www.medamericashipper.com June 2017 Average Industry Earnings remain in the red Carriers Global Capacity Share as at 1 May 2017 (in mTEU) Only 13 main global carriers left Top 5 carriers will control about 60% of the market Almost all major carriers reported losses for the 1st quarter of 2017 Their average operating margin remained at -1.2% Freight rates are increasing, but major carriers continued operating in the red. Increased consolidation and a positive demand outlook should tip the scale towards further rate increases. MED-AMERICA is now in position to grant continued partnership, alliances and stability with all the most important carriers! 1 Japanese liner shipping trio becomes ONE, ready for launch next spring The container businesses of K Line, MOL and NYK will operate under the tradename Ocean Network Express (ONE) from 1 April next year. In a joint statement today the Japanese trio said: “The move will allow Ocean Network Express to better meet customers’ needs by providing high-quality, consolidation and enhancement of the three companies’ global network and service structures.” The JV will integrate K Line, MOL and NYK’s container shipping businesses, including global terminals (not in Japan), propelling the new entity into sixth place in the global rankings with a capacity of around 1.4m teu and an approximate 7% market share. The largest carrier of the trio, NYK, with a fleet capacity of 592,000 teu, will have a 38% stake in ONE, with K line (358,000 teu) and MOL (491,000 teu) each having 31%. 2 Hapag-Lloyd finally completes merger with UASC Hapag-Lloyd and UASC pushed through further consolidation in the liner shipping in- dustry as the pair finally completed their merger. The UASC brand will be gone by the end of October when the integration will be com- plete. The merged entity will have a value of about $8bn, according to one market analyst. The combined line will have 230 vessels with capacity of about 1.6m teu; an average ship age of 7.2 years and an average size of 6,840 teu – about 30% larger than the average of the top 15 lines. Hapag-Lloyd will continue to be a German publicly traded company with its headquar- ters in Hamburg. It will also set up a new regional headquarters, its fifth, for the Middle East. Integration will start in about two months and will take until the end of the third quarter, when UASC staff have been trained to use Hapag-Lloyd’s IT systems, which will handle all the volumes. “The ownership structure of Hapag-Lloyd AG, before the forthcoming cash capital in- crease planned after the merger, is as follows: CSAV (22.6%), HGV (14.8%), Kühne Maritime (14.6%), Qatar Holding (14.4%), PIF (10.1%) and TUI (8.9%). The free float will amount to roughly 14.6%,” said a company statement. 3 Miscellaneous: • ‘Enough is enough’ - CMA CGM unveils cancellation fee for no-show boxes - CMA CGM will levy a cancellation fee on European shippers and forwarders that do not deliver their containers for booked services to Indian subcontinent, Middle East Gulf and Red Sea ports. Infact, “no-shows” were preventing it serving other shippers. The line says it will apply a $150 per teu cancellation fee on all equipment types, except reefer containers, from 1 June on applications to cancel or transfer a booking made less than seven days before the sailing date. • Drewry: Container shipping set for $ 1.5B profit in 2017 - The container ship- ping industry is set to close the year with an operating profit of around $ 1.5 billion, driven by higher freight rates and rapidly growing cargo demand, according to Dre- wry Shipping Consultants. • Fewer ‘no shows’ key to service contract evolution - No shows, or ‘downfalls’ in industry jargon, have been an issue to some degree for decades. Carriers, includ- ing Maersk and Hapag-Lloyd, have tried imposing penalties for no-shows, but none have stuck. Solving the problem isn’t a matter of imposing fees or market players suddenly deciding they will adhere to the letter of contracts. Rather, it’s more about the culture of the industry needing to change. But it’s very possible to see things moving. The industry is changing, with consolidation resulting in fewer, larger carrier organizations ambitious to take on the industry’s chronic challenges and earn an ac- ceptable rate of return. Technology and big data, enabling greater automation and visibility around performance metrics, respectively, will play a growing role in en- abling the industry to accelerate the discovery and implementation of new solutions. 