Global Logistics - Shipping

IBISWorld Industry Report22 January 2010 Global Logistics - Shipping: H4821-GL DISCLAIMER This product has been supplied by IBISWorld Inc. ('IBISWorld') solely for use by its authorized licenses strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. 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Contents Industry Definition................................................................................................................................................. 3 ACTIVITIES (PRODUCTS AND SERVICES) ......................................................................................................................................3 SIMILAR INDUSTRIES ........................................................................................................................................................................3 DEMAND & SUPPLY INDUSTRIES ....................................................................................................................................................3 Key Statistics........................................................................................................................................................ 5 CONSTANT PRICES ...........................................................................................................................................................................5 CURRENT PRICES .............................................................................................................................................................................5 REAL GROWTH...................................................................................................................................................................................6 RATIO TABLE......................................................................................................................................................................................6 GRAPHS ..............................................................................................................................................................................................6 Segmentation ....................................................................................................................................................... 8 PRODUCTS AND SERVICE SEGMENTATION ..................................................................................................................................8 MAJOR MARKET SEGMENTS............................................................................................................................................................9 INDUSTRY CONCENTRATION.........................................................................................................................................................10 GEOGRAPHIC SPREAD ...................................................................................................................................................................12 Market Characteristics........................................................................................................................................ 15 MARKET SIZE ...................................................................................................................................................................................15 LINKAGES .........................................................................................................................................................................................16 DEMAND DETERMINANTS ..............................................................................................................................................................16 DOMESTIC AND INTERNATIONAL MARKETS................................................................................................................................17 BASIS OF COMPETITION.................................................................................................................................................................18 LIFE CYCLE.......................................................................................................................................................................................20 Industry Conditions............................................................................................................................................. 22 BARRIERS TO ENTRY......................................................................................................................................................................22 TAXATION .........................................................................................................................................................................................23 INDUSTRY ASSISTANCE .................................................................................................................................................................23 REGULATION AND DEREGULATION..............................................................................................................................................23 COST STRUCTURE ..........................................................................................................................................................................25 CAPITAL AND LABOR INTENSITY...................................................................................................................................................27 TECHNOLOGY AND SYSTEMS .......................................................................................................................................................28 INDUSTRY VOLATILITY....................................................................................................................................................................28 GLOBALIZATION...............................................................................................................................................................................29 Key Factors ........................................................................................................................................................ 31 KEY SENSITIVITIES..........................................................................................................................................................................31 KEY SUCCESS FACTORS................................................................................................................................................................31 Key Competitors................................................................................................................................................. 