europe: economic outlook and impact on ports & shipping · • envisaged scenario 3 impact on...

Europe: Economic Outlook and

Impact on Ports & Shipping

Varna: May 30, 2013

ESPO 2013 Conference

icfi.com | ghkint.com

Agenda

Discussion Agenda Coverage

1 Economic Outlook: Europe • Historic review

• Regional patterns

2 Vessels & deployment • Visible shifts

• Envisaged scenario

3 Impact on Ports & Shipping • Likely vessel redeployment

• Changing role of ports

4 What could the Future look

like?

• Shipping services

• Port operating models


Overview of Global Port Market

China & HK31%

Other NE Asia9%

SE Asia14%

ISC3%

Mid East6%

Oceania2%

N Europe10%

S Europe6%

N Am8%

C&S Am7%

Africa4%

China & HK17%

Other NE Asia14%

SE Asia15%

ISC2%

Mid East5%

Oceania2%

N Europe14%

S Europe8%

N Am14%

C&S Am6%

Africa3%

GLOBAL PORT CONTAINER

THROUGHPUT

Note: * preliminary estimate

Source: ICF GHK based on

Alphaliner

240M TEU in

2000

630M TEU in

2012*


Global Port Market – Key Growth Regions

0%

3%

6%

9%

12%

15%

Ch

ina

& H

K

Afr

ica

S A

sia

Mid

dle

Ea

st

C+

S A

me

rica

SE

Asia

Oce

an

ia

S E

uro

pe

N E

uro

pe

Oth

er

NE

Asia

N A

meri

ca

CAGR 02-12

0%

3%

6%

9%

12%

C+

S A

me

rica

Ch

ina

& H

K

Afr

ica

Mid

dle

Ea

st

SE

Asia

Oth

er

NE

Asia

S E

uro

pe

S A

sia

N E

uro

pe

Oce

an

ia

N A

meri

ca

CAGR 10-12

In the last

decade

Last three

years

Source: ICF GHK based on Containerisation International and Alphaliner


Trends in Regional Economic Growth

Source: IMF Database

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14% Trends in GDP Growth

World Europe US Developing Asia Latin America Sub Saharan Africa

2010 – 2013: Marginal US recovery, continuing European woes


Container volumes are recovering…

0

100

200

300

400

500

600

700

Mil

lio

n T

EU

s

Global Container Throughput

Oceania

Africa

C + S America

N America

S Europe

N Europe

S Asia

Middle East

SE Asia

Other NE Asia

China + HKG

Source: Alphaliner

Europe accounting for more than

16% of global container port

throughput – Container throughput

growing at 5.8% CAGR 2000-12

-

50

100

150

200

250

300

350

400 Indexed Growth 2000-12

World

Asia/ Middle East

Europe

North America

South America

Africa


Global Container Trade

52.7

8.51.5

1.3

4.2

4.2

3.34.5

6.2

13.96.1

14.0

7.4

Global Container Trade in 2011 (million TEU)

Source: ICF GHK research & estimate based on PIERS, CTS, IADA, CI online, Drewry,

Alphaliner and shipping lines and port operators data.


Europe’s Key Trading Partners (2011)

Source: Eurostat

Asia and America dominating the trade…

Europe

Area

China

12.9 Mn

TEUs

US

5.2 Mn TEUs

Russia

2.6 Mn

TEUs

Brazil

1.8 Mn

TEUs

India

1.3 Mn

TEUs

Canada

1.4 Mn

TEUs

South Africa

1.3 Mn TEUs

Japan

1.1 Mn

TEUs


European Economy: Uncertainty continues…

-6%

-4%

-2%

0%

2%

4%

6%

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

GDP growth – Europe Region

0%

2%

4%

6%

8%

10%

12%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Inflation (%)

0%

20%

40%

60%

80%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Government Net Debt (% of GDP)

