Development tendency of

Global Shipping and Port

Yi-Chih Yang

Professor,

Department of Shipping and

Transportation Management,

National Kaohsiung Marine

University, Taiwan

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Outline 1. Current status of Seaborne trade and shipping

capacity

2. New development tendency of shipping and port markets

2.1 Mega ship development tendency

2.2 Reorganization of shipping strategic alliance

2.3 Automatic Container terminal

2.4 Reorganization of shipping strategic alliance

2.5 Panama Canal VS. Guatemala Canal

2.6 Arctic shipping routes

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1.Current status of Seaborne trade and shipping capacity

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1.1. Current status of Seaborne trade The booming of demand is one of the advantages for

the development of container ships.

As the stable growth of global demand for maritime in term of World Sea born trade, world merchandise export, and GDP for last period.

The seaborne trade increase is found in most of areas in the world

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World merchandise trade volume and seaborne trade volume

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1996-2015 trade volume and annual growth of global container

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Taiwan

Source: WTO In billions of dollars and in % of all exports.

Source: WTO

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World container estimated movement in 2015

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1. 2.Current status of shipping capacity

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Top 30 container shipping companies in

the world

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Rnk Operator TEU Ships TEU Ships TEU Ships % Chart TEU Ships % existing

1 APM-Maersk 3,252,733 621 1,731,862 255 1,520,871 366 46.8% 376,130 27 11.6%

2 Mediterranean Shg Co 2,939,308 491 1,069,001 191 1,870,307 300 63.6% 237,104 20 8.1%

3 CMA CGM Group 2,153,829 445 809,756 109 1,344,073 336 62.4% 233,980 23 10.9%

4 COSCO Shipping Co Ltd 1,638,732 293 461,863 77 1,176,869 216 71.8% 542,704 33 33.1%

5 Evergreen Line 989,592 187 548,041 105 441,551 82 44.6% 324,000 36 32.7%

6 Hapag-Lloyd 978,573 169 564,375 76 414,198 93 42.3% 10,589 1 1.1%

7 Hamburg Süd Group 594,327 115 313,508 46 280,819 69 47.2% 30,640 8 5.2%

8 Yang Ming Marine Transport Corp. 576,269 100 217,386 46 358,883 54 62.3% 98,396 7 17.1%

9 OOCL 555,124 91 410,739 54 144,385 37 26.0% 126,600 6 22.8%

10 UASC 520,254 54 410,383 37 109,871 17 21.1% 29,986 2 5.8%

11 NYK Line 504,165 95 267,544 45 236,621 50 46.9% 154,156 11 30.6%

12 MOL 488,107 79 151,316 22 336,791 57 69.0% 120,900 6 24.8%

13 Hyundai M.M. 462,233 67 165,080 22 297,153 45 64.3%

14 K Line 362,708 62 80,150 12 282,558 50 77.9% 69,350 5 19.1%

15 PIL (Pacific Int. Line) 353,552 134 295,619 118 57,933 16 16.4% 142,200 13 40.2%

16 Zim 295,170 64 27,800 6 267,370 58 90.6%

17 Wan Hai Lines 223,110 87 169,598 71 53,512 16 24.0% 15,200 8 6.8%

18 X-Press Feeders Group 152,291 91 26,734 21 125,557 70 82.4%

19 KMTC 125,887 61 57,636 29 68,251 32 54.2% 3,570 2 2.8%

20 IRISL Group 96,875 45 96,875 45 58,000 4 59.9%

21 SITC 96,124 75 67,134 49 28,990 26 30.2%

22 Arkas Line / EMES 73,686 42 60,408 35 13,278 7 18.0% 20,158 7 27.4%

23 Simatech 64,682 22 18,144 6 46,538 16 71.9%

24 TS Lines 63,032 32 1,578 1 61,454 31 97.5% 7,200 4 11.4%

25 Quanzhou An Sheng Shg Co 62,648 45 59,929 39 2,719 6 4.3% 9,600 4 15.3%

26 Sinotrans 61,437 41 16,207 13 45,230 28 73.6% 15,622 6 25.4%

27 Zhonggu Shipping 60,240 45 50,263 23 9,977 22 16.6% 20,000 8 33.2%

28 Emirates Shipping Line 58,428 12 58,428 12 100.0%

29 Transworld Group 53,138 32 28,019 18 25,119 14 47.3%

30 RCL (Regional Container L.) 51,503 27 24,731 19 26,772 8 52.0% 3,376 2 6.6%

Total Owned Chartered Orderbook

Source: Alphaliner (2017)

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2.New Development Tendency of Shipping and Port

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3.New development tendency of shipping and port markets

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2.1 The trend of Mega-sized ship China Shipping has recently been ordered the largest

container ship in the sea with a capacity of 19,000 TEU, 184,605 DWT, 187,541 gross tonnage, 16 knots, 400 m length and 58.6 m wide and Height of 73 meters, 28 crew members, the ship cost 175 million dollars.

the ship is too wide can not pass the Panama Canal and too high can not pass through the US port.

