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Challenging World For The Container Liner Operators Drewry
Challenging World For The Container Liner Operators Drewry
Drewry 2012
Drewry was founded in 1970 as a provider of independent information and advice to the global maritime industry. We are privately owned with research and advisory teams in London, Delhi, Singapore and Shanghai.
London Drewry 15-17 Christopher Street London EC2A 2BS,United Kingdom T: +44 (0)20 7538 0191 E: info@drewry.co.uk Delhi Drewry 209 Vipul Square, Sushant Lok-1 Gurgaon 122002, India Telephone: +91 124 40476 31/32 E: india@drewry.co.uk Singapore Drewry 15 Hoe Chiang Road, #13-02 Tower Fifteen Singapore 089316 T: +65 6220 9890 E: singapore@drewry.co.uk Shanghai Drewry 555, 5th floor Standard Chartered Tower, 201 Shi Ji Avenue, Pudong District, Shanghai, China 200120
Drewry 2012
Drewry 2012
Strategic Sourcing
Supply/Demand Trends Equipment Supply Constraints Congestion Impact Risk Analysis
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Origin DC
Customer Destination DC
Ports/airports
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5% 0% -5% -10%
US$ billion
0
-2 -4 -6 -8 -10 EBIT Profit/Loss (Left axis) EBIT margin (right axis)
-15% -20%
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10%
0% 2002 -10% 2003 2004 2005 2006 2007 2008 2009 2010
-20%
-30%
Maersk 2.9 CMA 3.4 APL 0.6 CSAV (0.9) ZIM (0.5)
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Industry overview
161 million TEU of full containers moved in 2011 Annual growth in container trade of 10% to 2008 Slowing growth since Steady containerisation of general cargo trades and commodities
More than 400 container shipping lines worldwide. Over 4,000 container ships worldwide Growth of global liner networks This is not the first time the industry has had to face challenging times
Mid 90s to early 2000 slowdown in demand growth resulting in huge oversupply situation
Now is different from before - In 2011 global demand increased by over 7% but the top 20 carriers lost a minimum of $5-6 billion
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200,000
100,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 N AMERICA MID EAST % change in world traffic EUROPE LAT AMERICA FAR EAST/SE ASIA OTHER REGIONS
-5%
-10% -15%
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Economies of scale
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Liner economics
Factor Economies of scale Perishability High operational gearing Effect Structural overcapacity Push for short run contribution rate erosion Push for short run contribution rate erosion
Fragmented industry
Commoditised Inelastic demand curve
Cumulative effect is continuous rate erosion Lines are profitable only when, by chance, demand exceeds supply This situation will persist until economies of scale run out and an oligopoly is established
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2006
2011
58%
13% MSC
8% CMA CGM
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Over tonnaging
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1,000
800 US$/teu)
600
400
200
4,000 9,000 Capacity (teu) Capital costs + operating costs Fuel costs Port + canal costs 11,000 14,000
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1,600
1,200
800
400
2004
2005
2006
2007
2008
2009
2010
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0 2000 -50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1H2011
0%
-200
-15%
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110.0
Supply-demand index (1980=100)
105.0 100.0 95.0 90.0 85.0 80.0 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Supply-Demand Index
21
108
106 104
1,550
1,500
1,450 102 100 98 96 1,300 94 92 90 2010 2011 2012 2013 2014 2015 2016 Drewry East-West Supply-Demand Index All-in rate including BAF (US$ per teu, right axis) 1,250 1,400
1,350
1,200
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20
Daily Cash Burn Rate = US$48.7m Forecast Date When CCE Runs Out = 03/10/2012 Daily EBIT Loss = US$25.7m Forecast Date When EBIT Losses Exceed CCE = 15/02/2014
15
10
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Liner operators have previously emerged from difficult times and whilst these are challenging times, no doubt the liner industry will once again emerge from these challenges
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