Highly fluctuating growth over the last 4-5 years

Source: IMF Database


Trends in European Trade: Correlation to GDP

Source: Eurostat

10,000

10,500

11,000

11,500

12,000

12,500

13,000

13,500

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

GD

P @

cu

rre

nt

pri

ce

s in

EU

R B

n

EU

R B

n

European International Trade

Exports Imports GDP at current prices

Trade is highly correlated to

GDP growth – Correlation of

0.92 over the period 2005-12

Rapid decline in both imports

and exports recorded in 2009,

following Global Financial

Crisis (GFC) was completely

reversed post 2009. Both

exports and imports have

reached record levels in 2012,

summing to more than EUR

3.5 Trillion


Europe Economic Outlook: Revival expected…

1.3% 1.7% 1.8% 1.9% 2.0%

0.0%

1.0%

2.0%

3.0%

2014 2015 2016 2017 2018

GDP growth projections

0%

1%

2%

3%

4%

5%

6%

2014 2015 2016 2017 2018

Export & Import growth projections*

Imports

Exports

Source: IMF Economic Outlook, April 2013

* Excludes UK whose exports are expected to outperform rest of Europe

while import growth is expected to be inline with rest of Europe

GDP Growth expected to

bounce back to 2% by the

year 2018 – But to remain

below the pre-crisis levels

Initially imports to grow

slower as compared to

exports – Due to reduced

consumption post crisis

However, as economy

recovers, imports to catch

up with exports by the

year 2017


Tradelanes to/from Europe: (1) Large Vessels

Liner Units TEU Capacity Avg. Vessel Size

Eur‐N. Am 154 624,890 4,058

FE‐N. Am 477 2,835,028 5,943

FE‐Eur 405 3,931,157 9,707

ME/ISC related 526 1,901,058 3,614

Africa related 535 1,357,051 2,537

Lat Am related 659 2,177,473 3,304

Oceania relared 229 647,218 2,826

Intra‐FE 1,463 1,683,118 1,150

Intra‐Europe 615 795,536 1,294

Other/Unassigned 106 228,626 2,157

Idle 263 699,072 2,658

Total 5432 16,880,227 3,108

Source: Alphaliner

Vessel deployment as on May 1, 2013 Tradelanes to/ from

Europe are served by

relatively larger sized

vessels

Far East – Europe

tradelane has

maximum capacity

allocation with largest

vessel size

Larger vessels being

forced into other

trades


Tradelanes to/from Europe: (2) Lower Utilization

Source: Alphaliner

Falling utilization owing to surplus capacity and weak demand…


Tradelanes to/from Europe: (3) Depressed Rates

Source: Alphaliner

Rates on a

downward

spiral – Failed

GRI Attempts

Depressed

rates a result

of weak

demand and

difficult

capacity

management

“capacity

overhang”

from previous

orders


Source: JOC / company Websites

Global Liner reactions – Historic Perspective

Early 90’s single companies, growing

First smaller acquisitions (for example Ben Line EAC by Maersk)

First regional - global VSA agreements

– P&O and Maersk

– SeaLand & Maersk

– P&O and Nedlloyd

Mergers, CMA CGM, MaerskSealand, followed later by PONedlloyd

Regional or niche acquisitions

– Safmarine, ANL, Delmas

Larger vessels, economies of scale drive more global VSA

agreements such as New World Alliance or

Even larger cooperations – G6 alliance 2012


Rates around 6-700 USD/TEU

apparently are getting close to

generating negative cashflow for

liners.

Then it becomes more attractive to

lay-up ships – Trickle effect is of

course that capacity is diminished,

improving the supply/demand to

restore rates and profitability

Current spot rates trending down?

Correlation between Freight rates & Idle fleet?

Source: Alphaliner / SCFI ICF GHK

Idle containerships by size


Slow steaming now on most longer sailing

legs on major trades

− absorb capacity in an over supply

situation

− reduce bunker expenses

− but it’s a one-off: “slow steaming is here

to stay”

The drive for market share to achieve decent

utilization continues to undermine rates &

profitability

Continued drive for cost reductions

New vessels offer lower opex costs (and

better environmental performance)

New & larger vsa agreements

Next steps?

Global Liner reactions

Source: JOC / Maersk


Fuel Efficiency

Bunker can constitute as much as 50-60% of ship operating cost.

10,000TEU vessels ordered 6-7 years ago burn 110t per day slow

steaming.

New generation of 10,000TEU vessels burn 65-70t per day.

Cautious about a new vessel that does not have an option for switching to

LNG.

Energy efficiency not only for fuel saving, but also for possible future

carbon trading (huge “transaction”).

Source: ICF GHK/HSBC


Hamburg - HHLA

direct involvement in rail services to large

part of the hinterland

own trucking services

network of inland depots

Rotterdam – ECT

large inland depot network (focus on barges

and rail connectivity)

Cargo acceptance at the depots

Direct investments

Operational involvement

no rail investments (but service

agreements)

Port Strategy – reaching into the hinterland….


Port Strategy – reaching into the hinterland, but….

Does it make sense for each Operator or Port to get its own network

established – Carrier terminals?

Environmental regulations will force a model shift through penalties or

transparent pricing

Increased complexity of rail connections in the Ports, who will take charge?

A real Pan-European Rail, but what about:

− Safety regulations

− Frequencies / electricity / gauges

− Language

Long term preparations for double stack?


What could the future look like?

Likely redeployment of surplus capacity in short-term – However, demand

on other trade lanes also bearish

Long-term recovery in terms of utilization and charter rates – balance S&D

by 2015

Deployment flexibility in oversupply scenario – impact on transhipment

volumes until capacity supply more tight

Reduced empties with higher exports narrowing the import-export gap

Ongoing merger (not acquisition) activity

Automation & technologies in main ports, upgrades in Tier 2 ports for larger

vessels

Intermodal transport solutions to significantly impact port competitiveness

Ongoing pricing pressure on both the land & the sea side

Environmental & climate change

Shipping

Ports


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