New Buildings, Market Trends and Development

BIMCO 2008 : Speaker : Prof. Dr. Manfred Zachcial, Institute of Shipping Economics and Logistics (ISL), Bremen Topic: New Buildings, Market Trends and Development Content 1. World Economy, Trade and Shipping 2. Container Shipping Markets 3. Tanker Markets 4. Dry Bulk Markets 1. World Economy, Trade and Shipping World transport and shipping are a derived demand of world economic development. After a phase of moderate growth during the late 90ies and early 2000, world economy accelerated since 2003 especially based upon the China boom that has been continued until today. It may be expected that the world economic growth rate of about 4.7 % in 2007 will slightly slow down but will remain on a quite high level of around 4.3 % in 2008 and the next years to come. This means that world shipping as a whole with an elasticity of demand related to world output of at least 1.0 will also grow with an annual rate of about 4.5 %, weighted over all commodity groups and loading categories. There is no doubt that container shipping will show comparably highest growth rates during the next decade, reaching up to 12 % annual growth rates in the short and medium run and then somewhat smaller rates in the long run. The demand for oil shipments by sea will probably continue to increase by a moderate growth rate of about 3 % p.a. Somewhat higher might be the growth in the dry bulk sector, but definitely not more than 5 % p.a. Leading forces of the strong expansion of imports from worldwide destinations, trade and shipping will remain China, more and more accompanied by India and several other emerging countries. The main shipping markets being containers, oil, and dry bulk show quite different origin/destination relationships. Large shipments of coal and iron ore are generated in Australia, Brazil, South Africa and are destined mainly for China and India. Also former coal exporting countries are ready to import more and more definitely cheaper coal over long distances mainly from Australia, Indonesia and the United States. New industrial concepts in several oil producing countries such as Saudi Arabia, the United Arabian Emirates, Iran, Venezuela, and maybe Russia will be in favour of exporting more mineral oil products and petrochemicals instead of crude oil in order to increase the value added of their resources. Before going into individual shipping markets it seems to be meaningful to give a brief overview on the whole world shipping market. According to our estimates being in line with other leading market observers such as Global Insight, Drewry, Ocean Shipping, and Clarkson total shipments in 2007 will be about 8.1 billion tons. Given an average distance of about 5,000 km per ton, this leads to a transport performance of more than 40,000 billion ton- kilometres. Assuming a future growth rate of at least 4 % p.a. over all loading categories during the next decade, there would be a total of up to 13 billion tons or 70.000 billion ton-kilometers. This growth will heavily be contributed by shipments of containers, but also by dry bulk and to a lower extend by liquid cargo. Fig. 1-1 : World Seaborne Trade by Main Loading Categories (2007: 8.1 Billion Tons) Others (Gas, Other general/dry Chemicals etc.) cargo Liquid Bulk 5% 9% 34% Container Cargo 15% Minor Bulks (Agric. Products, Forest Products, Steel etc.) 13% Major Bulk (Coal, Iron Ore, Grain etc.) 24% Fig. 1-2 : Growth Trends in Shipping by Major Loading Categories 800 700 600 Index 1985=100 500 400 300 200 100 0 Dry Bulk Liquid Bulk Other (Gas, Chemicals etc.) Container 2. Container Shipping 2.1. Demand The world container shipping markets are the most dynamic ones with an average annual growth rate of about 10 % p.a. during the period 1985 to 2007. Most recent growth rates since 2004 are even higher and may have reached about 12 % per year. The throughput in world container terminals amounted to 484 million TEU in 2007 and will probably reach 532 million TEU in 2008. The growth in container shipping will be mainly generated from Far East/China and South Asia. According to our forecasts – similar to those of other market analysts such as Drewry, Ocean Shipping Consultants, and Clarkson – there is no doubt that the 1 billion TEU limit of throughput worldwide will be overcome during the period 2015 – 2020. Fig. 2-1 : TOP 20 World Container Ports Rank 2007* 2006 2005 Growth Growth Port 2007 1,000 TEU 2006-2007 2005-2006 1 Singapore 27,935 24,764 23,192 12.8% 6.8% 2 Shanghai 26,109 21,864 18,084 19.4% 20.9% 3 Hong Kong 23,995 23,405 22,602 2.5% 3.6% 4 Shenzen 20,889 18,468 15,898 13.1% 16.2% 5 Pusan 13,259 12,021 11,663 10.3% 3.1% 6 Rotterdam 10,791 9,638 9,287 12.0% 3.8% 7 Dubai 10,697 8,783 7,619 21.8% 15.3% 8 Kaohsiung 10,257 9,764 9,471 5.0% 3.1% 9 Hamburg 9,890 8,863 8,088 11.6% 9.6% 10 Qingdao 9,469 7,732 6,307 22.5% 22.6% 11 Ningbo 9,336 7,143 5,181 30.7% 37.9% 12 Guangzhou 9,177 6,553 4,603 40.0% 42.4% 13 Los Angeles 8,355 8,462 7,485 -1.3% 13.1% 14 Antwerpen 8,269 7,035 6,464 17.5% 8.8% 15 Long Beach 7,313 7,332 6,710 -0.3% 9.3% 16 Tianjin 7,072 5,847 4,802 20.9% 21.8% 17 Port Klang 7,130 6,326 5,544 12.7% 14.1% 18 Tanjung Pelepas 5,500 4,770 4,169 15.3% 14.4% 19 New York / New Jersey 5,520 5,128 4,762 7.6% 7.7% 20 Bremen/Bremerhaven 4,932 4,450 3,736 10.9% 19.1% Total Top 20 235,895 208,348 185,664 13.2% 12.2% * partly preliminary estimates Sources: Ports, ISL Port Database 2008 Fig. 2-2 : Synopsis of Recent Forecasts of World Container Port Throughput up-to 2020 1200 1000 800 Mil. TEU 600 400 Corridor OSC 2007 Past Developement Drewry Forecast 2001 200 ISL Forecast 2007 Drewry Forecast 2007 0 2.2 Supply Fig. 2-3 shows the present world container fleet as at April, 1 2008 as well as the world container order book. The present fleet amounts to nearly 4,400 vessels with a total capacity of 11.5 million TEU. So far the majority of ships belongs to the size classes of 1,000 to 2,000 TEU. As a tendency, larger ships are going to be built. However, all size classes will have their specific markets being dependent on the demand side and the logistic systems. Very large carriers in direct trades will require more and more flexible feeder vessels such as in the North Range of Europe in order to serve the Baltic Sea and Russia, but also Great Britain/Ireland, France, Spain and Portugal. A look on the present world order book shows the immense quantity of new large ships on order. Provided data are correct there is a number of about 300 container vessels of more than 8,000 TEU on order. This is equivalent to an annual average growth rate of 13.7 % during the period 2008 – 2011. One might argue that this will lead to substantial overcapacities assume a growth rate of demand of about 12 % p.a. There are, however, some factors which will help to keep the container shipping markets in balance. These are: - longer distances in worldwide shipping of large tonnage; - waiting times at ports especially in China and FarEast; - slow steaming because of very high fuel cost; - beginning scrapping of old (but small) tonnage. Fig. 2-3 World Fleet and Order Book of Fully Cellular Container Vessels (April 2008) Fleet Orderbook Annual Growth until 2011 Size Class Slots in No. of Slots in No. of based on based on No.