After such a long period of problems, let's look at the Holiday Season with some relief and at the New Year with a renewed sense of partnership ...
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www.medamericashipper.com
December 2016
After such a long period
of problems, let’s look
at the Holiday Season
with some relief and
at the New Year with
a renewed sense of
partnership, good will
and positive feelings!!!
1
Economic Outlook
� Global impact of a Trump presidency will depend on whether “protectionist” or
“pro-growth” populism is the dominant theme during the next 4 yrs.
� The US economy is in reasonably good shape & on track to grow 2.0-2.5% in
the coming year. If President – elect Trump follows through with his campaign
promise of more fiscal stimulus, near-term growth could be boosted, but likely
not until late 2017.
� HIS expects a slight pickup in pace of GDP expansion in EU during the 4th
quarter, however also expects growth to soften next year because of increased
political risks (elections in NL, FR & DE, government looking vulnerable in IT).
� Although expected demise of the TPP will hurt, stronger US growth would bo-
ost exports throughout AP.
� Potential for rising trade tension & increase in US interest rates & USD are bad
news for emerging markets (BR, IN, ID). Negative comments by the US Presi-
dent-elect has hit the MX peso hard.
Ocean Freight Rates Outlook
� ASIA – EURO Peak expected to last until Chinese New Year. December
GRI/PSS in the pipeline.
� ASIA – AMLA Some blank sailing end-Nov 2016. Rates expected to trend
upwards amid expected tight space. Next booking rush will
be around early-Jan 2017, due to pre-Chinese New Year.
Space outlook continue to be tight and expected to last till
� TP Chinese New Year. Dec 1st GRI range between $600-$1000/
feu
� TA New services joined the trade and have cut into the Sep
GRIs since Oct
� ASPA-MENAT Successful Nov GRI into EMED, Middle East, West & East
Africa. Carriers restricting low paying cargo on board.
� ASPA-ASPA Space tight on all CN-IN lanes. Rates climbing by around usd
200/box in Nov. Chittagong congestion ongoing.
With promises for infrastructure, Trump sets
bar high for shippers
The highway bill already signed and not set to expire un-
til 2021, and the recent waterway infrastructure bill good
for another two years are unlikely to be on the table when
Trump moves into the White House in January. But there
will still be a need for infrastructure investment. A $ 1 trillion
investment plan may be the ticket, according to transporta-
tion industry executives.
2
Ocean Freight market in a nutshell
Carriers (1/2)
� Hanjin Shipping posts USD 258M operating loss for container business in 3rd
quarter. The loss has completely wiped out the company’s shareholder’s equity.
HMM posts USD 170M operating loss for liner business. It marks the com-
� �����������������������������������������������������������������������
pany’s sixth consecutive quarter operating loss.
CMA CGM reports USD 268M net loss in 3rd quarter. The company has com-
� ����������������������������������������������������������������������
pleted a sale lease-back transaction involving 11 NOL-APL owned ships, ge-
nerating USD 880M in cash proceeds which has allowed the company to fully
repay a USD 1’652 M loan. While interest expenses are expected to be redu-
ced as a result, container leasing and vessel charter expenses will increase.
� Hapag-Lloyd reports EUR 8M net profit in 3Q, reversing the previous negative
quarters. The positive results appear to be driven by a recovery of Latin Ameri-
ca rates, which account for 30% of its total liftings, and cost savings programs.
� Evergreen Marine corp. has posted an operating loss of TWD 1.82 Bn (USD
57M) in the 3rd quarter of 2016, its 7th consecutive quarter of negative net
earnings.
� Yang Ming also posted a seventh consecutive quarterly net loss of TWD 4.57
Bn (USD 144M). Shareholder’s equity could be completely wiped out if current
losses continue for another year. The company has announced a new capital
raising plan by issuing 1 billion new shares in privat placements. The plan will
be implemented after it is approved in an extraordinary shareholder meeting
scheduled for 22 Dec.
