home > shipping news > overview of global shipping
-
- overview of global shipping
-
global shipping
The world’s shipping lanes serve as the arteries of the world economy with over 80% of trade transported along them. Containers are the principal means by which manufactured goods are shipped from one country to another.
The collective loss of container lines worldwide in 2009 was estimated at $US19.5 billion.
2010 saw a surge into profitability with collective profit of $US17.
Estimated profitability for 2011 is $8bn. The drop reflects a breakdown in capacity discipline with carriers not withdrawing capacity towards the end of 2010.
Maersk
In 2009 Maersk, the largest container shipping line in the World experienced the first annual loss in its history. The Container shipping division made a loss of $1.1 billion with the combined effects of a 28% fall in freight rates and a 1% fall in demand.
In 2010 after robust cost cutting and increased container rates Maersk achieved a remarkable come back with a record profit of $5bn.
1st half profits in 2011 dropped to $393m down from $1.2bn, the previous year, owing to overcapacity and competition on freight rates and an increase in fuel prices.
MSC
MSC is a privately owned container shipping line founded in 1970 and based in Geneva. With a total of 475 ships it is now the second largest container shipping company in the World with a 13% share of total capacity.
CMA CGM
CMA CGM based in France is the 3rd largest container shipping company. In 2009 the company lost $1.43bn but in 2010 bounced back with a profit of $1.63bn. Owing to high fuel costs, profitability in the 1st half of 2011 was down to $237 compared with $849mn in 2010 despite revenue growth of 8%.
Neptune Orient
Neptune Orient, owner of APL, in 2009 experienced a fall in revenue of 31% to $5.5 billion and made a loss of $739 million down from an 08 profit of $83 million. The volume of container traffic fell by 7%. In November 09 the fleet carried 23% more cargo than November 08 but earned 28% less per container shipped.
With a 2010 2nd quarter net income of $100 million Neptune achieved its first profit in seven quarters after moving 32% more containers at higher rates amid a recovery in the global economy.
The company expects further improvement in profit for the third quarter and in July placed an order 12 new container ships, their first order in three years.
Evergreen
Evergreen the Taiwanese based shipping line suffered an annual loss of $300 million in 2009 despite turning to profitability in the latter half of the year. Evergreen has now one of the oldest container fleets but has managed to avoid the high purchase prices during the boom. The company has recently announced its intention to purchase up to 100 vessels to a total cost of $5 billion . 32 of these ships will have a capacity exceeding 8000 TEU’s.
Hapag Lloyd
Hapag Lloyd (43% owned by TUI) in 2009 incurred an operating loss of $986 million on a revenue of $4.8 billion, down 29% on the previous year.
The company obtained loan guarantees from the German Government and the City of Hamburg valued at 1.2 billion euros ($1.51 billion).
2010 third quarter earnings were 74.5 million euros as the shipping line posted a record profit on a recovery of freight rates by 30% and an 8% increase in volumes, thanks to the German export boom.
COSCO
COSCO (China) is a Government owned company that owns over 130 vessels (with a capacity of 320,000 TEU and visits 100 ports around the world. It is 6th largest in the number of container ships and 9th largest in aggregate container volume in the world. In 2009 it compensated for poor containerised shipping revenues with increased profits in its shipping services division.
Hanjin
Hanjin shipping America in June 09 sold off 39% of its container fleet as well as delaying delivery on another 10 ships. It is still struggling with a debt to equity ratio of 220%. Total losses in 2009 amounted to $652 million.
Hanjin moved 953,917 containers in the second qtr of 2010, 24% more than a year earlier. Operating profit from the container business reached 149.8 billion won, compared with a loss of 8.7 billion won in the previous three-month period.
Hanjin expects container volume to increase with Peak season activity but they are also extremely concerned about the excess capacity caused by deliveries of new large vessels.
CSCL
In 2009 CSCL (China) experienced a fall in revenue of 43% with total losses of $951 million as a consequence of U.S. and European consumers reduced spending on Chinese-made furniture and clothes.
In the first half of 2010 net profit rose 134.27% to CNY 1.17 billion with revenue increasing during this period by 77.38% to CNY 16.04 billion.
Revenue from Pacific routes rose 70.9% to CNY 5.366 billion.
Revenue from European and Mediterranean routes increased 204.8% to CNY 5.269 billion.
Revenue from Asia routes grew 51.9% to CNY 2.186 billion.
Revenue from domestic routes increased 34.9% to CNY 2.432 billion.
Revenue from other routes decreased 15.7% to CNY 784.963 million.
First half fuel expenses grew 49.5% to CNY 3.717 billion due to rising prices of crude oil since 2010.
container shipping lines & capacity
Data from alpha liner top 100 operated fleets as of 31/12/11
www.axs.alphliner.com/top100
"capacity is measured in TEU- 20ft equivalent units"
Rank Line Country TEU Capacity Market Share Ships Ships on order % of exist capacity 1 APM Maersk 2,456,444 15.7% 641 55 22.7% 2 Mediterranean Shg Co
2,031,551 13.0% 474 44 23.2% 3 CMA CGM Group 1,351,607 8.6% 406 15 10.8% 4 COSCO Container L. 652,597 4.2% 148 32 37.4% 5 Hapag-Lloyd 625,300 4.0% 144 10 20.9% 6 Evergreen Line 610,924 3.9% 167 35 50.4% 7 APL 585,736 3.7% 146 29 51.4% 8 CSCL 510,301 3.3% 146 12 18.4% 9 Hanjin Shipping 483,811 3.1% 101 31 50.9% 10 MOL 435,565 2.8% 103 12 26.5%
-
- dynamics of shipping
-
caught by surprise
The global recession and sudden drop in volume came at a time when the shipping industry was planning for annual expansion in excess of 10% a year.
