Global Logistics - Shipping

IBISWorld Industry Report
22 January 2010
Global Logistics - Shipping: H4821-GL
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Contents
Industry Definition................................................................................................................................................. 3
ACTIVITIES (PRODUCTS AND SERVICES) ......................................................................................................................................3
SIMILAR INDUSTRIES ........................................................................................................................................................................3
DEMAND & SUPPLY INDUSTRIES ....................................................................................................................................................3
Key Statistics........................................................................................................................................................ 5
CONSTANT PRICES ...........................................................................................................................................................................5
CURRENT PRICES .............................................................................................................................................................................5
REAL GROWTH...................................................................................................................................................................................6
RATIO TABLE......................................................................................................................................................................................6
GRAPHS ..............................................................................................................................................................................................6
Segmentation ....................................................................................................................................................... 8
PRODUCTS AND SERVICE SEGMENTATION ..................................................................................................................................8
MAJOR MARKET SEGMENTS............................................................................................................................................................9
INDUSTRY CONCENTRATION.........................................................................................................................................................10
GEOGRAPHIC SPREAD ...................................................................................................................................................................12
Market Characteristics........................................................................................................................................ 15
MARKET SIZE ...................................................................................................................................................................................15

LINKAGES .........................................................................................................................................................................................16
DEMAND DETERMINANTS ..............................................................................................................................................................16
DOMESTIC AND INTERNATIONAL MARKETS................................................................................................................................17
BASIS OF COMPETITION.................................................................................................................................................................18
LIFE CYCLE.......................................................................................................................................................................................20
Industry Conditions............................................................................................................................................. 22
BARRIERS TO ENTRY......................................................................................................................................................................22
TAXATION .........................................................................................................................................................................................23
INDUSTRY ASSISTANCE .................................................................................................................................................................23
REGULATION AND DEREGULATION..............................................................................................................................................23
COST STRUCTURE ..........................................................................................................................................................................25
CAPITAL AND LABOR INTENSITY...................................................................................................................................................27
TECHNOLOGY AND SYSTEMS .......................................................................................................................................................28
INDUSTRY VOLATILITY....................................................................................................................................................................28
GLOBALIZATION...............................................................................................................................................................................29
Key Factors ........................................................................................................................................................ 31
KEY SENSITIVITIES..........................................................................................................................................................................31
KEY SUCCESS FACTORS................................................................................................................................................................31
Key Competitors................................................................................................................................................. 33
MAJOR PLAYERS .............................................................................................................................................................................33

PLAYER PERFORMANCE ................................................................................................................................................................33
OTHER PLAYERS .............................................................................................................................................................................45
Industry Performance ......................................................................................................................................... 49
CURRENT PERFORMANCE.............................................................................................................................................................49
HISTORICAL PERFORMANCE.........................................................................................................................................................53
Outlook ............................................................................................................................................................... 57
INDUSTRY DEFINITION
Global Logistics - Shipping
22 January 2010
Industry Definition
This industry comprises establishments primarily engaged in providing deep sea, coastal and inland water transport. Deep
sea and coastal water transport includes the transport of passengers and freight over water, both scheduled and
unscheduled. The inland water transport segment includes the movement of passenger or freight via rivers, canals, lakes
and waterways, including inside harbors and docks. The industry excludes marine operations such as port operations and
stevedoring.
ACTIVITIES (PRODUCTS AND SERVICES)

The primary activities of this industry are:
Barge Shipping
Bulk Shipping
Commercial charter services for freight transport
Containerized Shipping
Deep Sea, Coastal and Inland Freight Transport
Deep Sea, Coastal and Inland Passenger Transport
Tanker Shipping (including liquefied natural gas)
The major products and services in this industry are:
International Freight Transport
International Passenger Transport
Coastal Freight and Passenger Transport
Inland Water Transport
Other
SIMILAR INDUSTRIES
Industry: A-GL - Global Agriculture, Hunting, Forestry and Fishing
Description: Establishments engaged in the transportation of goods via rail.
Industry: C2541-GL - Global Civil Ship and Boat Building
Description: These establishments manufacture barges, cargo ships, container ships, ferryboats, fireboats, fishing boats,
passenger ships, patrol boats and sailing ships for the Shipping industry.
Industry: H4832-GL - Global Logistics - Air Freight
Description: This industry comprises establishments primarily engaged in the air transportation of commercial cargo via
air.
Industry: H4911-GL - Global Travel Arrangement and Reservation Services
Description: Companies who dispatch shipments and arrange space for cargo movement to an international destination. It
includes reviewing invoices and documents required to export or import goods.
DEMAND & SUPPLY INDUSTRIES

B-GL - Global Mining
C-GL - Global Manufacturing
C2541-GL - Global Civil Ship and Boat Building
Copyright 2010, IBISWorld Inc.
INDUSTRY DEFINITION
22 January 2010
F4311-GL - Global Wholesale Trade

H4913-GL - Global Marine Port Operation
I5121-GL - Global Internet Service Providers
KEY STATISTICS
22 January 2010
Key Statistics
CONSTANT PRICES
Industry Revenue
Industry Gross Product
Number of Establishments
Number of Enterprises
2005
2006
2007
2008
*120,528.1
*133,027.0
*145,289.5
*161,081.7
*138,475.1 $Mill
2009
*59,541.0
*65,449.3
*71,191.8
*75,386.3
*60,513.6 $Mill
*28,626
*29,121
*29,328
*29,484
*28,815 Units
*10,592
*10,775
*10,881
*10,939
*10,690 Units
*1,550,148
*1,578,233
*1,602,192
*1,619,816
*1,555,024 Units
Exports
N/A
N/A
N/A
N/A
N/A
Imports
N/A
N/A
N/A
N/A
N/A
*52,296.4
*53,334.8
*53,499.5
*53,574.9
*50,604.0 $Mill
NC
NC
NC
NC
NC $Mill
959,964.0
1,042,328.0
1,117,779.0
*1,240,000.0
Employment
Total Wages
Domestic Demand
World Merchant Fleet
*1,290,000.0 Thousand metric tons
CURRENT PRICES
Industry Revenue
2005
2006
2007
2008
*109,293.6
*124,514.1
*139,651.7
*158,324.1
*138,475.1 $Mill
2009
*53,991.1
*61,261.0
*68,429.3
*74,095.7
*60,513.6 $Mill
*28,626
*29,121
*29,328
*29,484
*28,815 Units
*10,592
*10,775
*10,881
*10,939
*10,690 Units
*1,550,148
*1,578,233
*1,602,192
*1,619,816
*1,555,024 Units
Exports
N/A
N/A
N/A
N/A
N/A
Imports
N/A
N/A
N/A
N/A
N/A
*47,421.8
*49,921.7
*51,423.5
*52,657.7
*50,604.0 $Mill
NC
NC
NC
NC
NC $Mill
959,964.0
1,042,328.0
1,117,779.0
*1,240,000.0
Employment
Total Wages
Domestic Demand
World Merchant Fleet
*1,290,000.0 Thousand metric tons
KEY STATISTICS
22 January 2010
REAL GROWTH
2005
2006
2007
2008
2009
Industry Revenue
*11.3
*10.4
*9.2
*10.9
*-14.0 %
*10.9
*9.9
*8.8
*5.9
*-19.7 %
*1.2
*1.7
*0.7
*0.5
*-2.3 %
*1.8
*1.7
*1.0
*0.5
*-2.3 %
Employment
*2.3
*1.8
*1.5
*1.1
*-4.0 %
Exports
N/A
N/A
N/A
N/A
N/A %
Imports
N/A
N/A
N/A
N/A
N/A %
Total Wages
*3.2
*2.0
*0.3
*0.1
*-5.5 %
Domestic Demand
NC
NC
NC
NC
NC %
2005
2006
2007
2008
N/A
N/A
N/A
N/A
RATIO TABLE
Imports share of domestic demand
Exports Share of Revenue
Average Revenue per Employee
Wages and Salaries Share of Revenue
2009
N/A %
N/A
N/A
N/A
N/A
N/A %
*0.08
*0.08
*0.09
*0.10
*0.09 $Mill
*43.39
*40.09
*36.82
*33.26
*36.54 %
GRAPHS
Revenue
Revenue Growth Rate
KEY STATISTICS
22 January 2010
Employment
Note: Unless specified, an asterisk (*) associated with a number in a table indicates an IBISWorld estimate and references to dollars are to US dollars.
SEGMENTATION
22 January 2010
Segmentation
PRODUCTS AND SERVICE SEGMENTATION
Product/Services
Share
Coastal Freight and Passenger Transport
9.6%
Inland Water Transport
6.6%
International Freight Transport
69.1%
International Passenger Transport
11.3%
Other
3.4%
The Shipping industry transports both goods and passengers, generally referred to as cargo. The world seaborne trade
was around 7.55 billion tons in 2006, rising to 7.7 billion tons in 2007. This growth ensures that it remains, by an
overwhelming margin, the largest carrier of freight in the world. The largest product segment within the industry is
international freight transport, occupying 69.8% of industry revenue. This segment refers to the transportation of goods by
sea between domestic and foreign ports. More than 90% of goods traded between countries are transported by sea. The
shipment of goods via the ocean is the cheapest mode of transport for cross border transportation and can accommodate
bulky commodities that are not supported by air transport. Over 70% of the world's merchant fleet (in terms of deadweight tons) are tankers and bulk carriers. Furthermore, the ability of shippers to adapt to demand changes through
various shipment offerings such as round-the-world tri-continental services and traditional end-to-end services provide
greater flexibility to customers. The competitors in this product segment are from the Air Freight and Couriers industry that
charge a premium for their services.
International Passenger transport accounts for 11.3% of industry revenue and are usually provided for by cruise ships.
Cruise ships are floating resorts that tend to offer round trips of three days or more. In contrast passenger/ferry vessels
tend to convey passengers on daily one-way trips between two or more points (refer to "other" segment). The cruise
segment has grown significantly over the current performance period supported by the increase in disposable income
from Asia Pacific and Middle Eastern countries. While the volume transported by this product segment is small compared
to freight, passengers are charged more due to the amenities and service offerings provided by cruise liners. This product
segment is expected to increase over the outlook period, particularly as disposable income increases following the
resolution of the global economic crisis.
The cruise market has contributed solidly to industry revenue despite geo-political concerns and high oil prices over the
current performance period. Industry body Cruise Lines International Association (CLIA) predicted that 13.5 million people
would take a cruise worldwide in 2009, an increase of 2.3% over 2008. This increase is lower than in previous years, but
the significance of any sort of increase in the 2009 climate must be noted. An estimated 13.2 million travelers cruised in
2008, up from 12.6 million in 2007. Around 12% of passengers originate from the UK, and around 80% from North
America. The strong interest in cruising was mainly attributed to higher disposable income globally and innovative facilities
and amenities, upgraded cuisine, increased value-for-money and the rise in the number of home ports for liners. Greater
SEGMENTATION
22 January 2010
interest from developing countries such as China to experience ocean based rather than land based vacation also fueled
revenue growth in this market. The 130,000 square meter Shanghai Port International Cruise Terminal, completed in
2008, provides a further boost to the cruise market in China over the medium term.
Coastal Freight and Passenger Transport refers to the operation of vessels for the transportation of passengers or freight
by sea between domestic ports, usually within 32 kilometers of shoreline. It also includes units mainly engaged in
chartering or leasing ships with crew, for any period, for use in coastal sea transport. Inland Water Transport on the other
hand, refers to the operation of vessels for the transportation of freight or passengers in harbors or inland waters.
IBISWorld believes that both these segments represent 16.2% of industry revenue. The demand for "short-sea shipping"
that is the movement of cargo and passengers by water between point situated within close proximity to one another is
slowly increasing. It is used to reduce the reliance on congested road transport and bottlenecks, improve utilization of
waterway capacity, promotion of sustainability in transport and the reduction of greenhouse gases. For instance, barge
shipping is prominent in US waterways to ease traffic congestions in highways.
The Other product segment refers to activities not specifically covered by the above, such as ferry, scenic and "other"
associated services (e.g. tugboat and piloting services). Revenue from this segment depends on Government's initiative
to promote environmentally friendly water transport (and ease road congestion) in the passenger market and the level of
shipping activity. Increased shipping activities will lead to greater support services.
Ships in world fleet, 2008
Units
Number
Units
% of world fleet
General Cargo ships
18982
37.6%
Bulk Carriers
6890
13.6%
Container ships
4170
8.3%
Tankers
12583
24.9%
Passenger ships
5957
11.8%
Other
1943
3.8%
Ship Type
Source: Clarksons Research
MAJOR MARKET SEGMENTS
Market Segment
Liquid Bulk
36.9%
Dry Bulk
36.0%
Containers
21.6%
Others including Passenger
Share
5.5%
SEGMENTATION
22 January 2010
The major market segments for this industry are based on the types of ships used to transport cargo. A ship is defined as
a large watercraft capable of offshore navigation. Ships come in many sizes and can be measured in terms of overall
length, length of the waterline, beam (breadth), depth (distance between the crown of the weather deck and the top of the
keelson), draft (distance between the highest waterline and the bottom of the ship) and tonnage. In the Shipping industry,
the composition of vessels is based on tonnage.
IBISWorld believes that both dry and liquid bulk vessels represent 72.9% of total revenue. In both these markets, vessels
are identified based on their carrying capacity. Bulk carriers come in a variety of sizes from small (less than 10,000 DWT),
Handysize (10,000-35,000 DWT), Handymax (35,000-65000 DWT), Panamax (65,000-80,000 DWT), Capesize (80,000200,000 DWT) and very large bulk carriers of over 200,000 DWT. Dry bulk vessels transport non-containerized cargo
such as coal and coke, grains, limestone and cement, and ores and scrap. These trades are affected by general
economic conditions. Liquid bulk cargo consists mainly of crude oil, petroleum products, liquid chemicals, liquefied gases,
vegetable oils, water and wine. There are also certain ships manufactured for both dry and liquid bulk known as combined
carriers. Greece, Japan, and China are the top three owners of bulk carriers with around half of the world's fleet. The crew
of a typical bulk carrier may consist of about 20 to 30 seafarers, however smaller ships can be serviced by around 8
personnel. Both the dry and liquid bulk markets are expected to encounter challenging times during the outlook period.
The containers market is estimated to account for 21.6% of total revenue. The majority of containerized cargo consists of
manufactured and semi-manufactured products. The capacity of container ships are measured in twenty-foot equivalent
units (TEUs), however the majority of containers currently in use are 40 feet. Ship sizes of container vessels have
continued to increase with the average capacity of ship growing from 2,235 TEUs in 2005 to 2,324 TEUs in 2006,
reflecting the need to commission larger ships to achieve economies of scale. Deep sea container ships of 3,000 TEUs
and above are generally responsible for serving East-West trade routes. These vessels are designated as Panamax or
Post-Panamax according to their ability to transit the Panama Canal. The biggest container ship is the Emma Maersk, a
Denmark flagged ship with a maximum TEU of 14,500. It is capable of carrying a cargo value of around $300 million.
Ships below 1,000 TEU in capacity are the "Feeder" container ships generally operated on an intra-regional basis, often
"feeding" cargo within a region from or to main port hubs served by main-lane trade routes. The largest share of the
charter owner container ship fleet is owned by German ship owners. In 2006, the world container fleet was 98% larger
than in 2000 and new ships are still being built at a fast rate. The size of the order book has been rising from 25% in mid2003 to 57% of the existing fleet in June 2007. It is estimated that global shipping capacity expanded by 13% in 2008
alone, amidst a climate of increasing financial strife.
The "Others" segment represent 5.5% of total revenue and includes passenger ships and barges. Passenger ships
include many classes of vessels designed to transport substantial numbers of passengers as well as freight. Passenger
ships include: (1) ferries, which are vessels for day or overnight short-sea trips moving passengers and in some cases,
vehicles; (2) ocean liners, which typically are passenger or passenger-cargo vessels transporting passengers and often
cargo on longer line voyages; and (3) cruise ships, which typically transport passengers on round-trips, in which the trip
itself and the attractions of the ship and ports visited are the principal draw. Civilian ships by convention are measured by
gross tonnage.
INDUSTRY CONCENTRATION
Industry concentration is medium
Industry concentration indicates the extent to which major players dominate the industry. IBISWorld determines industry
concentration by such measures as the proportion of industry revenue earned by the four largest industry players.
IBISWorld believes that the level of industry concentration in the Shipping industry is medium.
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SEGMENTATION
22 January 2010
IBISWorld estimates that the top four industry players will account for an estimated 48.3% of global industry revenue in
2009, a rise of around 2.0% on the 2006 figure. The global economic troubles that commenced in 2007 have not had a
major impact on industry concentration as of early 2010. IBISWorld believes that the medium level of concentration is
attributed to: (1) the number of players in this industry; and (2) the vast number of markets covered by the industry. It is
estimated that there are more than 10,000 shipping companies in the world, though most are small local operations. The
rise in shipping activities is the result of the interplay of macroeconomic, microeconomic and policy-oriented factors. World
trade is facilitated through the elimination of trade barriers and the liberalization and deregulation of markets. For
example, China's entry into the World Trade Organization saw transport and logistic requirements blossomed in the
country. However, beyond the top 10 companies in this industry that holds more than 60% of industry revenue, the market
is highly fragmented with a large number of small regional players or family owned operations, especially in the coastal
and inland water transport segments. The increase in mergers and acquisitions (M&A) has also pushed concentration
higher over the current performance period. Maersk acquisition of P&O Nedlloyd saw their market share in the container
market increase from 12% in 2000 to over 18% in 2006.
The Shipping industry covers a vast number of markets (refer to market segmentation) and therefore, makes it difficult for
a company to be a prominent player in all markets. Again, using Maersk as an example, the company was the largest
container ship operator at the beginning of 2007 but does not feature anywhere else within the top 10 players in the other
market segments. Another major player in the Shipping industry, Nippon Yusen Kabushiki Kaisha (NYK) was ranked third
in bulk transport and tenth in container transport.
A cargo operator's decision to sail to a destination is determined by the level of fixed costs to operate a particular route.
Fixed costs are expenses that need to be incurred prior to the delivery of a service and are independent of output. Firms
will only provide a service if there is a sufficient market. It can also act as a barrier to entry as incumbent firms that have
already incurred fixed costs and have large levels of output will be able to produce at a lower per unit cost. Other costs
such as port, stevedoring, warehouse leasing, and various ancillary services are also taken into consideration before a
network route is determined, in addition to the availability of port capacity. Partnerships and alliances such as the New
World Alliance are helping shipping companies share their costs and better utilize their assets.
IBISWorld believes that concentration will increase during the outlook period. Numerous companies will be driven to the
wall during lean times for the industry, leaving them ripe for acquisition. Higher levels of competition and bunker oil prices
will push margins lower in the industry, increasing the possibility of further M&A activities as companies seek to expand
their geographical reach and distribution networks by acquiring struggling firms.
Top 5 Operators by company, 2007
Units
Vessels
Bulk Transport
Units
Vessels
Maersk
505
COSCO
324
MSC
282
Mitsui O.S.K. Lines
145
CMA CGM
234
NYK Line
119
Evergreen
160
"K" Line
92
Hapag Lloyd
128
Zodiac Maritime Agency
62
Containerships
Source: Various industry sources
11
SEGMENTATION
22 January 2010
GEOGRAPHIC SPREAD
Year: 2009
Geographical Spread by Revenue
Region
Percentage
Europe
43.2
North Asia
26.5
South East Asia
9.2
North America
8.4
Africa & Middle East
6.8
India & Central Asia
2.7
South America
1.9
Oceania
1.3
By definition, the global shipping network covers the entire globe, but the highest volume and value routes are primarily in
Europe, North Asia and North America. The performance of this industry depends on the same broad factors that
determine economic performance such as GDP, and the level of trade and growth within industries that use ships as a
mode to transport cargo.
Some of the major waterways in the world are: the North Atlantic, between Europe and eastern North America; the
Mediterranean-Asian route via the Suez Canal; the Panama Canal route connecting Europe and the eastern American
coasts with the western American coasts and Asia; the South African route linking Europe and America with Africa; the
South American route from Europe and North America to South America; the North Pacific route linking western America
with Japan and China; and the South Pacific route from western America to Australia, New Zealand, Indonesia, and
southern Asia.
Europe
The Shipping industry in Europe represents an estimated 43.2% of total revenue. Based on data from the European
Commission, around 90% of European Union (EU) external trade and more than 40% of its internal trade is transported by
sea. It corresponds to over 3.5 billion tons of goods and 350 million passengers per year. It has a merchant fleet of more
than 900 ships with a capacity of around 7.5 million deadweight tons. Europe also roughly has 270 international sea ports
and 210 inland ports. Greece has the largest number of vessels and represents slightly more than 16% of the total ships
in terms of deadweight tonnage, while the fleets of countries of Central and Eastern Europe dropped marginally. In 2008,
European shipping controlled 40% of the global merchant fleet. The average age of EU ships was 9.7 years.
Short sea (coastal) shipping (SSS) is also prominent in Europe. The EU defines short sea shipping as the movement of
cargo and passengers by sea between ports situated in geographical Europe or between those ports and ports situated in
non European countries having a coastline on the enclosed seas bordering Europe. SSS represents around two thirds of
the entire EU-25 maritime transport of goods, and the EU has set up a program to support SSS in Europe. The Marco
Polo Programme is an EU run initiative to provide funding to projects that will result in an important transfer of freight off
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SEGMENTATION
22 January 2010
heavily congested roads to more environmentally-friendly modes of transport. In 2006, 16 projects were selected
amounting to $27.6 billion.
The EU also has a strong cruise market as they are the leaders in cruise ship construction and refurbishment, with orders
worth more than $22.3 billion up to 2010. It is also a major source of inbound tourism as over 2.8 million cruise
passengers embarked on their cruises from European ports in 2005.
In Russia (for reporting purposes, Europe includes Western and Eastern Europe and Russia), shipping companies in that
region are global players such as Sovkomflot, Novorossiisk Sea Shipping (Novoship) and Far East Shipping (FESCO).
The majority of players in Russia are involved in the tanker and general cargo market. This is partly attributed to their rich
energy and commodity resources. Its percentage share of world trade generated in terms of volume was 1.8% as of the
beginning of 2006.
Asia
The Asian region (for the purpose of this report includes North Asia, South East Asia and India & Central Asia) represents
38.4% of estimated industry revenue in 2009. Asia features strongly in the shipping industry due to its strong economic
growth, enormous consumer market and relatively cost competitive labor resources. Centres such as Hong Kong,
Singapore, Taiwan and Korea started this cycle with its strong manufacturing base (with the exception of Singapore),
followed by China and India. China alone imported over 1.3 billion barrels of oil in 2008, a figure which continues to rise.
By 2007, 11 of the world's 12 highest tonnage ports were located in Asia. It is worthwhile to note that the proportion of
commodity trade is a lot higher than service trade and the former accounts for the largest share of total trade volume. In
particular, the processing and manufacturing of goods have taken a high proportion and brought significant demands of
shipping in both import and export. It is also arguable that countries and/or regions with a strong shipbuilding base have
contributed significantly to the Shipping industry in those nations. As of the end of 2006, close to 80% of ships were built
in South Korea, Japan and China. Prior to the 1970s, Europe was the largest shipbuilding region in the world, and their
huge fleet of ships still makes them a prominent player in the industry.
One of the major factors for the high proportion of revenue in this region may be attributed to China. China is the world's
top consumer of iron and steel, copper products, tin material, platinum and iron ore. They are also the second largest
consumer of oil, aluminum and lead due to their strong manufacturing base. In Central Asia, the dominant countries in that
region are India and Turkey. Based on industry sources, India had a shipping fleet of over 600 vessels in 2006 with a
capacity of around 6.62 million tons Gross Registered Tonnage (GRT). About one third of the vessels are used for
international freight transport, with the remainder plying coastal and inland routes. The high proportion of vessels used for
short sea transport is mainly attributed to the smaller sized shipping companies in India and the vast coastline of 6,000 km
of navigable inland waterways of nearly 14,500 km. Unlike China, India focuses on the energy trade with tankers as well
as wet and dry bulk such as iron ore, coal, fertilizers and grain as their main market segment (as compared to
manufacturing that utilizes containers). India is also one of the few countries that promote fair and free competition from
obtaining cargo.
Turkey plays a small but important role in this industry as they are an up-and-coming nation in the Shipbuilding industry.
Turkey is in the top 10 shipbuilding nations worldwide and holds a strong position in small vessels. IBISWorld believes
that they will play an even bigger role in the Shipping industry, should they become part of the EU in the future.
North America
The North America region is represented by the US, Canada and Mexico. A study by the United Nations showed that the
Trans-Pacific trade between Asia and North America represented 20.3 million TEU in 2007. It was expected that this trade
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SEGMENTATION
22 January 2010
route would exhibit the strongest growth of 6.5% per annum among the three major East-West trades (namely, Asia-North
America, Asia-Europe, and North America-Europe) between 2002 and 2015. The reason for the expected robust growth in
shipping activity in this region is similar to Europe. Many companies in the manufacturing sector in the US and Canada
are outsourcing their production process to developing Asia such as China and Vietnam. It is also worthwhile to note that
there is an imbalance of trade on this route. For example, in 2007, container flows from Asia to North America totaled 15.4
million TEU as compared to 4.9 million TEU in the opposite westbound direction. This is likely to continue in the outlook
period especially when China has a strong trade surplus with the US, and North American economic problems are
ongoing.
Growth in North American cruise passengers is expected to grow at a rate of 4.25% per year between 2005 and 2020. An
industry source revealed that up to 30 brand new vessels will enter service between 2007 and the end of 2010. The
Cruise Lines International Association reported that their member lines carried 10.18 million North Americans in 2006, up
from 9.67 million in 2005. Passenger numbers increased to approximately 10.6 million by the end of 2007.
Africa and Middle East
The Middle East, and to a lesser extent Africa, has grown in importance as an east-west hub in the Shipping industry. The
Middle East's position as an important trading region has been boosted by the region's continuing infrastructural
development and diversification into non-oil products and services, such as technology. While expanding, many industry
experts believe that it will face challenges in overcoming bureaucratic and regulatory obstacles and in the provision of
expertise in supply chain management and cargo security. One of the world's largest port operators (DP World) is based
in the United Arab Emirates, and the company's home port has recorded a sharp rise in shipping traffic over the past
decade.
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MARKET CHARACTERISTICS
22 January 2010
Market Characteristics
MARKET SIZE
The global shipping industry is now at a major crossroads, where years of rapid growth appear to be at an end, and the
future is uncertain. The global economic crisis has made credit hard to obtain, damaged business and consumer
confidence, and reduced freight volumes on key routes. The charter price of ships worldwide fell by astonishing amounts
between May and December 2008.
Total real revenue in the Shipping Logistics industry is estimated to increase from $108.26 billion in 2004 to $138.48
billion by end 2009. This represents a 5.0% increase on an annualized basis, indicating that it has been a good period for
the industry overall, despite the alarming change of fortunes between 2008 and 2009. During this period, major
companies placed ambitious orders for new ships as they struggled to build their capacity to meet demand. Now that the
demand has fallen away, shipping lines are cutting routes, cutting staff, and contemplating pulling some of their fleet out
of the water in order to remain viable businesses during the downturn.
Strong global demand for commodities, particularly between 2006 and early 2008, has been a key driver of shipping
activities worldwide. Commodity prices endured significant price falls in 2008, but the ongoing medium term demand for
resources in developing countries looks to be a ray of hope for the shipping industry. The fall in commodity prices has also
meant a fall in fuel costs for ships, which has been a welcome occurrence due to the profit squeeze that had been caused
by fuel costs in recent years. IBISWorld estimates that industry revenue will decline by 14% in 2009, bitten both by falling
volumes and weak charter rates.
IBISWorld estimates that there will be 28,815 establishments and 10,690 enterprises in the industry by the end of 2009.
Establishments are anticipated to increase by 0.4% over the current performance period. The average revenue per
establishment is estimated at $4.8 million. Establishment numbers in the past five years have been fueled by new
participants especially in developing regions such as Asia and the Middle East, partially offset by a slowdown in
establishment growth in North America and Western Europe. IBISWorld estimates that establishment numbers will fall by
2.3% in 2009, as an industry shakeout gains pace.
Total employment is estimated to reach 1.6 million people at a cost of $50.6 billion by the end of 2009. The industry
portrays moderate labor expenses with wages accounting for 36.5% of revenue. The average industry wage is about
$32,540, reflecting the moderate level of skills required by this industry. Wages are higher in developed and unionized
countries as compared to emerging countries. The majority of seafarers are from China, followed by the Philippines.
IBISWorld projects that employment and wages will decrease by 4.0% and 5.5% respectively in 2009.
As at January 2008, the world trading fleet was made up of 50,525 ships, with a combined tonnage of 728,225,000 gross
tones. These figures have been increasing over the current performance period. The merchant fleet experienced further
increases in 2008 and 2009 due to orders previously under construction by Shipbuilders around the world (refer to report
C2541 - Global Civil Ship and Boat Building for further details), and is set to rise again in 2010.
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LINKAGES
Demand Linkages
B-GL - Global Mining
The mining sector is a major user of water transportation services to transport cargo around the world.
C-GL - Global Manufacturing
Shipping providers transport a variety of manufactured goods such as clothing, apparels and accessories, computers and
in-process goods around the world.
F4311-GL - Global Wholesale Trade
Wholesalers use sea freight logistics (especially bulky products) to transport goods into the country.
I5121-GL - Global Internet Service Providers
Various online softwares are available to assist importers/exporters to schedule, book and track shipments.
Supply Linkages
C2541-GL - Global Civil Ship and Boat Building
The Shipbuilding industry manufactures barges, cargo ships, container ships, ferryboats, fireboats, fishing boats,
passenger ships, patrol boats and tankers for the logistics Shipping industry.
H4913-GL - Global Marine Port Operation
The industry provides wharves and docking facilities for ships to interface with land based transport.
DEMAND DETERMINANTS
The demand for shipping activities is determined by several economic and political factors; economic growth is a major
influencer but movement of cargo is also facilitated by trade treaties, economic environment, fiscal policies, tariff
regulations and political understanding. It is a cyclical industry and to a certain extent depends on trade cycles. Heavy and
low value commodities are exported and imported in bulk vessels, whereas lighter and high value commodities are
exported and imported on container ships. Generally, the factors influencing demand for the Shipping industry include:
Real GDP growth and Disposable income: An increase in economic activity and disposable income will lead to greater
demand for goods and logistic services. Strong real GDP growth has led to an increase in merchandise trade whereas
growth in disposable income has increased leisure activities such as cruising. Passenger shipping is represented by
cruise operations and its demand is determined by demographic and income factors.
Demand for bulk shipping fluctuates according to demand for commodities (i.e., shipping is a derived demand). For
instance, improved US-China trade relations brought about the export of wheat which in turn led to increased demand for
bulk shipping services between these two countries. In addition, the production of steel in China has generated coal and
iron ore movements into China, partly due to their entry into the World Trade Organization (WTO).
Movements in freight rates can influence shipping line choice and national flagged shipping face strong competition in this
regard from flag of convenience (e.g. Bahamas and Bermuda) ships.
Exogenous Shocks - fuel: The increase in fuel prices will have a positive effect on demand as water transport is the
cheapest form of cross border transportation against other modes. In addition, the level of crude oil production determines
domestic deep-sea crude oil movements.
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22 January 2010
Price of commodities: Demand for commodities is linked to price. For example, the price of coal had been increasing
since 2001 which also saw the Baltic Dry Index, an overall measure of commodity shipping costs on different routes and
ship sizes, advancing. The increase in price also saw world seaborne trade in coal rise from around 2,500 billion ton-miles
in 2001 to 3,140 ton-miles in 2005. By late 2008, this had all changed, with the Baltic Dry index plunging 79% in the space
of one month, and global commodities prices trending downwards.
Routes and destinations offered by operators: The higher number of routes and destinations offered by shipping providers
will likely increase demand. Around 90% of international trade is transported by sea and is largely due to a shipper's
ability to cover more than one geographical area at any given time.
Seasonal Factors: Depending on the region, seasonal and weather conditions can affect the demand for shipping. For
example, in Asia, the monsoon season, which occurs from October to March can slow down the voyage of vessels and
impedes chartering operations.
DOMESTIC AND INTERNATIONAL MARKETS

