Mega-Ships: Disruptive Innovation or Overstretch? Olaf Merk Exponaval 2016: Trans-Port 2016 Conference 30 November 2016, Viña del Mar, Chile
2 Disruptive shipping innovations 1820s 1960s 2010s
3 Development of container ship size Source: ITF/OECD (2015), The Impact of Mega-Ships
4 The mega-ship era All slaves to some defunct economic idea Need to cut costs Lower freight rates Bigger ships Fleet overcapacity Source: ITF/OECD elaborations
5 The mega-ship system How to handle them? Mega-ship How to finance them? How to fill them? Mega-port Mega-carrier How to avoid being crushed? Source: ITF/OECD elaborations
6 The mega-ship problem Mega-ship More peaks Higher costs Steeper risks Mega-port Less port calls Iron grip Mega-carrier Source: ITF/OECD elaborations
7 The mega-ship problem Emission peaks Traffic congestion Mega-ship Less choice for shippers Labour flexibility Automation More peaks Higher costs Steeper risks More accident risks Port-city disintegration Mega-port Less port calls Iron grip Mega-carrier Lower return on investment The certain death of certain ports Source: ITF/OECD elaborations
Hourly container arrivals/departures from/to hinterland GT 8 More peaks Traffic congestion 1200 1000 Hourly container arrivals/departures by road Hourly container arrivals/departures by rail GT hourly volume of container ships moored over 50 000 GT GT hourly volume of container ships moored <= 50 000 GT 250000 200000 800 150000 600 400 100000 200 50000 0 0 7-11 12-11 17-11 22-11 27-11 2-12 7-12 12-12 17-12 22-12 Source: ITF/OECD (2015), The Impact of Mega-Ships
9 More peaks Emission peaks Rather than emissions per box, focus on emission peaks, which are related to ship size Source: Kattner et al. 2015
10 More peaks Labour flexibility Automation Port-cities will be the cities that never sleep, unless everything gets automated 40000 Container arrivals/departures by road transport per hour of day in 2014 35000 30000 25000 20000 15000 10000 5000 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Source: ITF/OECD (2015), The Impact of Mega-Ships
11 Port-city disintegration Need for more yard space Quay lines, truck traffic Land-use conflicts Non-urban ports Off shore ports Shanghai Rotterdam Singapore Venice? Spatial disintegration Economic disintegration
12 Higher costs Lower return on investment More infrastructure costs, at least partly covered by port-cities More volatility of market shares More pressure of carriers on tariffs
13 Higher costs Lower return on investment Source: ITF/OECD (2015), The Impact of Mega-Ships
Deviation from trend-line growth (million TEUs) 14 Higher costs Lower return on investment More volatile market shares, so higher risks for ports and lower return on investment 1,5 1,0 0,5 0,0-0,5-1,0-1,5 Rotterdam Hamburg Antwerp Bremen/Bremerhaven Le Havre Zeebrugge Dunkirk Source: ITF/OECD elaborations
Market share container lines (%) 15 The iron grip of carriers The certain death of certain ports The top 4 carriers had 23% market share in 2000, almost 50% in 2016 80 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Top 4 Top 10 Source: ITF/OECD elaborations based on data from Alphaliner
16 The iron grip of carriers The certain death of certain ports Some ports are almost fully dependent on one alliance, so very vulnerable 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 2M O3 CKYHE G6 Rest 0% Container ship capacity on Far East-Med route (2015) Source: ITF/OECD elaborations based on data from Dynamar 2015
17 The iron grip of carriers The certain death of certain ports Container shipping alliances a blessing? Ask Zeebrugge Photo credit: Henk Claeys
18 The iron grip of carriers The certain death of certain ports Towards a graveyard of container ports? 1,0 0,8 0,6 0,4 0,2 0,0 Taranto 0,6 0,5 0,4 0,3 0,2 0,1 0,0 Malaga 0,3 0,2 0,1 0,0 Savona 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 Thamesport Yearly container port volume (million TEUs) Source: ITF/OECD elaborations
19 Steeper risks More accident risks
20 Steeper risks Less choice for shippers Service frequency going down, less direct port pairs 39 38 Weekly Asia-Europe services 8 7 Weekly Asia - ECSA services 37 36 35 34 33 32 31 6 5 4 3 2 1 30 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 Source: ITF/OECD elaborations based on SeaIntel data