Shipping owners were savagely confronted by a dramatic fall in demand, only shortly after confidently committing long term capital investment for new and bigger ships.
The asset value of these ships significantly declined significantly and there was less money available from the banks to finance them.
new vessel deliveries
In 2010 the key players in the market embarked on a savage cost cutting exercise in tandem with capacity reduction to maintain pricing for TEU's.
In 2011 an element of complacency crept in and a lack of capacity discipline has resulted in lower pricing at a time when fuel prices have increased significantly.
Furthermore on the back of the surge in demand in 2010, orders for container ships are set to result in a record level of deliveries in 2013. This has revived genuine fears of overcapacity at a time when global markets are in a state of turbulence.
Capacity management is the key to maintaining high profitability. The shipping lines that manage this most effectively will ultimately thrive.
response of shipping lines
In response to this dramatic turn of events the shipping lines have retired ships, laid up vessels for an indeterminate period, cancelled routes, fired staff and delayed deliveries of new vessels.
Nearly 8% of total capacity , 474 ships (1.22m TEU) continue to remain idle around the world. There is considerable caution about bringing ships back in to use when demand remains fragile.
Ships are also "super low steaming" to conserve fuel. In the last 10 years the average speed of container ships plying the world’s oceans has dropped by 30%.
Capacity management is the key to returning to profitability. The shipping lines that manage this most effectively will ultimately thrive.
fuel (bunker) prices
In the last year fuel prices (known in the trade as Bunker fuel because it is in bunkers that shipping fuel, either coal or oil has been historically stored) have both dropped rapidly then significantly increased.
Sudden increases in the price of fuel combined with low movement of shipping makes shipping lines more vulnerable.
In December 2008 oil was selling at $30 a barrel.
In August 2010 oil was selling at $73 a barrel.
In September 2011 oil was selling t $84 a barrel.
Reduced Ports & increasing co-operation
As part of the cost cutting exercise shipping lines have identified key ports and withdrawn operation from less profitable ports.
In a mutual endeavour to survive a number of shipping lines have begun sharing routes and agreed on pricing for these routes. This has prevented all out war on pricing in competition for the reduced volume of containers.
The Trans Pacific Stabilisation agreement (TSA) is a collective body of 15 major container shipping lines. In December it announced that it would institute an “emergency revenue” programme meaning that all 15 members would independently agree to raise prices. This would negate all existing contracts with shipping agencies.
The Asian shippers council based in Singapore has responded robustly accusing the TSA of operating a cartel.
container pricing
Container pricing continues to fall a a result of a slump in U.S. consumer confidence and a rise in vessel capacity.
In September 2011 the average spot rate for shipping a container from China to the west coast of the U.S. fell by 6.8% to its lowest level in 20 months.
The Drewry Container Rate Benchmark measure for pricing from Hong Kong to Los Angeles dropped to $1,525 per FEU (40-foot equivalent), the lowest point since the beginning of January 2010.
peak season
Normally July & August for the European holiday and back to school shopping periods.
This is also the time for the Christmas stock to start making its way around the World to the US.
constraints on capacity
The largest container ship in the world the Emma Maersk, 398m long can carry over 15,200 TEU’s.
A South Korean Shipbuilder STX had announced plans to build a container ship 450 m long with a beam of 60 metres that would hold 22,000TEU’s!
The Suez max size is 400m long and 50m wide (linking the Indian Ocean to the Med. & Europe).
The Malacca max size is the limit in ship size - 470m long and 60m wide that can safely pass through the Malacca straits (linking the Pacific & Indian Oceans)
-
- baltic exchange dry index (BDI)
- The London-based Baltic exchange which traces its roots to the Virginia and Baltick coffee house in London's financial district in 1744 plays a key role in providing economists and analysts around the world with a very powerful indicator of future economic activity. This exchange will influence projections by the IMF and the World Bank on future growth.
Every working day, the exchange contacts shipping brokers around the world to ascertain the cost of shipping raw materials in bulk carriers on a multitude of routes—iron ore from Australia to China, coal from South Africa to Taiwan, oil from the middle East to China, grain from America to the Far East...
All of the analysis is distilled into a single figure known as the Baltic Exchange Dry Index (BDI).
Because the supply of bulk carriers is relatively inelastic (it takes two years to build a new ship and recommissioning old ships is not cost effective) a marginal increase in demand quickly pushes the index higher and a marginal decrease in demand pushes the index lower. By indirectly measuring the global supply and demand for the commodities such as building materials, coal, crude oil, metallic ores and grains which are shipped aboard these vessels the BDI is actually predicting planned future economic activity. It is devoid of speculation because vessels are only booked by people who have both orders and the means of paying for cargos to be moved around the leading economies of the world.
In recent times it reached its nadir in December 2008 when it fell to 663 points. It currently (September 2010) stands at 1,927 points, still a long way from its peak of 11,793 in May 2008 when it was buoyed by China's voracious appetite for the world's natural resources, especially iron ore.
-
- china shipping
-
container port traffic
This huge volume of traffic is mainly accounted for by goods serving the domestic Chinese cities and the movement of bulk, part finished and finished goods between Chinese ports.
You only have to stand on the banks of one of the great Chinese rivers to witness the relentless movement of cargo through China.
"More containers are unloaded at ports on the coasts and rivers of China than throughout the rest of the world combined"