OCEAN FREIGHT MARKET UPDATE - January 2020 DHL Global Forwarding, Freight Dominique von Orelli - Global Head, Ocean Freight
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PUBLIC
DHL Global Forwarding, Freight
OCEAN FREIGHT
MARKET UPDATE
January 2020
Publication Date 10th January 2020
Dominique von Orelli – Global Head, Ocean Freight
1
PUBLIC
Contents
TOPIC OF THE MONTH
IMO 2020 – Low Sulphur Surcharge applicable from 1st Dec 2019
HIGH LEVEL DEVELOPMENT
MARKET OUTLOOK
Freight Rates and Volume Development
ECONOMIC OUTLOOK & DEMAND DEVELOPMENT
CARRIERS
DHL Global Forwarding | OFR Market Update | January 2020 2
2
Topic of the Month
IMO 2020 – Low Sulphur Surcharge applicable from 1st Dec 2019
Significant variations in IMO 2020 related surcharges amongst carriers
The IMO 2020 related surcharges announced by carriers effective from 1 December 2019, show
significant variations in the way that the surcharge is named and calculated by the different carriers.
The carriers did not provide full transparency of how the individual surcharges were calculated. Based
on some first analysis, there appears no correlation between the relative efficiency of the various
carriers based on the average size of vessels deployed and the surcharge applied by carriers. Even
within the same alliances that operate similar size ships, there are significant variations in the charge
applied.
In 2019 the average yard stay for ships undergoing scrubber retrofits has reached 59 days, with 17% of
these ships taking longer than 80 days to complete their retrofits. These yard delays mean that more
ships than expected are still bunkering VLSFO. A short term supply crunch for VLSFO is therefore quite
probable. Together with the ongoing tensions in the Middle East area this increases the risk of sharply
rising bunker prices. And indeed, fuel prices for both HSFO and VLSFO have gone up over the last few
days already.
It will be interesting to see how carriers adjust to that situation and where the market level of the
surcharge will settle over the next weeks.
Source: Alphaliner, DHL
DHL Global Forwarding | OFR Market Update | January 2020 3
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High Level Market Development – Supply and Demand
ECONOMIC OUTLOOK GDP GROWTH BY REGION1) DHL TRADE BAROMETER6) SUPPLY/DEMAND GROWTH
SUPPLY/DEMAND GROWTH (ANNUALIZED),
(ANNUALIZED),ININ
%%2) 2)
75 Demand
CAGR Dec19 index 6%
2020F 2021F 2022F 2023F 2024F 70 predicts Dec-
Growth
(2021-24) 65 Feb trade 5% %
EURO 1.1% 1.2% 1.5% 1.6% 1.6% 1.5% 60 development 4%
MEA 2.7% 2.7% 2.9% 3.2% 3.4% 3.2% 55
AMER 1.9% 1.9% 1.6% 1.6% 2.0% 1.7% 3%
50
ASPA 4.2% 4.3% 4.3% 4.4% 4.4% 4.4% 45 2%
Supply
40 Ocean
1% Growth %
DGF World 2.5% 2.6% 2.6% 2.7% 2.9% 2.8% 35 Global
30
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019F 2020F 2021F 2022F 2023F
’17 ’18 ’19
WORLD CONTAINER INDEX (WCI)3) SHANGHAI CONTAINERIZED FREIGHT INDEX (SCFI)4) BUNKER PRICES5)
3,000 1,200
1,100
2,500
1,000
2,000
900
1,500 800
700
1,000 Actual Actual
600
500 Forecast Forecast
500
0 400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
’18 ’19 ’20 ’18 ’19 ’20
1) real GDP, Global Insight, Copyright © IHS, Q4 2019 . All rights reserved. 2) Demand growth = Port-to-Port Container Traffic growth. Supply growth = Fleet Growth. Source: Drewry Maritime Research. 3) Drewry, in USD/40ft container, including BAF & THC both ends, 42 individual routes, excluding intra-Asia
routes. 4) Shanghai Shipping Exchange, in USD/20ft container & USD/40ft ctnr for US routes, 15 routes from Shanghai. 5) Source: DHL. 6) DHL Global Trade Barometer Jun19, index value represents weighted average of current growth and upcoming two months of trade, a value at 50 is considered neutral,
expanding above 50, and shrinking below 50.