Domestic and International Markets Trade
Trade in this industry is high
The trade trend is steady
Domestic and International Markets Analysis
IBISWorld measures the level of international trade in this industry based on the international routes and the level of traffic
(in terms of tonnage) operated by shipping transport operators. With billions of tons of cargo being transported across
borders each year by companies with global reach, there is no doubt that shipping is a highly internationalized industry.
That said, calculating an exact figure for trade is difficult due to a number of reasons. Many ships on international routes
carry cargo intended for domestic destinations along the way, and a similar thing can be said for international multi-leg
passenger cruises that offer packages for transit between two points within the same country.
Global demand for shipping has increased over the majority of the last five years. Many operators have catered for this
increase by adding more vessels into their fleet and forming partnerships (e.g. the Grand Alliance) to ensure high
utilization and coverage of vessels. For example, strong global demand for crude oil resulted in ton-miles for this
commodity rising by 4.2% in 2005. This indicates that crude oil supplies were moving longer distances in larger volumes.
Crude oil from the Barents, Baltic and Black Seas are increasingly being sourced from Europe and North America and
from West Africa to Asia. A similar trend was also seen in the dry cargoes segment where ton-miles rose by 5.7%, while
tonnage transported increased by 3.5%. This may be attributed to many of the manufacturing and production facilities
relocated from Western nations to Asia.
The World Trade Organization (WTO) reported that world merchandise trade grew by 6.0% in 2007, down from 8.5% in
2006, which was the second highest since 2000 due to strong global real GDP growth. Weakening demand in developed
countries, realignments in exchange rates and fluctuations in the prices for commodities (such as oil and gas) introduced
uncertainties into the global markets in 2007, were cited as factors responsible for the fall. These growth figures can also
be partly attributed to productivity and prosperity gains made by some of the larger developing countries. Merchandise
trade by dollar value increased 15% to $11.76 trillion in 2006. Commercial services exports were up by an estimated 11%
and reached $2.71 trillion in 2006. On the other hand, world seaborne trade amounted to 8.02 billion tons in 2007, up from
7.76 billion tons in 2006.
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22 January 2010
The share of developed market economy countries in goods loaded and unloaded in 2005 were 33.3% and 53.1% of the
world total respectively. For these countries, crude oil and petroleum products accounted for 5.2% and 21.5% of the total
world exports, while imports accounted 66.9% for crude oil and 50.5% for petroleum products. Among the market
economies, Europe was the most important exporter of crude oil and petroleum products, with a total of 105.3 million tons
(4.3% of the world total). The largest importer of crude oil and petroleum products was North America with 681.9 million
tons (28.1%), followed by Europe with 542.9 million tons (22.4%), and Japan with 247.5 million tons (10.2%).
The dry bulk segment has the largest share of industry tonnage in terms of dead-weight tons. The share of global
shipments of developed market economy countries was 54% of exports and 55.6% of imports. Europe was the largest dry
cargo market for exports and imports with 1.07 billion tons or (22.7% of world exports) and 1.51 billion (32.2% of world
imports) respectively. The US, Canada, Australia and New Zealand were also large exporters of dry shipments. This is
largely attributed to the rich resources inherited by these countries: iron ore, coal and grain.
In terms of developing countries, the share of seaborne exports was 49%, while imports were 30.4%. It has been
relatively stable but the share of products differs markedly. The combined share of petroleum products and crude oil
exports by developing countries represented 67.6% and 86.5% respectively. In terms of imports, the shares of crude oil
and petroleum products were 26.3% and 42.4% in 2005. The variations between developed and developing countries in
the crude oil and petroleum product segments reflect the Gross Domestic Product of these regions. In the dry bulk sector,
developing countries' share of both exports and imports were 32% and 30.5% respectively.
Leading exporters and importers in world merchandise trade, 2007 (Top 5)
Exporters
Billion Dollars
Value
Percentage
Share
Importers
Billion Dollars
Value
Germany
1326.4
9.5
USA
2020.4
China
1217.8
8.7
Germany
1058.6
USA
1162.5
8.3
China
956
Japan
712.8
5.1
Japan
621.1
France
553.4
4.0
UK
619.6
Total
4972.9
100
Total
5275.7
Source: World Trade Organization
World Seaborne Trade 2004-2007