Government support to prop up struggling carriers will only delay market recovery
3
Ocean Freight market in a nutshell
Carriers (2/2)
� HMM talks to join 2M have broken down due to differences over capacity
allocations. Maersk suggested that HMM may only be admitted as a slot
buyer on 2M-run services, rather than as an operating partner. The move
seems to be designed to avoid problems with vessel arrests if HMM were
to get into any financial difficulties. While HMM maintains that negotia-
tions are still ongoing and that a formal agreement is expected to be sig-
ned by early Dec, the carrier has little bargaining power. It is running out
of time to either negotiate revised terms with 2M , or to join a rival allian-
ce prior to Apr 2017 implementation of the new global ocean alliances.
� Maersk Line to acquire Hamburg Süd. An agreement was approved by
the Oetker Group, owners of Hamburg Süd, outlining Maersk Line’s in-
tentions of acquiring the carrier. The acquisition is pending final agree-
ment and regulatory approval. Hamburg Süd and Aliança will continue
as separate brands and maintain their local organisations. Hamburg Süd
and Aliança are very well-run companies and highly respected carriers –
with strong brands, dedicated employees, a good customer base and an
attractive fleet. They will maintain the personal touch and engagement
with customers that Hamburg Süd and Aliança offer today and Hamburg
Süd customers will continue to work with the same Sales and Customer
Service representatives as they have done in the past.
4
Dear Reader,
Please note the letter sent by the Med-America’s attorney, Mr David Street,
in connection with the Petition to Rationalize Demurrage and Detention
Practices
“In the past several years, shippers, NVOCCs and truckers have been as-
sessed significant demurrage and/or detention charges arising from situ-
ations beyond their reasonable control. For example, the recent Hanjin
bankruptcy left import, export and empty containers stranded in the US and
other places around the world. Similarly, the 2014-15 labor slow down in
the West Coast ports and Hurricane Sandy on the East Coast in 2012 led to
widespread assessment of demurrage and detention charges. In addition,
lengthy holds on containers by US Customs and Border Protection typically
result in the imposition of demurrage charges on shippers and NVOCCs.
The Coalition for Fair Port Practices has just filed a Petition with the Federal
Maritime Commission (“FMC”) asking the FMC to initiate a rulemaking re-
quiring the carriers and port terminals to establish provisions in their demur-
rage and detention tariffs to automatically extend free time in these types of
situations. The basis of the Petition is that the assessment of demurrage
and detention charges in situations where the cargo interests cannot timely
pickup or deliver cargo or containers due to circumstances that are clearly
beyond their control is an unjust and unreasonable practice, which violates
Section 41102 of the Shipping Act.
The Petition is likely to generate significant comment and opposition by the
carriers and marine terminal operators. We expect the FMC will review the
Petition and then post a notice in the Federal Register inviting interested
parties to comment. If this is an issue that is important to your company, we
suggest that you take this opportunity to submit your own comments so the
FMC is made aware of the need for it to take action.. we will send out addi-
tional information when the FMC does publish its Notice seeking comments.
Although the Petition will be available on the FMC’s website, let us know if
you would like us to send you a pdf. In addition, if you have any comments
or questions, please feel free to contact me”.
5
Miscellaneous
Hanjin Shipping’s fate to be decided in February
And still it drags on – like a headless chicken running around in its death throes as if it
is playing a game of five-a-side football. It’s now 10 weeks since Hanjin Shipping en-
tered bankruptcy, and it now appears we will have to wait until February until a Seoul
court receives a “rehabilitation plan” for the company. Quite what that is going to look
like, given the amount of time that will have passed by then, is anyone’s guess.
Steep rise in 2017 contract rates
The collapse of Hanjin Ship-
ping and the consolidation
that will reshape the global
alliances from April 2017 has
bred uncertainty for next year
as four alliances become three
and the number of global liners
is whittled down.
From April 1, the three vessel-
sharing agreements will be the
2M Alliance, the THE Alliance,
and the Ocean Alliance, which
at this point will comprise 10
global carriers. Hyundai Merchant Marine was trying to join 2M but will instead be-
come a slot sharer rather than a formal member. The record lows hit in mid-March,
the rate from Asia to North Europe and to the Mediterranean has risen 73 percent.
