mega ships, alliances, ports, supply chains, chaos

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Mega Ships, Ports, Supply Chains, Chaos

byTom Craig

tomc@ltdmgmt.com

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First

ILWU Contract Expires June 30

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State of the Industry

Too many shipsSlow growth of global trade with

recessionLosses (esp. Asia-Europe)

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The Times—They Are A Changing

Global Trade / Global Logistics

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Top 10 Container Carriers

19961) APM-Maersk2) Evergreen3) P&O Nedlloyd4) Sea-Land5) COSCO6) Hanjin7) MSC8) NYK9) Mitsui10) Hyundai

20101) APM-Maersk2) MSC3) CMA-CGM4) APL5) Evergreen6) Hapag-Lloyd7) COSCO8) CSAV9) CSCL10) Hanjin

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Top 10 Container Ports

19801) New York/New Jersey2) Rotterdam3) Hong Kong4) Kaohsiung5) Singapore6) Hamburg7) Oakland8) Seattle9) Kobe10) Antwerp

20111) Shanghai2) Singapore3) Hong Kong4) Shenzhen5) Busan6) Ningbo7) Guangzhou8) Qingdao9) Dubai10) Rotterdam

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Top 10 North America Ports

20001) Long Beach2) Los Angeles3) New York/New Jersey4) Charleston5) Oakland6) Seattle7) Norfolk8) Houston9) Savannah10) Tacoma

20111) Los Angeles2) Long Beach3) New York/New Jersey4) Savannah5) Vancouver6) Oakland7) Seattle8) Virginia9) Houston10) Manzanillo

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Ocean

Mega Ships

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Mega Ship

Mega Ship Aircraft Carrier

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Issues?

Megas (Triple E)—18,000+ TEU (vs 1000 TEU in 1970s)

Lower operating costsHow will ships be filled?Which ports will handle them?How will ports handle them? Investment?

Bottlenecks?

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P3 And More

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P3

Maersk, MSC, CMA-CGM– 3 largest carriers--operating alliance

FMC, EU, China reviewedThree issues–

market sharebig shipshubs/ports used

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P3 Market Share

44% Asia-to-Europe24% in the trans-Pacific 42% in the trans-Atlantic trade

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P3 Vessel Size

Average vessel for Asia-Europe-- increase from 9,300 TEU to 14,200 TEU by end of 2015

Maersk largest 100 vessels--surpass MSC and CMA CGM when all Megas delivered

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G6

From New World and Grand AlliancesAPL (#4)Hapag-Lloyd (#6)NYK OOCLHyundai Mitsui

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CKYH

Cosco (#7)Hanjin (#10)K LineYang MingEvergreen (#5)—may join

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Canals

Panama Canal—expansion— (2015 or 2016?)updates at East Coast ports with bigger ships

with widening$1.6bil overrun construction was slowed during dispute

Suez Canal--congestion

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Pending Chaos!?

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Issues

Supply (of ships/container space) exceeds demand

Pricing / rates – flat and somewhat lowWill Money People sit still?Last time – carriers laid up significant

tonnage “coincidentally” at same time

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Singapore 2009

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Shake Out Ahead?

FinancialMuch red ink for last 5 yearsHanjin—operating loss $225mil / net loss $631mil

for 2013M&A

CSAV / Hapag-Lloyd (could this new carrier join the P3?)

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Next few years

As big ships are spread around globally-- more rate volatility in more trade lanes

Schedule/service vagaries--dropped weekly sailings

Fewer carriers

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And

Tier 1 and Tier 2 carriersTier 1 and Tier 2 portsFinancial shakeoutsSupply chain issuesWoe to those who buy rates and do not

understand service and supply chains

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Ocean Carriers & Global Supply Chain

Erosion

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What Carriers Are Doing

Fewer carriers in businessAlliances, slot exchanges, and vessel sharing--

created and changedShipping routes--added and revisedSailing schedules--made and reworked“Slow steaming”--ongoing practice

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What Everything Means

Irregular performanceLack of service reliabilityPotential changes as to ports to handle

ships

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Which Means

Increased uncertainty for planningUndermine inventory yield maximizationMore inventories and more capital tied

up

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Impact

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