Mega Ships, Alliances, Ports, Supply Chains, Chaos

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There are significant changes ahead for container lines, ports, and for importers / exporters

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Mega Ships, Alliances, Ports, Supply Chains, Chaos

  1. 1. 1 Mega Ships, Ports, Supply Chains, Chaos by Tom Craig tomc@ltdmgmt.com
  2. 2. 2 First ILWU Contract Expires June 30
  3. 3. 3 State of the Industry Too many ships Slow growth of global trade with recession Losses (esp. Asia-Europe)
  4. 4. 4 The Times—They Are A Changing Global Trade / Global Logistics
  5. 5. 5 Top 10 Container Carriers 1996 1) APM-Maersk 2) Evergreen 3) P&O Nedlloyd 4) Sea-Land 5) COSCO 6) Hanjin 7) MSC 8) NYK 9) Mitsui 10) Hyundai 2010 1) APM-Maersk 2) MSC 3) CMA-CGM 4) APL 5) Evergreen 6) Hapag-Lloyd 7) COSCO 8) CSAV 9) CSCL 10) Hanjin
  6. 6. 6 Top 10 Container Ports 1980 1) New York/New Jersey 2) Rotterdam 3) Hong Kong 4) Kaohsiung 5) Singapore 6) Hamburg 7) Oakland 8) Seattle 9) Kobe 10) Antwerp 2011 1) Shanghai 2) Singapore 3) Hong Kong 4) Shenzhen 5) Busan 6) Ningbo 7) Guangzhou 8) Qingdao 9) Dubai 10) Rotterdam
  7. 7. 7 Top 10 North America Ports 2000 1) Long Beach 2) Los Angeles 3) New York/New Jersey 4) Charleston 5) Oakland 6) Seattle 7) Norfolk 8) Houston 9) Savannah 10) Tacoma 2011 1) Los Angeles 2) Long Beach 3) New York/New Jersey 4) Savannah 5) Vancouver 6) Oakland 7) Seattle 8) Virginia 9) Houston 10) Manzanillo
  8. 8. 8 Ocean Mega Ships
  9. 9. 9 Mega Ship Mega Ship Aircraft Carrier
  10. 10. 10 Issues? Megas (Triple E)—18,000+ TEU (vs 1000 TEU in 1970s) Lower operating costs How will ships be filled? Which ports will handle them? How will ports handle them? Investment? Bottlenecks?
  11. 11. 11 P3 And More
  12. 12. 12 P3 Maersk, MSC, CMA-CGM– 3 largest carriers--operating alliance FMC, EU, China reviewed Three issues– market share big ships hubs/ports used
  13. 13. 13 P3 Market Share 44% Asia-to-Europe 24% in the trans-Pacific 42% in the trans-Atlantic trade
  14. 14. 14 P3 Vessel Size Average vessel for Asia-Europe-- increase from 9,300 TEU to 14,200 TEU by end of 2015 Maersk largest 100 vessels--surpass MSC and CMA CGM when all Megas delivered
  15. 15. 15 G6 From New World and Grand Alliances APL (#4) Hapag-Lloyd (#6) NYK OOCL Hyundai Mitsui
  16. 16. 16 CKYH Cosco (#7) Hanjin (#10) K Line Yang Ming Evergreen (#5)—may join
  17. 17. 17 Canals Panama Canal—expansion— (2015 or 2016?) updates at East Coast ports with bigger ships with widening $1.6bil overrun construction was slowed during dispute Suez Canal--congestion
  18. 18. 18 Pending Chaos!?
  19. 19. 19 Issues Supply (of ships/container space) exceeds demand Pricing / rates – flat and somewhat low Will Money People sit still? Last time – carriers laid up significant tonnage “coincidentally” at same time
  20. 20. 20 Singapore 2009
  21. 21. 21 Shake Out Ahead? Financial Much red ink for last 5 years Hanjin—operating loss $225mil / net loss $631mil for 2013 M&A CSAV / Hapag-Lloyd (could this new carrier join the P3?)
  22. 22. 22 Next few years As big ships are spread around globally-- more rate volatility in more trade lanes Schedule/service vagaries--dropped weekly sailings Fewer carriers
  23. 23. 23 And Tier 1 and Tier 2 carriers Tier 1 and Tier 2 ports Financial shakeouts Supply chain issues Woe to those who buy rates and do not understand service and supply chains
  24. 24. 24 Ocean Carriers & Global Supply Chain Erosion
  25. 25. 25 What Carriers Are Doing Fewer carriers in business Alliances, slot exchanges, and vessel sharing--created and changed Shipping routes--added and revised Sailing schedules--made and reworked “Slow steaming”--ongoing practice
  26. 26. 26 What Everything Means Irregular performance Lack of service reliability Potential changes as to ports to handle ships
  27. 27. 27 Which Means Increased uncertainty for planning Undermine inventory yield maximization More inventories and more capital tied up
  28. 28. 28 Impact
  29. 29. 29

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