DHL Global Forwarding | OFR Market Update | January 2020 4
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Market Outlook January 2020 – Major Trades
Pre Chinese New Year rush in the 1st half of January is driving rate increases out of ASPA
EXPORT REGION1 IMPORT REGION CAPACITY RATE EXPORT REGION IMPORT REGION CAPACITY RATE
AMNO =/+ - AMNO = =
EURO AMLA
AMLA = = ASPA = =
ASPA -- + EURO = =
MENAT -- + MENAT = =
SSA = = SSA = =
AMLA = - ASPA -/= ++
AMNO ASPA
ASPA = = AMNO - +
EURO = + AMLA - +
MENAT = = EURO = ++
SSA = = MENAT = ++
OCEANIA - +
Strong Moderate No Moderate Strong
KEY ++ + = - --
Increase Increase Change Decline Decline
Source: DGF
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Market Outlook January 2020 – Ocean Freight Rates Major Trades
Market outlook on smaller trades available in the back-up
OCEAN FREIGHT RATES OUTLOOK
The pre-CNY rush is in full swing and space is expected to be tight until end of January and carriers will implement a GRI on 1st January.
ASPA – EURO
After the CNY break an extensive blank sailing program is in the pipeline with over 50 sailings planned to be blanked.
EURO – ASPA & MEA Space remains tight on all eastern hemisphere trades.
Pre-CNY rush in 1st half of Jan so overall utilization will be tight. Spot rates will be increased with GRI/PSS effective
ASPA – AMLA
Jan 1st/15th. Blank sailings announcement in place from last week of Jan till 1st week of Feb 2020.
Pre-CNY rush in 1st half of Jan so overall utilization will be tight. Spot rates will be increased with GRI/PSS effective
ASPA – AMNO
Jan 1st/15th. Blank sailings announcement in place from last week of Jan through Feb 2020.
EURO – AMNO No space issues anymore, rates are dropping overall.
Space tight all sectors until CNY. Middle east/East Med carriers are persistent full with rolls through Dec ~ Mid Jan.
ASPA – MENAT
Africa rush expected from late Dec to Mid Jan after temporarily ease off since pre-Christmas arrival rush.
Rates in January for IPBC will remain high due to the extreme tight space caused by the cascading blank sailing since October. In addition,
with the pre-CNY rush expected in mid January, space will be tight and rates will maintain at the level of December at least. For pure IA,
ASPA – ASPA
FAK rates has seen an increase of approximate USD50/teu on average based on the announcement from various carriers. Blank sailing
expected due to the pre-CNY rush as well.
AMNO – EURO Capacity remains stable . Rates are increasing with the implementation of the IMO2020 by all carriers.
Source: DGF
DHL Global Forwarding | OFR Market Update | January 2020 6
6Economic Outlook & Demand Development
Top 10 IHS Economic Predictions for 2020
1
US economy will grow
at trend - around 2.0%.
2
Europe’s economy will
stabilize, then recover a
3
Japan’s post-tax-hike
growth stumble will be
4
China’s growth rate will
fall below 6.0%.
5
Emerging markets will
continue to tread water,
little. cushioned by more as debt reaches new
stimulus. peaks.
6
Commodity prices will
trend down.
7
Inflation will remain
subdued.
8
The global monetary
easing cycle will
9
The US dollar will rise a
little more.
10
Despite historically high
levels of policy
probably come to an uncertainty, recession is
end. still not the most likely
scenario.
Source: Global Executive Summary, IHS, Dec 2019
DHL Global Forwarding | OFR Market Update | Jan 2020 7
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Market Outlook – Volume Outlook in Main Trade Lanes, 2019 Estimate &
2020-23 Growth Forecast in %
2019e, in mTEU 2020e-2023e CAGR, in %
N O R T H N O R T H
A M E R I C A A M E R I C A
I n c l . 4.2 mTEU +2.2% 7.6 mTEU +3.4% I n c l .
