Analysis on Trend of

International Container Shipping Market

SISI

SHIPPING DEVELOPMENT RESEARCH INSTITUTE

SHANGHAI INTERNATIONAL SHIPPING INSITITUTE

SISI

Content

I. Brief Review of Market

II. Several Structural Changes

III. Forecast on Future Trend of Market

SISI

I. Brief Review of Market – Freight RateSISI

Features:

⚫ 2008-2012/12: Market fluctuated violently; market forecast of lines conflicted with their operation strategies, assets acquisition and collaboration

appearing at the same time.

⚫ 2013/1-2016/5: Market continued to go down to the bottom; plenty of lines went through bankruptcy, annexation and reorganization; alliances

were reorganized as well.

⚫ 2016/6 till now: Market rebounded from the bottom; lines have basically completed reorganization, with their liability ratio and financial status

improved, and begun to focus on client service and performance growth.

⚫ In 2017, the mean value of CCFI rose by 15.3% from last year, but failed to recover to the level in 2013 and 2014. Market performance was far

below expectations in 2018 on the whole and still in low momentum in the first quarter of 2019.

Fig. 1 CCFI in the First Quarters from 2002 to 2019

Data Source: Shanghai Shipping Exchange

550.00

650.00

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1150.00

1250.00

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2002/1/11 2003/1/11 2004/1/11 2005/1/11 2006/1/11 2007/1/11 2008/1/11 2009/1/11 2010/1/11 2011/1/11 2012/1/11 2013/1/11 2014/1/11 2015/1/11 2016/1/11 2017/1/11 2018/1/11 2019/1/11

中国出口集装箱运价综合…CCFI

SISI

SISI

Time

China-Europe (Base Port)

($/TEU)

China-Mediterranean (Base Port)

($/TEU)

China-West America (Base Port)

($/FEU)

China-East America (Base Port)

($/FEU)

Freight rate YoY Growth Freight rate YoY Growth Freight rate YoY Growth Freight rate YoY Growth

2017 876.10 26.9% 817.25 19.5% 1485.33 16.8% 2457.22 17.3%

2018 821.76 -6.2% 797.29 -2.4% 1736.25 16.9% 2806.06 14.2%

Time

China-Southeast Asia (Singapore)

($/TEU)

Kansai, Japan (Base Port)

($/TEU)

Kanto, Japan (Base Port)

($/TEU)

Persian Gulf (Dubai)

($/TEU)

Freight rate YoY Growth Freight rate YoY Growth Freight rate YoY Growth Freight rate YoY Growth

2017 148.18 112.0% 214.61 14.7% 214.94 16.1% 618.27 54.8%

2018 146.14 -1.4% 222.80 3.8% 223.08 3.8% 463.16 -25.1%

TimeSouth America (Santos) ($/TEU)

Australia & New Zealand

(Melbourne) ($/TEU)South Africa (Durban) ($/TEU) West Africa (Lagos) ($/TEU)

Freight rate YoY Growth Freight rate YoY Growth Freight rate YoY Growth Freight rate YoY Growth

2017 2679.45 62.7% 676.98 28.6% 1155.41 99.2% 1769.86 49.1%

2018 1702.63 -36.5% 827.33 22.2% 888.35 -23.1% 1920.33 8.5%

Due to trade friction and capacity change, freight rate on China-North America routes rose sharply.

Freight rate on South America routes didn’t reach expectations; freight rate on China-South America routes saw an

unexpected and huge drop.

I. Brief Review of Market – Freight Rate

SISI

0

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

亚欧 太平洋 大西洋 南北 区域内（右坐标）

千TEU 千TEU

SISI

Fig.4 Proportion of Container Shipping Volume on

Different Routes in 2008

Fig.3 Global GDP Growth and Distribution

Fig.2 Proportion of Container Shipping Volume on Different Routes

Global container shipping volume in 2018

was 201 million TEU, with a year-on-

year growth rate of 4.46%, down from

that in 2017.

Container shipping volume on Far East-

Europe routes was 23.498 million TEU,

falling slightly from 2017.

Shipping demand on Pacific routes climbed

strongly; shipping volume kept a rapid

growth rate of 5.88%.

Shipping volume on North-South routes

saw a year-on-year growth of 6.29%;

regional routes increased year on year by

6.45%.

I. Brief Review of Market – Demand

Fig.5 Proportion of Container Shipping Volume on

Different Routes in 2018

Fig.1 Container Shipping Volume and Growth Rate from 2000 to 2018

SISI

Type Distribution of New Container Ships Delivered from 2013 to 2018 Contracting Order s for Container Ships from 2008 to 2018 Orderbook in Container Shipping Market from 2012 to 2018

• Total capacity of global container ships was 220.67 million TEU, with a year-on-year

growth of 6%.

