International Economic Outlook Impact on Global Shipping International Propeller Club Convention Tampa, FL Captain John W. Murray October 7, 2010
Hapag-Lloyd The Company Headquarters in Hamburg, Germany Fifth largest global container carrier More than 120 modern containerships Includes five US Flag ships Ship fleet capacity of about 550,000 TEU Five million TEU transported annually About 80 liner serves between all continents Container stock of about one million TEU Large and modern reefer fleet 160 year history Industry leader Reliability, Service and Productivity Environmental protection 6,800 employees 300 locations 114 countries Overview 2
Economic Deterioration led to Crisis in Container Shipping Development of Container Transport Volume and Global GDP from 2000-2009 Index 2000 = 100 COMMENT 250 200 +9% Crisis Compared to GDP the container industry grows with a multiple of 2.5x 150 100 0 2000 MULTIPLE approx. 2.5x 2001 2002 Container volume 2003 2004 +4% World GDP 2005 2006 2007 2008 2009 Negative growth of GDP in 2009 led to immense volume reduction Estimated industry loss of 20 USD bn in 2009* Sources: IHS Global Insight, July 2010; IMF April/July 2010 *Source: Drewry 2Q2010 3
Current State of the World Economy Following the deep global recession which started end of 2008 and lasted through 2009, global production and trade showed stronger than expected activity in first half of 2010 At the same time downside risks have risen again due to renewed financial turbulence which showed the urgent need for financial sector reforms In 2010, world output is expected to rise moderately by 4.6% with great variations among countries: Overview Facing high unemployment and public debt, only sluggish recovery is expected in advanced economies Growth is expected to be more dynamic for many emerging & developing countries, largely driven by strong internal demand. Key emerging economies in Asia are leading the global recovery The container shipping industry, which saw its worst year in 2009 with estimated total losses of 20 bn USD*, has adopted to the economic environment during the recession and is now profiting from the increase in consumption, production and investments, thus returning to profitability again Sources: IMF, July 2010 *Drewry 2Q 2010
Situation before Downturn Orderbook with Years of Delivery (in mteu) Orderbook by Orderer (in mteu) 3.4 3.4 3% 2.0 1.5 2.0 2.0 8% 40% 1.5 4% 49% 59% 2.0 8% 44% 52% 47% 37% 48% 2005 2006 2007 2008 2005 2006 2007 2008 Delivery 2006 Delivery 2007 Delivery 2008 Delivery 2009 Delivery 2010 Delivery 2011 Delivery 2012 Delivery 2013 Not Known Non-Operating Owners Liner Companies 5 Sources: Transmodal (various years)
Measures & Environment Market Trends Container Shipping Industry during the Crisis Pre-Crisis (2007-2008) Crisis Post-Crisis Strong Demand Normal Supply of Capacity High Freight Rates High Vessel Values Demand fell drastically Over-Supply Falling Freight Rates Declining Vessel Values Positively Demand Outlook Reduction of Supply/Demand Imbalance Increasing Freight Rates Rising Vessel Values Orderbook Expansion Slow Steaming Slow Steaming Fast Steaming Order Delays, Conversions & Cancellations Capital Constraints Scrappings Layups 6