Billion
Metric Tons
Billion
2004
6.76
N/C
2005
7.11
5.2%
2006
7.65
7.6%
2007
8.02
4.8%
Source: United Nations COMTRADE database
BASIS OF COMPETITION
Industry competition is high
Industry competition is increasing
The global Shipping industry has a high level of competition, with the level on the increase due to over-supply and weak
demand as a result of both a cyclical downturn in the industry, and the global economic crisis. The industry does exhibit
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high initial investment costs, operating and berthing costs that can fluctuate according to both capacity and demand.
However, there are no extra costs borne by new entrants that are not borne by incumbents.
Internal Competition
Internal competition in the global Shipping industry stems from both conference and non-conference operators.
Internationally, a conference is a particular type of agreement being: a route-specific agreement between carriers to
charge common freight-rates, pool revenue and costs, pool profits, and engage in capacity management. Conferences
also set out the schedule of sailing, ports of call and other minimum service levels. A conference is conventionally defined
as an unincorporated association of two or more ocean carriers carrying on two or more businesses each of which
includes, or is proposed to include, the provision of liner cargo shipping services. Notwithstanding the obvious competition
between the conference and non-conference operators, it is not uncommon for conference members to compete with
each other on providing better service levels in an attempt to introduce product differentiation on a small scale. The EU
ruling in October 2008 to ban conferences operating out of its ports was designed to increase competition in the future,
though it remains legal for conferences to operate in many parts of the world.
Conferences also compete with "Tramp" shipping. Tramp ships are generally not controlled by a specific route with a
single commodity. Large oil tankers that are built for time charters for specific origin-destination markets are the exception.
The basic tramp vessel might haul coal, grain, fertilizer, and timber in the same year. Adaptability is necessary to minimize
lost revenue possibilities that will arise. These vessels might not always be of low-cost, optimal design for any of the
movements, but that is a basic trade-off to being flexible. A major consideration of tramp owners is the nation in which the
ship is registered. The nation of registry requires the shipowner to comply with specific manning, safety, and tax
provisions. Liberia, Greece, and Panama are nations imposing relatively loose requirements in such areas. For this
reason, many of the world ships are registered in these countries.
Specific factors that influence competition in this industry are:
Price (Freight charges): Shipping companies compete on the freight rates charged. Freight rates are usually negotiated
between shippers and shipping operators. Rates are based on the type of cargo transported and the weight/volume of the
cargo. Generally, as volume increases, rates tend to fall. The excess capacity that shipping lines are predicted to have
from 2009 onwards will also serve to drive prices down and increase competition.
Price of Charter: The majority of operators lease and own their vessels. Operators that can rent vessels at a lower price
will enable them to be more competitive in the industry.
Geographical Coverage: Larger freight companies that have a bigger fleet and brand recognition will be able to gain a
higher market share as they can offer their services at a lower cost or even charge a premium for services to areas which
are not provided by other carriers. Furthermore, the more routes and destinations offered by shipping companies, the
more likely shippers will seek their service as better freight and charter rates can be negotiated.
Quality of Service: Shippers that provide reliable service and good reputation can have a competitive advantage in this
industry. This is especially true when there is excess capacity in the industry and rate cutting is common.
Technology: The use of the Internet to reach the customer has also been a successful competitive strategy deployed by
most operators. The internet is used for bookings and payments as well as cargo tracking services, which reduces costs
for both the supplier and consumer.
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Partnerships and Alliances: International alliances between domestic and foreign shippers, such as marketing and
capacity sharing arrangements, have significantly increased competition in international markets. Through code sharing
arrangements, foreign providers can obtain access to destinations in which they would otherwise not be able to access.
Competition is higher in the international shipping segment as compared to coastal and inland water transport. Coastal
and inland water trades in some countries such as the US and Australia is protected. This is to ensure that local players
can have a 'fair go' in this industry.
External Competition
The industry is also affected by substitutes such as road, rail and air transportation. Domestic water carriers compete for
traffic with other modes and to a limited degree with other water carriers. The major competition is from rail services and
pipelines. Rail and road competition is for dry-bulk traffic while pipeline competition is directed at the movement of bulk
liquids. Air freight competed on the grounds of having a superior level of service that is often preferred by customers who
are moving small volume, time-sensitive and valuable freight. Just-in-time production and inventory management policies
have added impetus to the demand for air freight, though the sharp rise in oil prices between 2005 and mid 2008 hit this
fuel-intensive mode of transport quite hard.
LIFE CYCLE
Life Cycle Stage
This industry is in the decline stage of its life cycle
Life Cycle Reasons
Industry revenue and value added has been growing at or above real GDP growth during the current performance
period, though this is set to cease from 2009
Mergers and acquisitions feature prominently in this industry as firms compete for market share
The number of establishments in the industry has only increased marginally over the past five years, and expected to
undergo a shakeout from 2009
Technology improvements on ships have been moderate and the classification of ships has not changed materially.
Product offerings are clearly segmented in this industry
Life Cycle Analysis
IBISWorld believes that the global Shipping industry is in the decline phase of its economic life cycle. Over the past five
years, value added growth has been above real US GDP growth on an annualized basis. The industry is determined by
the demand for water transport which picked up since the economic downturn in 2002, remaining robust for a number of
years following. The bubble finally burst in mid 2008, with shipping prices plunging at alarming rates, profits being
squeezed, and a number of operators being forces from the industry due to dwindling revenue and fierce competition. At
this point, the industry switched into a decline that may well take a number of years to play itself out.
Mergers and acquisitions are prominent in this industry. Major players have further expanded their market share in this
industry, an example being Maersk with the acquisition of P&O Nedlloyd in 2005. Joint ventures in this industry are also
prominent for companies to expand their geographical reach and share the costs associated with shipping. Many of the
alliances were only formed recently (in the last decade) as companies look at ways to improve operations in a relatively
competitive environment.
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Many governments support their local shipbuilding industries, especially in developing countries (as witnessed by Korea in
the 1960s and China in the 1990s) as it promotes employment. When demand for maritime transport increases, nations
will favor their own flagged vessels rather than a foreign flagged vessel to transport goods. Europe and Asia have been
the largest shipbuilding nations over the past fifty years and feature prominently in the list of the top 10 shipping lines in
the world.
Establishment numbers are expected to grow by a mere 0.4% over the current performance period. While demand for
shipping services increased during most of the current performance period, the level of globalization in this industry was
moderate, with many domestic operators competing with foreign firms. There has been a slowdown in new technology
and systems in this industry. While ships are more sophisticated, ship operations remain relatively unchanged. Over the
last five years there have been new trade routes opened and capacity and service quality has changed according to
derived demand. For example, increase trade with China has led to greater investments into US ports in the Far West to
ease congestion.
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INDUSTRY CONDITIONS
22 January 2010
Industry Conditions
BARRIERS TO ENTRY
Barriers to entry in this industry are medium
These barriers are increasing
The high start-up costs of equipment (vessels) are a formidable barrier to entry for the global shipping industry, although
depending on the trade or market that the new entrant wishes to enter, second-hand equipment may be adequate. The
price of a new oceangoing vessel costs anywhere between $120 million and $400 million, with fast increases in price over
2008-2009. Ships are also becoming bigger and more technologically advanced. In 1990, the largest container ship was
at around 4,500 TEUs; however in 2007 it reached 14,500 TEUs. Significant capital investments are not only required for
vessels, but also the technology, equipment and support services that goes with shipping. However, there are no extra
costs borne by new entrants that are not borne by incumbents when the company is up and running.
While labor in this industry is moderate compared to many other industries, the number of qualified seafarers and marine
personnel have been declining especially in developed nations such as Europe. It may be difficult for start-ups to obtain
qualified maritime personnel and may need to invest further by providing additional training to new recruits. Increasing
regulations pertaining to environment protection may also constitute a barrier to entry.
Many major cargo carriers are relying on long term contracts to increase revenue and market share in this industry. The
majority of routes are determined by demand and supply factors which is usually volatile. Many network routes are
established or suspended because of demand, therefore having a strong reputation with freight forwarders, ground
logistics companies and custom service is essential for participants in this industry. The increasing demand for express
door-to-door integrated service (Couriers) is also slowly gaining market share from this industry further increasing the
level of competition and hence barriers to this industry.
The opportunity for a new entrant to join a Conference would be based on the service levels that the operator wishes to
offer, and whether they are comparable to the standards set by other operators in the Conference. Membership of the
Conference system offers considerable advantages in terms of stability of rates. If the entrant wishes to enter the tramp
market, it would need long term contracts if it is to survive. In this market, it will also have to compete with strong
competition from lines with flags of convenience.
IBISWorld believes that margins in the Shipping industry are declining, with strong price pressure set to occur in coming
years. While revenue had been increasing strongly due to high demand for shipping services until mid 2008, the over
supply of ships and volatile bunker fuel prices have been affecting profits in this industry. While many major and existing
players should be able to accommodate this working environment, new players may find it difficult to get the returns
necessary to survive in the current life cycle stage of the industry in 2009 and 2010.
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INDUSTRY CONDITIONS
22 January 2010
TAXATION
Being a global industry, the operations of shipping logistics companies are taxed through hundreds of different local
taxation regimes. Generally, industry taxation regimes in each region/country don't differ markedly from those in the
broader economy, though some issues are of greater relevance to this industry, such as fuel and security.
Taxes that typically make up significant proportions of industry operators' tax bills include fuel tax, payroll tax, property
tax, excise tax; and income tax.
INDUSTRY ASSISTANCE
The level of Industry Assistance is low
The trend of Industry Assistance is steady
There are no specific tariffs for this industry

This industry is not directly affected by tariffs. However, the reduction in general tariffs on goods carried by water will
facilitate international trade and therefore influence demand for international shipping. Industry assistance over the past
few decades have been provided through the liberalization of the shipping market and international trade.
Cabotage Law
Many countries enforce cabotage laws. The broad purposes cited by all countries for cabotage laws are to assure reliable
domestic shipping services and the existence of maritime capability that is completely subject to national control in times
of war and national emergency. Cabotage laws such as the Jones Act in the US do not provide a direct subsidy to
domestic water carriers, but they do provide a monopoly for US coastal and intercoastal carriers. When implemented in
the correct manner, these laws provide safe, reliable and cost effective transportation options to shippers. Critics of such
schemes cite the lack of incentive to operate in an innovative and efficient manner.
REGULATION AND DEREGULATION

The level of Regulation is medium
The trend of Regulation is steady
The Shipping Logistic industry is moderately regulated. Standards and regulations are set by both national government
authorities and industry associations. The majority of government regulations is enforced by the nation's Department of
Transport and is similar in each country. On a global scale, regulations and benchmarks are set by the International
Maritime Organization (IMO).
International Maritime Organization
Regulation in the Shipping industry is governed by the International Maritime Organization (IMO). Adopted in Geneva in
1948, IMO's main task has been to develop and maintain a comprehensive regulatory framework for shipping and its
concerns today include safety, environmental concerns, legal matters, technical co-operation, maritime security and the
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INDUSTRY CONDITIONS
22 January 2010
efficiency of shipping. Some examples of proposals made by the IMO include "Goal-Based Standards (GBS)", which
aimed to strengthen safety management at sea, and protocols to prevent air pollution arising from ships' exhausts.
IMO's specialized committees and sub-committees are the focus for the technical work to update existing legislation or
develop and adopt new regulations. Some of the measures undertaken by IMO include: (1) prevention of accidents,
including standards for ship design, construction, equipment, operation and manning - key treaties include SOLAS, the
MARPOL convention for the prevention of pollution by ships and the STCW convention on standards of training for
seafarers; (2) rules concerning distress and safety communications, the International Convention on Search and Rescue
and the International Convention on Oil Pollution Preparedness, Response and Co-operation; and (3) conventions which
establish compensation and liability regimes - including the International Convention on Civil Liability for Oil Pollution
Damage, the convention establishing the International Fund for Compensation for Oil Pollution Damage and the Athens
Convention covering liability and compensation for passengers at sea. The inspection and monitoring of the above
requirements are the responsibility of member states but the IMO has an extensive technical co-operation program for
undeveloped and developing countries.
Firm operations are also subject to and affected by a variety of federal, state, local and foreign environmental laws and
regulations relating to the discharge, treatment, storage, disposal, investigation and remediation of certain materials,
substances and wastes. Some of the initiatives and on-going projects by the IMO include: (1) the International Convention
for the Safety of Life at Sea the International Convention on Standards of Training; (2) Certification and Watchkeeping for
Seafarers (STCW) which establishes basic requirements on training, certification and watch-keeping for seafarers; and (3)
to the Convention on the Prevention of Maritime Pollution (MARPOL 73/78), which required double hulls on all tankers.
These initiatives were prompted by representatives of the US. The following analysis will therefore concentrate on
industrialized nations (US and Europe) that are the heaviest regulated in the world.
United States
The Oil Pollution Act of 1990 (OPA-99) mandates that single-hull tankers serving U.S. ports be phased out in stages,
based on age and size, beginning in 1995. IMO regulations for tankers serving foreign ports require that new tankers
delivered after July 6th 1996 have doubled hulls and that 25 year-old single-hull tankers be retro-fitted with double hulls
beginning in 1995. At the end of 1998, Clarkson's Tanker Register (a comprehensive registry of seagoing tankers)
reported that only 26% of the world's tankers were equipped with double hulls.
The U.S. Coast Guard's Office of Response is responsible in administering Oil or Hazardous Material Pollution Prevention
Regulations for Vessels. Response plans are required by law for each vessel owner or operator of hazardous shipments.
In terms of safety the IMO Safety of Life at Sea (SOLAS) conventions requires that all ships of at least 500 gross
registered tons meet International Safety Management (ISM) mandated safe-management standards. Passenger ships,
tankers, bulk carriers, and high speed cargo ships had to be ISM certified by July 1, 1998. Other cargo ships had to be
ISM certified by July 1, 2002. Vessels that did not have ISM certification were denied access to U.S. ports. So far, ISM
certification has not restricted the shipping capacity available for the deep-sea trade. The Jones Act (Section 27 of the
Merchant Marine Act of 1920) precludes foreign owned, foreign built and foreign flagged vessels from participating in the
U.S. domestic trade.
From March 2004, the Bureau of Customs and Border Protection (CBP) has enforced a rule requiring ocean carriers to
electronically submit the names of the "actual shipper" of containerized cargo destined for the United States. As part of its
implementation of the Trade Act of 2002 and the Maritime Transportation Security Act, CBP issued a rule requiring
carriers to provide the names of all foreign shippers of inbound containerized cargo 24 hours prior to the vessel's
departure from the port of loading. Parties affected by this ruling such as the World Shipping Council, the National
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INDUSTRY CONDITIONS
22 January 2010
Industrial Transportation League, the National Customs Broker and Forwarders Association of America, and the Retail
Industry Leaders Association asked the government to revise the text of that rule. The groups objected to provisions
requiring ocean carriers to obtain and provide the names, in some cases, of their "customers' customers", who can be
foreign vendors and suppliers that do business with ocean consolidators (known as NVOCCs) and are not directly
involved in a commercial relationship with the carrier. Shipowners are also required to keep their ships sea-worthy and
certificates are issued after periodical inspections during ship surveys. As of January 1, 2007, vessels that operate on the
navigable waters of the US must be equipped with and operate electronic charts.
Europe
Regulations relating to shipping or maritime matters in Europe are part of the body of law and treaty developed by the
European Community. On December 1986, the Council of Ministers adopted four Regulations which lay the foundations
for most of EC shipping law such as liner conferences, the environment and pilotage. Since then, the commission has set
up a maritime policy function with the task of analyzing maritime affairs and the policies affecting them, coordinating
between sectoral policies and piloting the development of cross-cutting policy tools.
In October 2008, the EU ended the anti-trust immunity that allowed shipping lines to organize themselves into
conferences. From that date, the EU stopped allowing the issuance of certificates in respect of the vessel belonging to a
"conference line". European shipping conferences involved shipping lines applying joint tariffs for transporting containers
to and from the European Union. The conferences tended to make agreements on tariffs, capacity, etc for a certain trade
to reduce volatility and price competition. The carriers must now publish their own freight charges and the various
surcharges (for terminal costs, fluctuations in fuel and exchange rates, congestion in ports).
Others
The International Labour Organization is a specialized agency of the United Nations that is devoted to advancing
opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and
human dignity. Founded in 1919, it seeks to promote employment creation, strengthen fundamental principles and rights
at work. The ILO hosts the International Labour Conference in Geneva every year in June. At the Conference,
Conventions and Recommendations are crafted and adopted by majority decision. The Conference also makes decisions
on the ILO's general policy, work program and budget. The organization plays a huge role in the lives of seafarers by
ensuring their fair treatment and safety.
Environmental concerns are major issues in this industry. The reduction of air emissions from ships has become a major
focus of regulatory attention in the Shipping industry. In relation to air emissions, the EU was looking to the discussions in
IMO on the revision of MARPOL to come forward with measures to reduce air emissions by the end of 2008. The industry
is also committed to reducing carbon emissions. The IMO in conjunction with various Federal Governments are taking
action to reduce its CO2 emissions such as CO2 indexing, emission trading and differentiated harbor dues.
COST STRUCTURE
Year: 2009
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INDUSTRY CONDITIONS
22 January 2010
Item
Cost %
Wages
36.5%*
Purchases
32.2%*
Depreciation
6.5%*
Rent
4.3%*
Utilities
1.5%*
Other
16.8%*
Profit
2.2%*
IBISWorld believes that the cost structure of companies in this industry varies depending on the size of the company; the
services offered by the company, the value of contracts gained, capacity utilization, geographical spread of customers;
and the level of prices charged for products.
In general, labor costs makes up the single largest proportion of an entity's expenses at 36.5% of revenue, indicating that
the industry is labor intensive. Larger firms tend to have higher costs because they have broader service lines, cover a
wider geographical area and in more industrialized nations, are likely to be unionized. For larger companies, effective
route and schedule management and sourcing seafarers from cheaper overseas countries can lead to efficient
management of labor expenses. For vessel-owner operators, labor costs are more difficult to control and owners can
generally only increase revenue (and reduce the proportion of labor expenses to revenue), by working longer hours and
operating services at higher fees. Labor costs as a proportion of revenue have increased from 2008, as revenue has
fallen by a larger percentage than what has been saved through staff cuts.
A major expense in this industry is purchases which include the acquisition of vessels, materials, equipment and bunker
fuel. Because these costs are relatively large, this industry is vulnerable to fluctuations in the prices of materials and
supplies. Purchases account for around 32.2% of industry revenue. Bunker fuel is one of the most significant expenses for
a shipping company (within the "purchases" segment), often accounting for around 20% to 30% of all operating expenses
for firms in this industry. The expenditure on fuel that companies were forced to make during 2007 and 2008 fluctuated
wildly, but from late 2008 has settled at a more moderate level. Fuel prices and availability are subject to wide price
fluctuations based on geo-political issues and global supply and demand over which no one company (or country) has
control. Between 2005 and 2006 alone, bunker prices rose by an average 26%. Many smaller companies lack the
financial resources and expertise to buy fuel in bulk, enter into forward purchase contracts for fuel (whereby they agree to
take delivery of a set amount of fuel, at a fixed price, on a future specified date) and lack the negotiating power to
incorporate fuel cost adjustments or escalation provisions into long-term contracts.
The price of new ships has been another main upward driver of shipping costs in recent times. Shipbuilding costs in 2006
were about 25% higher than in 2005, and these prices soared even further until the economic crisis of 2008. While the
price for commissioning a newly built ship is much lower in 2009, many shipping companies are locked into very
expensive contracts that were signed in 2007 and 2008, and paying in installments into 2009. During the current
performance period, ships became bigger and more expensive as firms sought to expand their fleet size to exploit
economies of scale. All tanker vessels are expected to be double-hulled by 2010, and shipping companies have been
putting in strong orders for vessels during most of the current performance period to meet this regulatory requirement.
26
INDUSTRY CONDITIONS
22 January 2010
Other expenses include insurance, advertising, cleaning costs, repairs and maintenance of vessels, which account for
around 16.8% of industry revenue. Costs for storage during repairs (such as dry dock) can be prohibitive. As firms attempt
to gain an advantage in the market, advertising and promotion costs increase; because industry competition is fierce,
operators must constantly update their advertisements. Since the terrorist attack of September 11, 2001 on the US and
the subsequent war against terrorism, costs relating to insurance and security of cargo have increased. The major players
have passed this cost increases to their clients in the form of surcharges. Another driver of insurance premiums in 2008
and 2009 has been the increased incidence of piracy off the coast of Somalia. Finally, average returns within the industry
have fallen to around 2.2%, with numerous carriers expected to record a substantial loss in 2009.
CAPITAL AND LABOR INTENSITY

