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OCEAN FREIGHT MARKET UPDATE August 2017

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OCEAN FREIGHT MARKET UPDATE August 2017 DHL Global Forwarding, Freight OCEAN FREIGHT MARKET UPDATE August 2017 1 Contents TOPIC OF THE MONTH China Cosco Shipping’s offer to acquire OOCL HIGH LEVEL DEVELOPMENT MARKET OUTLOOK Freight Rates and Volume Development ECONOMIC OUTLOOK & DEMAND DEVELOPMENT CAPACITY DEVELOPMENT CARRIERS Mergers, Acquisitions and Alliances / Z-Score Update REGULATIONS DID YOU KNOW ? ? Congestion in European ports DHL Global Forwarding | OFR Market Update | Aug 2017 2 Topic of the Month – China Cosco Shipping’s offer to acquire OOCL A PROMISING OFFER THE OFFER COMPARING THE OFFER EXPECTED BENEFITS OF THE ACQUISITION It values OOIL’s1) share at HKD 78.67 (USD 10.07). The offer values OOCL at USD 6.4bn, i.e. 1.4x China Cosco Shipping is taking over the 3% market It is 31% higher than its closing value on the day OOIL’s P/B ratio (=the net worth of all of OOCL’s share of OOIL on the global container trade. More the offer was issued. 79 assets minus their debt). In comparison, CMA-CGM specifically, it reinforces the acqueror’s position on 60 acquired NOL for 0.96x its P/B ratio. several trade routes. COSCO COSCO INCREMENTAL TRADE SHARE +OOCL SHARE Asia - Indian 140% 6% 11% +6% 96% subcontinent NE Asia - OFFER JULY 7TH VALUE 14% 27% +13% Oceania OOIL OOIL P/B NOL NOL P/B North Europe - FINANCING THE OFFER ACQUISITION RATIO ACQUISITION RATIO 2% 7% +5% North America China Cosco is offering to buy 90.1% of the shares, PRICE V. P/B PRICE V. P/B while Shanghai International Port Group would Although this final figure may be considered as high, Asia - Europe 11% 15% +4% own the remaining 9.9%. It is solely financed OOIL has historically been more profitable than through external debt. NOL – and freight earnings are higher today than Transpacific 11% 18% +7% SIPG they were at the time of NOL’s acquisition. The acquisition certainly asserts China Cosco’s Investors have had concerns that the deal may not leadership on the North East Asia - Oceania route, China Cosco receive regulators’ approval: shares were last taking up to control short of a 1/3 of the trade. Shipping traded at HK$73.10 as at 25 July, for a 7% discount to the COSCO/SIPG offer price. Source: Drewry, Alphaliner; 1) OOIL is the mother company of OOCL DHL Global Forwarding | OFR Market Update | Aug 2017 3 High Level Market Development – Supply and Demand now Balancing CAGR 2’500 ECONOMIC 2017F 2018F 2019F 2020F 2021F WORLD (2017-2021) OUTLOOK CONTAINER 2’000 INDEX (WCI)2) GDP GROWTH EURO 1.8% 1.8% 1.7% 1.7% 1.8% 1.7% 1’500 BY REGION MEA 2.6% 3.4% 3.7% 4.1% 4.0% 3.8% 1’000 500 AMER 2.1% 2.6% 2.5% 2.4% 2.4% 2.5% 0 ASPA 4.8% 4.6% 4.6% 4.5% 4.7% 4.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 15 16 17 1’200 DGF World 3.0% 3.1% 3.1% 3.1% 3.2% 3.1% SHANGHAI CONTAINERIZED 1’000 15 13,7% FREIGHT INDEX 800 SUPPLY VS (SCFI)3) 600 DEMAND 10 6,8% 8,0% 7,4% 400 GROWTH 6,1% 6,3% 5,5% 4,9% 200 9,7% 4,7% 4,5% 5 7,8% 0 5,1% 5,3% 4,2% 4,3% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 3,1% 2,2% 3,4% 15 16 17 800 Demand -5 BUNKER PRICE -9,2% 600 Supply INDEX -10 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 400 200 Source: 1)real GDP, Global Insight, Copyright © IHS, Q4 2016 . All rights reserved; 2)Drewry, in USD/40ft container, BIX 380 including BAF & THC both ends, 42 individual routes, excluding intra-Asia routes; 3) Shanghai Shipping Exchange, in 0 USD/20ft container and USD/40ft container for US routes, 15 routes from Shanghai, 4) Global Insight, Drewry, 5) Bunker BIX MGO Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Index, in USD/metric ton, Bunker Index MGO (BIX MGO) is the Average Global Bunker Price for all marine gasoil (MGO) port 15 16 17 prices published on the Bunker Index website, Bunker Index 380 CST (BIX 380) is the Average Global Bunker Price for all 380 centistoke (cSt) port prices published on the Bunker Index website DHL Global Forwarding | OFR Market Update | Aug 2017 4 Market Outlook August 2017 – Major Trades Strong volume and upcoming peak season in conjunction with capacity control by carriers leads to further increasing rates EXPORT REGION IMPORT REGION CAPACITY RATE EXPORT REGION IMPORT REGION CAPACITY RATE AMNO = = AMNO = + EURO AMLA AMLA = + ASPA - = ASPA = = EURO = + MENAT = = MENAT = = SSA = = SSA = + AMLA = + ASPA = = AMNO ASPA ASPA = = AMNO = + EURO = = AMLA = + MENAT = = EURO + + SSA = = MENAT = = OCEANIA = + Strong Moderate No Moderate Strong KEY ++ + = - - - Increase Increase Change Decline Decline DHL Global Forwarding | OFR Market Update | Aug 2017 5 NEW: Market outlook on Market Outlook August 2017 – Ocean Freight Rates Major Trades smaller trades available in the back-up OCEAN FREIGHT RATES OUTLOOK ASPA – EURO As we enter the traditional peak season in Q3, uptick in demand is expected and market rates are expected to increase further. General expectation for carriers to implement PSS/GRI EURO – ASPA Rates are stabilizing; pick-and-choose of carriers continues ASPA – AMLA Space will continue to be tight as we enter into the traditional peak period. There are a few extra loaders to ECSA, but only to evacuate rolling cargoes, not for spot deals and special rates. We also hear of some carriers regrouping to Mexico & WCSA, with small capacity increase, yet to be confirmed. GRIs have been announced for 1st & 15th Aug ‘17. ASPA – AMNO The trade is in the peak and carriers indicating full ship situation. Spot rates expected to increase substantially with two planned increases on Aug 1st GRI & Aug 15th PSS. EURO – AMNO Well utilized vessels and lifting still strong in July. Short term rates will remain unchanged the rest of the quarter. ASPA – MENAT Still facing high utilization into Middle East and Africa. Carriers have successfully implemented GRI in July, and remain firm on limiting low paying cargo on board. ASPA – ASPA Rates into IPBC region have stabilized. Though space continue to be tight, we are not seeing mid month rate increases as opposed to preceding months. Customers should continue to be encouraged to place bookings at least 2-3 weeks in advance to minimize probability of space rejections. Despite period being the traditional slack season for the trade to SPAC, some carriers are already experiencing space issues out of certain ports. Bookings should be made as early as possible to secure space. The peak season is expected to start in August. DHL Global Forwarding | OFR Market Update | Aug 2017 6 Market Outlook – Volume Outlook in Main Trade Lanes, 2017 Estimate & Growth Forecast 2017/20 in % 2017e, in mTEU 2017e-2021e CAGR, in % NORTH NORTH AMERICA AMERICA I n c l . 3.5 mTEU +1.2% 7.6 mTEU +0.7% I n c l . MEXICO F A R E A S T MEXICO 1.7 mTEU +0.9% 11.9 mTEU +1.6% 15.8 mTEU +0.9% 3.5 mTEU 2.0 mTEU +1.3% +0.7% 1.7 mTEU +1.3% EUROPE 7.0 mTEU +0.9% 7.0 mTEU +0.9% LATIN I n c l . M E D LATIN AMERICA 0.2 mTEU +3.0% 4.5 mTEU +2.8% AMERICA I N T R A A S I A excl. Oceania 35.1 mTEU +3.1% GLOBAL CONTAINER TRADE 2017e 1 3 8 . 5 m T E U + 2 . 3 % C A G R 2017e- 2020e Mid-term growth is mainly driven by Asian tradelanes. Source: Drewry DHL Global Forwarding | OFR Market Update | Aug 2017 7 Economic Outlook & Demand Development A SHARP DECLINE IN ECONOMIC POLICY UNCERTAINTY Latest elections pave the way towards business-friendly policies. Business and consumer confidence are high. EURO Brexit uncertainties makes UK business confidence slide Strong retail sales and foreign trade contribute to growth in the rest of the EU Reduced uncertainty boosts consumer and business spendings. More uncertainty regarding 2018 growth, as it partly depends on the rollout of President Trump’s fiscal stimulus. US Fed and CA Bank of Canada started gradually raising interest rates. AM 2017 growth to average 2.3%, solidly pushed by consumer spendings. Decline in goods prices, whilst services’ are inflating JP: Prime minister Abe’s scandals are unlikely to affect the political and economic outlook of the country. AP CN: Fast industrial sector growth, smaller contribution of consumption to the GDP growht lead to think the old Chinese model is returning 20 years after the Asian financial crisis, we see elevated debt burden in large emerging markets such as KR, MY, HU and BR, that may EMERGING undermine growth on the long term. MARKETS Gains are up in the commodities market BR’s PMI is negative, RU’s declined. Source: Global Executive Summary, IHS Markit, July 2017 DHL Global Forwarding | OFR Market Update | Aug 2017 8 Capacity Development CAPACITY DEVELOPMENT The idle fleet slightly fell, to the favor of an increased demand for smaller 1’000-3’000 TEU ships. As these ships are controled by NOOs, the NOO share of idle fleet dropped from 85 to 79%. Idle fleet in other segments remained flat. By assigning two 13’000+ TEU maxi-neo-panamax scale vessels to the Asia-USEC loop the CMA CGM T.
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