M E X I C O F A R E A S T M E X I C O
2.1 mTEU +2.4% 13.3 mTEU +3.8% 18.9 mTEU +3.3%
2.0 mTEU 1.5 mTEU
+3.6% +3.2% 1.6 mTEU +3.7% E U R O P E 6.6 mTEU +2.5% 1.7 mTEU +4.0%
L A T I N L A T I N
I n c l . M E D
A M E R I C A 1.8 mTEU +2.5% 4.1 mTEU +4.1% A M E R I C A
INTRA ASIA
incl. Oceania
39.3 mTEU +3.1%
GLOBAL CONTAINER TRADE 2019e 148.2 mTEU +3.6% CAGR 2020e-2023e
Mid-term reasonably healthy container trade growth is expected.
Source: Seabury Nov19 update
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Carriers
CARRIERS
CMA CGM and Total have signed a second agreement as part of a wider contract under which the global energy French group Total will supply LNG to bunker the
carrier’s upcoming fleet of gas-powered mainline container vessels. CMA CGM has already confirmed that the 11 LNG-powered 15,000 TEU containerships that it will
receive in 2021 and 2022 will be deployed on the the Far East-Med trade lane. As part of the agreement, Total will position an LNG bunker vessel to Marseille-Fos and
Total’s subsidiary Total Marine Fuels Global Solutions (TMFGS) will also provide CMA CGM with a complementary bunkering solution in Singapore. CMA CGM has taken a
leadership positions when it comes to LNG as an environmentally friendly fuel for cargo ships. CMA CGM is so far the only global carrier to have opted for LNG to comply
with the IMO 2020 sulphur rules while also offering a way to reduce its carbon footprint.
China Merchants Ports Holdings (CMP) on 20 December reached a definitive agreement to acquire interests in ten terminals from CMA Terminals (CMAT). The facilities
will be transferred to Terminal Link, a joint venture of CMA CGM (51%) and China Merchants (49%). The deal is valued at $468M for a bond that will be converted into a
49% stake in Terminal Link, which will own the ten new terminals, as well as an additional $500M loan from CMP to Terminal Link. The loan will pay an interest of 6% per
annum and mature in eight years. CMA CGM said it will use the cash proceeds of $968M to reduce debt. The carrier group’s debt stood at massive $19.7Bn as per end of
September 2019. The remaining 22 port facilities in CMA Terminal’s portfolio, excluded from the China Merchants deal, will remain under CMA CGM control. The French
Group has not disclosed any plans to dispose of further facilities.
DP World-controlled Unifeeder has acquired a 77% stake in the Feedertech Group, a Singapore based feeder and shortsea operator. The combined fleets of Unifeeder
and of Feedertech will stant at 85,500 TEU, placing it as the 19th largest carrier in the world by operating fleet capacity. Apart from the feeder services operated by
Feedertech, the Feedertech Group also runs regional shortsea network under the Perma Shipping Line brand. Through Feedertech and Perma, Unifeeder will have the
capability to offer feedering and regional shortsea connectivity in Europe, the Mediterranean, North Africa, the middle East, the Indian Subcontinent and East Asia, even
though Feedertech Group will continue to operate independently. The expansion will also increase Unifeeder’s logistics capabilites and will enable opportunities in the
coastal short-sea trade and on the Indian Subcontinent, completmenting the existing India logistics strategy of DP World.
COSCO SHIPPING Lines (Europe) GmbH will officially transfer the intra-Europe Services to Diamond Line GmbH, as the shipping company pre-announced
on October 10, 2019. Diamond Line GmbH is the wholly-owned subsidiary of COSCO SHIPPING Lines (Europe) GmbH and registered in Hamburg. Cosco
stated that following the transfer they will be in a better position to improve overall customer service and benefit from synergy advantages in the
organization. The specific time of service transfer shall be subject to the cut-off voyage published, it is anticipated to begin on January 15, 2020. After the
transfer, Diamond Line GmbH will be the carrier identified for the Intra-Europe Services and the B/Ls will be issued under the name of Diamond Line GmbH.
