the 3 rd industrial revolution by : parakrama dissanayake will shipping lines manage supply in...
TRANSCRIPT
THE 3RD INDUSTRIAL REVOLUTION
By : Parakrama Dissanayake
WILL SHIPPING LINES MANAGE SUPPLY
IN RELATION TO DEMAND
CILT International Conference 2012
SHIPPING DEMAND – DERIVED DEMAND
Stems From
Demand For Goods
DEVELOPMENT OF TRADE <> ECONOMIC GROWTH
CILT International Conference 2012
CHINA’S GROWTH GLOOM
China’s economy slowed for a 7th straight quarter
Missing governments target
CILT International Conference 2012
INDIA –
“Hindu rate of growth’’ A decade ago 3 to 4%
Zoomed to approx. 9%
And now down at around 5.4%
IS IT IN SEARCH OF A DREAM?
CILT International Conference 2012
AMERICA’S FISCAL CLIFF
USA is the largest importer of goods
With effect from Jan. next year US Fed tax increase and spending cut equivalent
This will raise taxation by US$ 3500 per household.
Will result in a fiscal restriction of US$ 600 billion in a single year.
Unless Democrats and Republicans agree would not Consumption decrease?
WILL IT AFFECT SHIPPING?
of 5% GDP will come into force.
Would not demand for Trade decline ?
CILT International Conference 2012
EUROZONE SOVEREIGN DEBT CRISIS
Are we seeing the light at the end of the tunnel ?
CILT International Conference 2012
NOW US BUSINESS
Coca Cola moving offices of huge bottler from Greece.
FORD estimated loss 1.5 Billion – Closing 2 plants in UK , 1 Plant in Belgium
Dow Chemicals – Close 4 plants in Europe.
Kimberly Clark – Lay off 1500 jobs in Europe.
- Lay offs 6200 workers
FLEEING SLUMPING EUROPE
CILT International Conference 2012
WORLD ECONOMY
Potential for growth in both advance and emerging economies permanently
People will be poorer and budget deficits more difficult to close
IMF PROGNOSIS SEES LONG TERM PAIN
damaged
CILT International Conference 2012
GLOBAL TRADE
The G20 economies have added 124 new restrictive measures affecting about
Staggering increase in protectionism in recent months with a 25% rise in trade
Mounting trade tension between China and USA.
China telecoms Huawei and ZTE “A Threat to Security” USA.
PROTECTIONISM IS RAISING ITS UGLY HEAD
3% of global imports and nearly 4% of G20 trade.
restrictive measures.
“As long as politicians in the worlds big three economies continue to dither another global recession is possible. Judging by politicians behavior – the world economies could slow a lot further. It could even tip into recessions in 2013”. The Economist
CILT International Conference 2012
CONTAINER SHIPPING LINES PROFITS PLUMMETS
• Loss > US$ 16 Billion2009
• Profit > US$ 16 Billion2010
• Loss > US$ 6.3 Billion2011
Top 20 Carriers
CILT International Conference 2012
ASIA-EUROPE / MEDITERRANEAN
Asia – Europe
Asia – Mediterranean
STEEP DECLINE IN CONTAINER VOLUMES
Declined by 10% in August 2012 as against 2011.
Minus 20% in August 2012 as against 2011.
CILT International Conference 2012
ASIA – MEDITERRANEAN RATES PLUNGE
US$ 1892 Per Teu
JUNE 2012
US$ 1204 Per Teu
OCT 2012
Shanghai Container Freight Index Spot Rates
Fall 36.3% in a single quarter
Terminated
AE5 service(8) 6500 TEU
Ships
Terminated
AE9 Service(1
1) 8000 TEU
Ships
MAERSK LINE CUTS 19 SHIPS
21 % Capacity Reduced
ON ASIA / EUROPE SECTOR
HANJIN / EVERGREEN
Among 13 voyages scheduled from October to December,
CILT International Conference 2012
Lloyd’s Loading List
CUT ASIA - EUROPE CAPACITY
the companies have decided to skip three, which is a 23% capacity reduction in total.