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Over 20000 TEU container ship MOL Triumph, with

a length of 400m, breadth 58.8m, depth 32.8m, is an ultra-containership that can transport 20,150 containers.

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MSC has ordered 11 units of 22,000 teu from Korean yard Daewoo Shipbuilding & Marine Engineering (DSME), latest statistics from Alphaliner on what it calls ‘megamax’ containerships of 18,000 to 22,000 teu reveal some curious coincidences between ordering patterns of individual lines and alliances.

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Taiwan

Ordered Mega Sized Ship tendency

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Main carriers-breakdown of units operated

by TEU size range

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2.2.1 Advantages and disadvantages of Mega sized ships 2.2.1.1 Advantages of Mega sized ships

The long haul route from Asia to Europe and to Transpacific has required bigger ships to satisfy the demand and to take advantage economic of scale.

Economic of scales at sea is the greatest advantage of mega container vessels (Stopford, 1999).

As shipping is intensive capital and fuel cost accounts 60% of operating cost, so it always the most concern of ship owner when calculated the economy of scale of a Malacca-max would offer a unit cost 30% lower than a Panamax.

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According to Drewry shipping consultants (2001) with the bunker price USD 110 per ton as for an example, the fuel cost for 10,000 TEU vessel is around USD 0.60 per TEU per annum while it cost 0.87 USD per TEU of a 4,000 TEU ship (Cairu, 2008)

Similarly as crews, there do not need two time crews if the ship size is double.

Other different areas can also enjoy the economies such as overheads, dry-docking, surveys, etc. In short, larger ships accrue economies of scale both in building and operating costs.

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2.2.2.2Advantages and disadvantages of Mega

sized ships

New generation of ship size has become controversial topic with a lot of arguments about the challenges big ship may face up such as whether have sufficient cargo to fill up the ship on frequency, deep-sea ports to accommodate the ships is qualified, trade is balance, technical issues. All these concern and worries become realistic since Emma Maersk which was the bigger vessel at operation in 2007 with 370 m long, 56 m wide, 16 m draft, has limitations for many port since few ports in the world can offer the “nautical conditions, infrastructure, superstructure, and the inland connection” (Cairu, 2008) to handle this kind of ship.

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Because the big ships are also less flexible in port area, they have limited choice to come along side berth with their side, so it may result in longer time stay in port and also will negatively affect economies of scale. Besides, it has limit ports that vessel can call. Hubs and spoke system are the choice of those ships and it inevitably leads to the feeder and transshipment costs for ship owner (Cairu, 2008).

Finally, less developed hinterland facilities are one of drawbacks for mega container ships in port.

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Due to the strong growth rate of industrial production in China, and the emerging of some Asia countries, the trade imbalance is widening in the majority of the east/west and north/south trades.

(Bimco) almost 50% of containers were leaving North America and 20% in Europe were empty according to ISL, 2007, (Cairu, 2008). It leads to the cost of ship owner.

In addition, if the prize of fuel oil increases, it will have negative impact on the variable shipping and the total costs of the ships (investment, depreciation, fuel etc.) were doubtful, many shipping lines have decided to reduce speed and find other solutions to reduce fuel consumption.

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Moreover, the uncertainty of world economy is also a problem, the weakening of the US economy may reduce consumer demand, and rely much on China industrial economy very vulnerable when the supply for the market bases on it.

The bigger the ship is, the larger the risk is. The value of commodities transported by container is getting higher and higher, therefore in the event of accident, the loss of huge amount of cargo will be the lost for ship owner, cargo owner and insurance company

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2.2.1.2. The impact of mega ship on the container terminal 1. To increase the berth length

2. To deeper the pier depth

3. To improve gantry crane operating efficiently

4. To upgrade container handling equipment efficiently

5. To establish automated container terminal operation

6. To expand hinterland size

7. To make inland transportation access conveniently

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Mega container ships undoubtedly create big challenges for ports.

There are four types of major problem on port facilities when mega container enters to port.

Firstly, the draft limitation is common problem because most hub ports do not have enough draft which mega container can berth easily without any draft limitation.

Secondly, lack of crane ability can be another reason escalating the lack of port facilities

Thirdly, the limited berth size is other demerit for mega ship

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the environment will be threatened by a possible huge the oil spill because the quantity of fuel oil of mega container ship is equal to that of a small tanker. It would cause serious pollution to the environment.

