Carrier perspective on Refrigerated Shipping [PDF]

ooter…' USA Reefer Market Share and Volume. Total. Market. Total Market. Maersk Line. Maersk Line YTD. 2013 Mkt. Share

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Idea Transcript


AgTC Annual Meeting, June 26, 2014 William C. Duggan, Jr, Maersk Line North American Refrigerated Services

Carrier perspective on Refrigerated Shipping

Agenda Key Messages The Global and USA Reefer Market The Reefer Container Challenge The Reefer Rate Japan & China 24 Hour Rule The Future Questions

My key messages today

MAERSK LINE REMAINS COMMITTED TO THE REEFER BUSINESS

THE SHIPPING INDUSTRY IS STILL FACING SIGNIFICANT CHALLENGES

PARTNERSHIPS AND SERVICE INNOVATION WILL BE FUTURE VALUE DRIVERS

SECTION 4:

GLOBAL & US REEFER MARKET

Global Market 2013- Reefer Cargo

Meat-poultry is the largest and fastest growing segment At 4.8% CAGR from 2002-2012 (or 36.3m MT)

Source: Drewry Container Forecaster

Seasonal demand creates pressure in Q1-Q2 peak

ECSA

WCSA

CAM

ROW

USA Reefer Market - all

USA Reefer Market Share and Volume Maersk Line 2013 Mkt 2013 Share Volume

Total Market

Maersk Line YTD

Total Market

YTD ML YOY Mkt YOY YOY YTD Mkt 2013 YTD Mkt Reef Share Volume Volume Reef Volume Share Volume Growth Growth Growth Volume

GRAND TOTAL 11.35% 117,098 1,032,051 12.06% 42,556

2.4%

18.1%

-5.5% 352,933

#1 Carrier YTD

#2 Carrier YTD

#3 Carrier YTD

Maersk Line

Great White

Dole

Great White MSC Hamburg Sud MSC Maersk Line Hamburg Sud APL MSC Maersk Line Maersk Line Dole

Dole SETH MSC Maersk Line APL Maersk Line OOCL Safmarine APL Hapag Great White

NETWORK Maersk Line Hapag ZIM Hanjin USLINES Maersk Line Maersk Line MSC Safmarine MSC

Dole

Great White

Maersk Line

TROPICAL SHIPPING Maersk Line Hamburg Sud MSC Maersk Line Hamburg Sud Maersk Line MSC Maersk Line Maersk Line Maersk Line