Carrier s Response to Crisis 420 1,420 1,040 380 1,240 Lay Ups (kteu) (TTEU) 1,298 680 643 1,480 842 Total 1,178 596 560 655 638 582 Charter Owner Carrier Owned 381 158 223 262 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Jul 10 Slow Steaming Other 60% 7 Demolitions 12% MSC 5% 11% MOL 8% Evergreen 5% Technomar Costamare Total Scrappings 2009: 380 kteu 2008: 100 kteu 2007: 20 kteu Capacity Development in 2009 (mteu) 1.9 Expected Fleet Growth 09-42% Scrappings Order Cancellations Order Delays Order Conversions 1.1 Actual Fleet Growth 09 Sources: Various
Carrier s Response to Crisis Slow Steaming 8
Active Capacity Development by Hapag-Lloyd Comparison of Capacity: World Fleet, Top 20 and Hapag-Lloyd (Index) 130 120 125 121 110 111 100 90 Hapag-Lloyd Top 20 World Fleet 9 Sources: Transmodal and internal data
Economic Indicators that effect Container Shipping Industrial Production (change t/t-12) Exports of Goods (change t/t-12) 40% 30% 20% 10% 0% -10% -20% -30% -40% 16.5% 13.4% 8.2% 7.8% 60% 45% 30% 15% 0% -15% -30% -45% -60% -75% 45.9% 33.4% 21.2% 9.5% EU-27 US Japan China EU-27 USA China Japan GDP Growth World Trade Growth (Goods & Services) China Brazil US -0.2% -2.4% 3.3% 7.1% 9.1% 10.5% 12.3% 10.7% 7.8% 9.1% 7.3% 5.5% 3.6% 2.8% 0.2% 9.0% EU-27 Japan -4.1% -5.2% 1.0% 2.4% 2009 2010e 2000 2002 2004 2006 2008-11.3% 2010e 10 Sources: IMF (Apr10/July10), National Statistics
Short-term Indicators Industrial Production (change t/t-1) Exports of Goods (change t/t-1) 5% 4% 3% 2% 1% 0% -1% -2% 1.0% 0.2% 0.0% 20% 15% 10% 5% 0% -5% -10% -15% 14.9% 2.3% 0.9% -2.2% EU-27 US Japan EU-27 US Japan China Retail Sales (change t/t-1) Industrial New Orders (change t/t-1) 3% 2% 1% 0% -1% -2% -3% 1.2% 0.1% -0.2% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% 2.5% 0.3% EU-27 US Japan EU-27 US 11 Data shows monetary changes to previous month, Sources: National Statistics
Development of Containerized Trade Market Decline in Demand limited to 2009 GDP/World Trade Growth 2009 2010e 2011e World GDP -0.6% 4.6% 4.3% EU-27 GDP -4.1% 1.0% 1.3% China GDP 9.1% 10.5% 9.6% India GDP 5.7% 9.4% 8.4% World Trade (goods & services) -11.3% 9.0% 6.3% Global Trade Growth 2009 2010e 2011e IHS Global Insight -8.4% 9.6% 6.9% Drewry -9.9% 8.6% 7.4% Clarkson -9.4% 8.8% 10.0% Major NVO Feedback - 9-12% - 7.9% 6.2% 13.1% 8.1% 10.1% 5.3% 12.4% 8.2% 7.2% 3.5% 9.6% 6.9% -3.8% -9.4% -13.1% -14.1% -8.4% -20.5% Europe-Far East Transpacific Transatlantic IRT Far East 2009 2010 2011 Europe-Latin America World 12 Sources: IMF July 2010; Data per Trade: IHS Global Insight July 2010, Drewry as of 2Q10, Clarkson as of 2Q10
Global Container Transport Global Container Trade (mteu) is projected to grow by 38% between 2010 and 2015 86 +11% 96 +11% 107 +3% 110-8% 101 +10% 110 +7% 118 +7% 126 +7% 135 +6% 143 +6% 152 CAGR*: 5.0% CAGR*: 6.6% 2005 2006 2007 2008 2009 2010e 2011e 2012e 2013e 2014e 2015e 13 *Compound Annual Growth Rate Status: IHS Global Insight July 2010
Volume Development of Main Trade Lanes World Container Trade 2010e (mteu) and growth rates* 2.4 (+11.6%) 2.9 (+8.9%) Europe 12.5 (+8.5%) 5.8 (+6.6%) Intra Far East 22.7 (+12.4%) North America 1.1 (+13.1%) Far East 1.8 (+4.0%) Africa Middle East / Indian Ocean Volume Share 2010e EU-FE Other 16% 23% 5% AT FE-LA 3% EU-ISC/ME 4% 5% 17% TP FE-ISC/ME 4% NA-LA 3% 21% EU-LA IRT FE 14 Latin America 11.9 (+12.5%) 7.0 (+14.1%) Australia/ New Zealand *Growth 2009-2010 is shown in brackets Status: IHS Global Insight July 2010