The level of Capital Intensity is medium
The cost of buying and/or leasing vessels and other equipment is high. In addition, once purchased, labor input is
required
Capital costs are less significant in ship management segment
The handling of cargo requires less labor as compared to passengers due to the technological advancement in the
tracking and handling of goods
Technological advancements have reduced labor input
The industry is moderately labor intensive with wages accounting for 36.5% of revenue, with a typical firm in the industry
using approximately 5.6 units of labor for each unit of capital. This means that for every dollar invested into plant and
equipment, approximately $5.60 is spent on labor. The average industry wage is moderate at around $32,500 per person,
per year, reflecting the skilled nature of maritime work; however, many industry positions are as low skilled deck hands or
hospitality workers, and a large proportion of positions are part time in nature. The industry portrays a medium level of
capital intensity owing to the high costs involved in ship acquisition, offset by the less capital intensive segment of ship
management. The cost of new builds, depending on the type and size, can vary between $120 million and $400 million. It
is also worthwhile to note that in most cases, ship management services providers do not actually own the vessel that
they are operating.
Water carriers are not highly labor intensive in terms of their movement operations but may require more labor in terminal
areas for certain types of freight. Labor costs have not moved higher over the last five years as there is a large pool of
seafaring labor readily available from developing countries. In addition, technological advancement in ship operations has
allowed multi-skilling to take place and therefore has reduced labor input but increased the skill level required by laborers.
In addition, ships are becoming more sophisticated with high value vessels such as Liquefied Natural Gas (LNG) and
Liquefied Petroleum Gas (LPG) vessels having the best safety record with the best crews and officers. However, labor
requirements are much higher in cruise ships as compared to other carriers due to the amenities and service offerings
provided by cruise liners to their passengers.
It is however important to note that while vessels are becoming more sophisticated and modern seafarers are required to
do multiple tasks, wages accorded to seafarers are still considered low. Prior to the beginning of 2007, the minimum
salary for a seafarer was $500 per month. This was increased to $515 per month by the International Labour Organization
(ILO) effective January 1, 2007.
Over the longer term, capital investment within the industry is likely to increase as competition becomes more intense and
there is a greater demand for high quality, safe and environmentally sound travel options. Sightseeing firms will be able to
27
INDUSTRY CONDITIONS
22 January 2010
gain an advantage in the market by increasing investment in technologically advanced vessels with on-board
communications and entertainment equipment (cruise liners) and improved route and schedule planning programs.
TECHNOLOGY AND SYSTEMS

The level of Technology Change is medium
Technology is focused on maintaining a competitive cost structure by controlling acquisition and operating expenses, and
investing in global standardization, information technology infrastructure and product development.
One of the major technological developments associated with liner shipping has been the design of the ships themselves.
Ships with more fuel-efficient engines and shallow draughts have helped the industry to be more competitive through cost
savings. Vessels today are also becoming much larger. The demand for ultra-sized container ships (vessels over 12,600
TEU) surged at the end of 2006. Based on industry sources, as of August 2007, global demand for these vessels totaled
80 ships as compared to 0 in the same period in 2006. The demand for such vessels is due to strong growth in
containerized cargo trades and substantial expansion on container fleets due to competition among the global shipping
lines. Some of the other on-going technology improvements made on ships are propulsion, transmission and engine room
equipment, noise, shock and vibration controls, security, satellite and navigational equipment and electrical equipment
and power supply.
The use of satellite communications is another major technological advance in the industry facilitating the Global Maritime
Distress and Safety Signals (GMDSS) system. The GMDSS is used for maritime safety information, to communicate with
land and to provide search and rescue information. Paper navigation charts have been replaced with electronic chart
display systems. These digital charts provide greater accuracy than paper charts, and are very reliable in shallow waters
and tight waterways such as paths through coral reefs and other reefs.
Through Information System Agreement (ISA) the world's major ocean carriers are co-operating to promote Global
Electronic Commerce in the Maritime Industry. ISA has been a leader in developing standards for electronic data
interchange (EDI). With the advent of the internet, the participants are creating web-based applications that can speed the
delivery of important information amongst themselves and their customers. While it does not usually occur very often,
container losses at sea does occur. Many ships have lost their cargo due to rough weather. Modern container ships make
use of rigid, fixed lashing structures as opposed to old-style lash-ups of chain and wire. Efficiencies in ship operations and
design include the burning of low-sulphur bunker oil which can reduce fuel use by 10%. The design of new cargo ships
has reduced the number of pillars in the structure, which allows another 10% of cargo to be carried.
INDUSTRY VOLATILITY
Industry revenue volatility is medium
In theory, this industry should not display high levels of volatility. Industry output is affected by economic activity, as
measured by world GDP. As world economic growth is more stable than the GDP growth of individual countries, it is
therefore less volatile. The level of international trade will influence the demand for shipping logistics. International trade
has been increasing throughout the current performance period. The shipping transport industry caters for a diverse range
of clientele, which should limit the degree of revenue volatility. In the passenger segment, industry output is driven by the
contraction or expansion of international sea travel, which has been expanding for over 20 years. Trade fluctuations are
caused by a number of factors such as exchange rates, pricing levels of commodities, domestic demand for imports and
income levels. Shipping is the cheapest form of cross-border transport, leading to relatively stable demand over time.
28
INDUSTRY CONDITIONS
22 January 2010
However despite all of this, the industry does indeed exhibit high revenue volatility. Because of the length of time that it
takes to order and build a ship, the shipping industry tends to either overshoot or undershoot on its demand forecasts for
its fleet. This creates regular supply/demand imbalances, which have a big impact on shipping rates and hence revenue.
In October 2008 alone, the charter rate for dry bulk ships fell by 79% in the wake of the global economic crisis, yet the
world shipping fleet is set to grow by over 10% in both 2008 and 2009 as pre-existing orders are delivered to their new
owners. It is this constant battle to accurately predict economic and demand conditions years in advance that makes it
difficult for shipping lines to match their fleet levels with demand levels that is a key driver of the revenue volatility that is
currently being witnessed, and will continue to haunt the industry until at least 2011.
IBISWorld measured industry revenue volatility at 6.1 over the current performance period; a score of between three and
10 points indicates a medium level of volatility.
GLOBALIZATION
The level of Globalization is high
The trend of Globalization is steady
Globalization measures the extent to which this division operates on a global scale and is determined by: (1) level of
foreign operators; and (2) the level of foreign interaction by local operators in a particular country. IBISWorld rates the
industry as having a high level of globalization, with the majority of the industry's major companies operating in multiple
geographic regions. In 2006, the top 35 maritime countries according to deadweight tonnage registered controlled over
95% of the world merchant fleet. Foreign flagged ships carry significant tonnage, particularly in the international shipping
segment, while domestic and coastal shipping are normally restricted to vessels registered and owned by operators from
the domiciled country and/or region. For example, The Jones Act (Section 27 of the Merchant Marine Act of 1920 - US)
precludes foreign owned, foreign built and foreign flagged vessels from participating in the US domestic trade.
The level of foreign interaction by local operators in a particular country is also considered medium and increasing. This is
largely attributed to the diversity of operators from various countries. For instance, the leading 10 container service
operators as of 2008 were: A.P. Moller Maersk Group (Denmark), Mediterranean Shipping Company S.A. (Switzerland),
CMA-CGM (France), Evergreen Group (Taiwan), Hapag-Lloyd (Germany), COSCO Container Lines (China), APL
(Singapore), China Shipping Container Lines (China), NYK Group (Japan), and Hanjin Shipping Group (Republic of
Korea/Germany). The global financial crisis had not caused any major companies to topple by early 2010, with the market
shares of the major global players remaining relatively stable during the worst of the downturn.
Consolidation within this industry is also increasing the level of globalization. In late 2005, A.P. Moller - Maersk A/S
acquired Royal P&O Nedlloyd N.V. To honor P&O Nedlloyd's commitments to various conferences and consortia, P&O
Nedlloyd and Maersk Sealand continued to operate separate shipping lines until February 2006, after which Maersk
Sealand and P&O Nedlloyd was branded under the new name of Maersk Line. Maersk Logistics and P&O Nedlloyd
Logistics were integrated under the brand name Maersk Logistics. The full integration was completed end 2006 (Refer to
Major Players for further details). The acquisition of P&O Nedlloyd by Maersk has led to increased competition in this
industry and the importance of alliances and partnerships.
There are two major shipping alliances, the Grand Alliance and New World Alliance. Shipping alliances enable carriers to
realize economies of scale while providing customers with more frequent sailing and quicker transit times. During periods
where shipping activity are low, alliances allow carriers to meet demand without facing the intense fixed-cost investments.
Many operators also have associated shipping businesses such as piloting and port operations of which firms within the
alliances can share assets to further reduce operating costs.
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INDUSTRY CONDITIONS
22 January 2010
The lifting of many trade restrictions and the promotion of free trade has proved to be beneficial for this industry. In real
terms, world merchandise trade rose by 6.0% in 2007 and 2.0% in 2008, significantly exceeding average trade growth
over the last decade. Asia and the Commonwealth of Independent States countries reported the strongest growth
followed by South America, Africa and the Middle East, North America and Europe. More than 90% of goods traded
between countries are transported by sea. The sustained economic growth experienced by the world economy over the
majority of the last two decades, coupled with strong international trade performance has translated into a positive trend
over this period for the global Shipping Logistics industry.
Top 5 maritime fleet countries, 2006
Country
Units
Vessels
Tons
Deadweight Tonnage
Greece
3027
163394
Japan
3091
131703
Germany
2786
71516
China
2893
65488
United States
1679
46927
Source: United Nations COMTRADE database
30
KEY FACTORS
22 January 2010
Key Factors
KEY SENSITIVITIES
The key sensitivities affecting the performance of the Global Logistics - Shipping industry include:
Growth (GDP) & Inflation - World GDP
The industry is most sensitive to the level of GDP growth. An increase in real GDP growth will lead to an increase in
demand for shipping freight logistics services and also cruise activities.
Merchandise Trade - Balance (Exports - Imports)
An increase in trade activities will push the demand for shipping freight logistics services higher. For example,
merchandized trade volumes impact on containerized traffic and are significant user of liner services.
Transport Infrastructure - Airline Traffic Usage
The industry is highly sensitive to the level of airline traffic usage. Air transport is a direct substitute of water transport in
the realms of international trade.
Transport Infrastructure - Water Transport
The improvement in water transport infrastructure will lead to greater demand for shipping services. Bigger ships for
example can carry more cargo to promote economies of scale. Advancements in technology in ships and shore activities
have all assisted in reducing unit costs and improve ship turnaround times, thereby increasing utilization rates.
World Markets - Goods - Crude Oil
The increase in the price of crude oil will have a negative impact on the industry. Operating costs for industry participants
will increase which will affect prices and decrease the demand for air transport.
KEY SUCCESS FACTORS

The key success factors in the Global Logistics - Shipping industry are:
Ability to accommodate environmental requirements

An essential requirement in the 21st Century, as the general community increasingly demands more environmentally
friendly vessels.
Market research and understanding

An intimate knowledge of the market so that vessels may be deployed efficiently.
Prompt delivery to market

Competition is fierce in this industry. The inability to deliver products on-time may result in lost sales to a competitor.
Ability to expand and curtail operations rapidly in line with market demand
Establishing flexible capacity to meet troughs and peaks in demand, allows profitability to be maintained.
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KEY FACTORS
22 January 2010
Ability to pass on cost increases

Operating costs in this industry are high. Transferring cost increases to the client can assist firms in maintaining their
profit margin.
Membership of an industry organization

Securing a membership of a conference in operating liner services can enhance a company's client base.
Access to the latest available and most efficient technology and techniques
The use of up-to-date technology such as the internet and loading facilities will help improve efficiency in this
industry.
32
KEY COMPETITORS
22 January 2010
Key Competitors
MAJOR PLAYERS
Market Share
Major Player
Market Share
Range
A.P. Mller - Mrsk A/S
20.1% (2009)
Nippon Yusen Kabushiki Kaisha
9.5% (2009)
Hapag-Lloyd AG
9.4% (2009)
Mitsui O.S.K. Lines, Ltd.
9.3% (2009)
Carnival Corporation
8.0% (2009)
Other
43.7% (2009)
PLAYER PERFORMANCE
A.P. Mller - Mrsk A/S
Market Share: 20.1%
A.P. Moller - Maersk (Maersk) was established in 1904, founded by A.P. Moller and his father. Headquartered in
Copenhagen, Denmark, the Maersk Group is a global organization with around 110,000 employees and offices in 130
countries. The name Mrsk was taken from Mr A.P. Moller's grandmother, Kiersten Pedersdatter Mrsk. The company is
one of the largest shipping companies and is also involved in a wide range of activities within the energy shipbuilding,
retail and manufacturing industries. The four business areas operated by the company are; (1) container and related
activities; (2) energy; (3) shipping and offshore; and (4) retail and other business. The company is listed on the
Copenhagen Stock Exchange.
The container and shipping activities is the largest business segment of Maersk that includes Maersk Line, Maersk
Logistics, Damco, APM Terminals, Maersk Container Industri and Safmarine. Maersk Line, launched as a brand in 2006,
combines the operations of Maersk Sealand and Royal P&O Nedlloyd, which was acquired by A.P. Moller - Maersk in
2005. The business segment operates more than 550 container vessels. Maersk Oil, part of the energy business segment
was established in 1962 when the company was awarded the concession for oil and gas exploration and production in
Denmark. It is considered a mid-size player in the oil and gas industry with around 600,000 barrels of oil production per
day and gas production of up to 1,000 million cubic feet per day. Maersk Oil participates in production activities in
Denmark, Qatar, United Kingdom, Algeria and Kazakhstan with exploration sites in the North Sea, North Africa, West
Africa, the Middle East, Central Asia, South America and the Gulf of Mexico. The shipping and offshore business is
slightly different to the container segment in that it provides services predominantly to the oil and gas sector, such as
tankers, oil rigs, drilling contractors and supply service. It operates more than 260 vessels and rigs, of which 140 is owned
by the business segment. Finally, Maersk retail and other business division includes supermarkets (Denmark, Germany,
UK, Poland and Sweden), plastic products, ship repair yards and towage and salvage operations.
Yearly Performance
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KEY COMPETITORS
22 January 2010
For the first six months of 2008, revenue rose 30% to $30.4 billion (aided by the slump in the US dollar relative to the
Danish currency), and ended the year at $61.21 billion. About half of the company's revenue was generated by container
shipping and related activities, while tankers generated around 20% of revenue. Results for the full year saw a 19.5%
increase in revenue, and a marginal increase in net profit. Maersk Line implemented a restructuring process and a
number of improvements under the headline streamLINE. These process improvements were undertaken with the aim of
creating cost reductions, fewer errors, improved schedule reliability, and greater customer satisfaction. Results for
Maersk's shipping activities were affected by higher fuel costs through much of the year, although to a larger extent than
previously, the company was able to reduce the impact of this through fuel surcharges on freight rates. Increasing freight
rates in the first half of the year boosted revenue, though the fall in freight volumes on major routes by the fourth quarter
caused rates to fall.
Net profit rose to $2.4 billion from $1.6 billion in the first half of 2007, much of it due to the oil and gas business. Revenue
at Maersk, the world's largest container carrier, increased 16% on a volume 4.0% higher at 6.2 million TEUs. The
company said volume in the Asia-Europe trades increased 1.0% in the first half of the year but slipped 2.0% during the
second quarter compared to last year. Trans-Pacific volume fell 7.0%, partly the result of Maersk's closure of a number of
US inland destinations during 2007, but second-quarter volume was up 5% from a year ago.
The party ended for Maersk in mid 2008, with years of capacity expansion being swapped for a strategic cutting of
services. In a response to the global economic downturn, the company announced in October that it would remove 7,600
twenty-foot equivalent units (TEU) per week from its network. The Asia - Europe route was particularly targeted, with the
company believing that the fall in shipping rates had created an unsustainable situation.
Also in 2008, Maersk Tankers announced a takeover of leading Swedish operator Brostrom, a move that made Maersk a
world leader in the product tanker segment. The $569 million deal gave Maersk a combined owned and chartered fleet of
138 vessels excluding ships on order.
The 2007 year proved to be a strong one for Maersk, with consolidated revenue derived by Maersk up 17%, surpassing
the $50 billion mark for the first time. The company's total operated tonnage was more than 470 vessels, with a total
capacity of over 1,800,000 TEU (Twenty-foot Equivalent Unit). Net income increased for the first time in three years,
recording a 25.1% growth on 2006. The tankers, offshore and other shipping activities business unit recorded revenue
growth from the sale of ships, partly offset by a decline in freight rates for tankers.
The market for drilling rigs was also strong due to the high activity level within exploration and production of oil and natural
gas, as oil prices at this time were reaching unprecedented highs. All major segments of the company grew their revenue
figures, with the percentage growth in the retail arm of the company expanding by over 36%. Container shipping returned
to marginal profitability after a $568 million loss the year before. In total, the freight volumes handled by Maersk Line and
subsidiaries increased by 2.0% in 2007. The company was able to derive a 5.0% increase in average rates (or 4.0%
excluding the Bunker Fuel Adjustment Factor) compared to 2006. The rise in oil prices created a shift in the company's
cost structure, with fuel costs (USD per ton) increasing on average by 10% compared in the year.
For the financial year ended 2006, revenue increased by over 25% as the world economy continued its march. Each of
the four business segment recorded an increase in revenue during the financial year. The container and related activities
division was up 17% from the previous year due to higher volumes. It was however, offset by lower freight rates for the
period, which was 10% lower than 2005. Strong real GDP growth especially in Europe and developing Asia together with
the integration of P&O Nedlloyd increased the coverage under Maersk Line which contributed to higher volumes. The
division sold 15 old container vessels during the financial year but was replaced by 17 new ships capable of handling
more than 80,000 containers. In the tankers, offshore and other shipping activities segment, revenue rose by 20.4% to
$3,73 billion. The positive result from this division was due to rates above or at the level of 2005, prompted by higher oil
34
KEY COMPETITORS
22 January 2010
prices, robust demand for contractors and a strong market to the USA during the summer. Revenue from the oil and gas
sector rose a significant 51% due to higher oil prices and acquisitions. Finally, positive market trends in Europe and
continued growth for discount stores in the EU saw revenue from retail activity increased by 89.8%. In 2006, Dansk
Supermarked established 75 new stores, of which 64 are outside Denmark. The total number of stores after the
expansion was 1,125.
Consolidated net income for the period fell by 22.3%, due primarily to a decrease in net profit from the container shipping
and related activities division and to a lesser extent discontinued operations. Container shipping was negatively affected
by high oil prices that pushed operating costs, an increase in depreciation due to the acquisition of P&O Nedlloyd and
lower freight rates. As a result, the company recorded a net loss of $568 million from this division compared to a profit of
$1.28 billion in 2005. In addition, the Roulunds Group together with certain assets from Maersk Aviation was sold in the
2006 financial year, which contributed to the fall in net income. As a result of the full integration of P&O Nedlloyd, the
number of employees in Maersk increased by a huge 60.8% to 108,530 at the end of 2006. IBISWorld estimates that
around 52.1% of revenue derived by Maersk was related to this industry in 2006, giving it a market share of 19.6% in
2006.
In 2005, revenue increased by 31.5% to $34.84 billion. Revenue increased in all business segments due to higher
volumes and activities. The container division recorded a strong 36.2% increase in revenue. Demand for container
capacity was high throughout the year, with good growth in the central container markets. Maersk Sealand recorded a
6.0% increase in volumes partly due to the scarcity of capacity, which also saw freight rates rose by 10%. This was
however offset by high fuel prices as well as a general continual upward pressure on other costs. In terms of trade,
volume growth was seen from Asia to North America, Asia to Europe and Europe to North America. The division also took
delivery of four new ships and another 22 on long term time charter contracts, further increasing its capacity for the period.
The purchase offer for Royal P&O Nedlloyd was made in May 2005 which saw more than 500 vessels with a capacity of
more than 1,300,000 TEU engaged in the container business. Other revenue from this division namely; Safmarine,
Maersk Logistics and APM Terminals also saw an increase in both revenue and volume. Tankers, offshore and other
shipping activities rose by 17.9% in the period, supported by higher revenues from Maersk Contractor and Maersk Supply
Services. Good results were achieved from crude oil tankers even-though rates were lower than the previous year as
demand remained strong. Product carriers were however more or less the same as 2004. High oil prices and rigging
activities also saw revenue from the Oil and Gas division increase. It was also positively affected by the acquisition of
Kerr-McGee Corporation in November 2005. In the retail segment, revenue fell marginally to $4.01 billion from $4.28
billion (after conversion) due mainly to the appreciation of the US dollar. In Danish Krone (DKK), revenue increased 8.5%.
Other operating income rose by 9.5% for the financial year 2005 due to strong revenue growth from Stan Air A/S, Danske
Bank, Martin Air Holland N.V. and the Rosti Group.
Net income for the year ended 2005 fell by 27.9% to $3.37 billion. Profit was lower in many of the divisions except
tankers, offshore and other shipping activities and retail activity. The results were affected by accounting losses in the oil
interests purchased in the UK, accounting losses in P&O Nedlloyd and high expenses relating to the integration of P&O
Nedlloyd. Employment increased to 67,498 for the year ended December 2005. IBISWorld estimates that Maersk had a
market share of 19.3% in 2005.
Revenue for the financial year ended 2004 increased by a solid 10.5%. The strong increase in revenue was due to
numerous factors that included: (1) higher volumes from both containers and tankers and rates from tankers; (2) gains
from the sale of vessels; and (3) high oil prices that positively affected oil and gas and tanker shipping activities that was
partially offset by higher taxes and depreciation of the US dollar. Container shipping and related activities represented the
largest portion of consolidated revenue during the year and increased by 15.7%, making it a central driver of the
company's growth during the period. The strong global demand for container capacity led to a shortage of tonnage and
increased rates throughout the year. The effect of the positive supply and demand relationship was however dampened
35
KEY COMPETITORS
22 January 2010
by higher time charter rates (part of the fleet operated by Maersk is leased), high fuel prices and a general pressure on
costs. Services from Asia to North America and Asia to Europe showed continuous growth whereas cargo volumes from
Europe to North America only increased moderately. Other divisions within this segment such as the Maersk Sealand
Agencies, Logistics, APM Terminals and Safmarine Container Lines also recorded positive revenue growth. The tankers,
offshore and other activities division recorded revenue growth of 11.6% due to high level of activity from crude oil carriers
and product tankers. The market for large tankers was strong due to increased oil consumption in the US and China. This
growth was primarily covered from the Arabian Gulf, as production peaked in the North Sea and the Mexican Gulf. The
increase in oil prices also led to modest gains in the Oil and Gas activities segment which rose by 14.2%. IBISWorld
would like to highlight that the depreciation of the US dollar has made growth rates higher in US dollar terms as compared
to the local Danish Krone currency. In retail, revenue growth in Dansk Supermarked contributed to revenue growth due
primarily to increase in the number of stores and the development and adjustment of product range. Other operating
income was down slightly divestments and negative results in some of its business lines namely Maersk Container
Industri, and the Odense Staalskibsvrft A/S Group.
Net profit for the period surged in 2004 to $4.67 billion, up 48.3% on the previous year. High container rates together with
high oil prices contributed to the rise in net income for the period. The disposal of companies and sale of rigs and wells
also contributed to the net profit result. Finally, employment fell 1.4% to 623,000 partly due to the divestment of Maersk
Data.
Mrsk - financial performance
Year
Million Dollars
Revenue
% change
Growth
Million Dollars
NPAT
% change
Growth
Units
Employees
% change
Growth
2003
2004
23970.0
N/C
26490.0
10.5
3151
N/C
63161
N/C
4672
48.3
62300
-1.4
2005
34843.0
2006
43763.0
31.5
3370
-27.9
67498
8.3
25.6
2617
-22.3
108530
60.8
2007
2008
51218.0
17.0
3271
25.0
117000
7.8
61211.0
19.5
3329
1.8
120000
2.6
Source: Annual Report
Nippon Yusen Kabushiki Kaisha