• Total delivery of new container ships in 2018 was 1.313 million TEU, with a year-on-year

growth of 9.9%; that of container ships above 10000 TEU accounted for 83%.

• In 2018, contracting orders for container ships was of 1.2136 million TEU, up by 42.1%

year on year, with a significant rebound.

• In 2018, global container ship orderbook totaled 428 ships and 2.995 million TEU, down

by 11% year on year.

SISI

5.91%

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全球集装箱总运力（000,teu） 同比

I. Brief Review of Market – Supply

SISI

SISILarge fleet deployment led to the downturn of market in 2018

Fig.8 Relationship between Container Shipping Volume and Fleet supply from 2000

Data Source: Alphaliner

Fig.9 Idle Capacity of Global Container Ships

Data Source: Alphaliner

Fig.10 Mega Container Ships above 7500 TEU in Major Lines

Data Source: Alphaliner

25 Knots

15-17 Knots

7.7% 1.8% 9.5%

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全球集装箱船舶闲置运力

单位：千TEU2019年3月3日闲置运力：90.85万TEU，闲置占比4%

2015年低位0.8%

2014年高位4.5% 2018年高位2.8%

2018年低位0.9%

Estimated (September, 2018)

I. Brief Review of Market – Demand and Supply

SISI

Content

I. Brief Review of Market

II. Several Structural Changes

III. Forecast on Future Trend of Market

SISI

II. Several Structural Changes – Echelon StructureSISI

Echelon structure of lines becomes more obvious (the gap between the first group and the second, the third has enlarged),

with cross-border integration of logistics chain more and more frequent.

Fig.8 Major Lines and their Share in the Market (by the end of 2012)

Fig.9 Capacity Rankings of Top 20 Lines in 2018

Currently the market share of top 10 ship companies has taken up for

over 80%, and the concentration of liner market is further enhanced.

While the integration among lines has suspended, the cross-border

integration of upstream and downstream industries like ship companies,

ports and logistics is beginning. DP World purchased Unifeeder, the feeder

ship companies; CMA CGM became one of the shareholders of CEVA

logistics; SIPG merged with JJ Shipping. All parts in the logistics ecosystem

are going through accelerated integration and coordinated development.

17.9%

14.6%

12.2%11.7%

7.3%6.7%

5.2%

2.8%1.8% 1.8% 1.5% 1.1% 0.7% 0.6% 0.6% 0.6% 0.5% 0.5% 0.3% 0.3%

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自有运力 租入运力 占市场份额 单位：万TEU

37.1%

56.4%

SISI

SISI(a) Cost structure among lines is largely differentiated. Part lines are eager for the delivery of mega container ships.

Major factors:1. Destination ports see a slow recovery of cargos, while piggyback business grows rapidly. 2. The gap between top 4 giants are small

and their cost competition is hard to win; 3. The second group developed greatly and their delivery of mega ships is rapid. Currently

there are few effective countermeasures. Cost is still an important factor to maintain market share, and it is crucial to optimize

routes layout and freight management.Tab.2 14000+TEU Ships in Major lines

II. Several Structural Changes – Cost Structure

SISI

SISI(b) The accumulated capacity of mega container ships has exceeded the bearing capacity on Asia-Europe routes; the cost

competition of Asia-Europe routes will affect the cost base of other routes in the globe.

Tab.3 Mega Ship Deployment on Asia-Europe Routes and its Future Effect

Number of ships Fleet capacity/TEU Average ship size /TEU Annual voyage capacity/TEU Number of voyages(expected)

Asia- Europe routes 371 4768743 12854 22462506 4.71

Accumulated mega ships 301 5236808 35235 24667262

14000+TEU (current) 205 3487278 17011 16426342 ditto

14000+TEU (orderbook) 96 1749530 18224 8240920 ditto

Capacity supply saturation 110% 274% 110%

Tab.4 Deployment of Different Ship Types on Different Routes

Feeder Intermediate Intermediate Neo-Panamax Neo-Panamax Neo-PanamaxTOTAL

＜3000TEU 3000-5999TEU 6000-7999TEU 8000-11999TEU 12000-14999TEU 15000+TEU

Proportion of

capacity of

different ship

types on

different routes

% of TEU

East-West main lanes 4% 22% 52% 53% 79% 100% 48%

Pacific routes 1% 6% 37% 36% 23% 0% 19%

Far East-North Europe routes 0% 2% 6% 7% 49% 100% 22%

Atlantic routes 3% 12% 8% 8% 0% 0% 6%

Other routes 0% 2% 1% 1% 6% 0% 2%

East-West non-main lanes 5% 14% 20% 14% 13% 0% 12%

South-North routes 19% 38% 23% 32% 8% 0% 23%

Regional routes 72% 26% 5% 1% 0% 0% 17%

Asia 48% 19% 1% 0% 0% 0% 11%

Europe 19% 5% 4% 1% 0% 0% 4%

Other regions 5% 3% 0% 0% 0% 0% 1%

II. Several Structural Changes – Cost Structure

SISI

SISILines reconsider route layout and cooperation. Capacity of main lanes is upgraded; opening of new routes is frequent.

