1. 2017 Container Shipping Outlook - A tragedy in three acts
Alan Murphy
CEO and Co-Founder
SeaIntel Maritime Analysis
June 1st, 2017
ESPO Barcelona 2017

2. SeaIntel Core values: Major Milestones: Container Shipping Analysts
Founded January 1st, 2011
Fully independent, private company with no interests from brokers, banks or others.
12 Analysts, Developers & Consultants in Copenhagen and Hong Kong.
Management Team with combined 35 years of experience in Container Shipping
Core values:
Integrity
Methodology
Assumptions
Data Quality
Major Milestones:
900+ Research & Analysis articles published since March 2011
5,000+ citations in Industry Press (Lloyd’s List, JoC, etc.)
Official Knowledge Partner of the Global Institute of Logistics
World’s most comprehensive database on Carrier Reliability
- Curriculum provider at the World Maritime University
- Curriculum provider at the Blue MBA at Copenhagen Business School

3. SeaIntel subscription reports
SeaIntel Sunday Spotlight (SSS) - Weekly
Global Liner Performance (GLP) report - Monthly
Tradelane Capacity Outlook (TCO) report - Weekly
Weekly report on relevant container market analysis
Quantitative insights into important market drivers
Regular topics include: Supply/Demand, deployment patterns, freight rate analysis, environmental issues, reliability, and much more
World’s largest study of carrier on-time performance
Report covering 65+ carriers, distinct carrier services/loops, ports, across 34 trade lanes
116 pages including global carrier performance Top20 and niche operators, benchmarking alliances and detailed trade performance
12-week future outlook on container space supply
Most accurate and updated capacity deployment figures for 23 trade lanes between Asia, Europe, North and South America
Based on actual vessel schedules of individual named vessels on all services in the trade lanes

4. Prologue: 8 Years of over-supply

5. Gap in Supply/Demand opened in 2009

6. Freight rates were down, starting to come up

7. Freight rate volatility is through the roof
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Rate data based on SCFI from Shanghai Shipping Exchange
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8. Carriers’ P&L
were the worst years since 2009 in terms of over-capacity, tanking freight rates, weak demand, price wars and rate erosions, etc.
Why did they end up with a profit of 2.7 bn USD for 2015? And why a 1.1bn loss in 2016?

9. Carriers’ P&L per Transported TEU

10. Carriers’ Q2 P&L
2017-Q1 was better than the period in 2016, but that is really the only positive spin
“It is not as bad as last year” does not mean that everything is going great.
The larger carriers seem to be handling it better, ML still expecting a positive FY 2017.

11. Prologue II: Impact of BAF-delay

12. Impact of oil price and BAF delay
Bunker oil prices lead BAF charges by approximately 3 months
When oil prices fall, carrier get a cash injection as their BAF only drops 1-2 quarters later
When oil prices rise, carriers have a cash drain, as costs go up but the BAF is delayed

13. Impact of oil price and BAF delay II
Using crude oil forecasts from the World Bank, we can create a forecast of Bunker Oil prices
The two variables are very strongly correlated

14. Impact of oil price and BAF delay III
2015 saw a net cash injection of 4.13 bn USD to the industry
2016 saw a cash drain of bn USD in Q2-Q4
2017-Q1 will be challenging with a cash drain of 570M USD
FY 2018 will see 350M USD cash drain, while FY is projected at M USD

15. Act 1: Service disruptions, blank sailings and Schedule Reliability

16. Visualizing service launches and suspensions I

17. Blank sailings

18. Visualizing blanks sailings I
Active services in Asia-North Europe

19. Global Reliability Developments
Global developments
In April 2017, global schedule reliability reversed its upward trend and declined by 4.0 percentage points to 71.4%. On a Y/Y level, the Arpil 2017 global average was down 12.0 percentage points compared to April Schedule reliability in April was based on 13,031 vessel arrivals.
N.B.: Starting from September 2015, we have introduced a new feature to measure vessel arrival delays. Importantly, the chart below to the right shows the average delay based ONLY on the vessels that are recorded as being late.
The global average delay for LATE vessel arrivals continued its positive trend and decreased further by 0.22 days over March 2017 to reach 3.45 days in April However, the average delays showed a Y/Y increase of 0.51 days compared to the delays of 2.94 days that were recorded in April last year.