In 2015 there are three major shipping companies ordered

more than 20000TEU mega sized ship

OOCL ordered six 21,000TEU ships at Samsung Heavy

Industries

CSCL ordered ten 20000TEU ships.

COSCO ordered nine 20000TEU ships

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2.3 Automatic Container terminal The global automated container terminal market is

expected to grow at an impressive CAGR of 25% during 2017 to 2021, according to Technavio’s latest research.

Automated container terminals are cleaner, safer, and quieter than conventional terminals, and they deliver containers much faster than fully manned terminals.

Harmful diesel emissions are lowered because electricity and batteries power the cargo-handling equipment.

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Terminal operators seek time and cost savings during the loading and unloading of containers. Hence, to increase operational efficiency, terminal operators opt for automation of container terminals

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Automatic Container terminal

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Automatic Container terminal

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2.4 Reorganization of shipping strategic alliance

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The motivation of shipping strategic alliance Economic scale

Market access

Reduce the investment of physical assets

Market coverage

Service frequency

Marketing ability

Cost Control

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The motivation of shipping strategic alliance Vessel space usage availably

Container configuration

Knowing how to operate

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Top 3 shipping strategic alliance

Alliance Name Alliance number Rank Total vessel

Number

Transport

Capacity

Market

percentage

2M聯盟

Maersk 1 621 3,252,733 15.7%

MSC 2 491 2,939,308 14.2%

Hamburg Sud Group 7 115 594,327 2.9%

Hyundai M. M. 13 67 462,233 2.2%

Ocean Alliance

CMA CGM 3 445 2,153,829 10.4%

COSCO 4 293 1,638,732 7.9%

Evergreen 5 187 989,592 4.8%

OOCL 9 91 555,124 2.7%

THE Alliance

Hapag-Lloyd 6 169 978,573 4.7%

Yangming 8 100 576,269 2.8%

UASC 10 54 520,254 2.5%

NYK 11 95 504,165 2.4%

MOL 12 79 488,107 2.4%

K Line 14 62 362,708 1.8% 58

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Members of shipping strategic alliance As of 18 July 2016, the world’s shipping alliances

include the 2M alliance (Maersk and MSC), the Ocean Three alliance (CMA CGM, UASC, COSCO Shipping), the G6 alliance (NYK Line, OOCL, APL, MOL, Hapag-Lloyd* and HMM) and the CKYHE alliance (K Line, COSCO, HANJIN, Evergreen, Yang Ming).

Independent top carriers include PIL, ZIM, Wan Hai Lines, X-Press Feeders and KMTC.

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Four alliances including the 2M, the Ocean Alliance, The Alliance and the independent carriers announced reorganizations starting from January next year,

2M: Maersk , MSC

Ocean Alliance: CMA CGM,COSCO, Evergreen, OOCL

The Alliance: Yang Ming, Hapag-Lloyd, NYK, K-Line and MOL

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let’s say that you want weekly service between Busan and Rotterdam, with various port calls in between. Most carriers run vessels at 18 knots an hour on this trade lane, and one-way transit time is about 5.5 weeks. In other words, it takes a vessel 11 weeks to loop Busan and Rotterdam. Instead of dedicating 11 vessels to this lane, a carrier can rely on the vessels of others in the same alliance.

“2M” Alliance: Maersk and MSC (+HMM) Maersk and MSC have a combined capacity of about 6

million TEUs, and that’s about 29.5% of the overall global market share in container capacity. Maersk announced at the end of 2016 its plans to acquire Hamburg Sud, subject to regulatory approval. The new merger would push 2M’s container market share to 33.4%.

The 2M alliance was in discussions with HMM about possible membership, but ultimately decided to go with a Vessel Sharing Agreement (VSA), rather than full membership. Under the agreement, HMM will purchase slots on the 2M routes connecting Asia with North Europe, the Mediterranean and the US East Coast, while continuing to operate Asia – US West Coast services on its own, with Maersk and MSC taking slots. Maersk and MSC will take control of an undisclosed number of vessels currently operated by HMM on the Asia – Europe and Asia – USEC routes. These vessels will be operated and marketed by Maersk and MSC, downgrading HMM to slot buyer thereby removing their purchasing power.

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“OCEAN” Alliance: CMA, COSCO, Evergreen, OOCL The Ocean Alliance brings together the world’s 3rd,

4th, 5th, and 9th largest container lines and is seen as a direct attempt to counterbalance the dominance of the 2M alliance in the market. This follows CMA’s recent takeover of Neptune Orient Lines and the consolidation of its APL, USL, and ANL brands, as well as COSCO’s giant merger with China Shipping. The Ocean alliance will represent roughly 26% of global container capacity or about 5.5 million TEU’s.