Seaboard Marine MSC MSC Maersk Line Hanjin USLINES MOL Maersk Line Hapag MSC MSC

Crowley CMA CSAV ZIM APL Maersk Line Hanjin MOL OOCL CMA Hamburg Sud

Maersk Line

MOL

Hanjin

Import CAMCAR EAFR ECSA MED MEIP OCE PAC SAFR TATL WAFR WCSA IMPORT TOTAL

3.51% 48.90% 0.68% 11.81% 16.46% 17.02% 8.75% 15.53% 16.97% 38.73% 7.30%

8,343 19 77 2,919 1,821 4,193 9,092 524 6,643 145 7,089

237,391 39 11,404 24,723 11,066 24,644 103,912 3,374 39,147 375 97,122

4.91% 5.04% 0.91% 13.41% 21.20% 18.13% 9.68% 4.85% 19.81% 39.24% 6.34%

4,907 1 28 1,169 636 1,539 3,190 17 2,269 53 2,048

0.6% -55.6% -0.1% -0.4% 5.0% 1.8% 1.6% 2.1% 4.1% 14.2% 1.6%

8.1% -92.6% -12.7% -1.9% 3.4% 12.1% 29.2% 19.6% 16.6% 58.6% 21.2%

-5.1% -11.3% 1.5% 1.3% -20.8% 0.7% 7.6% -32.6% -7.7% 1.4% -8.8%

99,999 11 3,085 8,715 3,002 8,486 32,959 353 11,453 134 32,324

7.39%

40,866

553,196

7.91%

15,857

1.2%

14.0%

-3.8%

200,521

3.74% 32.45% 6.32% 31.69% 35.08% 8.88% 10.64% 26.91% 33.17% 41.69% 25.66%

2,321 245 106 10,196 11,794 1,271 28,605 579 12,484 5,322 3,308

62,143 755 1,677 32,174 33,621 14,314 268,728 2,150 37,635 375 12,893

3.14% 45.36% 8.34% 29.43% 36.83% 8.46% 13.20% 27.07% 34.09% 37.56% 27.04%

558 97 47 3,300 4,128 421 11,368 128 3,987 1,639 1,025

2.0% 27.8% -1.0% 0.6% 5.6% 2.1% 3.9% 3.9% 8.0% 1.1% 4.8%

130.8% 96.9% 4.4% 12.1% 2.9% 33.9% 30.7% -26.0% 10.5% 38.4% 20.6%

-17.0% -23.7% 16.9% 9.8% -12.6% 1.4% -7.8% -36.7% -15.4% 34.4% -0.6%

17,809 213 563 11,214 11,207 4,977 86,105 473 11,694 134 3,792

EXPORT TOTAL 15.92%

76,232

478,856

17.52%

26,699

4.1%

20.7%

-7.7%

152,412

Export CAMCAR EAFR ECSA MED MEIP OCE PAC SAFR TATL WAFR WCSA

YTD includes Jan – April 2014

SECTION 5:

CONTAINER CHALLENGE

Actual reefer carrying capacity: container versus conventional

Container

Conventional

Global Cellular Container Fleet by size Range

5,122

Total number of vessels Total TEU ship Capacity 16,701,264

2.9M Reefer Capacity (TEU) Source: Drewry June 2013) Reefer Shipping Market

17.8%

10

Major Reefer Carriers

1.17M

comprise

TEU of available equipment

or 63% of total Reefer supply

425000 40,000 50,000 90,000 38,000 10,000 45,000 59,000 32,000 35,000 426,000

25000 80,000 70,000 10,000 42,000 70,000 21,000 18,000 7,000 257,000

450000 120,000 120,000 100,000 80,000 80,000 66,000 59,000 50,000 42,000 683,000

18% 5% 5% 4% 3% 3% 3% 2% 2% 2% 27%

Containerized Mkt Share 24% 6% 6% 5% 4% 4% 4% 3% 3% 2% 37%

1,250,000

600,000

1,850,000

74%

100%

Owned Fleet

ML MSC CMA CGM Hamburg Süd APL CSAV Hapag-Lloyd Evergreen MOL Hanjin Other lines Total Container Carriers Conventional Carriers

Leased Fleet

Total Fleet

Total Mkt Share

26%

Source: Drewry Reefer Shipping Market Review and Forecast , Annual report, 2013/14

Reefer container fleet

Source: Harrison Consulting and Nordea Markets

Reefer Equipment will be a bottleneck when market improves 200,000 160,000 120,000 80,000

19,216

36,500

14,040 15,487

14,556 15,875

29,090 23,595

13,676

68,613 61,683

47,616

66,514 55,432

44,000

21,436 50,702 27,099

54,545 54,543

57,270

60,133

63,140

66,297

69,612

2011

2012E

2013E

2014E

2015E

2016E

20,763 15,668

12,930 14,430

72,998 69,300

48,000

40,000 46,807

0 2008

18,761 16,000

22,673

2009

2010

Market Growth Market Growth

Container Scrapping Container Scrapping

Est. Reefer Container Order

Break Bulk Scrapping

Break Bulk Scrapping Reefer Container Production

Reefer Container Production

Assumptions: Market growth estimated at 5% annually from 2014 onwards Container scrapping based on a 13 year lifespan Production for 2013 has been reduced to 82,000 FFE which is approx 60,000 unit below max production capacity BB vessel scrapping continues The containerized reefer market has grown strongly since 2008 and reached a share of 75% of total reefer

Direct containerization will increase ~ 2% p.a. in coming years while the break bulk fleet will shrink Containerization  will  be  driven  by  break  bulk  scrapping… which will reduce the break bulk fleet by around 30% in the next 5 years and a further 25% until 2024

In recent years, low prices for containerized reefer have pulled demand away from the break bulk market

Reefer break bulk fleet, (Start of year, FFE)

120,000 100,000

0-9

10-14

15-19

20-24

25-29

30+

602 8,933 18,364

With increasing prices in the container market, the containerization in coming years will be mainly driven by the scrapping of break bulk vessels

80,000

The scrapped reefer capacity is estimated to be fully replaced by containerized reefer