20. Asia-North Europe – Trade Developments
Asia – North Europe developments
April schedule reliability in the Asia-North Europe trade lane continued the upward trend and increased by 7.3 percentage points to 72.4%. On a Y/Y level the on-time performance decreased by 7.1 percentage points, from when reliability was equal to 79.5%.
The average delay for LATE vessel arrivals increased by 0.13 days from 3.93 days in March to 4.06 days in April. Nonetheless, the average delay for ALL vessel arrivals dropped by 0.32 days M/M, reaching 1.23 days in April.
The best performing carriers were Evergreen and COSCO with a reliability score of 82.5%, while UASC followed with 81.5%.

21. Asia-Mediterranean – Trade Developments
Asia - Mediterranean developments
In April, schedule reliability in the Asia-Mediterranean trade lane increased significantly by 8.2 percentage points to 68.4%. Nonetheless, the April score corresponds to a decrease of 13.2 percentage points compared to 81.6% recorded in April last year.
The average delay for LATE vessel arrivals decreased by 0.75 days to 3.51 days M/M and rose by 0.59 days on a Y/Y level. The average delay for ALL vessel arrivals decreased by days from March to 1.23 days in April.
In the trade COSCO was the top performing carrier with a reliability score of 76.4%, followed by Evergreen at 75.7%, UASC at 75.0%, and Yang Ming at 74.9%.

22. Act 2: New Mega-Alliances

23. Alliances are not a new thing…
Source: Wang, Mariner: “The Formation of Shipping Conference and Rise of Shipping Alliances“
International Journal of Business, Vol. 6, issue 5, 2015.

24. … They just controlled much less capacity
On 1/1/2005, Alliance carriers controlled:
GA: 1,102,197 TEU 12.2%
CKYH: 935,611 TEU 10.3%
NWA: 669,478 TEU 7.3%
TOTAL: 2,707,286 TEU 29.8%
On 1/1/2010, Alliance carriers controlled:
GA: TEU 8.9%
CKYH: TEU 11.2%
NWA: TEU 8.7%
TOTAL: 2,707,286 TEU 28.8%
Source: Lu, Cheng and Lee (2006): “AN EVALUATION OF STRATEGIC ALLIANCES IN LINER SHIPPING - AN EMPIRICAL STUDY OF CKYH”, Journal of Marine Science and Technology, Vol. 14, No. 4, pp (2006)
In 2015, six carriers entered alliance : Maersk Line (1st), MSC (2nd), CMA CGM (3rd), Evergreen(5th), CSCL (7th) & UASC (15th)
On 1/1/2016, Alliance carriers controlled:
2M: TEU 28.1%
G6: TEU 17.6%
CKYHE: TEU 16.5%
O3: TEU 14.2%
TOTAL: TEU 76.4%

25. What are the new (April 2017) alliances?
2M Alliance
Ocean Three
CKYHE
G6 Alliance
April 2016
1st
2nd
3rd
4th
5th
6th
9th
7th
12th
THE Alliance
2M Alliance
Ocean Alliance
May 2016 (announced)
1st
3rd
14th
8th
6th
13th
11th
9th
4th
5th
10th
16th
12th
15th
2nd
2M Alliance
Ocean Alliance
THE Alliance
April 2017 (reality)
1st
2nd
7th
8th
3rd
11th
4th
5th
9th
6th
4.25M
3.19M
1.31M
0.71M
2.37M
0.47M
2.22M
1.74M
0.68M
1.53M
F+O TEU
14th
17th
10th
11th
13th
15th
16th

26. Alliance Capacity Market Shares

27. Act 3: Consolidation

28. The level of consolidation is unprecedented

29. The level of consolidation is unprecedented

30. Epilogue: Forecast for 2017-2020

31. Rate erosion better on all trades, except Asia-USWC

32. 2016/17 TP Contracts were set “too low”

33. 2016/17 TP Contracts were set “too low”

34. Shorter sailing distances has weakened demand
2016
2017
2018
World GDP
3.1%
3.4%
3.6% AE
1.6%
1.9%
2.0%
EMDE
4.1%
4.5%
4.8%
2016
2017
2018
World Trade
1.9%
3.8%
4.1% AE
2.0%
3.6%
EMDE
4.0%
4.7%
AE = Advanced economies.
EMDE = Emerging market and developing economies

35. Capacity Outlook

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