TPM Asia 2012 Alphaliner

Cont ai ner Shi ppi ng
2013 Mar ket Out l ook

Web: www.alphaliner.com E-mail: hjtan@liner-research.com

The worldwide reference in liner shipping
Shenzhen, 17 October 2012
ALPHALINER Containership Market Outlook
www.alphaliner.com the worldwide reference in liner shipping Alphaliner 1999-2012 Contents not to be reproduced without permission
TPM Asia : October 2012
Carriers remain trapped with surplus capacity
Alphaliner Page 1
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
The surplus
capacity trap
may last to
2014
Capacity overhang remains
Alphaliner Page 2
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
Capacity overhang from 2009
crisis has not been cleared
Over-supply most severe and
prolonged in history
Rate volatility in 2012 unprecedented
Alphaliner Page 3
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
Jan-May 2012 saw sharpest rise in
CCFI (+52%)
But index dropped by 9% since May

Compression of shipping cycles
Previous cycles last 4-6 years
Current cycles 12-18 months
Compression of the shipping cycle
Alphaliner Page 4
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
Variance of CCFI rates in 2012 highest
since 1998

High volatility due to capacity overhang
Excess capacity returns with each
recovery
Idling/slow steaming/charter redeliveries
are only temporary solutions
Compressed shipping cycle will continue in 2013
Alphaliner Page 5
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
Lows more severe limited only by carriers
capacity to stomach losses
Highs will be short-lived

Rate trend show long-term decline
0
200
400
600
800
1,000
1,200
1,400
1,600
J
a
n
-
9
8
J
a
n
-
9
9
J
a
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-
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0
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a
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-
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1
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a
n
-
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a
n
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a
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a
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7
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9
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0
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1
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2
C
C
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I

I
n
d
e
x

(
J
a
n

1
9
9
8
=
1
,
0
0
0
)

CCFI
0
200
400
600
800
1,000
1,200
1,400
1,600
J
a
n
-
9
8
J
a
n
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9
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a
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0
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1
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2
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a
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5
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6
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7
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9
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0
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(
J
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1
9
9
8
=
1
,
0
0
0
)

FO $/ton
CCFI
Fuel Adjusted Freight Index
Trend even more apparent if fuel adjusted
rate index
Significant new vessel deliveries due in 2013
Alphaliner Page 6
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
40% are new ships of over
10,000 teu
Driven by need to lower
unit costs
Orders have not stopped
1.05 million TEU already delivered YTD
1.41 million TEU to be delivered in 2012
1.77 million TEU due in 2013
Idle capacity remains at 6%
Alphaliner Page 7
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
Surplus capacity of between
500,000 teu and 1,000,000 teu
Too much capacity reactivated in
2011 and 2012
About 6% of total fleet are
expected to be idle by end 2012
Scrapping has increased but still insufficient
Alphaliner Page 8
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
242,000 teu scrapped YTD
Average age of scrapped ships at all time low

But new ships outpacing scrapping by 4-to-1 (teu)
Chartered tonnage returned
Alphaliner Page 9
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
85% of idle tonnage are
chartered ships
Burden of idling being
shifted to charter owners
500,000 teu or 6% of charter
tonnage currently
unemployed

Chartered tonnage returned
Alphaliner Page 10
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
But mismatch in charter returns (mainly 1,000-5,000 teu ships)
vs new deliveries (8,000 teu and above)
Return of charter tonnage is not enough to overcome pressure
from new capacity influx

Charter rates remain depressed
Alphaliner Page 11
New
deliveries
Return of
chartered
tonnage
Scrapping
increases
Charter rates
drop
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
Depressed charter rates will
continue in 2013

Carriers continue to take on new
charters, with low charter rates
Capacity can return on short notice

Carriers unable to break the vicious cycle in 2013
Alphaliner Page 12
Return of
chartered
tonnage
Scrapping
increases
Surplus
Capacity
Rates fall
below
breakeven
Idling of
surplus
capacity
Rates return
to breakeven
Idle capacity
re-activated
The surplus
capacity trap
Carriers
market share
ambitions
Weakening
Demand
Growth is slowing
Alphaliner Page 13
Carriers
market share
ambitions
Weakening
Demand
Demand growth at 4-6% in 2012-2013
Vs capacity growth of 9% in 2013

Weak headhaul volumes pose significant challenge
Alphaliner Page 14
Carriers
market share
ambitions
Weakening
Demand
FE-Europe volume expected to shrink by -4.2% in 2012
FE-US volume growth still weak at 1.5%
The two main trades will come under greatest capacity pressure

Average load factors weak
Alphaliner Page 15
Carriers
market share
ambitions
Weakening
Demand
Average load factor on FE-Europe only 85%
Average load factor on FE-US at 91%

