Maersk Line presentation

Trade flows in an uncertain economy
1

Presenter
Soren Andersen
> Vice President, Fleet Management, Maersk Line, A.P. Moller – Maersk A/S
> 12 years with A.P. Moller – Maersk A/S
> Background in broking, tanker and offshore divisions
> M.Sc. in Business Administration
> 38 years old
> Wife and three children
Maersk Line Fleet Management includes chartering container vessels, sale & purchase
of container vessels incl. newbuildings, global bunker exposure, operation of own and
chartered vessels
2

Agenda
Maersk Line - status
Economic crisis – effect on container shipping industry
Super-slow steaming as an industry concept
Developments in sea-freight, port infrastructure and intermodal network in Europe
Q&A
3

The size of container related activities - 2009
> Over 100,000 customers globally
> More than 325 offices in 125 countries
> 22,000 employees world-wide
> Maersk container shipping and related
activities generated a total revenue of USD
9.8 billion and a net loss of USD 961 million
in H1 2009
> More than 500 operated vessels
> A container fleet of more than 1.9 million
container units
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Age (Years)
CSAV
Hamburg Sud
OOCL
Hanjin
Maersk Line
Hyundai
CMA CGM
K Line
PIL
Yang Ming
MOL
APL
Wan Hai
NYK
Hapag Lloyd
CSCL
Zim
Evergreen
COSCO
MSC
Capcity (TEU)
Maersk Line’s current fleet is modern compared to
competitors
18.0
16.0
14.0
12.0
10.0
2,500,000
2,000,000
1,500,000
8.0
6.0
4.0
2.0
1,000,000
500,000
0.0
Fleet Age
Capacity (TEU)
Source: AXS-Alphaliner
5

Thousands
TEU
APM-Maersk
Mediterranean
Shg Co
CMA CGM
Group
Evergreen
Line
Hapag-Lloyd
COSCO
Container L.
APL
CSCL
NYK
Hanjin /
Senator
Maersk Line has a smaller vessel order book than
most competitors
Top 10 Container operators
3000
2500
2000
Orderbook TEU
Chartered TEU
Owned TEU
1500
1000
500
0
Source: AXS Alphaliner
6

Maersk Line is the most reliable among the 30 largest carriers
80%
75%
70%
65%
60%
55%
50%
45%
40%
35%
30%
APM-Maersk
Hapag-Lloyd
NYK
OOCL
Hamburg Süd Group
Hyundai M.M.
APL
UASC
Evergreen Line
CSAV Group
MOL
CMA CGM Group
Zim
CSCL
Mediterranean Shg Co
Yang Ming Line
Hanjin Shipping
K Line
COSCO Container L.
PIL (Pacific Int. Line)
Arrivals noted as being on-time
Source: Drewry Schedule Reliability 2Q2009, Measured for January-March 2009
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Agenda
Maersk Line - status
Economic crisis – effect on container shipping industry
Super-slow steaming as an industry concept
Developments in sea-freight, port infrastructure and intermodal network in Europe
Q&A
8

Global Container Demand is expected to bounce back but modest or
no growth anticipated for 2010
19.0%
14.0%
9.0%
4.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
2009 Quarterly Demand Growth
Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009
-1.0%
-6.0%
-11.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Drewry Clarkson Global Insight
-10.0%
-12.0%
-14.0%
-16.0%
Drewry 2009 Q2
Contraction in 2009 container demand seen for the first time since 1980 – 2009 contraction of
~10% vis a vis trend growth of +9% (1980-2008)
According to Drewry, Q1 2009 saw the trough of the demand decline but recovery to be slow
2010 demand expected to end up on a marginally positive note based on slow recovery of the
global economy
9

Capacity Growth is expected to drop in 2009 and 2010
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Drewry
Clarkson
Zero orders placed in the last eight months with expectations of ordering activity not to pick up any
time soon
Given significant contraction in demand in 2009 and marginal growth in 2010, industry set for
overcapacity situation this year and the next
Lay up of vessels/slow steaming likely to be a capacity modifier – current estimates from AXS-
Alphaliner show that 1.3 million TEU equalling 10.4% of current fleet is idle
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Lack of demand and increasing supply - long term concerning
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Industry Mitigating Actions
• Current level of freight rate increases
insufficient
• Network rationalisation – adjusting capacity to
the low demand level
• Slow steaming will help absorb capacity as
well as save bunker costs
12

Agenda
Maersk Line – status
Economic crisis – effect on container shipping industry
Super-slow steaming as an industry concept
Developments in sea-freight, port infrastructure and intermodal network in Europe
Q&A
13