CILT International Conference 2012
CONTAINER CHARTER PRICES SLIDE
2012 August 2011
August
1000 Teu Vessel• (- 37%)
1600 Teu Vessel• (- 41%)
2000 Teu Vessel• (- 49%)
3500 Teu Vessel• (- 41%)
CILT International Conference 2012
JOBLESS – ARMADA OF SHIPS
No. of idle vessels as at Sep 2012 is 290 ships / 550,000 Teus
Biggest vessel without work is 7200 Teu ``SVENDBORG MAERSK”
CILT International Conference 2012
MIS – MATCHCONTAINER DEMAND AND CAPACITY
Round the World
2012 2011
Westbound TEU 25,416,000 25,598,000
Eastbound TEU 24,635,000 24,046,000
Total Trade 50,051,000 49,644,000
Growth 1% 3%
Imbalance TEU 781,000 1,552,000
CILT International Conference 2012
ULTRA LARGE CONTAINER SHIPS (ULCS)
95% deployed in Asia to Europe Sector
7 Ports of calls
Will South Asia be part of it ?
April 2012 – Operating - Ordered
Average Size - > 13,200 Teus
No. of Ships - 274Total Teus – 3,628,100
6000 Containers per port call 24 Hrs 250 Berth moves per/hr with 8 cranes
Maersk Challenge to Port Operators
MAERSK LINES TRIPLE E 18,300 TEUULTIMATE CONTAINER CARRIERS
CILT International Conference 2012
USA / EUROPE ASIA / CHINA
DEMAND SUPPLY
Consumption Production
Container Shipping
CILT International Conference 2012
OUTSOURCING MODEL - CHALLENGED
Increase in costs in Asia
Loss of jobs in USA / Europe
Politicians no choice but create jobs in the developed world
CILT International Conference 2012
WORLDS FACTORY - CHINA
Costs soaring by increase in Land, taxes, labor costs
Southern China labor cost up by 20% a year since 2008
Nike shifts from China to Vietnam
American Chesapeake Scented Candles shifts from
Rising labor costs Increase shipping charges Supply chain duration – high inventory cost Respond to trends faster.
China - > Vietnam - > Maryland USA
CILT International Conference 2012
LABOR COSTS – LESS IMPORTANT
Slicing the Apple I Pad Assembled in China Worldwide $
33
China $ 8
Cannot I Pad relocate assembling in America even at double the cost ?
Source : University of California
Total Labour Cost
CILT International Conference 2012
LESS WORKERS
Nissan British Factory in Sunderland
271,157 Cars with 4594 people (1 person - > 59 Cars)1999
480,485 Cars with 5462 people (1 Person - > 87 Cars)2011
CILT International Conference 2012
PRODUCTION Vs. COSTS
Americas manufacturing output in Dollar terms same as China
America achieves this with only 10% of workforce deployed by China
Despite China’s rapid rise
Source : Massachusetts Institutes of Technology
CILT International Conference 2012
THIRD INDUSTRY REVOLUTION
• 18t
h
century mechanization of textile industry
1st
• 20t
h
Century Henry Ford mastered the moving assembly line
2nd
• Manufacturing going digital through 3 D printers
3rd
– Age of Mass Production
CILT International Conference 2012
3-D PRINTER
Old way was taking lots parts and screwing or welding
Now product can be designed on a computer and printed on a 3-D printer
Designed with software and a cartridge with material in plastic , metal , ceramic
Already high tech parts of military jets printed using 3-D printer
University of Southern California – A giant 3-D printer
in fine powder or gel
Lay down concrete foundation Put up walls Inserts wiring and plumbing Construct an entire building
CILT International Conference 2012
Will Jobs go back to rich countries ?
Will this not change the demand model of Shipping ?
CILT International Conference 2012
CONCLUSION
Importance of low cost labour in production will diminish.
Gradual shift of low cost production from Asia to West.
Like with Postal mails to E-mails, 3-D printing will completely alter manufacturing
Shipping Line – Ports have to re-assess development of capacity.
Business models of Shipping Line will alter.
models
Thank You
CILT International Conference 2012