Market Share: 9.5%
Nippon Yusen Kabushiki Kaisha (NYK) was formed in 1872 when the Tosa Clan established Tsukumo Shokai Shipping.
Its first overseas liner service began in 1875 between Yokohama and Shanghai and by 1896, the company expanded its
routes outside Asia to Europe, the US and Australia. The company's first overseas branch was open in London in 1896. It
was during this period that the company changed its name to Nippon Yusen Kabushiki Kaisha when Nippon Yusen
Kaisha became a joint-stock corporation. Today, NYK is one of the largest marine providers in the world with a fleet of
around 770 vessels. It includes container ships, bulk carriers, wood chip carriers, tankers, LNG carriers and cruise ships
with close to 48 million dead weight ton (DWT).
NYK has four major business segments namely; (1) global logistics business that incorporates container and car
transport; (2) bulk and energy transport business; (3) cruise services; (4) logistics and terminal and harbor transport
services; (5); real estate and (6) others which include technology, tugboat operations and restaurants. The largest
business segment within the company is shipping. The shipping segment comprises of three areas: liner trade - container
transport operations; specialized carriers - bulk ore, coal and car carrier operations; and tankers - Liquefied Natural Gas
(LNG), crude oil and petroleum and chemical products.
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KEY COMPETITORS
22 January 2010
Yearly revenue
In the second quarter of the 2008 calendar year, consolidated revenue climbed 13% against the same period in 2007,
reflecting substantial revenue growth in the shipping segment. Freight rates were also strong, and the company reported
unprecedented high demand for dry-bulk carriers, and increasing cargo volume made possible by fleet expansion. There
were certain cost increases, such as a surge in bunker-oil price, but in total, the increase was limited to 11.7%. Third
quarter results were also strong across most business segments, despite the commencement of a sharp global economic
downturn. This was largely due to the company carrying out contracts that were signed in the previous quarter, when
prices and demand were still high. By the end of the company's financial year, the global economic downturn had
precipitated a steep drop in the dry bulk market, a weakening of container transport levels, and a decline in freight rates
and handling volumes. Profitability was slightly higher than the previous year, though the company was well aware at the
end of 2008 that its year ending March 2010 figures were unlikely to be as good. During the year ending March 31, 2009,
the company's largest source of revenue was bulk shipping, followed by liner trade and logistics.
During the financial year ended March 2008, the company reported its biggest revenue growth in recent years. The 35.1%
growth in revenue was accompanied by a 79.7% increase in net income. During 2008, NYK's fleet comprised of 113 car
carriers, 155 container ships, 450 bulk vessels, and 59 others.
The company's total fleet increased by 34 to 777 during the year, with the biggest increases coming in container ships
and Panamax and Handysize bulk carriers. The number of LNG carriers in the fleet also expanded by 25%, responding to
significant demand growth for this type of shipping. In January 2008, NYK's American logistics division acquired Bruni
International, a customs brokerage, freight forwarding, and warehouse- and distribution-services company based in
Laredo, Texas. The move was made with a view to strengthening NYK's ability to compete in the movement of goods
between Mexico and the US.
During the year, NYK was included in the "Global 100 Most Sustainable Corporations in the World" list by Innovest
Strategic Value Advisors Inc, and Corporate Knights Inc. The list selects the top 100 companies from various industries
that display a better ability than their industry peers in handling non financial corporate values, such as environmental,
social, and corporate governance issues that affect risk management.
For the financial year ended March 2007, consolidated revenue derived by NYK increased 12.3% to $18,333.6 million. In
the container liner trade segment (within the global logistics business), freight movements were steady. Freight rates were
higher on the European trade and together with strong load factors on the Australian trade; the segment recorded
increased revenue. In the car transport business, freight movements continued to be strong due to higher transport
demand and tonnage supply. In the bulk cargo market, robust demand, primarily in China, increased the freight movement
of steel materials, coal, grains, steel products and cement. Due to favorable market conditions, the company also
negotiated new and medium-to-long term contracts with customers in Japan and overseas to boost revenue growth for the
future. The tanker segment also remained strong for the financial year ended 2007 due to favorable demand for gasoline
but turned sluggish in the second half due to a warm winter in the US and production cuts from OPEC. Overall, these two
business segments account for almost 60% of total revenue. The logistics and terminal businesses recorded good
revenue growth over the fiscal year due to new customers in North America and Europe together with improvements in
cargo handling charges. Cruise services were also higher due to the warm winter months in North America that promoted
more cruise activities. The two remaining business segments (real estate and technology) were higher for the period as
rentals and demand for ad-hoc services increased.
Net income for the financial year ended 2007 amounted to $550.9 million, lower than the previous year. This was
attributed to sharp rises in bunker oil prices and inland trucking and railway charges. In addition, the small increases in
freight rates from trunk trade routes were not enough to offset the rise the expenses. Cost of sales increased 15.4% from
37
KEY COMPETITORS
22 January 2010
the previous year due mainly to bunker oil prices. The company employed 1,669 employees in 2007, down slightly from
the previous financial year. IBISWorld estimates that NYK had a market share of 8.4% in 2007.
Consolidated revenue for the financial year ended March 2006 rose by 9.3% to $16.32 billion. Freight shipping was strong
in the financial year but was hampered slightly by high oil bunker prices. Liner trade on North American routes was strong
and shipments on European routes were robust, while a strong Australian economy supported solid shipping demand in
Oceania. Fleet expansion also pushed up revenues in the liner trade and other shipping segments. In the other shipping
segment, bulkers and tankers also recorded robust revenue growth during the period due to strong demand for raw
materials and petroleum products. The company also added a total of eight new tankers and bulk carriers which
contributed to an 18.5% increase in revenue in the bulk and energy transport segment. The cruise business was also
stronger during the year as the company solidified its presence in the US market and increased its service offerings.
Performances in the logistics and terminal and harbor transport segments were also stronger during the financial year due
to strong demand from North America and favorable cargo movements at its terminals. Real estate on the other hand
recorded lower revenues due to restructuring. In the 'Other' business segment, tugboat operations maintained revenue
levels but earnings were down, however the trading, manufacturing and shipping agency businesses posted gains due to
robust real GDP growth in the Asian region.
Net income for the year improved 18% to $782.9 million for the financial year. This was primarily due to robust revenue
growth but was offset by high bunker oil prices and increases in North American inland rail transport prices that caused
expenses to rise 24.2%. It is worthwhile to note that operating income from shipping activities decreased in the financial
year from $1.04 billion to $1.40 billion as a result of higher expenses from the container shipping business rather than
bulk/energy shipping. The number of employees fell slightly during the financial year from 1,739 in 2005 to 1,720 in 2006.
In 2005, consolidated revenue increased by 12.8% to $14.93 billion. The increase in global trade led to a significant rise in
shipping revenues for the financial year. Revenues from shipping services increased to $8.33 billion in the financial year,
up around 11% from the previous year. Demand for liner and specialized carriers increased and this enabled the company
to push up freight rates to offset the impact of higher fuel prices. Car transportation remained at high levels for the year
due to a reduction in vehicle tariffs especially in the Asia Pacific region. It was however offset by a slight drop in revenue
from the tanker business due to higher charter prices incurred by the company (around 41% of tankers was leased). The
company's cruise segment recorded a drop in revenue for the financial year. Passenger demand was low from the
aftermath of the September 11 terrorist attacks, the war in Iraq and the severe acute respiratory syndrome (SARS). The
logistics and terminals divisions both recorded strong revenue growth as the company gained new contracts. Revenue
from other services was also up by 2.8% as a result of gains from wholesaling and travel agency services, offset by a
decline in real estate and tugboat operations.
As a result of the strong surge in revenue and lower interest expenses and other non-recurring items, net income for the
period rose by 101.3%. Intensive cost cutting initiatives by the company improved the operating margin to 6.6% 'Forward
120' was a plan initiated in 2003 for the company's 120th anniversary in 2005 that amongst other things looked at
stabilizing profitability in the container transport business. The cost cutting effort also saw a decline in employee numbers,
which fell 3.9%. The robust rise in net income also saw return on equity (ROE) increase from 4.7% in 2004 to 10.8% in
2005.
NYK Line - financial performance
Year
Million Dollars
Revenue
% change
Growth
Million Dollars
Operating Profit
% change
Growth
Units
Employees
% change
Growth
2003
10423.7
N/C
119.3
N/C
1878
N/C
2004
13236.5
27.0
329.5
176.2
1809
-3.7
2005
14933.5
12.8
663.2
101.3
1739
-3.9
38
KEY COMPETITORS
22 January 2010
2006
16321.7
9.3
782.9
18.0
1720
-1.1
2007
18333.6
12.3
550.9
-29.6
1669
-3.0
2008
24737.6
34.9
571.6
3.8
1643
-1.6
Hapag-Lloyd AG
Market Share: 9.4%
Hapag-Lloyd AG was formed in September 1970 through the merger of the shipping lines Hamburg Amerikanische
Packetfahrt-Actien-Gesellschaft and Norddeutscher Lloyd. Prior to this, the two organizations have been in operations
since 1847 and 1857 respectively. The company is a leading player in the global integrated logistic transport industry and
handles complex logistics packages along the transportation chain. Since the 2005 acquisition of CP Ships, the Canadian
container line, the company has become one of the world's five largest lines. The fleet is made up of 128 container ships
with a total transport capacity of 492 000 standard containers. The ships operate globally in the Far East, Trans-Pacific,
Atlantic, Latin America and Australasia.
CP ships started operations in 1886 through the incorporation of Pacific Railway in 1881 when it transported tea from Asia
to Canada with the first ocean-going vessel chartered by Canadian Pacific Railways. Its Trans-Atlantic operations started
a few years later in 1903 and not long after entered into the cruise business in 1922 with the "Empress" liners. The
company's container transport business started in the mid-1990s and by 1964 had container ship each carrying 12 boxes.
Since then, CP Ships grew through acquisitions and since 1993 has acquired as many as 10 companies, including
Canada Maritime, Lykes Lines and Italia Line. Montreal Gateway Terminals are also run by CP Ships which is one of the
largest container terminals in Canada.
In late 2008, TUI sold the majority of its ownership of Hapag-Lloyd, returning the container shipping company to effective
independence.
TUI
TUI AG (TUI) was formerly a mining, primary products and technology group. It was reorganized to a tourism and shipping
company when the management of Preussag made its first investment into the tourism business with the acquisition of
Hapag Lloyd in 1997. The next year, Preussag bought shares in Touristik International GmbH & Co (TUI), Europe's
biggest travel company who later adopted the same name.
TUI Travel is a recently formed company through the merger of First Choice Holidays PLC and the Tourism Division of
TUI AG (initially formed in 1923). The company has close to 200 brands and consists of a network of 3,600 retail travel
stores throughout Europe, together with a fleet of 150 aircraft. It is a leading leisure and entertainment company with
operations in 17 major markets and employs more than 15,000 people across 18 brands. It is important to note that the
majority revenue derived by this company is not part of this global industry. The company's cruise division is the largest in
Europe with four cruise liners namely; Europa, Hanseatic, Bremen and Columbus. The Europa was also ranked as the
world's finest cruise ship for seven years running by the prestigious Berlitz Cruise Guide. Hapag-Lloyd provides container
line transport and logistics services for container transport in over 100 countries. The company divested the majority of its
stake in Hapag-Lloyd in 2008.
Yearly Revenue
The global shipping slump has hurt Hapag-Lloyd particularly hard, with its owners sufficiently alarmed by the company's
financial plight that they announced an intention to make a 923 Euro cash injection into the company in August 2009.
39
KEY COMPETITORS
22 January 2010
Industry sources around that time suggested that the company was on target to record a second half operating loss in
excess of $700 million.
In October 2008, TUI agreed to sell its Hapag-Lloyd shipping subsidiary in a 4.45 billion Euro deal that will keep the
company in German hands and see the tourism group retain an interest through a minority stake in the buyer. A
consortium of Hamburg businessmen won the race to acquire Hapag-Lloyd after Singapore's Neptune Orient Lines
dropped out of the auction. In the 2008 financial year, turnover by the container shipping component of TUI's operations
increased by 4.0%. This growth came on the back of a 2% increase in volumes, and, importantly, a 12.7% increase in
freight rates to a yearly average of $1590 per TEU. At the end of 2008, Hapag-Lloyd's fleet stood at 128 ships with a
combined capacity of 492,000 TEU.
In the 2007 financial year, turnover by the shipping division declined slightly by 0.8%, with container shipping (which
comprised 97% of TUI's shipping division) dropping by 1.2%. This decline was primarily attributable to the weakness of
the US dollar exchange rate against the euro. Shipping volumes rose by 9.0% to 5.5 million TEUs. Average freight rates
rose substantially in all trade lanes in the second half of the year. However, average freight rates for the year as a whole
still fell 1.3 per cent short of 2006 levels. The company's strategy for this period centered upon process optimization and
productivity enhancements, following the completion of the integration of CP Ships in 2006.
For the financial year ended 2006, revenue was up 7.7% from 2005. Revenue growth from the tourism division was
modest (increasing by 1.2%), despite the divestments of the business travel activities as well as the majority interest in
TUI InfoTec, both shown in the other tourism sector. The small increase in revenue was achieved from robust sales in
both the agency and hotel business. In terms of the shipping business, revenue increased 65.9% and represented 30% of
consolidated revenue. The primary reason for the strong revenue growth was due to the additional turnover volume of CP
Ships which merged with Hapag Lloyd in 2005. IBISWorld believes that the deployment of new vessels such as the
"Tsingtao Express" and additional services between Europe and Asia led to the increase in revenue. Hapag Llloyd is also
part of the Grand Alliance consortium formed in 1998 and agreed to extend their co-operation for another 10 years to
2017. The Grand Alliance members deploy in their services a total of about 140 vessels with a capacity of between 2,700
and 9,000 TEU offering 20 services, mainly on major east- west routes. The company recorded consolidated net loss of
$1.06 billion and stated that the losses were primarily due to the impairment of goodwill. The shipping division also
contributed to negative earnings as a result of difficult market environment in the container shipping industry. It was
impacted by the fall in freight rates together with high fuel costs. IBISWorld estimates that TUI AG had a market share of
9.3% in 2006.
Consolidated revenue for the period ended 2005 was in the order of 24.4 billion. Revenue from shipping activities rose by
58.8% as at the end of the financial year; both Hapag-Lloyd and CP Ships operated a total of 133 vessels. The transport
volume in the shipping division totaled 3.1 million standard containers, exceeding the previous year by 27.3% with
average freight rates for the period up by around 8.0% year on year. The strong revenue growth from shipping also
reflected the integration of CP Ships into the overall business. The tourism division also recorded positive revenue growth
of 5.8%, with customer numbers up by 9.1%. The company mentioned that all sectors of the division recorded year on
year increases with the largest from Western Europe at 9.9%. Revenues from destination and 'Other' tourism also rose
due to improvements recorded by hotel companies and commissions. While revenue increased, net profit for the year fell
to $485.9 million. This was primarily due to higher expenses as cost of materials and personnel expenses rose by 41.1%
and 68.9% respectively. The number of employees in 2005 increased to 61,559 from 57,716 in 2004. Other expenses
also rose by 7.0% as a result of the acquisition of CP Ships. IBISWorld believes that TUI AG had a market share of about
6.4% in 2005.
Hapag-Lloyd AG - financial performance
40
KEY COMPETITORS
22 January 2010
Year
Million Dollars
Revenue
% change
Growth
Million Dollars
Operating Profit
% change
Growth
Units
Employees
% change
Growth
2005
24400
N/C
485.9
N/C
61559
N/C
2006
26276
7.7
-1059.1
N/C
53930
-12.4
2007
29978
14.1
323.6
N/C
68521
27.1
Mitsui O.S.K. Lines, Ltd.