The Ocean Alliance will own 41.43% market capacity on the Transpacific trade lane, and 34.86% in Asia-Europe, allowing for considerable strength across both major trade lanes.

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“THE” Alliance: Hapag-Lloyd, KLINE, MOL, NYK, Yang Ming THE is another alliance marked by the industry’s

recent moves towards greater consolidation. Hapag-Lloyd is looking to finalize talks to bring its merger with UASC to completion, while the three Japanese carriers in the alliance announced their intentions to merge, creating the sixth largest container operator in the world. THE will represent roughly 16% of global container capacity.

THE Alliance will have 28.68% market capacity on the Transpacific trade lane and 23.41% in Asia-Europe.

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The number of global carriers will fall from 20 at the beginning of 2016 to 14 2018 by virtue of Mergers and acquisitions (M&A).

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All Ocean Alliances: East-West Trade Lane Capacity Breakdown

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2.5. Panama Canal VS Nicaraguan Grand Canal

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Panama Canal VS Nicaraguan Canal After the completion of the large-scale expansion of

the Panama Canal, the future can carry up to 14,000 TEU container ships, is currently allowed to tonnage 3 times. About 5% of the world's cargo traffic through the Panama Canal, which is the largest use of the United States and mainland China.

The existing locks allow the passage of vessels that can carry up to 5,000 TEUs. After the expansion the Post-Panamax vessels will be able to transit through the Canal, with up to 13,000/14,000 TEUs. The Expansion will double the Canal’s capacity, having a direct impact on economies of scale and international maritime trade.

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In June 2013, Nicaragua's National Assembly approved a bill to grant a 50-year concession to finance and manage the project to the private Hong Kong Nicaragua Canal Development Investment Company (HKND Group) headed by Wang Jing, a Chinese billionaire. The concession can be extended for another 50 years once the waterway is operational.

The Nicaraguan Canal has been able to stop at 27.6 meters depth and more than 20,000 TEU, while the range from Shanghai to Baltimore is 4,000 kilometers less than the Panama Canal and is believed to compete with the Panama Canal's interests.

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2.6 Arctic shipping routes

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Arctic shipping routes Arctic shipping routes are the maritime paths used by

vessels to navigate through parts or the entirety of the Arctic.

There are three main routes that connect the Atlantic and the Pacific oceans: the Northeast Passage, the Northwest Passage, and the Transpolar Sea Route. In addition, two other significant routes exist: the Northern Sea Route, and the Arctic Bridge

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A total of about 120 full transit voyages took place during these three years by Arctice-strengthen cargo vessels transporting different types of cargo at different times during the summer-autumn navigational season and encountering different sea-ice conditions and other weather-related operational conditions. These demonstration voyages showed that NSR can be relatively safe and reliable providing escorting and guidance from Russian icebreaking fleet and use of Russian ice pilots (navigators).

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Arctic route has been concerned about the subject by International Maritime Organization, Europe, United States and Asia countries.

Arctic route has a competitive advantage from the transport distance and time view, Seat transportation from Dalian to Amsterdam via Suez Canal took 48 days whereas Arctic route spend 35 days which could save 7 days navigation.

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In terms of the location of Taiwan, just as in the center of the two shipping routes crossings, any shipping route seems to be available.

Kaohsiung is a main transshipment port with 50 % transshipment ratio in Taiwan rather than Dalian Port or Shanghai Port for a simple export or import port, in additional to our current Taiwan businessmen Overseas investment gradually from mainland China to Southeast Asia, the Arctic route seems not be obtained by Taiwanese shipping industry or international logistics industry’s support, this route appears not many attractive points for Taiwan shipping sector.

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A Russian Federal state Institution “The Northern Sea

Route Administration” was established in 2013 to

organize navigation in the water area of the Northern

sea route by issuing navigation permissions and

contributing to support activities.

According to Barents Observer reported that the

Arctic route transport cargo volume decreased by 77%

compared with 2013 can get some information to be

certified.

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Number of transits per flag state.

Year Total Russia Singapo

re Finland Norway

Germany

Spain China Greece Hong Kong

Sweden Netherl

ands Other

2011 41 26 4 2 2 1 1 5

2012 46 18 6 5 2 15

2013 71 46 2 2 2 1 18

2014 53 47 3 3

2015 18 10 2 1 1 4

2016 18 7 1 2 8

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Comparison between NSR and SCR

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Thanks for your attention