Container shipping: Successful turnaround - Deutsche Bank Research

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Container shipping has recovered from recession Global container throughput, % yoy 91 93 95 97 99 01 03 05 07 09 20 15 10 5 0 -5 -10 Source: Drewry 1 World trade and container shipping closely correlated x-axis: world trade, % yoy y-axis: container throughput, % yoy 20 R² = 0.73 15 10 -10 -15 -20 -10 0 10 20 Sources: CPB Netherlands, Drewry, DB Research 2 The biggest container ports in the world: Asia dominant Container throughput (million TEU) Singapore Shanghai Hong Kong Shenzhen Busan Guangzhou Dubai Ports Ningbo Qingdao Rotterdam Tianjin Kaohsiung Port Kelang Antwerp Hamburg Los Angeles Tanjung Pelepas Long Beach Xiamen Laem Chabang 5 0 -5 0 10 20 30 2000 2009 Source: Hafen Hamburg 3 Current Issues 2009 sees global container throughput sink for the first time The global recession of 2008/09 hit the global container shipping business hard. Global container throughput fell for the first time in the annals of the sector in 2009, contracting by over 9%, according to Drewry Shipping Consultants (Drewry). Prices (freight and charter rates) fell by between 50% and 80%. At its height some 12% of the fleet (based on lot capacity in TEU 1 ) was laid up, which means that at one stage about 600 ships had been taken out of service. According to information from Germany’s Verband Deutscher Reeder (VDR), international shipping lines suffered losses of USD 20 bn in 2009. The reasons for these losses are obvious: the global economic crisis was marked by a slump in trading activities and investment. This had a knock-on effect on container shipping since the fortunes of the sector are very closely correlated with global trade developments. 2 From a regional standpoint it was the European and North American ports that were particularly hard hit by the recession. In 2009 container throughput contracted by more than 16% at northern European ports and by over 13% in North America. The biggest decline of around 36% was posted by the eastern European ports (Baltic area, Black Sea, eastern Mediterranean) that are small by international standards. Several routes were completely suspended at these ports during the crisis. The decline in 2009 is, however, put into perspective by the fact that the eastern European ports had posted the highest growth rates for many years prior to the recession. Of the world’s 30 biggest ports Hamburg suffered the biggest decline at 28%. The deep slump in German external trade was one major reason. On top of this, several feeder services 3 from Hamburg to the Baltic area were temporarily suspended or transferred to competing ports (e.g. Rotterdam). Asian ports were less affected by the crisis as the economic environment there was much more favourable than in Europe and the US. In both the Far East and South Asia the decrease in container throughput in 2009 was about 8%; in the Middle East the decline was a mere 2%. Several Asian ports even managed to grow their container throughput in the crisis year of 2009 (e.g. Khor Fakkan in the United Arab Emirates: +30% to 2.8 m TEU). Container shipping enjoys multiple advantages Before the slump in container throughput in 2009 the sector posted very high growth rates. Between 1990 and 2008, for instance, global container throughput rose by an annual average rate of more than 10%. The discrepancy between the 2009 figure and the prior longterm performance highlights the scale of the crisis. The reasons for the historically very high growth in container shipping include the increasing international division of labour and the growing liberalisation of world trade (e.g. China’s WTO accession in 2001). Furthermore, the share of goods that are ideal for shipping via container (semis and finished products) has risen steadily over the last few years, and advances in container technology allow more and more goods to be transported via 1 TEU stands for Twenty Foot Equivalent Unit and is the usual standard container size. 2 Container throughput invariably grows faster than world trade: between 1991 and 2008 it expanded by 50% more than world trade. 3 Feeder services operate between the larger and smaller ports within a region. 2 March 28, 2011
Container shipping: Successful turnaround Asia least affected by the crisis Container throughput by region based on biggest ports, 2005=100 140 80 05 06 07 08 09 3.6 Europe Asia North America Exports by major trading nations continue rising % yoy CN JP DE US 3.6 5.2 2009 2010 2011 Asia commands large share of container trade Individual routes as % of container trade, 2009 28.6 13.4 32.8 12.7 120 100 Sources: Hafen Hamburg, DB Research 4 40 30 20 10 -10 -20 -30 Trans-Pacific Europe-Far East Intra-Asia Intra-Europe Transatlantic Far East-Middle East Other 0 Source: DB Research 5 Source: Drewry 6 container (e.g. containers for refrigerated goods or liquids). In addition, container ships possess specific advantages over traditional general cargo freighters: shorter loading and unloading times reduce turnaround times in the port, which cuts costs. Also, the options for onward conveyance via other modes of transport are better with containers than with general cargo. Ever bigger and faster ships have enabled constant productivity gains, although the increase in capacity over recent years has cranked up the price pressure in the sector (see page 5). Extensive investment in port infrastructure has been and remains essential for fast growth. Especially in Asia a very large number of container terminals have been expanded or built from scratch in the last few years. 4 As a result the containerisation level, that is the proportion of cargo shipped in containers, has risen worldwide and exceeds 90% at most of the big ports (Hamburg: 97%; 1990: 69%). Container shipping celebrates an impressive comeback Global container shipping has managed a complete turnaround following the crisis. Global container throughput probably rose by at least 11% in 2010 (final figures are not yet available). This means that the record level of 2008 has been bettered again. The key factor in this recovery was the stockbuilding by the industrial sector and the swift economic recovery in many countries that was often driven by external trade. Particularly the upturn in Asia (real GDP ex Japan 2010: +9%) helped to get container shipping back on a growth track. The world’s leading exporter, China, boosted its shipments by more than 30% in 2010 (2009: -16%). Other Asian economies, too, bolstered the sector. Overall, container throughput in Asia probably increased by at least 13% in 2010, whereas North America (+9%) and Western Europe (+7%) are likely to have achieved only belowaverage growth (Hamburg: +12.7%). Asia setting the pace The focus of the global container shipping sector has been steadily shifting towards Asia in any case over recent years. Some 70% of global container throughput is handled by ports in Asia. In 2009 nine out of the ten biggest container ports in the world were in Asia (in the year 2000 the figure was just five). China is the dominant force in this respect, being home to six of the current top 10 ports. Looking at container trade by shipping route reveals that at least one port in Asia is involved in around 80% of all movements. Intra- Asian routes with a share of one-third are by far the most important (2007: just 23%). This illustrates that global container shipping not only benefits from the manufacturing in Asia (China) of consumer goods for western Europe or the US, but that in addition the trade links and the international division of labour between Asian countries have also increased significantly. There are individual ports that are highly specialised in the pure transhipment of containers, thus operating primarily as hubs for global and regional container shipping and handling relatively little local traffic. Overall, besides China there are smaller developing countries and emerging markets (e.g. Malaysia, Indonesia, Vietnam) that are also continually investing in their port capacities. A cluster analysis underlines that both the biggest and the fastest growing container ports are located in Asia. The axes of Figure 8 plot the deviations of the world’s 35 biggest container ports from 4 See Heymann, Eric (2006). Container shipping: Overcapacity inevitable despite increasing demand. Deutsche Bank Research. Current Issues. Frankfurt am Main. March 28, 2011 3
Page 1: International topics Current Issues
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Container shipping: Successful turnaround - Deutsche Bank Research

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