Capacity reductions are necessary but difficult to implement

60%
65%
70%
75%
80%
85%
90%
95%
100%
J
a
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A
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2
Average vessel load factor
FE-Europe route
(Source : Shanghai Shipping Exchange)
60%
65%
70%
75%
80%
85%
90%
95%
100%
J
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2
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2
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-
1
2
Average vessel load factor
FE-US route
(Source : Shanghai Shipping Exchange)
Carriers unable to curb appetite for capacity
Alphaliner Page 16
Carriers
market share
ambitions
Weakening
Demand
19 of Top 21 carriers have new capacity coming in next 15 months
Only UASC/Zim are without new capacity

0 50,000 100,000 150,000 200,000
APL
APM-Maersk
MSC
Evergreen
Hamburg Sd
Hapag-Lloyd
COSCON
CSCL
Hanjin Shg
OOCL
MOL
Yang Ming
PIL
CMA CGM
NYK Line
HMM
Wan Hai
K Line
CSAV
Zim
UASC
New Vessel Deliveries Oct 2012-Dec 2013 (TEU)
Carriers unable to curb appetite for capacity
Alphaliner Page 17
Carriers
market share
ambitions
Weakening
Demand
Top 21 carriers capacity growth of 7.4% p.a. over 2008-2012 period
A single carrier is enough to break capacity discipline and trigger a rate war

7
%

1
2
%

9
%

1
0
%

2
%

6
%

6
%

7
%

1
1
%

8
%

5
%

1
0
%

-
1
%

1
0
%

4
%

4
%

2
%

1
3
%

1
9
%

-
2
%

7
%

0.00
0.50
1.00
1.50
2.00
2.50
3.00
A
P
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M
a
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M
S
C
C
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A

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g

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d
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Y

M
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i
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n
s

Sep-08 Sep-12 CAGR 2008-2012
Excessive competition will remain
Alphaliner Page 18
Carriers
market share
ambitions
Weakening
Demand
20 main carriers in FE-US and 19 main carriers in FE-Europe
No indication of carrier exits in 2013
Formation of alliances (MSC-CMA CGM, G6, CKYH ++) has reduced impetus for
carrier consolidation
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
Maersk
MSC
CMA CGM
COSCO
Evergreen
CSCL
Hanjin Shg
Hapag-Lloyd
HMM
OOCL
UASC
MOL
NYK Line
APL
K Line
Zim
Yang Ming
Wan Hai
PIL

0 10,000 20,000 30,000
Maersk
Hanjin Shg
COSCO
Evergreen
MSC
Hapag-Lloyd
APL
CMA CGM
K Line
Yang Ming
HMM
OOCL
MOL
NYK
CSCL
Zim
Wan Hai
PIL
Matson
UASC

Weekly capacity share by carrier (Oct 2012)
FE-Europe FE-North America
Carriers have limited options to curb growth
Alphaliner Page 19
Carriers
market share
ambitions
Weakening
Demand
Slow steaming, return of chartered tonnage and idling are only temporary solutions
Scrapping & curbing new orders are more permanent solutions
But capacity curbs have been ineffective so far

-15%
-10%
-5%
0%
5%
10%
15%
20%
10
11
12
13
14
15
16
17
2009
Jan
2010
Jan
2011
Jan
2012
Jan
%

C
h
a
n
g
e

(
Y
e
a
r
-
o
n
-
y
e
a
r
)

T
o
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a
l

C
e
l
l
u
l
a
r

C
a
p
a
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t
y

i
n

T
E
U

M
i
l
l
i
o
n
s

Capacity absorbed by ESS/SSS Idle capacity
Effective Capacity YoY % change in Fleet Capacity
YoY % change in Effective Capacity
Slow steaming absorbed 6% of fleet
Potential for further slow steaming
~4%
Predictions for 2013
Alphaliner Page 20
Rate volatility will continue
Supply overhang will continue to dictate rates cycle in 2013
NVO rates will be less volatile than 2012 - 3Q base rates 28% higher than 2011
BCO rates will rise in 2013 but quantum probably lower than carrier targets

Carriers will continue to shoot themselves in the foot
Carrier discipline only when suffering from losses or when utilisation levels are
high
Nov GRI on FE-Europe will be followed by rate undercutting if load factors
remain weak

None of the main carriers will exit the market
Excessive competitive will continue
Predictions of industry consolidation are premature
End

Please send any queries to hjtan@liner-reseach.com/hjtan@alphaliner.com

Alphaliner Page 21
Alphaliner clients include the following top shipping lines :

TPM Asia 2012 Alphaliner

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