Consumption (ton/day)
Reducing engine load dramatically decreases fuel consumption
185
> Fuel consumption and CO 2 emissions increase
exponentially with speed
> Going at full throttle is not economically or
ecologically optimal
165
145
125
105
85
65
Medium size
vessel of
8,000 TEU
45
25
12 15 18 21
Speed (kn)
24
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In 2008, Maersk Line led the way by slow steaming
> We were at the spearhead of the industry when we slowed down our vessels during 2008
> We successfully reduced the
> economic impact of dramatically increased
fuel prices
Slow
Regular
> ecological impact of our operations
Fuel and CO 2 savings:
14% per vessel
10% per service
18 kn 20 kn
40%
60%
Super
Slow
14 kn 24 kn
10% 90%
Full
* Based on medium sized 8,000 TEU vessel
kn = knots / % of engine load
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Further slowing down seemed impossible
> Manufacturers traditionally design vessel engines
for high speed
Slow
Regular
> Further reduced engine load below 40% and
consequently lower vessel speed was feared to
damage engines
18 kn 20 kn
40%
60%
Super
Slow
14 kn 24 kn
10% 90%
Full
* Based on medium sized 8,000 TEU vessel
kn = knots / % of engine load
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We challenged these policies against all odds
> In a tremendous effort, we have tested Super Slow Steaming
> By research on 110 of our own vessels on trades across the world since 2007
> We proved it was possible to go down as low as
10% engine load - when applying expertise and
constant care
Slow
Regular
Fuel and CO 2 savings:
43% per vessel
30% per service
18 kn 20 kn
40%
60%
> This breakthrough means increased flexibility in
choosing the right speed
> We have convinced engine manufacturers to
revise their instructions - for the benefit of the
whole industry and our environment
> For these efforts, we received the reputable
award ‘Sustainable Shipping Operator 2009’
Super
Slow
14 kn 24 kn
10% 90%
Full
* Based on medium sized 8,000 TEU vessel
kn = knots / % of engine load
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Add a vessel, save fuel
> For many services, slow steaming requires one or
two additional vessels to maintain the weekly
schedule
> Yes, we do increase our capital costs
> But:
> Even with additional vessels, we reduce the total
fuel consumption and CO 2 emissions
> On some services, this allows for more port calls
> Without
Super Slow Steaming
8 vessels at 20 knots
136,000 mt
CO 2 *
+
> Possible with
Super Slow Steaming
10 vessels at 14 knots
91,000 mt
CO 2 *
* Roundtrip Asia-Europe
30% savings on fuel and CO 2 –
even with additional vessels
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Agenda
Maersk Line - status
Economic crisis – effect on container shipping industry
Super-slow steaming as an industry concept
Developments in sea-freight, port infrastructure and intermodal network in Europe
Q&A
19

TEU ('000)
Percentage
Growth of sea-freight volume is expected to be sluggish – increase in
demand for Intra-regional trades
> 2010 volumes to remain at depressed
2009 levels in key trade lanes
> Steady but limited growth in Intra-
European sea-borne containerised trade
> Direct competition from rail companies,
trucks, ro/ro and breakbulk
> Long term, volume is anticipated to be
converted into sea freight (and rail) due
to focus on environment and European
Commission initiatives (Marco Polo
programme)
> High oil price increases competitiveness
of sea freight
Intra-European seaborne trade forecast (2010-2014)
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2010 2011 2012 2013 2014
Year
Source: Global Insight
7%
6%
5%
4%
3%
2%
1%
0%
TEU
Year-on-year growth
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Container terminal expansion is expected to be subdued in the near term
> Recession is not expected to impact the position of the
four global container terminal operators (Hutchison,
PSA, APM Terminals and DP World) as they are better
positioned to meet the needs of large containerships
> Expansion plans are being shelved
> Global container terminal operators are increasingly
willing to cooperate e.g. Eurogate and APMT in Gioia
Tauro and Bremerhaven, DP World and CMA CGM in Le
Havre
> Growth in capacity is not expected to return till 2011
> The leading European projects are the Maasvlakte 2
(Rotterdam, 2013, Port of Rotterdam) and London
gateway project (north bank of the Thames River, DP
World, 2011)
London Gateway project
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TEU
European container terminals are expected to be underutilised until
2015. Capacity gap is expected to narrow from 2h2010
> Terminal utilisation levels are anticipated to be subdued across Europe and are not expected
to exceed 80-85% in Northern and 65-70% in Southern and Eastern Europe by 2014
> Ocean carriers could start offloading their assets
> Slower growth is hampering investments in higher risk areas i.e. Eastern Europe (throughput
declined by 22% in 2009 and is anticipated to decline by another 10% in 2010)
> Leading container operators are expected to add capacity to network by 2014, although
cautious of future prospects.
Northern Europe Forecast Terminal Supply & Demand Balance to 2015,
base scenario
100,000,000
80,000,000
Avg. supply growth (09-15): 4.2%
60,000,000
40,000,000
20,000,000
0
2008 2009 2010 2011 2012 2013 2014 2015
Avg. demand growth (09-15): 7%
Reduction of free capacity from 16
mill. TEU in 2009 to 7.7 mill. TEU in
2014.
Year
Total Supply
Total Demand
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Developments in European inland infrastructure will be driven by
volume growth and focus on environmental issues
> Implementation of new transport solutions hinge on trade
growth - no significant infrastructure developments
planned within 1-2 years
> The European emerging markets to attract most of the
investments aimed at improving infrastructure, partly
subsidised by the European Union
> In the long term, volume is anticipated to be converted to
rail transport (and sea freight) due to growing focus on
environmental issues as well as European Commission
initiatives including Marco Polo
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In conclusion
> The downturn is not expected to be short term.
> The key trade lanes anticipate 2010 volumes to
remain at the low 2009 levels.
> Modest growth in Intra-European trade expected in
2010
> Many terminal expansion plans are being shelved
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Questions
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