Source: Alphaliner, Dynaliners, carriers
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B A C K- U P
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Market Outlook January 2020 – Ocean Freight Rates Additional Trades (1/2)
OCEAN FREIGHT RATES OUTLOOK
EURO – AMLA General rate extensions into January, in some cases up to end Q1. No space issues.
EURO – MENAT ME region shows same trend as ASPA; space remains tight on all eastern hemisphere trades.
Rates and space remain stable. Nigeria congestion surcharges are increasing due to local situation. South Africa is still suffering from port
EURO – SSA
congestions due to weather conditions, strike actions and infrastructural problems.
Rates remain stable. No changes are expected for January.
AMNO – MENAT Space is tight out of USEC & USGC Ports as usual on services to M. East & India Subcontinent, but situation is expected to improve in
January. Currently no space issues out of USWC.
AMNO – SSA Rates to South Africa and West Africa remain stable. No changes in capacity. Space is available.
Market soft/capacity stable. Rates slightly drifting downwards. IMO2020 resulting in some uncertainty moving forward given the wide gap of
AMNO – AMLA
fuel charges from the carriers. COSCO may insert service USEC to ECSA which will further erode rates.
Congestion in T/Shipment ports continue within CENAC.
AMLA Exports Multiple carrier service changes announced.
Space constraints expected Q1 on WCSA due to AP blank sailings and CNY.
AMNO – ASPA All carriers are looking for new customers for TPWB and are very aggressive in pricing and terms.
Source: DGF
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Market Outlook January 2020 – Ocean Freight Rates Additional Trades (2/2)
OCEAN FREIGHT RATES OUTLOOK
EURO MED - AMNO Rates will remain stable. Depending on the agreement and provider IMO2020 bunker has been implemented.
EURO MED – AMLA Unchanged / stable. Depending on the agreement and provider IMO2020 bunker has been implemented.
EURO MED – ASPA Unchanged / stable. Depending on the agreement and provider IMO2020 bunker has been implemented.
EURO MED – MENAT Unchanged / stable. Depending on the agreement and provider IMO2020 bunker has been implemented.
EURO MED – SSA Unchanged / stable. Depending on the agreement and provider IMO2020 bunker has been implemented.
Rates in January will be higher in the 1st half, as carrier make use of the final wave of Lunar New Year cargo rush to implement rate
ASPA-SPAC
increases. However this will immediately fall into slack after, due to the upcoming holidays of Lunar New Year.
Source: DGF
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Carrier Financial Results 9 Months 2018-19 - revised
CARRIER FINANCIAL RESULTS 9 MONTHS 2018-19 (US$ MILLION)
Revenue Operating Profit Operating Profit Margin Net Profit
Carrier 2018 2019 % 2018 2019 % 2018 2019 2018 2019 %
Maersk (Ocean business) 5) 21’083.0 28’366.0 35% 2’634.0 3’263.0 24% 12.5% 11.5% n.a. n.a. n.a.
CMA CGM 2), 4) 17’176.0 17’600.0 2% 376.8 815.8 117% 2.2% 4.6% 49.0 -213.1 -535%
COSCO SHIPPING Holdings 1), 4) 10’428.0 13’880.0 33% n.a. n.a. n.m. n.m. n.m. 126.0 296.0 135%
Hapag-Lloyd 1), 5) 10’141.0 10’654.0 5% 970.0 1’697.0 75% 9.6% 15.9% 15.0 333.0 2120%
OOCL (container transport & logistics)4), 7) 4’396.0 4’672.0 6% n.a. n.a. n.m. n.m. n.m. n.a. n.a. n.a.
Evergreen Marine Corp. 1), 4) 4’020.9 4’604.0 14% -38.4 122.4 419% -1.0% 2.7% -13.4 11.0 182%
Yang Ming 1), 4) 3’462.0 3’655.0 6% -209.9 16.9 108% -6.1% 0.5% -223.6 -107.3 52%
ONE 3) 4’847.0 5’984.0 19% n.a. n.a. n.m. n.a. n.m. -311.0 126.0 141%
Zim 5) 2’395.0 2’473.0 3% 79.0 285.0 261% 3.3% 11.5% -74.0 -14.0 81%
Wan Hai 1), 4) 1’614.1 1’745.0 8% 19.5 69.0 254% 1.2% 4.0% 28.0 77.2 175%
HMM (container shipping business 1) 3’007.0 3’021.0 0% -397.0 -222.0 -44% -13.2% -7.3% -527.0 -416.0 n.a.