Market Share: 9.3%
Mitsui O.S.K. Lines (MOL) was established in 1884 through the formation of Osaka Shosen Kaisha. After a few decades
of regional shipping, the company began expanding services to the US, between Yokohama and New York. Consolidation
within the shipping industry in Japan in the 1960s led to the merger of Japan Line, Ltd. (JL), and Yamashita-Shinnihon
Steamship Co., Ltd. (YSL), thus creating Mitsui O.S.K. Lines Ltd. The company ventured into the petroleum shipping
market in the 1980s and the leisure cruise market in 1989. MOL is now one of the largest marine transport companies in
the world with a fleet of more than 800 vessels and an overall capacity of some 53 million deadweight tons (DWT). The
operations of MOL are very similar to Nippon Yusen Kabushiki Kaisha (NYK) in that they provide liner, bulk, car, Liquefied
Natural Gas (LNG) and tanker transportation in the shipping segment in addition to logistics and associated businesses
such as port operations, warehousing and air-cargo transport.
In the bulk and container shipping market, MOL transports 30% of Japan's raw material imports and serve around 70
routes all over the world. The company is also one of the leading LNG and petroleum transport provider in the world with
162 tankers. In addition, the company is Japan's largest ferry and domestic transport operator. Shipping revenues
represented around 89% of total income. The logistics segment was formed to maximize synergies with other MOL
business segments. It has core operations comprise of investments in China and the ocean consolidation business that
provides optimal logistics solutions to meet the demand for high-value added services. Finally, associated businesses
include office and residential building leasing operations of Daibiru Corporation and 'other' shipping related activities such
as marine consulting, maritime engineering, trading and temporary staffing.
Annual Revenue
MOL made a number of revisions to its profit and revenue forecasts since the onset of the global financial crisis. As of
October 2008, the company was expecting a recurring profit of around $2.7 billion in the business year to March 2010,
which would be a 17% fall from estimates relating to the previous year. Its year to March 2009 profit forecast was also
lowered by 6.3% due to weak demand for dry bulk shipping. By January 2009, the company's net income forecast had
been revised to a 32% fall on the prior year. The progressive and dramatic profit forecast downgrading underlines just
how fast the industry terrain was changing during this time. In the company's native Yen, revenue fell by 4.1% in the year
ending March 2009. When converted into US dollars, the figure was 4.2%. Net income fared worse, falling by around a
third due to declining profitability in the face of the global financial crisis. MOL's new Jacksonville, Florida shipping
terminal was due to commence business during 2009.
The 2007 financial year (year ending March 2008) saw the company report very strong increases in revenue and net
income, reflecting the robust growth of both the company and the general shipping market over that time period. The
container shipping industry worldwide grew by 11% in the period, however MOL was able to increase its own volumes by
13% to 3.2 million TEU due to fleet expansion and the development of new routes. The strongest growth was recorded on
the company's Asia-Europe routes, which experienced a 20% increase in trade volume. The company's most successful
business segment during the year ended March 2008 was related to the transport of iron ore, coking coal, and other raw
materials for steel production. The leading steelmakers in South Korea, Japan and China are the main clients of this
41
KEY COMPETITORS
22 January 2010
segment, along with raw materials producers in Australia and Brazil. The increase in Brazilian iron ore exports to China
created strong results for MOL, which expanded its dry bulk ship fleet from 2002 onwards in anticipation of higher
demand. The route from Brazil to China is 3 times as long as the route from Australia to China (the other main exporter of
ore to the Chinese), meaning that the Chinese are requiring significantly greater amounts of shipping resources. MOL
added 12 new ore carrying ships during the year to March 2008, bringing its fleet to around 130 - the largest steel raw
material carrying fleet in the world.
Consolidated revenue derived by MOL increased in the 2006 financial year by 67.1%. Revenue from shipping operations
amounted to $11.82 billion. The main contribution came from the dry bulk segment which contributed 23% of total
shipping revenues due to the strong demand for iron ore in China as it reached 326 million tons in 2006. In the tankers
segment, fleet expansion and the utilization of bigger vessels enabled the division to charge higher rates and increase
revenue for the period. Similarly, LNG carriers also recorded revenue growth with LNG consumption increasing. In the car
carrier and container divisions, strong exports from Japan and China created strong demand for these carriers. While
freight rates declined, volumes during the financial year increased. The container market was supported by the ongoing
shift in production to China, India and other Asian markets together with the strong economic growth in the Asia Pacific
region. Revenue from ferry and transport also rose in the financial year due partially to the Japanese Government's policy
of favoring environmentally friendly modes of transport. Finally, the associated businesses segment also recorded growth
of around 13.4% due to modest real estate and tugboat operations market.
Net income for the financial year ended 2006 increased to $1.64 billion. It is worthwhile to note that MOL was the only
international shipping company in the world that recorded an increase in net income during the financial year. The
company stated that this was primarily due to cost cutting activities and the focus on fields that have the potential to
expand over the long term (i.e. LNG and tanker markets). The success was a result of a balanced portfolio with an
emphasis on emerging opportunities in the spot market with flexibility to capture developing opportunities in the marine
transport industry. IBISWorld estimates that MOL had a market share of 8.8% in 2007.
In 2005, consolidated revenue was up 6.5% to $11.62 billion. Revenue from container ships and bulk-ships totaled 86% of
consolidated income in the 2005 financial year. In the container segment, freight rates fell but higher volume of containers
transported increased its share of revenue from 34% in 2004 to 36% in 2005. Income from bulk-ships also increased
during the year from fleet expansion and additional new contracts from clients in Qatar, Yemen, India and Japan. A new
joint venture with the Leif Hoegh Group of Norway was also formed in 2005, designed to increase LNG transport activities
to the US. Tanker operations increased in 2005 and recorded revenues and earnings above initial targets even-though
charter rates for tankers were below expectations (but still high). Similar to the LNG market, new joint ventures with
established companies in China and UAE produced solid demand. The growth from the above segments was offset by a
decline in revenue from the ferry and domestic transport division, though this was largely attributed to the high cost of
bunker fuel. The remaining logistics and associated businesses performed well due to increased volumes and contracts.
The first full year contribution from Daibiru Corporation, a real estate company, which become a consolidated subsidiary in
2004 also contributed to higher income from the associated businesses division.
Net income for the financial year was $968.2 million, up 5.8% from the previous year. The increase in net income was
primarily due to higher margins from the bulk-ship segment. Operating income from this division rose by 11.7%. However,
the higher cost of bunker and increases in a variety of container ship expenses lowered operating earnings in the
container ship division by around 36%. Another division that saw a decline in operating income was ferry and domestic
transport which fell by roughly 76%. The remaining divisions achieved modest gains. Employee numbers surged 13.1% to
8,351 due to the integration of Daibiru Corporation in the financial year. IBISWorld estimates that Mitsui O.S.K. Lines Ltd
had a market share of 8.1% in 2006.
42
KEY COMPETITORS
22 January 2010
Consolidated Financial Performance

Year
Million Dollars
Revenue
Million Dollars
Million Dollars
Net Income
Million Dollars
Units
Employees
Units
2004
9440.1
N/C
524.1
N/C
7033
N/C
2005
10909.6
15.6%
915.0
74.6%
7385
5.0%
2006
11622.6
6.5%
968.2
5.8%
8351
13.1%
2007
19420.1
67.1%
1646.9
70.1%
8621
3.2%
2008
18602.2
-4.2%
1265.2
-23.2%
9626
11.7%
Fleet scale and type, 2008

