1km
World Firms Strategy . 23
Maersk Line 23
Overview .... 23
Strategy ..... 23
Financials .. 24
2011 24
4 Business Monitor International Ltd
Container Shipping: Replay of 2009 Threatens As Carriers Face Twin Threats Of Declining Demand And Overcapacity
Latest Activity . 26
Mediterranean Shipping Firms (MSC). 28
Overview .... 28
Strategy ..... 28
Routes . 28
Fleet ..... 29
Financial Results .. 29
2011 29
2010 29
Latest Activity . 30
CMA CGM.... 31
Overview .... 31
Strategy ..... 31
Financial Results .. 32
Latest Activity . 33
COSCO Container Lines Firms Limited (COSCON).. 34
Overview..... 34
Strategy 34
Alliances..... 34
Fleet 35
Financial Results... 35
2010. 36
Latest Activity.. 36
Hapag-Lloyd.... 38
Overview .... 38
Strategy ..... 38
Financial Results .. 39
Latest Activity . 40
World Assumptions .... 42
Growth Prospects Dim As 2012 Begins 42
TA BLE: GLOBAL ASSUMPTIONS42
Data : DEVELOPED STATES REAL Gross Domestic Product GROWTH FORECAST ...43
Data : REAL Gross Domestic Product GROWTH CONSENSUS FORECASTS ..43
Data : EMERGING MARKETS REAL Gross Domestic Product GROWTH FORECAST .44