Average 6) 62’899.0 72’118.0 15% 3’434.0 6’047.1 76% 5.5% 8.4% -619.9 -33.2 95%
Source: Alphaliner; n.a. = not available, n.m. = not meaningful, 1) local currency numbers were converted into US$ using the average exchange rate for relevant financial period, 2) shipping activities only, excl. CEVA Logistics, 3) results are H1 of Japanese
financial year, i.e. Apr-Sep, not calendar year, 4) operating profit is “Core EBIT”, 5) operating profit is EBITDA, 6) Average excluding ONE, 7) Long Beach Container Terminal (LBCT) are excluded from Jul’18 pursuant the decision to sell the terminal
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Carrier Mergers, Acquisitions and Alliances
A L L I A N C E S
F O R M E R A L L I A N C E S P R E S E N T A L L I A N C E S
CMA CGM OOCL
MAERSK LINE CHINA SHIPPING MAERSK LINE OCEAN CMA CGM
2M OCEAN 3 2M
MSC UNITED ARAB MSC ALLIANCE CHINA COSCO SHIPPING
SHIPPING COMPANY EVERGREEN
HAPAG-LLOYD
HAPAG-LLOYD HYUNDAI COSCO
ONE
MOL MERCHANT EVERGREEN K-LINE
G6 MARINE CKYHE THE ALLIANCE YANG MING
NYK HANJIN YANG MING
OOCL SHPPING HMM (from 1 April
APL
2020)
*Source: Carriers
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Acronyms and Explanations
AMLA - Latin America OWS - Overweight Surcharge
AMNO - North America PH - Philippines
AR - Argentina PNW - Pacific North West
ASPA - AsiaPacific Ppt. - Percentage points
BR - Brazil PSW - Pacific South West
CAGR - Compound Annual Growth Rate QoQ - Quarter on quarter
CENAC - Central Amercia and Caribbean SAEC - South America East Coast
CNC - CNC Line (Cheng Lie Navigation Co. Ltd.) SAWC - South America West Coast
DG - Dangerous Goods SOLAS - Safety of Life at Sea
DWT - Dead Weight Tonnage SPRC - South People’s Republic of China – South China
EB - Eastbound SSA - Sub-Saharan Africa
ECSA - East Coast South America (synonym for SAEC) SSL - Steam Ship Line
EGLV - Evergreen Marine Corp T - Thousands
EURO - Europe TEU - Twenty foot equivalent unit (20‘ container)
GRI - General Rate Increase TSA - Trans Pacific Stabilization Agreement
HMM - Hyundai USGC - US Gulf Coast
HL - Hapag-Lloyd US FMC - US Federal Maritime Commission
HSFO - High-Sulphur Fuel Oil (< 3.5% Sulphur) USEC - US East Coast
HSUD - Hamburg Süd USWC - US West Coast
HWS - Heavy Weight Surcharge VGM - Verified Gross Mass
IA - Intra Asia VLCS - Very Large Container Ship
IPBC - India Pakistan Bangladesh Ceylon (= Sri Lanka) VLSFO - Very Low-Sulphur Fuel Oil (< 0.5% Sulphur)
IPI - Inland Point Intermodal VSA - Vessel Sharing Agreement
ISC - Indian Sub Continent (synonym for IPBC) WB - Westbound
MENAT - Middle East and North Africa WCSA - West Coast South America (synonym for SAWC)
ML - Maersk Line WHL - Wan Hai
mn - Millions WRS - War Risk Surcharge
MoM - Month-on-Month YML - Yang Ming Line
NOO - Non-operating (vessel) owners YoY - Year-on-Year
OCRS - Operational Cost Recovery surcharge YTD - Year-to-Date
OOCL - Orient Overseas Container Line
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