Alphaliner Marine Money 2020 02 27 JANT · Title: Microsoft PowerPoint - Alphaliner Marine Money...

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Marine Money - Hamburg 2020 Jan Tiedemann - Alphaliner

Alphaliner Container Ship MarketReview and Outlook 2020

Jan Tiedemann at Marine Money

www.alphaliner.com


part 1

a container market snapshot

key numbers, world fleet, capacity, growth

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the global container fleet : key numbers

Currently there are around 53,000 merchant ships globally. About one tenth of these are container vessels...

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top-3 market share46.2%



the global container fleet : carrier consolidation

ten years ago: 33.8% ten years ago: 41.8% ten years ago: 58.1%

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How did we get here? World fleet and order book since 2000

Relentless fleet growth since 2000 at about +1 Mteu / year

2008 and 2009 - ‘crazy’ order book of +65% vs. world fleet

2010 to 2016: order book ‘stable’ at ca 4 Mteu in absolute terms…

…o/f ratio reduction is purely a statistical effect for 2010-2016.

As of 2017: Finally an actual reduction of oder book size.

2020: orderbook hits absolute low of only ca 10% to fleet.

Just a thought: 10% for a three-year order book outreach could

be seen as a ‚natural‘ fleet replenishment rate..

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the vessel order book in January 2020

The current order book is skewed toward larger ships. The +10,000 teu category accounts for 1.95 Mteu (80.5%) of the pipeline in terms of vessel capacity.

LNG-propulsion gains traction in the 15,000 teu segment, where ships trade in areas with an LNG bunkering supply chain in place.

Few orders for mid-sized ships. Demand remains covered by ship‘cascading’ from above

As for the smaller sizes, the order book to fleet ratio is much lower.However, note that this can in part be explained by the shorter lead times for small ships.

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the vessel order book in January 2020

As of 2016: the size range from Panamax to 10,000 teu is ‘dead’ as far as vessel newbuilings are concerned.

Finally some replenishment in the sub-5,000 teu sector, but the picture very much depends upon the exact vessel type

Data distorted by shorter lead times for smaller ships. Vessels for Q1-2022 delivery could still be ordered in 2020…

How does the order book pipeline spread out?

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part 1 : findings

• Fleet growth has been relentless over the past 20 years at an average of ca 1.00 Mteu annually –even throughout the global economic crisis.

• Compared to 10 years ago, a sizable portion of tonnage demand on mainline services has been generated by slow-steaming (which is now the norm). Loops that turned 8 to 9 weeks now turn in 11 to 12 weeks.

• Fleet age (12.7 years) is in line with the expectations of a ‘mature market’ at roughly half the economic lifetime of a container vessel (assuming 25 years of economic lifetime).

• However: The ‘biological age’ of many ships will be older than the ‘on-paper age’. Think of outdated designs, oversized engines, poorly attended ships, orphan types, etc.

• The historically-low vessel order-book-to-fleet ratio (around 10%) could prompt carriers to order again, especially large ships.

• Big ship boom supported by volume growth, slow steaming and carrier consolidation

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part 2

the inactive fleet

idle ships, owners vs operators, scrubber conversions

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Vessel unemployment: ‘carrier tonnage’ vs ‘owner tonnage’

For the first time in ten years, the burden of the idle fleet has shifted structurally* from owners to carriers (orange line).

However, the market remains divided and the overall picture ‘fleet teu’ is somewhat distorted:

As illustrated by graphs on the next slide, non-operating owners still bear more than two-thirds of the ‘idling cost’ for smaller and regional container tonnage.

*the ‘charter free’ percentage of idle ships had already briefly dipped below 50% in 2011, 2012 and 2018, but only very slightly and very briefly. The picture has only changed structurally now.

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vessel unemployment: types of unemployment (side 2)

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charter rates by size class – 2019 timeline

Last year saw charter rates improve notably for larger tonnage, that is employed in global mainline trades.

In this sector, vessel demand increased and supply was diminished since…

…carriers needed short-term replacements for vessels that go out of service for scrubber retrofitting

…carriers anticipated rising charter rates for larger tonnage and tried to ‘hedge’ by fixing ships on ‘longish’ terms

Smaller charter market tonnage meanwhile faced increasing competition from carrier-controlled newbuildings (carrier-owned or long-term leased).

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part 2 : findings

• For the first time in many years, vessel unemployment hits carriers more than it hits vessel owners (meaning: non-operating owners).

• The current ‘inactive fleet’ situation is structurally different than more recent ‘unemployment peaks’.

• A large portion of the ‘inactive fleet’ is undergoing IMO 2020 conversion, meaning that…

• …some of the unemployment is not related to the lack of cargo demand.

• Larger ships have fixed fairly ‘healthy’ rates. Contrary to many reports this is not primarily driven by drydock (scrubber retrofit) replacement charters.

• Carriers have fixed larger ships on long-ish terms to reduce per-teu bunker consumption, by means of service consolidation and up-sizing.