Idle container ship fleet rockets on Hanjin collpse
Idle container ship fleet rockets on Hanjin
collapse: The idle container ship fleet
has soared to 1.7 million twenty-foot-
equivalent units this year, driven up by
the bankruptcy of Hanjin Shipping and
from container lines withdrawing ships
from service at a rapid rate in an attempt
to limit the impact of chronic overcapac-
ity and weak demand.
The number of idle ships has increased
from 238 vessels in November 2015,with
a combined capacity of about 900,000
twenty-foot-equivalent units, to 435 ships aggregating 1.7 million TEUs in early No-
vember of this year, according to industry analyst Drewry.
6
Growing imbalance
Empty containers repositioning costs the
shipping industry up to $ 20bn a year
Repositioning empty containers costs the shipping industry $ 12-$ 20 bn a year – up to 8%
of a shipping line’s operating costs – according to Boston Consulting Group (BCG).
The huge number of empty container movements across the globe accounted for 15% of all
box movements in the US, 14% in Latin America, 29% in Europe, 16% in the Middle East
and 25% in China.
The problem arose from a mixture of structural trade imbalances and liner and network inef-
ficiency.
US Imports from Eu propel trans-Atlantic growth
Overall U.S. container trade with European countries increased 3.1 percent year-over-year
to 4.8 million twenty-foot-equivalent units in the 12 months ending Mar. 31 2016, according
to data from PIERS. Although U.S. exports slipped 1.8 percent to 1.8 million TEUs, U.S. im-
ports, representing 62.5 percent of the trade, increased 6.3 percent to 3 million TEUs.
The Port of New York- New jersey handled 26.4 percent of total U.S. – Europe containerized
trade in the 12 months ending March 31 – 31.6 percent of U.S. imports and 17.6 percent of
U.S. exports from Europe.
Among the Top 10 U.S. ports in this trade, Georgia ports was the growth leader, with a jump
of 13.9 percent. Among the Top 10 trading partners in the European trade, Spain was the
fastest-growing U.S. export destination. Valencia was instead the fastest-growing long haul
ports.
Mediterranean Shipping Co. led the Top 10 carriers with a 27.7 percent share of U.S. im-
ports from European countries and a 25.3 percent share of U.S. exports in the 12 months
ending March 31. Following, Hapag-Lloyd, inclusive of CSAV, held a 17.7 percent export
market share and a 17.6 percent import market share.
CMA CGM, inclusive of U.S. Lines, Delmas and APL volume, was the fastest-growing Top
10 U.S. export carrier, with volume spiking 23.3 percent from the prior 12-month period. Uni-
ted Arab Shipping, to be combined with Hapag Lloyd by year-end, was the fastest-growing
Top 10 U.S. import carrier with 70 percent growth.
7
Did you Know?
Drewry’s Z-score financial stress index
� The Z-score is a statistical analysis to predict a company’s probability of failure
in the next 2 years, using data from the company’s financial statement.
� A Z-score >= 2.99 � company is “safe”. A Z-score between 1.8 and 2.99 � ex-
ercise caution (“grey zone”). A Z-score < 1.8 � higher risk of the company going
bankrupt (“distress zone”). All indications based on these financial figures only.
� The latest index highlights the extend of the current financial risk in the container
shipping sector as only 2 of the major carriers listed have a rating above 1.8
� Carriers’ declining Z-score performance has coincided with the heavy reduction
in container freight rates that dropped to historical lows in the 2nd quarter. Ma-
jority of carriers will almost certainly continue to reside in the so-called “distress
zone”
Source: DHL Global Forwarding / OFR Market Update / December 2016
Edito da: Società Editoriale Marittima a r.l. - 57123 Livorno - Via Fiume, 23.
Stampa: Centro Tipografico Livornese S.n.c. - 57126 Livorno - Borgo S. Jacopo, 63. Finito di stampare il 16 Dicembre 2016.
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