20,000

Source: Lloyd’s  list,  Monaco  Shipping

363

# of vessels

5,955

60,000 40,000

0

33,332

21,601

217 9,458

23,322

23,322

16,318

16,318

16,318

6,470

6,470

2019

2024

9,311 2014

2,841

15,079

2,841

Both containerization and break bulk scrapping have been consistently growing in recent years The break bulk fleet has been constantly decreasing with ~ 6% p.a. & very few deliveries Average reefer break bulk fleet, 160,000

828

793

140,000

Since 2008, containerized reefer demand has grown 3-6% p.a. stronger than total reefer Reefer break bulk containerization, (%)

757

# of vessels

714

7% 6%

5.7%

650

120,000

607

5% 4.2%

100,000 4% 80,000

3.4%

4.4%

3.7%

3% 60,000 2%

40,000

20,000

1%

0

0% 2008

2009

2010

2011

2012

2013

Scrappings

38

39

42

52

78

9

Deliveries

5

3

6

2

-

-

Source: Drewry, Lloyd’s  list,  Monaco  Shipping

2008

2009

2010

2011

2012

Slide 17

Growth of containerized reefer demand is driven by 3 main drivers 1 Population growth

Demand for reefer goods increases when the number of people continues to grow worldwide

Income effect

The wealthier people become the more goods they demand

Containerization

The conversion of reefer transportation from break bulk vessels into reefer containers

2

3

An increase of general reefer demand leads to additional containerization as the break bulk fleet cannot absorb it

Growth of containerized reefer demand

Overall, the containerized reefer demand is expected to grow by around 5.2% per year Containerized reefer demand 2014-2019, y/y growth (%) 6% 2.5%

5.2%

Containerization (Direct + Indirect)

Total

5%

4%

3%

1.5%

2.7%

Income Effects

Subtotal

2% 1.2% 1%

0% Population Growth

During the last 8 years our reefer rates have not covered inflation nor the rising bunker prices Index 2005=100 300

Bunker price

273

Maersk Line reefer rates (incl. BAF) 260

264

Inflation (world)

220

202 192

180 151

147 140

125 100

104

108

100 100

101

101

114

117

121

108 89

127

132

97

100

99

2010

2011

2012

60

2005

2006

2007

Source: Maersk Line internal data, IMF, bunker prices for ROT 380 CST

2008

2009

Investment is essential to meet market growth Investing in reefer equipment must be financially sustainable Cost of capital warrants a contraction of supply in the reefer market A.P. Moller Group has cancelled planned

1,400

investments of USD 500 million in new

1,200

1,000

FFE (thousand)

equipment for 2014

5% market growth

If Maersk Line does not recommence

Industry reefer container

800

investment, global reefer container

demand

demand will outstrip supply by 9% by

600

Scenario 1: Maersk invests

400 200

9% capacity gap!

Scenario 2: Maersk halts investment 2012

2013

2014

2015

2016 1.7b USD total investment cost in 2013 just to maintain existing reefer equip fleet

24 hour rule Japan • Electronically submit to Japan Customs the container cargoes to be loaded on a vessel intended for entry into a port in Japan, no later than 24 hours before departure of the vessel from the port of loading • Carriers typically require these details 1-2 days in advance of Customs deadline so that information may be transmitted to Japan authorities by 24 hour deadline • In effect since March 2014

China • New China Customs Advance Manifest (CCAM) system • Similar to Japan 24 hour rule to allow for prompt manifesting and transmitting of cargo details • Applies to cargo discharging and/or transshipping at Mainland China ports

• Strict enforcement expected to begin September 30, 2014, though not official

Maersk Line is maintaining all rules according to Japan 24 regulations  and  will  do  the  same  once  China’s  are  confirmed

FUTURE

Where is the reefer business heading?

The Future Ball Game New and emerging markets will grow fast

Food shortages and increased commodity prices

Retailers want more control over their refrigerated supply chain

Increased focus on health, food safety and environment

Partnership & collaboration will increase to drive out waste: this will include reciprocal service level agreement

Full transparency in the cold chain

Key takeaways As an Industry, Carriers are losing big money

The  price  paid  in  today’s  market  for  international  shipping   does not cover cost of capital

While markets, vessel plug & capacity grows, the reefer equipment is not

Alliances and cost savings will be the way of the near future

Closer partnerships between carrier and shipper is critical

Questions?

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