By December, 2018, major lines have made route adjustments for altogether 50 times. Port calling and capacity have been optimized.

Generally pay attention to and open routes in China,

Japan, South Korea-Southeast Asia (Vietnam, Thailand,

Singapore and Malaysia), etc.; China-India routes;

Japan & South Korea - Singapore & Malaysia routes;

Northern China-Vietnam & Thailand.

Heung-A Shipping and Sinokor Merchant Marine

merged their container business in order to accelerate the

greater cooperation with South Korea Maritime Alliance

in the future.

Lin

er

All

iance

OCEAN Alliance: Increase Far East/East America routes; provide Asia/Red

Sea direct routes. OOLC: Increase the routes directly from Hong Kong and

Southern China to Japan; open four direct routes from Far East to East Africa.

2M Alliance: Suspend part of Asia/West America routes; plan to resume Asia-

Europe AE2/Swan routes; conduct strategic cooperation with Star Shipping on

Asia/East America routes; Mediterranean: upgrade Far East/Australia & New

Zealand routes and direct routes to Mexico and west coast of South America.

THE Alliance: decrease and optimize the routes between Asia and west coast of

North America; ONE and Hapag-Lloyd: realize feeder service in Asia and

Europe; ONE: optimize port calling in Asia and east coast of North America.

Oth

er l

ines

Data Source: Clarksons

Far East-America route: make adjustments on 11 routes, among which 5 are increased (Maersk mainly, adding South America routes ) and 6 are

upgraded (direct routes mainly); Asia-Europe routes: focus on capacity upgrade: CMA-CGM upgrades the routes from India to Europe; Mediterranean

Shipping upgrades the Far East-Europe routes; Africa routes: open 6 new routes and greatly upgrade its capacity, concentrating on East Africa region

and Southwest Africa region. Southeast Asia routes: increase 16 routes (large adjustments), including 11 new routes from China and 5 new routes from

Japan and South Korea, and upgrade 7 routes. Australia routes: open 2 new routes and upgrade 7 routes.

Besides, Alliance and non-alliance region strengthen their cooperation: 2M Alliance begins to cooperate with Star Shipping, ONE Company cooperates

with OCEAN Alliance.

Features: 1. Coverage of routes are expanded; 2. More direct routes are opened; 3. More efforts are made for the layout of Southeast Asia routes .

II. Several Structural Changes – Route Structure

SISI

Content

I. Brief Review of Market

II. Several Structural Changes

III. Forecast on Future Trend of Market

SISI

14

How is the confidence of dry bulk shipping companies in the future?

12.9%10.6%

17.6%

2.4%10.6%

10.6%

4.7%

4.7%

11.8%

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小幅上涨 基本持平 小幅下降 可能再次探底

干散货

集装箱

其他

Confidence of container shipping companies is slightly insufficient.

Among the container shipping companies surveyed, 10% believe that

profits will see a small increase; 45% hold that global liner market

will keep flat with or decrease slightly from that in 2018 respectively;

and no companies stand for a sharp decline in global liner market in

2019. In the first quarter of 2019, the prosperity index of container

shipping company is 102.26, and the confidence index is 97.57, with

a drop by 14.1 quarter by quarter, falling into the slightly stagnant

interval.

上海国际航运研究中心 14上海国际航运研究中心 14

118.72

143.31

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中国航运景气指数 中国航运信心指数

景气分界线

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测

中国航运景气指数 中国航运信心指数

下滑的起点

本轮景气周期到顶

复苏的起点

复苏的起点

SISI

III、Forecast on Future Trend of MarketSISI

Conclusion (for your reference):

1. In long term, market is in the phase of “bottom-recovery”, which is mainly featured of

upgraded client service, false prosperity of market and small fluctuations of freight.

2. In short term, market is expected to fall considering that capacity supply accelerates,

global routes are renewed and optimized, and lines are slightly unconfident.

3. The capacity of East–West main lanes of liner alliance is facing upgrade and adjustment;

the launch of mega ships have great impact on routes in Europe and America.

4. Regional routes and South-North routes present a good performance, which have been

attracting the attention of different lines.

5. The opening of new routes or the upgrading of capacity will influence the current pattern

of competition and change initial common expectations, with a large impact on the tactic

understanding of rise in price.

6. The rise of fuel price, the implementation of low-sulfur oil policy will further burden the

industry.

SISI

Thank you!Dr. Zhou Dequan, Senior Engineer,

Director of Shipping Development Research Institute,

Shanghai International Shipping Institute,

No.150 Huoshan Road, Hongkou District, Shanghai

www.sisi-smu.org