Ocean Transportation Overview Ocean Transportation Overview - Standard
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Ocean Transportation Overview Ocean Transportation Overview - Standard 20’ GP – 33.2 CBM | 28,130 KGS* / 62,016 LBS* 40’ GP – 67.70 CBM | 28,750 KGS* / 63,383 LBS* 40’ HC – 76.30 CBM | 28,600 KGS* / 63,052 LBS* 45’ HC – 86.0 CBM | 27,700 KGS* / 61,067 LBS* Ocean Transportation Overview – Specialized I Hardtop – Equipment 20’GP = 33.00 CBM – 27,780 KGS* / 61,250 LBS* 40’GP = 67.20 CBM – 25,780 KGS* / 56,840 LBS* 40’HC = 76.00 CBM – 27,300 KGS* / 60,180 LBS* Ocean Transportation Overview – Specialized II 20’ REEFER – 28.10 CBM – 29,140 KGS* / 64,242 LBS* 20’ FLATRACK – 42,100 KGS* / 92,800 LBS* 40’ REEFER HIGH CUBE – 67.70 CBM – 29,580 KGS* / 65,212 LBS* 40’ FLATRACK – 49,100 KGS* / 108,350 LBS* Types of Services Bulk ISO – ISO Bulk Breakbulk RORO FCL / LCL Containerized Ocean Booking Process - Overview NOTE: INCOTERMS 2020 has changed DAT to DPU (Delivered at Place Unloaded) Containerized Ocean Booking Process - Detail Customer requests a Is the request for SHIPMENT quote or shipment a quote or shipment? COUNTRY ORIGIN OFFICE CUSTOMER Who arranges the QUOTE pickup? Does AIT have a contract AIT contacts Country NO with the Country Origin Origin Office for charges Office? Customer arranges pickup Country Origin Office YES and freight drop at origin arranges pickup port Country Origin Office AIT creates quote and provides origin charges sends to Customer Country Origin Office Country Origin Office’s books shipment and Customer approves quote AIT notifies Customer local vendor drops freight sends pre-alert with at the origin port reference and PO numbers to AIT Customer or Country Origin Office provides shipment information AIT pays freight charges AIT turns over shipment and surrenders the OB/L Ocean Carrier departs documents to Customs to the Forwarder or Ocean origin port with shipment Broker Carrier Ocean Carrier or Country AIT arranges for shipment Customs Broker turns Customs Broker AIT dispatches shipment Ocean carrier arrives Origin Office sends transfer to bonded shipment over to AIT with clears freight and provides Local at destination port customs release, entry arrival notice to AIT warehouse Delivery with shipment Agent with documents summary, and invoice necessary to deliver shipment Local Delivery Agent Local Delivery Agent AIT invoices Customer or delivers provides proof of Country Origin Office shipment to Consignee delivery (POD) to AIT Intro to Key Ocean Entities – ALLIANCES 2019 Ocean has a unique route, container and vessel sharing strategy commonly referred to as “Alliances.” 3 Main Alliances (right image) NOTE 1: HMM will be dropping out of the 2M and switching to THE ALLIANCE – estimated early/mid 2020. NOTE 2: ZIM is a non-exclusive member of the 2M Alliance. NOTE 3: SM LINE still largely independent (main remnant of Hanjin Shipping). Mostly a inter- Asia carrier. TEU v FEU & Liner Terms ▪ TEU represents TWENTY EQUIVALENT UNITS or a 20’ container ▪ NOTE: TEU is the generally accepted value for service contracts and maintenance requirements. ▪ FEU represents FORTY EQUIVALENT UNITS or a 40’ container Liner terms tend to be for specialized cargo and are not as prevalent in day/day containerized cargo. For reference, the most common are listed below: ▪ Hook/Hook = Chartering term that pushes the stevedoring/terminal fees onto the shipper/receiver. ▪ Full Liner Terms = Freight rate generally includes full stevedoring, loading/unloading, dunnage, etc. This is generally considered containerized cargo. ▪ SUBSETS OF FULL LINER: ▪ Free In/Liner Out (FILO) = cost of loading the vessel at origin is not included but is included at destination. ▪ Free In & Out (FIO) = cost of loading the vessel is not included for origin or destination. ▪ Liner In/Free Out (LIFO) = cost of loading the vessel is included but unloading is not included Intro to Key Ocean Entities – Share of Market I ▪ 1. A.P. Moller–Maersk Group ▪ 7. Hapag-Lloyd (inclusive of UASC) ▪ TEU: 3,012,172 ▪ TEU: 1,480,556 HQ: Copenhagen Denmark HQ: Hamburg, Germany Founded: 1904 Founded: 1847 Revenue: $40.3 Billion (USD) Revenue: $12 billion USD ▪ 2. Mediterranean Shipping Company S.A. (MSC) ▪ 8. Hamburg Süd Group ▪ TEU: 2,659,489 ▪ TEU: 646,918 HQ: Geneva, Switzerland HQ: Hamburg, Germany Founded: 1970 Founded: 1871 Revenue: $28.2 Billion (USD) Revenue: $6.9 billion USD ▪ 3. CMA CGM Group & APL ▪ 9. Orient Overseas Container Line (OOCL) ▪ TEU: 2,331,096 ▪ TEU: 565,113 HQ: Marseille, France (APL Singapore, Singapore) HQ: Hong Kong Founded: 1978 Founded: 1969 Revenue: $21.1 Billion (USD) Revenue: Unknown ▪ 4. China Ocean Shipping (Group) Company (COSCO) ▪ 10. Hyundai Merchant Marine (HMM) ▪ TEU: 1,539,618 ▪ TEU: 395,477 HQ: Beijing, China HQ: Seoul, South Korea Founded: 1961 Founded: 1976 Revenue: $10.2 billion USD Revenue: $855 million (USD) ▪ 5. Ocean Network Express (ONE) ▪ 11. Zim ▪ TEU: 1,428,834 ▪ TEU: 338,754 HQ: Tokyo, Japan HQ: Haifa, Israel Founded: 2017 Founded: 1945 Revenue: $2.7 billion USD Revenue: $3.4 billion USD ▪ 6. Evergreen Marine ▪ 12. Yang Ming Marine Transport Corporation ▪ TEU: 929,700 ▪ TEU: 520,364 HQ: Taoyuan City, Taiwan HQ: Keelung, Taiwan Founded: 1968 Founded: 1972 Revenue: $4.6 billion USD Revenue: Unknown Intro to Key Ocean Entities – Share of Market II Power of consolidation toward market share NOTE: Two largest carriers within their own alliance driving +35% of market share… Problems with consolidation? Top 20 Largest Ports Largest Global Sea Ports as of 2018 Activity Rank Port Volume 2018 (Million TEU) Volume 2017 (Million TEU) Volume 2016 (Million TEU) Volume 2015 (Million TEU) Volume 2014 (Million TEU) 1 Shanghai, China 42.01 40.23 37.13 36.5 35.29 2 Singapore 36.6 33.67 30.9 30.92 33.87 3 Shenzhen, China 27.74 25.21 23.97 24.2 24.03 4 Ningbo-Zhoushan, China 26.35 24.61 21.6 20.63 19.45 5 Guangzhou Harbor, China 21.87 20.37 18.85 17.22 16.16 6 Busan, South Korea 21.66 20.49 19.85 19.45 18.65 7 Hong Kong, S.A.R, China 19.6 20.76 19.81 20.07 22.23 8 Qingdao, China 18.26 18.3 18.01 17.47 16.62 9 Tianjin, China 16 15.07 14.49 14.11 14.05 10 Jebel Ali, Dubai, United Arab Emirates 14.95 15.37 15.73 15.6 15.25 11 Rotterdam, The Netherlands 14.51 13.73 12.38 12.23 12.3 12 Port Klang, Malaysia 12.32 13.73 13.2 11.89 10.95 13 Antwerp, Belgium 11.1 10.45 10.04 9.65 8.98 14 Kaohsiung, Taiwan, China 10.45 10.27 10.46 10.26 10.59 15 Xiamen, China 10 10.38 9.61 9.18 10.13 16 Dalian, China 9.77 9.7 9.61 9.45 10.13 17 Los Angeles, U.S.A 9.46 9.43 8.86 8.16 8.33 18 Tanjung Pelepas, Malaysia 8.96 8.38 8.28 9.1 8.5 19 Hamburg, Germany 8.73 8.86 8.91 8.82 9.73 20 Long Beach, U.S.A. 8.09 7.54 6.8 7.19 6.82 The recent trend of mega ships has spurred the addition of deep water sea ports. Many older ports struggle to service mega ships efficiently. Most North American ports have adequate deep water slips, however developing and under-developed countries struggle. Vessel Types Mega Ships & Counter Cyclical Trends ▪ Mega ships tend lead to “herd” effects, which tends to create overcapacity. ▪ Financing for mega ships is relatively cheap, considering many mega shipbuilders are subsidized by public funds in their home countries. Financing is even easier for SSL under state control. ▪ Growth of SSL vessel fleets are opposite of the global trade trend. ▪ Capacity is currently x4 of what it was in the year 2000. ▪ Container growth path was largely inline with global economic conditions between 1990 and 2000. This largely diverged beginning in late 2007, which brought on stagnation in seaborne trade. ▪ Economies of scale has also largely encouraged further consolidation and alliance sharing privileges leading to competition concerns. Mega Ships & Counter Cyclical Trends II ▪ Cost Savings? IMO 2020 causes significant concerns on this topic: ▪ The majority of savings with larger vessels is attributed to efficiencies gained through propulsion. ▪ New ships focus on “slow steaming,” meaning ships voluntarily move slower to avoid burning fuel more rapidly and increasing the frequency of stops at ports. ▪ Cost savings to carriers is typically enjoyed when increasing from 8,500 TEUS to 15,000 TEUS. When increasing from 15,000 TEUS to 19,000 TEUS, the cost savings are reduced significantly. ▪ WHY? Due to the inability to fill all container slots…especially moving west bound on the equipment reposition to Asia from North America. Speed v Cost savings Operational Costs v Speed / TEU Increase Mega Ships & Counter Cyclical Trends III Diseconomies of Scale? ▪ The largest container ships are deployed on the Far East-North Europe/North America trade lane, as there is sufficient cargo for this route, but also because this is the trade lane with the longest distance in nautical miles. Most of the cost savings of upsizing of container ships are realized at sea, because it is here that the fuel cost savings take place. ▪ The above is great, however this assumes that all vessels are full…This is not the case, especially for return/reposition voyages. ▪ Cost savings are absolutely dependent on the extent of a vessel being filled. ▪ The utilization rate that a 18,000 TEU vessel needs to reach a cost savings higher than that of a 14,000 TEU vessel is roughly 90%.