Type
Units
Dry Bulk Ships
364
General Cargo Bulkers
135
Containerships
130
Tankers
166
Others
44
Total
839
Carnival Corporation
Market Share: 8.0%
Carnival Corporation is a global cruise company with a portfolio of 12 distinct brands comprised of the leading cruise
operators in North America, Europe and Australia. The company is headquartered in Miami, Florida and London, England.
It operates a fleet of 85 ships with a passenger capacity of 158,000, and there are another 16 ships scheduled for delivery
by 2011. Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn Cruise Line, Windstar Cruises, AIDA
Costa Cruises, Cunard Line, P&O Cruises, Ocean Village, Swan Hellenic, and P&O Cruises Australia are all included in
this group.
Carnival Corporation's success can be attributed to its marketing strategy and service offerings to a range of customers.
It's Seabourn and Swan Hellenic cruises target upscale clients and offers fine foods, personalized service and exotic
destinations around the world. On the other hand, Carnival Cruises and P&O Cruises both target families, retirees, and
other upper middle class customers with competitively priced cruise packages to popular destinations. Holland America
however is known for its scenic cruises in New England, Canada and the Pacific Coast. The company is also a member of
the World's Leading Cruise Line alliance that includes Holland America Line, Cunard Line, Princess Cruises, Seabourn
Cruise Line, Costa Cruises and Windstar Cruises. They are listed in both New York and London Stock exchanges and are
part of the S&P 500 and FTSE 100 index.
In terms of market share, Carnival is the big fish in the pond, with a roughly 44% share of the global cruise market - far
ahead of its nearest competitor, Royal Caribbean Cruises. In a business in which size gives a competitive advantage in
terms of pricing power with travel agents and the ability to spread fixed costs (such as maintenance and berthing costs)
over more ships, Carnival enjoys an enviable position. On April 17, 2003, Carnival Corporation and P&O Princess Cruises
plc merged via a dual listed company structure. Subsequently, P&O Princess cruises plc changed its name to Carnival
plc.
Yearly Revenue
43
KEY COMPETITORS
22 January 2010
Considering the market conditions that prevailed during 2008, Carnival did well to increase its revenue by 12.4%. A minor
drop in net income occurred during the year, but the profit margin for the company remained strong. The company
suspended its quarterly dividend in October, stating that it needed to preserve its liquidity in an environment where credit
was very difficult to access. The peak of fuel prices in the middle of 2008 has a significant impact on the business, with
fuel costs for the year being 55%, or $626 million higher than 2007. Fleet capacity during the year expanded by 9.0%, due
to orders placed prior to the commencement of economic troubles.
In 2007 the company reported strong revenue growth, with a figure of $13.03 billion representing a 10.1% increase on the
previous year. Operating income also grew, increasing 5.7% to $2.41 billion. Income growth was lower than revenue
growth largely due to rises in fuel costs, as unit operating costs (excluding fuel and currency) rose by only 1.0% for the
period - considerably below the rate of inflation. The hike in fuel costs experienced by the company in 2007 was 17.2%,
and represents a cost pressure on the company going forward. IBISWorld forecasts that the sharp rise in oil prices during
2008 will deliver an even sharper cost increase for the company. Carnival Corporation reports that nearly two thirds of the
company's passengers are sourced from the US market, the world's number one cruise market. These passengers
generated 54% of the company's total revenue. As of 2008, the company had nine ships on order that will primarily source
the US market in coming years, and IBISWorld believes that the aging US population will represent a growth market for
the company.
For the year ended 2006, consolidated revenue derived by Carnival Corporation and Carnival plc increased by 6.7% to
$11.84 billion. Net cruise revenues rose by 6.2% to $9.22 billion in 2006, up from $8.68 billion in 2005. Revenues rose
due to higher cruise ticket prices primarily from Alaska and European routes, higher onboard revenues and a 0.4%
increase in occupancy. Revenue from North America for the period totaled $7.68 billion. Onboard and other revenues also
increased during the period by 4.6% due to higher passenger spending on ships. Operating income for the period was
relatively unchanged, falling by 1.0% to $2.61 billion. This was primarily attributed to higher operating costs, in particular
fuel costs that increased by $75 per metric ton.
In 2005, total consolidated revenue increase by 14.1% to $11.1 billion. Net cruise revenues for the period rose by 15.6%
to $8.66 billion from $7.5 billion in 2004. Yields in 2005 increased primarily from higher ticket prices, a 1.1% increase in
occupancy, higher onboard revenues and the depreciation of the US dollar relative to the Euro and Sterling currencies.
Onboard and other revenues also rose by 8.5% due to increased passenger spending on liners. Operating expenses for
the period increased by 13.7% to $5.17 billion in the cruise segment. This was mainly attributed to a $66 increase in fuel
cost per metric ton; higher dry-dock amortization expense and weaker US dollar. The company recorded a net income of
$2,253 for the period, up 24.5% from 2004, primarily due to the strong increase in revenue as a result of higher ticket
prices and margins. IBISWorld estimates that Carnival had a market share of 7.6% in 2005.
Consolidated Financial Performance
Year
Million Dollars
Revenue
Million Dollars
Million Dollars
Net Income
Million Dollars
Units
Employees
Units
2004
9727
N/C
1809
N/C
69500
N/C
2005
11094
14.1%
2253
24.5%
71200
2.4%
2006
11839
6.7%
2279
1.2%
75000
5.3%
2007
13033
10.1%
2408
5.7%
81000
8.0%
2008
14646
12.4%
2330
-3.2%
86000
6.2%
44
KEY COMPETITORS
22 January 2010
OTHER PLAYERS
China Ocean Shipping (Group) Company
Estimated Market Share: 5.8%
China Ocean Shipping (Group) Company (COSCO Group) was founded in 1961 with four ships. It is now one of the
world's leading marine transport companies and operates over 600 ships with facilities in more than 160 countries around
the world. The company specializes in shipping and logistics with services in freight forwarding, shipbuilding, ship
repairing, terminal operation, trade, financing, real estate and IT industry. Within the COSCO Group, shipping activities fall
under China COSCO Holdings Company and China Corporation (Singapore) Ltd.
In order to further expand the business, COSCO Group formed China COSCO Holdings Company to be a leading
integrated container shipping operator. China COSCO Holdings Company was established in March 2005 in China. Used
as a listing vehicle, the company was listed on the Hong Kong Stock Exchange and is the overseas listed flagship of
China Ocean Shipping (Group) Company. COSCO Shipping Co. Ltd. was established jointly by Guangzhou Ocean
Shipping Company, Guangyuan Marine Service Company, China Ocean Shipping Agency Guangzhou, Shenzhen Ocean
Shipping Co., Ltd. and COSCO Guangzhou International Freight Co., Ltd. It listed on the Shanghai Stock Exchange in
April 2002 and owns around 90 ships with 1.4 million dead-weight tons (DWT). (Note - COSCO Group is a dual listed
company). The company is a major provider of container shipping and its related activities, including logistics, terminal
and container leasing services. It operates a fleet of over 140 container vessels through COSCO container Lines, which is
one of the world's leading providers of integrated container shipping services.
The firm expects to achieve lower revenue in 2009, but it is believed that China's stimulus package will help to cushion the
fall. Full information on COSCO's 2008 performance was not widely released, but revenue was $21.38 billion. Net profit is
believed to have fallen appreciably, as conditions became tougher.
The company's fortunes soared in 2007, with revenue rising 35.2% to $20.84 billion, and net profit rising an incredible
236% to $1.09 billion. COSCO's rise as a global shipping player continued, seeing it placed 405th on the Fortune Global
500 list. The dry-bulk service was a major driver behind the profit growth, with the company's dry-bulk unit transporting
264.7 million tons of goods, 15.1% more than the previous year. In 2007, demand for container shipping services across
the Pacific reported slower growth due to the weak US economy, but demand from other regions for the company's
services remained strong. High fuel prices and vessel leasing fees were experienced by the company during the year,
with operating costs rising 31.9%. China Cosco operated 144 container ships and 419 dry-bulk vessels at the end of
2007. Its total capacity reached 5.7 million TEUs, up 11.7% from 2006.
For the financial year ended 2006, revenue from COSCO Group was $15.41 billion. The container shipping division
achieved a 12.7% increase in volume to 5.1 million TEU over the same period in 2005. This was mainly attributed to
strong real GDP growth in China and the increase in the shipping capacity by the Group. Volume growth was the
strongest between Asia and Europe, followed by the domestic routes which increased by 20.5% and 17.9% respectively.
During the year, the COSCO also implemented the shipping capacity upgrade plan with seven new vessels and the
optimization of its fleet structure. The company's terminal and related business, container leasing and logistics businesses
all recorded an increase in revenue due to high freight volumes and movements in China. Net income for the year was
modest at $367.8 million as a result of high operating costs, especially bunker oil prices.
Another wholly owned subsidiary of COSCO Group is COSCO Corporation (Singapore) Ltd. Listed on the Singapore
Stock Exchange in 1993, the company undertakes shipping, ship repair and other shipping related services. While
COSCO Singapore is predominantly in the Ship Building and Repair business, a small part of their operations involve dry
45
KEY COMPETITORS
22 January 2010
bulk shipping. Consolidated revenue derived by COSCO Singapore in 2006 was $792.6 million, up 51.2% from the same
period in 2005. Around 12% of revenue is derived from dry bulk shipping between major ports in China, US, South
America, Europe and South Africa with a fleet of 12 bulk carriers. Income from dry bulk shipping amounted to $94.9
million in 2006, an increase of 1.7% from 2005 boosted by strong global trade. Total net income for the period amounted
to $133.7 million from $96.1 million the previous year, primarily due to its shipbuilding and engineering related activities
where revenue jumped 45.4%. IBISWorld believes that COSCO Group had a market share of 4.1% in 2006.
Neptune Orient Line
Estimated Market Share: 6.8%
The Neptune Orient Line (NOL) is a Singapore based shipping company and it operates in the United States through
American President Lines (APL). American Eagle Tankers Inc. (AET) has since been sold to Malaysia International
Shipping Corporation. The Group operated a fleet of 24 modern Aframax tankers, with an average age of just over six
years compared with an industry average around 12 years.
In July 2008, NOL submitted a non-binding bid for the Hapag-Lloyd container shipping business. A completed transaction
would result in the integration of NOL's container shipping business APL with Hapag-Lloyd, creating the world's thirdlargest container carrier. Annual revenue was up strongly to $9.29 billion, but net profit fell sharply due to the effect of the
global financial crisis on the industry. APL, which contributes the majority of the company's revenue, grew its container
volumes by 5%, but recorded a substantial operating loss in the final quarter which severely reduced the Group's overall
full year result.
The company reported a record $8.16 billion in revenue in 2007, up 12%. The net profit figure for the year was up 44% to
$523 million, going some way to reversing the decline of the previous year. In March 2007, vessels operating to the US
West Coast were converted to the use of cleaner-burning low sulphur fuel. In June, the company introduced "cold-ironing"
for ships calling at California, allowing NOL's ships to use cleaner land-based power while berthed. The company derived
76% of its 2007 revenue from container shipping.
For the financial year 2006, revenue generated by Neptune Orient Line fell marginally by 0.1% to $7.26 billion. Revenue
from the Americas contributed around 58.2% of total revenue up from 57.9% the previous year. Volume generated from
the company's Transpacific and Latin America shipping trade totaled 892,000 FEUs (forty feet equivalent unit) due to
strong growth in these regions. In addition, US imports from China alone in 2006 grew by 15.4% which saw revenue from
the Americas increase despite a slight fall in consolidated revenue. During the year, the company expanded its US West
Coast marine terminal, in Los Angeles, Oakland and Seattle to cater for the anticipated increase in demand for shipping
services in the future. Net profit for the year fell by 54.8% to $363.7 million due to higher cost of sales and impairment in
the value of goodwill due to consolidation.
Strong freight market raised rates on all operating corridors, which led to group revenue in 2004 to increase to $6545
million and posted net profit of $943 million. The profit included gains from non-recurring items totaling $120 million,
including earnings following the sale of American Eagle Tankers and a write-back of deferred tax liabilities. NOL continued
to perform strongly in 2005, when it posted net profits of $804 million from revenue of $7271 million.
Crowley Maritime Corporation
Estimated Market share: 1%
46
KEY COMPETITORS
22 January 2010
Crowley Maritime Corporation transports freight, petroleum products, and breakbulk by ship. It also provides trucking
services, ship assists, towing, logistics, and marine salvage. The company has a fleet of more than 400 vessels and more
than 100 offices worldwide; it has expanded with the acquisition of Marine Transport Corporation. Group revenue in 2000
was estimated at $1100 million. The company's history began in 1892 when founder Thomas Crowley purchased one 18foot Whitehall boat to provide transportation of personnel and supplies to ships anchored on San Francisco Bay. Crowley
Maritime Corporation (CMC) is primarily a family and employee owned company engaged in marine transportation and
logistics services.
CMC is organized to provide services in two major segments of operations. Crowley Liner Services provides cargo liner
services throughout the U.S., Central America, the Caribbean, and northern Venezuela and Colombia, whereas Crowley
Marine Services provides specialized marine transportation and logistics services on a worldwide basis, including marine
project management and breakbulk cargo transportation through its Crowley Marine Transport operating division,
petroleum tanker transportation through its subsidiary Crowley Petroleum Transport, Inc. (formed in 1997), and petroleum
and chemical transportation and crude oil lightering through its Marine Transport Lines subsidiary. The principal
operations of the company are located in the US, Alaska, Puerto Rico, Central America, the Caribbean Islands, Russia
and other international markets.
In 2007, CMC's business was strong, with $1.62 billion in revenue representing a 10.4% growth on the previous year. An
even greater increase of 80.5% in income was estimated to have occurred, due in a large part to a number of one-off
factors such as the sale of a vessel, the completion of a no-cure-no-pay contract by the company's Marine Services
business, and the settling of a Lloyd's Standard Form of Salvage Agreement or "Lloyd's Open Form" ("LOF") contract.
Growth in CMC's liner business was assisted by an increase of 6.4% over 2006 in the average revenue per twenty-foot
equivalent, or TEU, consisting of rate increases for services and fuel surcharges. Partially offsetting this gain was a first
quarter decrease of 4% in container and noncontainer volume, primarily due to a continued downturn in the Puerto Rico
market. CMC has expanded its petroleum carrying capabilities in recent years with the construction of four new 155,000barrel articulated tug barge (ATB) tank vessels and four 185,000-barrel ATBs. Six more 185,000-barrel ATBs are on order
with a shipyard and scheduled for delivery by the end of 2010. In 2007, the company placed orders for three, 330,000barrel ATBs, which are scheduled for delivery by mid-2013.
For the financial year ended 2006, consolidated revenue of the company increased by 23.3% to $1.47 billion. All four of
the company's business segments recorded an increase in revenue, with the largest increase coming from petroleum
services. Liner services for the period increased due to an increase in rates which was partially offset by a decrease in
container and non-container volumes. In the Marine Services division, operating revenues from this segment increased by
21.3% to $223.1 million in 2006; compared to $183.9 million in 2005. The increase in revenues was due to higher demand
and utilization for tug and barge fleet in the Gulf of Mexico, West Coast and Alaska, stronger marine salvage operations
and higher rates. This was partially offset by a $5.8 million decrease in revenues from services provided in Far East
Russia due to a change in contract work being performed. The utilization rate of vessels was also higher in 2006 as
compared with 2005. Total consolidated operating expenses increased by 8.8% during the period as a result of higher
vessel-related costs such as fuel, maintenance and crew costs in addition to higher company-wide insurance expenses.
The strong rise in revenue led to an increase in the company's operating profit by 1.9%.
In 2005, consolidated revenue increased by 20.2% from 2004 to $1,190.8 million. The increase in revenue was attributed
to higher rates within the Liner Services segment, strong demand for tug and barge fleet in the Gulf of Mexico, along the
US West Coast and Alaska and the expansion of warehousing and distribution activities in Central America. Marine
Services recorded a revenue increase of 13.9% to $183.9 million in 2005. This was due to an overall increase in demand
for the company's tug and barge fleet for the year. Consolidated expenses for the year also increased by 6.9% due to
higher fuel and crew costs. Direct administrative expenses also increased as a result of a rise in administrative payroll
expenses primarily as a result of the acquisition of Northland Fuel. Operating income for CMC increased by a huge
47
KEY COMPETITORS
22 January 2010
178.6% in 2005, partly due to gains from the sale of equipment, land and seven vessels. A stronger waterborne freight
market increased revenues in 2004 to $999.7 million and net income to $24.9 million. Consolidated operating revenues for
2003 totaled $978.0 million and net income amounted to $12.8 million.
48
INDUSTRY PERFORMANCE
22 January 2010
Industry Performance
CURRENT PERFORMANCE
After years of easy growth, life has got much more difficult for operators in the global shipping industry since the second
half of 2008. Difficulties in accessing credit, an over-supply of ships in the world fleet, faltering world growth, and major
economic problems in most of the world's high consumption economies have laid down a "once in a generation" set of
problems for the industry. The challenge of remaining viable in a nose diving market is a significant one, and is consuming
the minds of shipping executives worldwide. Major player Hapag-Lloyd's situation has gotten to the point where by August
2009, it was set to receive a billion dollar cash injection from its owners in order to remain solvent. The currently
unprofitable industry is locked in a tussle and jostle between corporate muscle and fossil fuel. It is estimated that total
active capacity amongst the world's 20 largest shipping lines has contracted by over 2% during the year, as companies
took ships out of service to adjust to lower levels of demand. Despite these very tough conditions, no major global
shipping company has yet collapsed.
The Shipping Logistics industry is cyclical and is primarily measured by economic activity. The industry is sensitive to real
world GDP growth (which is the main driver for ocean cargo growth), water transport infrastructure, the level of
merchandise trade, the price of crude oil and the usage of substitute products such as air transport. Strong economic
growth also produces high business sentiment which in turn affects company profits and investment for new equipment.
Demand for new vessels remained strong until late 2008. The global logistics (shipping) industry is expected to record an
annualized growth rate of 5.0% between 2004 and end 2009. IBISWorld believes that the industry is in the mature stage
of its economic life cycle.
International cargo volumes depend on changes in income, industrial output and the relative value of world currencies.
Passenger numbers are dependent on the demand for cruise travel, and the level of disposable income. Real increases in
domestic consumer income tend to induce increases in imports of household goods, while growth of consumer spending
around the world aids export markets and hence shipping. Expanding industrial production will tend to generate more
shipments of export raw materials and intermediate or semi-finished goods. A rise in the value of the currency of major
markets such as the US and the Euro zone would impact negatively on its exports while accelerating imports. Conversely,
a significant drop in the value of certain currencies would reduce imports and strengthen export markets. This issue is of
relevance to the shipping industry, which strives to have full ships entering and exiting ports to maximize efficiency and
revenue.
Industry revenue: the party is over
After a lengthy period of robust growth and very high freight rates, the global shipping industry entered 2009 with a
different reality surrounding it, and this gloomier tone prevailed for the year. Services were being cut, prices were sharply
down, and revenue was far harder to generate than it has previously been.
Total revenue in the Shipping Logistics industry will increase from $108.26 billion in 2004 to $138.48 billion by end 2009.
This represents a 5.0% increase on an annualized basis, indicating that it has been a very good period for the industry
overall. More accurately, it has been a tale of two very different eras - the good times until mid 2008, and the bad times
since. Over the period, revenue per establishment will likely rise from $3.8 million to $4.8 million, reflecting the significant
increase in revenue as compared with the annualized rise in the number of establishments. The industry is heavily
influenced by worldwide real GDP growth due to the strong link between consumer confidence and business sentiment
and the volume of cargo transported.
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22 January 2010
The nightmare
The perfect storm is set to continue for the industry in 2009, with a natural cyclical downturn in the shipping industry
coinciding with a major recession in key economies around the world. Major shipping lines are cutting routes and staff
wherever possible as they attempt to remain solvent during the slump. The managements of these companies have
shifted their focus from revenue and market share growth to defending the existence of the companies themselves. It is
expected that industry revenue will decline by about 14% during the year as a result of weak shipping rates, service
cutbacks, and increased competition. Additionally, fuel surcharges that previously added to revenue (if not profit) are
lower in 2009, due to the large fall in the price of oil in the second half of 2008. The picture is even worse than the 14%
suggests, because of the large increases in the fleet sizes of most major shipping lines during 2009. Revenue would have
had to grow significantly to cover the extra costs involved in having these ships available, so for revenue to fall by such a
large amount is a big problem. The Baltic Dry Index, an index that measures the cost of chartering a bulk ship, grew
solidly through the first half of 2009, recovering a small slice of what it lost in 2008. By August, however, it has started to
slide again, as China cut back its orders of raw commodities.
The golden years
IBISWorld believes that industry revenue enjoyed its final positive year for some time in 2008. A 10.9% rise in industry
revenue was estimated to have occurred due to brisk trade in the first half of the year, and contracts that were signed
before the global economy began to sharply decline in July and August. The drastic turnaround in industry fortunes is
portrayed by the Baltic Dry Index, a measure of the cost of hiring different types of ships for private use. In May 2008, the
daily charter rate for a Capesize ship was in excess of $230,000, as a shortage of ships coupled with high demand to
drive prices to unprecedented highs. By November, the daily rate had slumped to as little as $5,000 (hardly more than the
wages price of a basic crew). This 97% fall in the space of five months represents a shift in industry conditions on a scale
rarely seen anywhere. The saving grace for the industry is that many of the contracts signed in the first half of the year
were for services to be delivered in subsequent months, meaning that many operators continued to receive strong
revenue flows for much of the year. Once these generous contracts expired, there was nothing nearly as lucrative on
offer. Another concerning development in the second half of the year was a substantial decline in the price of
commodities, the high demand for which had been central to the expansion of the shipping industry in the years prior.
Revenue increased by a further 9.2% in 2007. This was mainly attributed to strong real GDP growth of 4.9%, which
increased demand for global trade. In Europe, the shipping market picked up as economic growth in the European Union
region was solid. The increase in trade relations and outsourcing activities between Europe and Asia was an important
driving force for revenue growth in the region. In North America, the US economy cooled down late in the year due to the
onset of the sub-prime mortgage crisis, though this did not immediately translate into crippling the broader national
economy. Consumer sentiment was estimated to have fallen slightly (0.9%) as economic growth slowed, interest rates
rose, and high oil prices and sub-prime issues remained an ongoing concern. IBISWorld believes that higher rates for
shipments to Europe (as their demand for Asian products increased) offset the impact of a slowing US economy to a
considerable extent. In addition, a key point to note is that the demand for bulk commodities, which by default are
transported by ships (e.g. wood, crude oil, steel and copper) remained strong.
Strong economic growth and stabilized crude oil prices saw industry revenue increase in 2006 by 10.4%. IBISWorld
estimates that worldwide real GDP growth increased by 5.1% in 2006 (similar to 2004) and as a result, served to drive the
level of international trade upwards. Data from the World Trade Organization (WTO) shows a direct correlation between
real GDP growth and international trade. Similar to 2005, high oil prices produced high volumes for the Shipping industry
as it is the cheapest form of (cross-border) transport. However, unlike the previous years, the increase in revenue in 2006
was driven by volume rather than prices. Freight and charter prices began to fall in 2006 due to the oversupply of vessels
and capacity. Margins were reduced as supply exceeded demand. In addition, high energy prices led to a sharp rise in
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22 January 2010
bunker prices that further reduced profitability in this industry. In terms of progress in the various market segments, the dry
bulk sector performed very well due to high demand for commodities especially from Oceania (Australia) and South
America, while the tanker market was moderate. Elsewhere, Liquefied Natural Gas trades were up 12% while world
container trades were up 10.4%.
For 2005, industry revenue increased 11.3%, another very strong result for the industry. While merchandise trade
continued to increase in 2005, IBISWorld believes that revenue was driven by higher oil prices. Crude oil prices averaged
about $49 a barrel in 2005 and this pushed the demand for water transport higher (a trend that began in 2004). Revenue
growth in the Air Freight industry was estimated to have grown by a mere 1.0% in 2005 as a result of high oil prices as jet
fuel increased 42%. This forced many manufacturers to shift towards shipping as an alternative mode of cross-border
transport. Vessel deliveries during this period increased by 17.3%, however China's deliveries rose by nearly 54% thanks
to bulk, product, and chemical carriers and container ships. The number of ships scrapped during this period was also at
an all time low. Besides rising fuel costs, the surge in maritime transport was due to the rapid growth in container ships,
which had increased about 10% per year in overall capacity since the mid 1990s, brought about by higher outsourcing
and globalization activities. This was seen in many developing countries in Asia and to a certain extent South America;
however, the main contribution of industry revenue was from Asia, in particular China. China's trade flows are focused on
the US, Europe and Asia Pacific region and with China becoming an integrated part of the worldwide manufacturing
process and outsourcing needs; it provided strong revenue growth in the container segment for time sensitive shipments.
The volume of merchandise trade increased 6.0% in 2005 as a result of a decrease in economic activity at the global level
that caused a deceleration in the expansion of world merchandise and services trade. In terms of region, the strongest
increase was recorded in the Middle East, followed by Africa, the CIS and South America. These four regions'
merchandise exports contain a high share of mining products (ranging from 40% for South and Central America to 70%
for the Middle East). World export of automotive products also increased in 2005 which also led to strong growth in car
transport for the year, especially from Japan.
Profitability
Whenever a big shift in charter rates and freight volumes occurs, the consequences don't take long to make their way to
the bottom lines of companies. In late 2008, key industry figures were reporting that the negative market conditions were
"unprecedented" in the industry's history. Prior to 2008, the industry was enjoying steady profitability due to global
economic growth and a shortage of shipping capacity around the world driving up freight rates. The shipbuilding industry
was operating at maximum capacity between 2005 and 2008, and now there is an oversupply of ships. The market's
tendency to over-correct shortages and surpluses in the shipping fleet means that periodically there will be very lean
years in the water transport industry, as there will be more ships than cargo.
According to Bloomberg, the average price of 380 Centistoke (the main marine bunker fuel) was $670 a metric ton in the
third quarter of 2008, compared with US$383 a year earlier. By April 2009, weak demand had caused the price to fall
below $300 per ton. This significant volatility in a key cost area is generally passed on to customers through fuel
surcharges, but in an already weak market it is difficult to raise prices in the event of fuel cost increases. In the instance
that the cost is able to be fully passed on to customers, the rise in price is likely to result in a fall in demand, which is also
a problem for industry profitability.
Profitability has also been aided during the current performance period by a decrease in wages as a proportion of
revenue. Larger ships and improvements in technology have allowed staffing costs to be contained, which reduces the
day to day expenses of the industry. Many companies in the industry have procured larger and more fuel efficient vessels
to exercise economies of scale in order to remove operating costs and increase margins. Profits were strong up to 2004,
however high bunker prices and lower charter/freight prices in 2006 reduced margins. The increase in both depreciation
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22 January 2010
and profits will be offset by a decrease in wages as a proportion of revenue. While wages are expected to increase in the
current performance period, its growth rate is expected to be lower than revenue due to the modest wage rates offered by
this industry. Industry profits for 2008 and 2009 are expected to be significantly lower than in previous years, if indeed
most companies manage to turn a profit in 2009 at all.
Establishments, employment, and wages
The number of industry establishments worldwide in the Shipping Logistics industry will increase from 28,283 in 2004 to
28,815 in 2009. This represents an annualized growth of 0.4%. The small rise in industry establishments is due to the
medium barriers of entry to the industry (see Barriers to Entry section) despite strong revenue growth over much of the
current performance period. Establishment growth has been minimal in developed countries due to consolidation (U.S.)
and low real GDP growth (Europe) but higher manufacturing and service capabilities from developing countries such as
China, India and Eastern Europe has helped push overall establishment upwards for this industry. IBISWorld believes that
the large establishments in Europe contribute significantly more per employee to the industry than other regions. This is
because entities in these regions can command better economies of scale through better infrastructure, cost-effective
purchasing of equipment and greater utilization of technology as compared with developing regions. Overall establishment
numbers are expected to decline during 2009, as the poor market conditions force some companies to the wall.
As a result of the increase in establishments during the five year period, employment is also expected to rise by about
40,000. The increase in demand for shipping services lifted employment numbers during the 2005-08 period. The skills
and experience required by this industry differ by occupation. Seafarers can enter the industry from high school or special
training schools whereas ship pilots and captains require specialized training. Administration and customer service
functions however require a pleasant personality and good speaking voice. A typical international merchant ship has a
captain, three deck officers or mates, a chief engineer and three assistant engineers, a radio operator, plus six or more
unlicensed seamen, such as able seamen, oilers, and cooks or food handlers.
Wages in 2009 will be similar to 2004, largely due to a dip in 2009 as companies cut shifts and staff offsetting previous
wage gains. Labor costs are the highest in Western Europe followed by Oceania and North America. For example,
countries that provide more high value and movements of cargo (carriers transporting cargo into the country also provides
transportation out), utilize greater technology, have a higher standard of living and are more unionized would attract
significantly higher wages. During 2008, wages and employment figures were affected by the industry downturn which
took hold in the latter part of the year, and have continued into 2009. Major companies such as NOL announced
significant staff cutbacks, and a surplus of skilled labor in the industry stifled wage growth.
Pirates...and not an eye-patch in sight
An issue for the global industry that has recently risen to new levels of prominence is piracy. The prevalence of pirate
attacks worldwide in 2008 was approximately 20% higher than in 2007, with particular hot spots in Indonesia, Nigeria, and
Somalia. Modern pirate attacks tend to involve the ship's crew being held hostage at ransoms of up to $10 million.
Tankers and cargo vessels comprise 80% of all pirate attacks. Cruise ships, fishing boats, and yachts are relatively safe.
Many pirate attacks occur while ships are anchored, with the pirates armed with guns and rocket-powered grenade
launchers approaching in speedboats. As the focus of many pirates is taking the crew hostage, the particular cargo on
board is often of little interest. Somalia's lack of a functional central government has meant there hasn't been a
coordinated response to piracy in its waters. Nations in extreme poverty lack the resources to stamp out pirates.
In South-East Asia, national naval forces and coast guards have increased their efforts to patrol their waters effectively,
including information sharing and joint patrols between nations. Following the September 11 attacks, the US government
provided significant financial support and training to South-East Asian nations to assist them to combat terrorism and
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22 January 2010
organized crime. Indonesia's navy and marine police are still under-resourced, and pirates continue to prosper in its
waters. Many developed countries invest money and resources in regional co-operative agreements to reduce crime.
More sophisticated vessel tracking devices are being used to address hijackings, along with electric force fields around
the perimeter of ships.
The costs of piracy to the industry and the economy in general are considerable. These costs are incurred through the
ransom sums that shipping companies pay, the value of goods stolen, the cost of productivity losses, and higher
insurance costs. The losses are all passed onto consumers via higher shipping rates, and hence higher prices for
imported and exported goods. Attacks continued during 2009, with the average random sum demanded by pirates
actually increasing.
The Baltic Dry Index, and why it matters
The Baltic Dry Index chronicles the prices paid by dry cargo owners to charter ships on the spot market. Aggregated from
different regions and different ship sizes, the index gives a real time insight into the demand for cargo movement
worldwide, and is seen by many as a glimpse into the future for the world economy. With today's dry cargo being
tomorrow's inputs into industrial production, it is indeed a useful indicator of where things are headed.
The index soared in 2006 and 2007, with global shipping capacity failing to keep pace with the booming global economy,
causing cargo owners to attempt to outbid each other to get their products to their destinations. These massive prices
prompted a rash of new building contracts for shipyards. The problems that caused the world economy to take a
damaging tumble from mid 2008 were particularly acutely felt in the shipping industry, with demand drying up at the same
time as many newly built ships entered the market. This resulted in a phenomenally sharp decline in the Baltic Dry Index,
as seen in the accompanying table. Since this time, modest improvements in the index have been experienced, but the
level remains far below its earlier peak.
Baltic Dry Index
Year
Year
Index
Baltic Dry Index
June 30, 2006
2964
December 31, 2006
4362
June 30, 2007
6278
December 31, 2007
9143
June 30, 2008
9599
December 31, 2008
774
June 30, 2009
3757
December 31, 2009
3005
Source: IBISWorld
HISTORICAL PERFORMANCE
The history of commercial shipping stretches back millennia, and the technology and methods were largely unchanged
until quite recently. Commercial shipping up to the 19th Century was owned by the merchant or by the trading company
(tramp shipping), rather than a common-carrier service. It was only in 1818 that an American registered ship, the Black
Ball Line started its service from New York to Liverpool on a common-carrier line service on a dependable schedule. A
policy of sailing regularly and accepting cargo in less-than-shipload lots enabled the Black Ball Line to revolutionize
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22 January 2010
shipping. Not long after, steamboats were used to transport goods, pioneering the first Atlantic crossing under steam
power in 1838. Steamships gradually replaced sailing ships for commercial shipping through the 19th century. The first
steam-propelled ship designed as an ocean-going tanker was the Gluckauf, built in Great Britain in 1886. It had 3020
deadweight tons (DWT; the weight of a ship's cargo, stores, fuel, passengers, and crew when the ship is fully loaded) and
a speed of 11 knots.
20th century
Internal combustion engine and gas turbine came to replace the steam engine in most vessels in the 1900s. This was
prominent on trans-oceanic travel, transatlantic and transpacific routes, with steam powered ocean liners replacing sailing
ships, and then culminating in the massive Super liners which included the Titanic. It is also worthwhile to note that the
event with the Titanic led to the first Maritime Distress Safety System. Another influential early 20th century innovation
was the "ro-ro" (roll on, roll off) type of vessel and cargo. This technique was first used on World War II landing craft, and
allows the loading and discharge of vehicles without hoisting. This type of vessel remains in use to the present day.
The major innovation for global shipping logistics in the 20th century was containerization. Road-and-rail containers,
sealed boxes of standard sizes, were used early in the century; but it was not until the 1960s that containerization became
a major element in ocean shipping, made possible by new ships specifically designed for container carrying. Early
container ships were designed to be loaded with railway boxcars. The boxcars could be moved directly into the shipping
yard on wheels, and then lifted onto the ship with cranes. At the other end, the boxcars could be put back onto the tracks
and moved to their final destination. In the 1950s, the technique was perfected, moving just the container onto the ship,
rather than the container and the wheeled chassis used to support it. By 1960 these factors had led to the introduction of
standardized steel or aluminum containers (8 x 8 x 40 feet in the most common size) into which almost any non-bulk
commodity could be stored. This eliminated wasted space on ships, and also paved the way to the development of
container ships, which are designed to have maximum space efficiency for containers of a uniform size.
By the end of the century, container ships were moving millions of tons of goods all over the planet. Large and fast,
container ships carry containers above deck as well as below; and their cargoes are easily loaded and unloaded, making
possible more frequent trips and minimum lost time in port.
21st century
The world economy experienced a bumpy year in 2001, due in part to the September 11 attacks. The economy, along
with the global shipping industry, recovered thereafter to record a number of very strong years of growth amidst good
conditions. In the years from 2003, this growth began to use up spare capacity in the production of oil and commodities,
with the high levels of demand starting to drive prices up. These years of easy growth also encouraged shipping
companies to make plans to expand their fleets in a major way, taking advantage of abundant finance and seemingly
endless confidence in the business world. As it turned out, what was really happening was the beginnings of a credit and
asset bubble that would bring the industry to its knees by the end of the decade.
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Revenue (constant prices)

