OCEAN FREIGHT MARKET UPDATE May 2018
Total Page:16
File Type:pdf, Size:1020Kb
PUBLIC DHL Global Forwarding, Freight OCEAN FREIGHT MARKET UPDATE May 2018 1 PUBLIC Contents TOPIC OF THE MONTH Operational Start of Ocean Network Express (ONE) on 1 April HIGH LEVEL DEVELOPMENT MARKET OUTLOOK Freight Rates and Volume Development ECONOMIC OUTLOOK & DEMAND DEVELOPMENT CAPACITY DEVELOPMENT CARRIERS BACK-UP DHL Global Forwarding | OFR Market Update | May 2018 2 Topic of the Month Operational Start of Ocean Network Express (ONE) on 1 April ONE HAS COMMENCED OPERATING AS SCHEDULED • ONE combines the container operations of three Japanese carriers K Line, MOL and NYK in a new entity and is part of THE Alliance • According to Alphaliner data the new carrier operates a fleet of 230 containerships with a total capacity of 1’494’135 TEU with NYK being the largest contributor with 90 ships with a total capacity of 550’593 TEU. • The newly combined fleet gives ONE a global capacity share of 6.8%, making them the 6th largest carrier in the world • The three shareholders have also announced completion of a USD 3bn cash investment into ONE with 31% contributed by K line, 31% by MOL and 38% by NYK, all made fully in cash. • The new joint venture was established as Ocean Network Express Holdings Ltd in Tokyo. Operations are however managed from Singapore by Ocean Network Express Pte Ltd. • ONE has selected magenta as its brand color, thus standing our from the usual colors used in the industry like blue and red Source: Alphaliner, carrier, DHL DHL Global Forwarding | OFR Market Update | May 2018 3 PUBLIC High Level Market Development – Supply and Demand ECONOMIC OUTLOOK GDP GROWTH BY REGION1) DHL TRADE BAROMETER6) SUPPLY/DEMAND GROWTH (ANNUALIZED), IN % 2) CAGR 2017F 2018F 2019F 2020F 2021F 80 9% (2018-21) Supply 8% Growth % EURO 2.4% 2.4% 2.0% 1.9% 1.8% 1.9% 70 7% 6% MEA 3.3% 3.4% 3.6% 3.8% 3.7% 3.7% 60 5% 4% Demand AMER 2.2% 2.6% 2.7% 2.3% 2.1% 2.4% 50 Growth 3% % Ocean 2% ASPA 5.0% 5.0% 4.8% 4.7% 4.8% 4.8% 40 Global 1% 30 0% DGF World 3.3% 3.4% 3.3% 3.1% 3.1% 3.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2015 2016 2017 2018F 2019F 2020F 2021F '16 '17 '18 WORLD CONTAINER INDEX (WCI)3) SHANGHAI CONTAINERIZED FREIGHT INDEX (SCFI)4) BUNKER PRICE INDEX 5) 2’000 1’000 800 700 800 1’500 600 600 500 1’000 400 400 300 500 200 200 BIX 360 100 BIX 380 BIX MGO 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 BIX Q3 MGO Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 16 17 ’18 16 17 ’18 16 17 ’18 1)real GDP, Global Insight, Copyright © IHS, Q2 2018 . All rights reserved 2) Demand growth = Port-to-Port Container Traffic growth. Supply growth = Fleet Growth. Source: Drewry Maritime Research. 3) Shanghai Shipping Exchange, in USD/20ft container & USD/40ft ctnr for US routes, 15 routes from Shanghai. 4) Global Insight, Drewry, 5) Bunker Index, in USD/metric ton, Bunker Index MGO (BIX MGO) = avg. Global Bunker Price for marine gasoil (MGO) port prices; (BIX 380= avg. Global Bunker Price for all 380 centistoke (cSt) port prices; both index published on the Bunker Index website., 6) DHL Global Trade Barometer Mar18, index value represents weighted average of current growth and upcoming two months of trade, a value at 50 is considered neutral, expanding above 50, and shrinking below 50. DHL Global Forwarding | OFR Market Update | May 2018 4 PUBLIC Market Outlook May 2018 – Major Trades Capacity reductions and blank sailings on most ASPA outbound lanes support the announced GRIs 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 Source: DGF DHL Global Forwarding | OFR Market Update | May 2018 5 PUBLIC Market Outlook April 2018 – Ocean Freight Rates Major Trades Market outlook on smaller trades available in the back-up OCEAN FREIGHT RATES OUTLOOK A new round of GRI’s are announced for the month of May and rates are expected to increase due to an overall capacity reduction and ASPA – EURO blank sailings. Market showing signs of softening; space is back and the carriers are looking for high volume cargo to fill gaps left open by the EURO – ASPA & MEA recyclables. Rates to MX/WCSA have reached 3-digit level, and carriers have introduced several blank sailing to bring up the rates. We can expect ASPA – AMLA some rate recovery in mid-May 2018. ECSA do not have major space injection and rate is stable at the moment. Ocean alliance has announced 1 blank sailing into USWC early May. With TP contract renewal commencing May 1st, most carriers have ASPA – AMNO