Challenges in Liner Shipping: Imbalances 2010e 2005-2012e Transpacific Europe Far East 65% 11.9 7.0 5.9 42% 12.1 5.8 6.3 52% 60% 55% 50% 52% EB WB Imb. WB EB Imb. 45% 40% 42% 41% Transatlantic 0.7 23% Europe Latin America 0.7 41% 35% 30% 25% 26% 3.1 2.4 1.8 1.1 20% 2005 2006 2007 2008 2009 2010e 2011e 2012e WB EB Imb. NB SB Imb. Transpacific Atlantic Europe - Far East Europe - Latin America Source: IHS Global Insight, July 10
Challenges in Liner Shipping: Container Market Situation Status Update Container Fleet Development (in Mio. TEU) Chronic and growing container shortage after minimal production in 2009 Price increases for newly delivered standard containers in 2Q 2010 as demand has strengthened Buyers, especially leasing companies, are stepping up investments Factory capacity is not yet back to pre-crisis level Jump in box prices far less due to rising material costs as was the case in 2008 Chinese manufacturers face challenges with replacement and retraining of staff, labor shortages and rising labor costs Output of container production in 1HY 2010 estimated at 1 Million TEU, including 80% standard containers; similar estimates for 2HY 70% of new boxes to go to leasing companies in 1HY 2010, shipping lines expected to increase investments in 2HY 2010 Reefer manufacturing also increased in 2Q 2010, prices have tended to level off 40 35 30 25 20 15 10 2,750 2,800 2,383 2,400 2,033 2,092 1,933 1,900 1,817 2,000 27.7 27.8 26.1 1,600 24.5 22.0 1,200 20.5 18.0 800 400 0 2004 2005 2006 2007 2008 2009 2010e Containerfleet avg.price per 20'dry in US$ * 16 *Current market price as per June 2010 Source: various, September 2010
Challenges in Liner Shipping: Fluctuation of operative Costs Currency Vessel Newbuldings 1.60 1.55 1.50 1.45 1.40 1.35 1.30 1.25 Euro in USD (2004 1Q10) 1.47 1.39 1.37 1.70 per quarter yearly average 1.27 1.33 $14,100 $10,000 Costs per TEU (vessels of 8,600 TEU) $15,575 $15,000 $15,700 $14,000 $12,875 $12,500 $12,700 Trendline 700 500 300 100 1.60 1.50 1.40 Bunker 1.47 1.37 1.36 1.30 1.25 1.25 1.24 Bunker Price (Rotterdam) IFO 380 1.20 R.o.E. Average 1.10 470 441 435 352 2003 2004 2005 2006 2007 2008 2009 1Q10 2Q10 Container Price per 20 Standard Container 2,450 $2,383 2,350 2,250 $2,200 2,150 $2,092 2,050 1,950 $1,817 $2,033 1,850 $1,900 $1,933 1,750 2004 2005 2006 2007 2008 2009 1HY2010 17 Sources: various, Status: September 2010
Outlook: Container Shipping remains a growth industry Development of Container Transport Volume and Global GDP from 2000-2013e Index 2000 = 100 250 200 150 100 0 18 +9% MULTIPLE approx. 2.5x +4% Container volume World GDP Crisis +8% +4% 2001 2003 2005 2007 2009 2011e Sources: IHS Global Insight, July 2010; IMF April/July 2010 2013e Globalization and the international division of labor will continue to shape world trade The recent economic crisis has no negative long-term effect on world trade and shipping Container Shipping is an efficient, productive and sustainable growth industry The share of containerized cargo is expected to increase continuously and depends on the world GDP and global trade volume Global output (GDP) for 2011 is estimated at 4.3% Trend growth for global container trade is above 7%
Thank you! 19