• Corona has wreaked havoc on the tonnage situation and the picture is changing from day to day.

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part 3

ship propulsion and emissions

LNG vs. Scrubbers vs. Compliant Fuels

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The ‘easiest’ solution: exhaust gas scrubbers

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scrubbers - price delta between HSFO and MGO

*note: the spread has been notably different at other main bunkering ports such as Rotterdam.

scrubber:USD 6.0M - 8.0M

for a ‚big‘ mainline container

ship...

consumption:100 mt/day

275 days per yearat sea

total bunker ca. 30,000 mt/year

100 USD= USD 3.0M/year

price delta MGO vs HSFO (mt) and annual savings




In the short term: installation pays off so quickly, you ‚cannot go wrong‘ with a scrubber.

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scrubbers and LNG-propulsion : fleet numbers

LNG top 5

CMA CGM : 4 ships

TOTE Maritime: 2 ships

Crowley: 2 ships

Unifeerder: 1 ship

Scrubber top 5

MSC: 83 ships

Evergreen: 50 ships

Maersk: 41 ships

CMA CGM: 36 ships

- - - / - - - HMM: 23 ships

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scrubber and LNG-fitted container ship fleet (existing)

Mid-sized Jones Act LNG-tonnage for the intra-USA trade. These ships only have a very limited bearing on the overall ‘liquid’ vessel (charter) market.

Dedicated Baltic Sea tonnage for trading not only under IMO2020, but also under EU-ECA regulations. Also includes first LNG conversions.

Compared to the sector size, smaller vesselslag behind in terms of scrubber installation.Concerns over HFO availability and therelatively long port stays of regional tonnagemake the business case less compelling,compared to mainline tonnage.

No LNG-powered ships yet here, but vessels ordered in the MGX and ULCS sectors. First ships to enter the market in 2020 under carrier ownership or long term commitment.10,000+

1.83 Mteu

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scrubber pros and cons

• Scrubbers are the ‘cheap’ in comparison to their potential savings. The investment can pay off in just 1 or 2 years.

• Scrubbers are ‘low tech’ and thus ‘low risk’.

• External funding is ‘easily’ available for scrubber retrofitting.

• Compared to LNG, scrubbers only have little impact on a ship’s container capacity.

• Retrofitting is usually quick and painless. It is done in a matter of weeks (except for the current mess with major yard delays, in part due to the fallout from the Coronavirus epidemic).

• Scrubbers make ships ‘fit for mission’ but not necessarily ‘fit for future’.

• Scrubbers increase overall bunker consumption and thus increase shipping’s CO-2 emissions.

• Scrubbers do not solve the global Sulphur Oxide emissions problem, they just move (mitigate?) it from air to water.

• Additional regulation could further limit when and where (open loop) scrubbers can be used.

• Major cargo owners could come out against scrubber use (‘cheat devices’).

• Scrubber lifetime is potentially ‘half’ a vessel lifetime – you might have to buy two.

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part 3 : findings

• Carriers have opted for scrubbers as their preferred means for IMO2020 compliance.

• Scrubbers make sense for carrier-ships and owner-tonnage.

• Scrubber viability depends upon the bunker spread, but even a moderate spread will suffice to make the investment worthwhile.

• LNG remains a distant second, but it is gaining some traction in the +15,000 teu class.

• Carriers will generally be able to ‘pass along’ increased bunker cost to cargo owners. However, they will only be able to do so

• Carriers that only have limited scrubber (or LNG) fleets will relatively worse than their competition

• IMO2020 related cost will further drive service and carrier consolidation (‘scale benefits’).

a) If ships are filled with paying cargob) In line with the industry average

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and finally…

the big picture, the next decades

IMO 2050, carbon neutrality, regulation

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the big picture, the next decades… questions

- The container fleet has grown 20 Mteu in 20 years. When will overall market growth finally end?

- IM2020 is behind us, but what is next? On a global scale, scrubbers seems to be an interim measure, but they will not fix shipping’s overall emissions problem.

- IMO 2050 aims to reduce the total annual GHG emissions by at least 50% compared to 2008.

- LNG is shaping up as a viable technology to 2025, but it will not be sufficient to achieve the wider goals set for the maritime industry.

- Are vessel speed reductions an ‘the easy way out’? Will ship designs adapt to this?

- How to achieve the phases 2 (20% by 2025) and 3 (30% after 2025) of the EEDI?

- Carriers and ship owners will be ‘in this together’ - shipping lines will not be able to shift the burden of future regulations to ship owners (like it happened in the vessel overcapacity crisis).

- If carriers do not reward top-tier eco-friendly vessels – will cargo owners force them to? What if IKEA and Walmart make their ‘own rules’ (no scrubbers, proof of above-average EDDI, etc.)

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presentation prepared by:

Jan Tiedemann / Alphaliner GmbH (BRS Group) / Hamburg / Germany

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Alphaliner Marine Money 2020 02 27 JANT · Title: Microsoft PowerPoint - Alphaliner Marine Money...

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