announced May 1st/15th GRI in an effort to raise the spot rate levels. Space is getting really tight and carriers have started to push up the rates. Additional increases are also affecting the Ramps / Inland EURO – AMNO locations. Carriers have implemented few GRI for the month of May. Rates have been declining into EMED and Middle East, and in order to push ASPA – MENAT through GRI, Carriers have now introduced several blank sailings from End April till May. The May GRI has been announced for the IPBC trade. Vessel schedules have been affected by the recent bad weather in Shanghai. ASPA – ASPA The delays have led to some space issues from this port of loading. Most services are running full leading to rate increases for Q2. AMNO – EURO Carriers are increasing their door rates in their tariffs. Source: DGF DHL Global Forwarding | OFR Market Update | May 2018 6 PUBLIC Economic Outlook & Demand Development Even a limited tariff war could begin to wear down global economic growth EU’s growth is still solid, but softening. Recent data on inflation, output, and retail sales have been disappointing. The European Central Bank (ECB) removed its easing bias in early March, sounding more confident that medium-term core inflation will pick up. Yet, cautious withdrawal of EURO stimulus is still the most likely scenario. Meanwhile, high inflation, a strengthening currency, and continued uncertainty about the path of Brexit mean UK growth is likely to slip. Consumer spending slowed sharply early this year in the US. Recently legislated tax cuts and new federal spending will however aid GDP AMNO growth for the rest of the year. The announced tariffs will have a negative, but probably small, impact on growth. Moreover, numerous exemptions and carve-outs from these tariffs will likely mitigate their effect. JP: early data suggest a further softening GDP growth in Q1 ’18 with residential investment declining, consumer spending restrained by heavy snowfalls, and imports outpacing exports. ASPA CN: the three rounds of tariffs proposed by the US and the two rounds proposed by CN are highly dangerous. If it is the prelude to an all-out trade war, then the damage to US, CN, and global growth could be substantial. However, this scenario looks unlikely. If the tariffs announced by the US and CN take effect, there could be sizeable impacts on global supply chains. The shares of exports going from Asian economies (AU, KR, JP, ID) to CN are substantial, making them particularly vulnerable. Value added by some countries (e.g. TW, MY, EMERGING SG) to CN exports going to the US is also large. Tariffs on CN aerospace, automotive, machinery, information technology industries could help MARKETS China’s competitors in DE, JP, MX. Chinese tariffs on US agricultural products could benefit BR and could lift demand for substitutes such as palm oil products, helping ID & MY. In March, global business optimism dropped sharply to the weakest level in over a year. The Global PMI fell, for the 1st time in six months, down DEMAND sharply from 54.8 in February to a 16-month low of 53.3. The 1.5-index-point drop was the steepest for two years. Weaker business sentiment DEVELOPMENT was seen in all four of the largest developed economies (EU, UK, JKP, US). Source: IHS Markit Global Executive Summary, IHS Purchasing Manager Index Manufacturing, a PMI at 50 is considered neutral, expanding above 50, and business shrinking below 50. DHL Global Forwarding | OFR Market Update | May 2018 7 PUBLIC Capacity Development 1/3 CAPACITY DEVELOPMENT Containership scrapping activity has slowed dramatically from the frenetic pace of 2016 and early 2017, with only 12 ships for 21,778 TEU sold for recycling so far this year. Full-year scrapping estimates for 2018 have been adjusted to only 200,000 TEU and this number could be revised downwards further if the currently slow pace of ship-breaking does not pick up in the coming months. 413,982 TEU of container tonnage were recycled in 2017 and 654,862 in 2016. A further reduction in the rate of vessel scrapping could therefore make this year’s container ship-breaking volume the lowest in record since 2011. With more than 1.00 M TEU of new container ship capacity still due for delivery between April and December this year, the reduced rate of scrapping has pushed full-year capacity growth estimates up to 6.0%. The total cellular vessel fleet is thus expected to reach 22.37 M TEU by the end of the year, compared to 21.10 M TEU at the beginning of 2018.