4 Tim Scharwath takes on top job at DHL Global Forwarding More than a year after announcing the news, Deutsche Post DHL Group has appointed Tim Scharwath as the new chief executive of DHL Global Forwarding. Mr Scharwath worked for over 25 years at Kuehne + Nagel. Speaking about the appointment, Mr Appel said he was delighted to be welcoming Mr Scharwath to the management team. “The extensive work of restructuring and improv- ing processes in the division is already paying off, as our results have shown,” Mr Appel continued. “As a real expert in the freight forwarding world, I am certain that Tim is prepared for his new responsibilities and is the right choice to realize our ambitious goals for DHL Global Forwarding.” “I am enthusiastically looking forward to joining Deutsche Post DHL Group at a time of significant opportunity,” Said Mr Scharwath. Mr Scharwath’s appointment was considered something of a coup, due to his reputa- tion as one of the most experienced freight forwarders in the business. 5 Maersk scrapping eight Panamax ships Maersk Line is scrapping eight Panamax container ships and said it expects to demol- ish a larger number of vessels in the future than in previous years as they come to the end of their economic life. How a shipment held ‘hostage’ may legally be theft A carrier has a lien on any shipment tendered to it until freight charges on that shipment have been paid. That is, it’s within its rights to hold the shipment and refuse to make de- livery until you’ve ponied up what you owe it for moving that shipment. That lien doesn’t extend to any other money you may owe the carrier, whether for previous shipments or any other reason. In other words, the carrier has no legal right to hold your ship- ment “hostage”. There are exceptions in certain U.S. States, such as California. Infact, pursuant to Section 3051.5 of that State’s Civil Code, a carrier’s lien on freight extends to any and all monies the shipper owes it. Because this is strictly State law, however, that exception would only come into play if the shipment the carrier was holding was an intrastate one, moving solely within the borders of California (or some other state that might have a similar statute). 6 Economic Outlook & Demand Development EU Political risk diminished (FR presidential elections) yet still exists (upcom- ing elections in DE, UK). Eurozone to post 1.8% GDP growth in 2017. Euro currency rising to USD 1.10. Slight underperformance of US economy during Q1, to bounce back during Q2 through growth in consumer spending. BAT tax reform plan would as presented burden import and global supply chain industries, and is finding strong opposition. Household expenditures up and unemployment down to a 22-year low (2.8%) in JP. CN stocks shock after government enforced tight new financial regulation to deleverage Chinese economy. Oil Barrel to average USD55 in 2017. Source: IHS, IHS Markit Carriers � OOCL reported revenue & volume grows YoY for Q1 ’17 driven by a rebound in volume and spot rates for the TP trade since Q4 ’16 due to strong demand recovery in the US. Higher rates were however insufficient to lift OOCL’s earnings as overall revenue was 9.0% lower on a quarter–on- quarter basis, while bunker fuel costs have increased by 8.7% during the period. In addition, 6 vessel deliveries this year could strain the carrier’s balance sheet. � Maerks has reported a net loss of –USD66 M and operating loss (EBIT) of –USD56 M in Q1 ’17. Al- though total liftings were +10.2% higher & average rates +4.4% higher than the same period last year, results were dragged down by higher fuel costs which increased by 80% year-on-year. The re- sults were also affected by continued rate weakness in North-South and intra-regional routes which negated the significant improvement on the East-West routes. East-West routes accounted for 35% of Maersk’s total liftings, compared to 48% on the North-South routes & 16% on intra-regional routes. � Zim reported an operating profit (EBIT) of USE31 M in Q1 ’17, helped by a +3.6% increase in total liftings & +1.1% improvement in average freight rates. However, net loss reached –USD8 M, due to significant interest expenses. Its weak balance sheet position continues to drag down its overall results. � HMM recorded an operating loss of –KRW116 Bn (-USD100 M) in Q1 ’17, despite a +37% increase in total liftings that reached a record high of 458’736 TEU during the seasonally weak 1st quarter of the year. Higher volumes were achieved at a significant cost, with average revenue falling at -12.9% YoY. Average bunker cost also increased by 92.8%. � CMA CGM recorded a net profit of USD86 M and an operating profit (core EBIT) of USD252 M in Q1 ’17, out-performing its peers. The carrier benefited from animproving rate environment, with average revenue per TEU rising by 12%.