21 Why is it going to get worse? More mega-ships are coming More overcapacity is coming so more pressure from carriers on ports More concentration is coming, so less port calls, less service frequency and Bigger call sizes (peaks) are coming A wave of cascading effects is coming
Mega container ships (number) New-built ship capacity (million TEUs) 22 More mega container ships are coming 53 mega-ships in 2016, 108 in 2020 4 mln TEU extra ship capacity over 2016-2018, 50% of which >13,000 TEU ships 120 2,0 100 80 1,5 60 1,0 40 20 0,5 0 2013 2014 2015 2016 2017 2018 2019 2020 0,0 2015 2016 2017 2018 0-7k 7-13k 13-17k 17-22k Source: ITF/OECD elaborations based on data from Clarksons Research Services
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 23 More container ship overcapacity is coming 800 700 600 500 400 300 Growth world container fleet (TEU capacity) Growth containerised seaborne trade (tonnes) 200 100 0 Source: ITF/OECD elaborations
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Index (2005 = 100) Gross tonnage (mln) 24 More container ship overcapacity is coming 350 300 250 25 20 15 200 150 100 10 5 0 Orders Cancelled Scrapped 50-5 0-10 2015 2016 2017 2018 Growth world container fleet (TEU capacity) Growth containerised seaborne trade (tonnes) ITF/OECD elaborations based on IHS and Clarkson data
25 More concentration is coming Alliances: From four to three Upcoming potential mergers: Hapag Lloyd UASC Remnants Hanjin Japanese HMM Hamburg Sud Conditional to approval of competition authorities
Average number of moves 26 Bigger call sizes Mega-ship has not brought mega-peak yet, but this is about to change 7000 6000 5000 4000 3000 2000 1000 T1 T2 T3 T4 T5 T6 T7 0 0 5 10 15 20 Ship capacity (in 1000 TEUs) Average call size per container ship calls in seven selected terminals in 2014 Source: ITF/OECD elaborations based on data from global terminal operators
Average vessel size (TEU) 27 A wave of cascading effects 16000 14000 12000 10000 8000 6000 2012 2016 4000 2000 0 Asia - N Eur Asia - Med Asia - ECSA Asia - USWC Asia - USEC N Eur - ECSA USEC - ECSA N Eur - USEC
Share of calls in size class Share of calls in size class 28 A wave of cascading effects 100% 100% 90% 90% 80% 18,000-22,000 TEU 80% 18,000-22,000 TEU 70% 14,000-17,999 TEU 70% 14,000-17,999 TEU 60% 10,000-13,999 TEU 60% 10,000-13,999 TEU 50% 6,000-9,999 TEU 50% 6,000-9,999 TEU 40% 30% 20% 10% 4,000-5,999 TEU 2,000-3,999 TEU 1,000-1,999 TEU up to 999 TEU 40% 30% 20% 10% 4,000-5,999 TEU 2,000-3,999 TEU 1,000-1,999 TEU up to 999 TEU 0% 2015 2020 2025 0% 2015 2020 2025 San Antonio Valparaiso Source: ITF/OECD (2016), Ports Policy Review of Chile
Share of calls in size class Share of calls in size class 29 A wave of cascading effects 100% 100% 90% 90% 80% 70% 18,000-22,000 TEU 14,000-17,999 TEU 80% 70% 18,000-22,000 TEU 14,000-17,999 TEU 60% 50% 40% 30% 20% 10% 0% 2015 2020 2025 10,000-13,999 TEU 6,000-9,999 TEU 4,000-5,999 TEU 2,000-3,999 TEU 1,000-1,999 TEU up to 999 TEU 60% 50% 40% 30% 20% 10% 0% 2015 2020 2025 10,000-13,999 TEU 6,000-9,999 TEU 4,000-5,999 TEU 2,000-3,999 TEU 1,000-1,999 TEU up to 999 TEU San Vicente Coronel Source: ITF/OECD (2016), Ports Policy Review of Chile
30 Mitigating the impact of mega-ships Port level City level Traffic congestion Emission peaks Labour flexibility Automation Port-city disintegration Appointment systems Incentives off-peak hours Incentives: green port tariffs Rules: fuel, speed, age Infrastructure: shore power Labour pools Labour relations Port planning Communication Truck parking areas Congestion charge Emission zones Truck bans Opening hours Training and schooling Social policies Metropolitan networks Maritime waterfronts Communication Source: ITF/OECD elaborations
31 Solving the mega-ship problem Regulation Incentives Planning Mega-ship Ship size Big pays more Where are we going? Mega-carrier Competition State aid conditions What is needed? Mega-port Port mandate Investments if carriers commit Where is it needed? Source: ITF/OECD elaborations
Thank you Olaf Merk olaf.merk@oecd.org Twitter: @o_merk