Revenue $ Million
Growth %
2000
93,388.7
N/A
2001
76,190.6
-18.4
2002
84,203.1
10.5
2003
98,922.7
17.5
2004
108,259.0
9.4
2005
120,528.1
11.3
2006
133,027.0
10.4
2007
145,289.5
9.2
2008
161,081.7
10.9
2009
138,475.1
-14.0
2010
133,351.5
-3.7
Revenue Growth Rate
Revenue
Gross Product (constant prices)

Gross Product $ Million
Growth %
2000
45,853.9
N/A
2001
37,181.0
-18.9
2002
41,175.3
10.7
2003
48,768.9
18.4
2004
53,696.5
10.1
2005
59,541.0
10.9
2006
65,449.3
9.9
2007
71,191.8
8.8
2008
75,386.3
5.9
55
22 January 2010
2009
60,513.6
-19.7
2010
58,141.3
-3.9
Gross Product
Gross Product Growth Rate
56
OUTLOOK
22 January 2010
Outlook
Revenue (constant prices)
Revenue $ Million
Growth %
2010
133,351.5
-3.7
2011
136,151.9
2.1
2012
147,588.7
8.4
2013
154,230.2
4.5
2014
161,633.2
4.8
Revenue Growth Rate
Revenue
Gross Product (constant prices)

Gross Product $ Million
Growth %
2010
58,141.3
-3.9
2011
61,949.1
6.5
2012
69,071.5
11.5
2013
72,642.4
5.2
2014
76,614.1
5.5
57
OUTLOOK
22 January 2010
Gross Product
Gross Product Growth Rate
For all the pain that the industry is experiencing in 2009, its fortunes will eventually improve. However, the muchanticipated upswing may not occur early enough to save some players in the industry. Falling demand, coupled with an
oversupply of ships has created a situation for the shipping industry whereby transport prices have plummeted, and
competition is set to become fierce in the new global economic environment. All major world economies are encountering
significant financial difficulties that are trimming growth rates and constricting demand for goods and services. A direct
consequence of this is that the level of demand for shipping transport will be weaker than it has been in recent years.
Industry revenue
During the 2010 to 2014 period, industry revenue is expected to rise from $138.47 billion at end 2009 to $161.63 billion in
2014. This represents an annualized revenue increase of 3.1%; which indicates a period of steady recovery from the
sharp downturn of 2009. This prediction is based upon improving rates of world GDP growth from 2010 onwards,
recovering demand for energy and commodity products, and cost increases for crude oil prices. Throughout the period,
increased globalization and outsourcing activities are expected to continue. On the shipping side, the traditionally strong
demand for cruising activity is expected to diminish somewhat due to economic troubles, but not to the same extent as
other parts of the shipping industry. Weak global demand for vessels is expected to continue until at least 2011, due in
part to a surplus of ships.
IBISWorld predicts that 2010 will be the worst year during the outlook period for the industry, with companies continuing to
shed staff, reduce the frequency of their services, and hold some of their ships entirely out of service due to demand
being considerably lower than capacity. Consumer spending and sentiment will remain flat through this period as
unemployment in the broader global economy remains high. Despite government investment in infrastructure, this weaker
growth will limit demand for raw commodities in China and elsewhere, which has been a big driver of the shipping industry
in recent years. Revenue is forecast to fall by 3.7% in 2010.
The good news is that the shipping industry remains central to the world economy, and when a recovery does occur,
shipping will be a beneficiary. Currently 2011 looks to be the year that the global economy could meaningfully turn the
corner and get back on track, and IBISWorld forecasts a return to revenue growth for the shipping industry at this time. As
58
OUTLOOK
22 January 2010
globalization continues to increase, this industry remains an essential element for the sourcing, manufacturing,
assembling, and distribution of goods for individuals and businesses around the world. Revenue growth in each region will
depend on the real GDP growth rates in that region. Once the recovery occurs, it is envisaged that developing Asia will
contribute the strongest increase in revenue growth followed by South America, Middle East and Africa. Good revenue
growth is also expected from Eastern Europe as countries within the Commonwealth of Independent States continue to
grow from an influx of investments and oil revenue.
Global demand for energy and commodity products has declined from peaks early in 2008, and is expected to remain
below those highs during the outlook period. Shipping charter rates for the transportation of commodities (and energy
related products) are directly linked to the demand for such cargo. In the medium term, demand for commodities is set to
remain solid, albeit not over-heated as it was in 2007 and early 2008. There are a number of key reasons for both prices
and demand for commodities being expected to remain moderate during the outlook period.
After dipping into recession in 2009, the global economy is forecast to return to growth in 2010 and thereafter.
Furthermore, ongoing demand for raw materials and energy products to fuel real GDP growth in developing countries
(e.g. China) will act as a price floor, preventing further drastic falls. Low commodity and energy prices in the 1980s and
1990s had depressed investments in commodity production. The lack of capital investments has reduced capacity,
especially in the mining industry where demand has long exceeded supply. In addition, greater emphasis on
environmental issues has also slowed down capacity growth. The large scale nature of mining investments creates long
lags between investment and production, often up to a decade.
The majority of commodities traded in the open market are transacted in U.S. dollar. The depreciation of the U.S. dollar,
especially since 2003 has also been a contributing factor for high commodity prices. The dollar recovered somewhat
against other currencies from late 2008, and is expected to remain in that area in the short term. Ongoing geo-political
tension, especially in the Middle East, has created more speculators in both the energy and commodity markets. The
increase in anxieties and energy prices has had a knock on effect on the price of other commodities for transportation
purposes. In the past few years commodities have emerged as an investment asset. Low global interest rates and under
performing stock markets in the first half of the current performance period sent hedge funds and institutional investors in
search of better yields.
IBISWorld estimates that crude oil prices will stabilize during the outlook period; however prices are unlikely to remain at
their late 2008 and early 2009 lows. Oil producers have reduced production in light of the global economic conditions,
however production capacity is growing in response to the high amounts of capital investment and exploration activity that
have occurred over the last few years as a result of the historically high oil prices. The net result of this should be a
marginal increase in oil stocks.
Globalization is increasing and many companies are outsourcing or establishing entities outside their domestic market.
India is the leading offshore location for many U.S. and European entities and as risk falls and infrastructure improves,
more companies will outsource functions overseas. Favorable labor and operational costs in Central/Eastern European
countries such as Poland, Hungary and the Czech Republic also provide attractive outsourcing options for Western
European businesses. The globalization index by AT Kearney that tracks components of global integration, such as trade
and investment flows, internet usage and volume of international telephone calls showed that 72 countries ranked in the
2007 Globalization Index account for 97% of global GDP and 88% of the world's population. In 2004, 62 countries were
ranked in the Index and represented 96% and 84% of the world's GDP and population respectively. As globalization
increases, the demand for transport services, such as shipping will increase due to higher movement of goods.
The cruise segment is expected to grow throughout the forecast period as innovative products attract the affluent young,
baby boomers and retirees. With annual world growth of 18% and an estimated worth of $17 billion a year, cruising is one
59
OUTLOOK
22 January 2010
of the fastest growing sectors in the international tourism market. Growth in North American cruise passengers (the
largest market) is expected to grow at a rate of 4.25% per year between 2005 and 2020. An industry source revealed that
up to 30 brand new vessels will enter service between 2007 and the end of 2010. The Cruise Lines International
Association reported that their member lines carried 10.18 million North Americans in 2006, up from 9.67 million in 2005.
Passenger numbers increased past 10 million in 2007. While passenger numbers have continued to grow in 2008 and
2009, the prices charged by cruise lines have fallen sharply to entice customers during poor economic times. The
challenge for the industry will be to ratchet prices back up when a recovery occurs. In some instances, deep and extended
discounting can devalue the worth of a product in the minds of consumers, creating a risk of losing substantial patronage
if prices are restored to their former levels.
Between 2002 and early 2008, world shipping freight rates shot up as trade volumes soared. On many of the most critical
shipping routes, there was a severe shortage of capacity. Shipping lines placed huge speculative orders for new vessels,
and shipbuilders had over three years of work on their books at almost any given time. But suddenly, the boom has
vanished. As of late 2008, freight rates have nose dived, the world is spiraling into a prolonged slump, excess shipping
capacity has developed, and consumer confidence is down. This all combines to mean that the global Civil Ship and Boat
Building industry is experiencing an altered reality. Boat builders are cutting staff and trimming product lines, shipbuilders
are staring down the barrel of order cancellations, and the finance to undertake major projects has become much more
difficult to obtain. This situation will take quite some time to fully correct itself, with shipping companies set to suffer during
the outlook period due to excess capacity.
Profitability
The big challenge for the industry is how to remain profitable with considerably less revenue than has been the case in
previous years. Companies are cutting routes, pulling ships out of the water, reducing the size of their workforces, and
undertaking programs to improve efficiency. Even with all this, there are likely to be casualties who are ill-prepared for the
current climate.
Companies that have shifted their operations to have a greater LNG and bulk transport focus appear to be better
equipped to stay afloat, while IBISWorld expects that a number of mergers and acquisitions will take place during the
outlook period as the industry undergoes a new round of consolidation. IBISWorld predicts that carriers with strong
exposure to the Asian region will find it easier to remain profitable during the outlook period, while dry bulk shipping has a
less rosy immediate future due to the recent end of the commodities boom. Overall industry profitability will be low while
the industry adjusts to the new set of market conditions.
Companies will continue to source seafarers, especially "ratings" staff (deck crew) from Asia where labor is cheap.
Another approach that has been used by shipping lines to contain costs (particularly during early 2008 when fuel prices
peaked) is to reduce the cruising speed of ships. Reducing the speed of a ship from 22 knots to 20 knots has
considerable fuel cost savings. When supply of ships was tight, some shipping lines were reluctant to slow their ships as it
meant that it reduced the daily productivity potential of each ship. Now that ships are in over-supply, it would appear
unlikely that companies will remain anxious on that front.
Establishments, employment, and wages
IBISWorld believes that the number of establishments will increase marginally over the forecast period fueled by higher
participants from the Far East offset by a relatively stable/declining number of firms in Western countries due to higher
merger and acquisition activities. The increase in establishment numbers will come from developing regions such as
North Asia, Africa and Middle East, and India and Central Asia who are building better infrastructure to cater for the
60
OUTLOOK
22 January 2010
exports/imports of goods. IBISWorld estimates that establishment numbers will increase by 0.8% during the outlook
period to 30,030.
Employment is expected to increase by about 1.0% per annum over the outlook period. A decline is expected to mostly
occur during 2010, while companies are trying to become leaner. After that point, employment will gradually expand as
the industry recovers and increases its capacity. Ship officers (e.g. captains) are usually sourced from OECD countries
and tend to command higher wages, as compared with ratings staff that are sourced from Asia. A study by the Warwick
Institute for Employment Research in December 2005 showed that the labor market for seafarers has continued to shift
from the traditional maritime countries of Western Europe, Japan and North America towards the Far East, Indian subcontinent and Eastern Europe. This can be attributed to the higher levels of maritime activity in the Asia region, especially
in the Far East. Wages are expected to rise by 2.2% per annum, while revenue per employee is expected recover
strongly, rising from $89,050 to $98,840 in 2014.
The Arctic: The race for pole position
Global climate change has been triggering large scale melting of the Arctic polar ice cap over the past decade, and
scientific reports indicate that the melting is now proceeding at an accelerating rate. The Arctic Ocean currently has two
main sea routes that are open to shipping for about five months of the year with the help of icebreaker ships: the Northern
Sea Route and the Northwest Passage. If the Arctic ice cap continues to shrink, it will become a major route for
international shipping in coming decades. A Northern Sea Route that is navigable longer would make the transportation of
commodities to international markets easier and significantly reduce transportation times and costs between Asia, Europe,
and North America.
According to a report by the US Office of Naval Research, by 2050 the Northwest Passage through the Canadian
Archipelago and along the coast of Alaska will be "ice-free and navigable every summer by non-icebreaking ships." As
most government reports of this type are quite conservative, IBISWorld believes that the pace at which this scenario
unfolds could be considerably quicker than that indicated by the Office of Naval Research. All nations with Arctic borders
and interests are becoming increasingly aware of the impending significance of the Northern Sea area, and governments
and private enterprises will be jostling for position on this matter in coming years.
61

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IBISWorld Industry Report

Global Logistics - Shipping: H4821-GL

MARKET SIZE ...................................................................................................................................................................................15

Key Factors ........................................................................................................................................................ 31

MAJOR PLAYERS .............................................................................................................................................................................33

Industry Performance ......................................................................................................................................... 49

ACTIVITIES (PRODUCTS AND SERVICES)

DEMAND & SUPPLY INDUSTRIES

F4311-GL - Global Wholesale Trade

Copyright 2010, IBISWorld Inc.

*1,290,000.0 Thousand metric tons

Copyright 2010, IBISWorld Inc.

*1,290,000.0 Thousand metric tons

Industry Gross Product

Copyright 2010, IBISWorld Inc.

Revenue Growth Rate

Copyright 2010, IBISWorld Inc.

Coastal Freight and Passenger Transport

Inland Water Transport

International Freight Transport

International Passenger Transport

Copyright 2010, IBISWorld Inc.

General Cargo ships

Source: Clarksons Research

MAJOR MARKET SEGMENTS

Others including Passenger

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Mitsui O.S.K. Lines

Zodiac Maritime Agency

Source: Various industry sources

Copyright 2010, IBISWorld Inc.

South East Asia

Africa & Middle East

India & Central Asia

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

DOMESTIC AND INTERNATIONAL MARKETS

Copyright 2010, IBISWorld Inc.

Source: World Trade Organization

World Seaborne Trade 2004-2007

Source: United Nations COMTRADE database

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

There are no specific tariffs for this industry

REGULATION AND DEREGULATION

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

CAPITAL AND LABOR INTENSITY

TECHNOLOGY AND SYSTEMS

Copyright 2010, IBISWorld Inc.

Copyright 2010, IBISWorld Inc.

Source: United Nations COMTRADE database

Copyright 2010, IBISWorld Inc.

KEY SUCCESS FACTORS

Ability to accommodate environmental requirements

Market research and understanding

Prompt delivery to market

Copyright 2010, IBISWorld Inc.