33 MAJOR PLAYERS .............................................................................................................................................................................33 PLAYER PERFORMANCE ................................................................................................................................................................33 OTHER PLAYERS .............................................................................................................................................................................45 Industry Performance ......................................................................................................................................... 49 CURRENT PERFORMANCE.............................................................................................................................................................49 HISTORICAL PERFORMANCE.........................................................................................................................................................53 Outlook ............................................................................................................................................................... 57 INDUSTRY DEFINITION Global Logistics - Shipping 22 January 2010 Industry Definition This industry comprises establishments primarily engaged in providing deep sea, coastal and inland water transport. Deep sea and coastal water transport includes the transport of passengers and freight over water, both scheduled and unscheduled. The inland water transport segment includes the movement of passenger or freight via rivers, canals, lakes and waterways, including inside harbors and docks. The industry excludes marine operations such as port operations and stevedoring. ACTIVITIES (PRODUCTS AND SERVICES) The primary activities of this industry are: • Barge Shipping • Bulk Shipping • Commercial charter services for freight transport • Containerized Shipping • Deep Sea, Coastal and Inland Freight Transport • Deep Sea, Coastal and Inland Passenger Transport • Tanker Shipping (including liquefied natural gas) The major products and services in this industry are: • International Freight Transport • International Passenger Transport • Coastal Freight and Passenger Transport • Inland Water Transport • Other SIMILAR INDUSTRIES Industry: A-GL - Global Agriculture, Hunting, Forestry and Fishing Description: Establishments engaged in the transportation of goods via rail. Industry: C2541-GL - Global Civil Ship and Boat Building Description: These establishments manufacture barges, cargo ships, container ships, ferryboats, fireboats, fishing boats, passenger ships, patrol boats and sailing ships for the Shipping industry. Industry: H4832-GL - Global Logistics - Air Freight Description: This industry comprises establishments primarily engaged in the air transportation of commercial cargo via air. Industry: H4911-GL - Global Travel Arrangement and Reservation Services Description: Companies who dispatch shipments and arrange space for cargo movement to an international destination. It includes reviewing invoices and documents required to export or import goods. DEMAND & SUPPLY INDUSTRIES B-GL - Global Mining C-GL - Global Manufacturing C2541-GL - Global Civil Ship and Boat Building © Copyright 2010, IBISWorld Inc. 3 Global Internet Service Providers © Copyright 2010.Global Wholesale Trade H4913-GL .INDUSTRY DEFINITION Global Logistics .Shipping 22 January 2010 F4311-GL . 4 .Global Marine Port Operation I5121-GL . IBISWorld Inc. 6 $Mill *28.991.000.541.775 *10.690 Units *1.4 *53.024 Units Exports N/A N/A N/A N/A N/A Imports N/A N/A N/A N/A N/A *47.550.117.3 *74.328 *29.3 *71.514.0 *68.0 Employment Total Wages Domestic Demand World Merchant Fleet *1.657.964.574.148 *1.7 *158.484 *28.191.233 *1.499.602.0 *1.000.592 *10.449.0 Employment Total Wages Domestic Demand World Merchant Fleet © Copyright 2010.240.421.3 *60.148 *1.0 *65.7 *50.0 1.5 *53.513.386.1 *133.000. IBISWorld Inc.9 *50.289.964.328.0 1.8 *53.626 *29.690 Units *1.921.121 *29.651.8 *49.296.7 *51.0 *1.328 *29.555.626 *29.Shipping 22 January 2010 Key Statistics CONSTANT PRICES Industry Revenue Industry Gross Product Number of Establishments Number of Enterprises 2005 2006 2007 2008 *120.081.619.233 *1.0 Thousand metric tons 5 .117.290.328.290.578.475.5 *52.5 *161.513.095.240.550.KEY STATISTICS Global Logistics .816 *1.604.0 $Mill NC NC NC NC NC $Mill 959.042.0 1.881 *10.423.293.939 *10.1 *139.1 *61. *1.475.484 *28.1 $Mill 2009 *53.0 $Mill NC NC NC NC NC $Mill 959.0 1.619.261.816 *1.815 Units *10.939 *10.027.779.775 *10.779.578.1 *138.324.555.0 Thousand metric tons CURRENT PRICES Industry Revenue Industry Gross Product Number of Establishments Number of Enterprises 2005 2006 2007 2008 *109.7 *60.6 *124.192 *1.121 *29.0 *145.000.815 Units *10.602.6 $Mill *28.881 *10.8 *75.042.7 *138.592 *10.604.334.192 *1.1 $Mill 2009 *59.024 Units Exports N/A N/A N/A N/A N/A Imports N/A N/A N/A N/A N/A *52.429.528. 26 *36.10 *0.7 *1.0 % Exports N/A N/A N/A N/A N/A % Imports N/A N/A N/A N/A N/A % Total Wages *3.5 *1.9 *9.08 *0.7 *0.3 *0.2 *1.8 *1.0 % Industry Gross Product *10.39 *40.3 % Number of Enterprises *1.82 *33.0 *0.4 *9.3 % Employment *2.0 *0.7 % Number of Establishments *1.5 *-2. IBISWorld Inc.8 *5.5 *-2.KEY STATISTICS Global Logistics .8 *1.09 *36.09 *0.9 *-19.09 $Mill *43.9 *-14.7 *0.2 *10.08 *0.5 % Domestic Demand NC NC NC NC NC % 2005 2006 2007 2008 N/A N/A N/A N/A RATIO TABLE Imports share of domestic demand Exports Share of Revenue Average Revenue per Employee Wages and Salaries Share of Revenue 2009 N/A % N/A N/A N/A N/A N/A % *0.9 *8. Revenue Growth Rate 6 .3 *1.Shipping 22 January 2010 REAL GROWTH 2005 2006 2007 2008 2009 Industry Revenue *11.1 *-4.3 *10.54 % GRAPHS Revenue © Copyright 2010.1 *-5.2 *2. KEY STATISTICS Global Logistics . © Copyright 2010. an asterisk (*) associated with a number in a table indicates an IBISWorld estimate and references to dollars are to US dollars.Shipping 22 January 2010 Employment Note: Unless specified. IBISWorld Inc. 7 . Over 70% of the world's merchant fleet (in terms of deadweight tons) are tankers and bulk carriers. rising to 7. This increase is lower than in previous years.6% International Freight Transport 69.Shipping 22 January 2010 Segmentation PRODUCTS AND SERVICE SEGMENTATION Product/Services Share Coastal Freight and Passenger Transport 9. In contrast passenger/ferry vessels tend to convey passengers on daily one-way trips between two or more points (refer to "other" segment).6 million in 2007.8% of industry revenue. While the volume transported by this product segment is small compared to freight. The cruise market has contributed solidly to industry revenue despite geo-political concerns and high oil prices over the current performance period. Around 12% of passengers originate from the UK. up from 12. upgraded cuisine. and around 80% from North America.4% The Shipping industry transports both goods and passengers. the largest carrier of freight in the world.2 million travelers cruised in 2008. The largest product segment within the industry is international freight transport. but the significance of any sort of increase in the 2009 climate must be noted.3% over 2008.1% International Passenger Transport 11. An estimated 13. Industry body Cruise Lines International Association (CLIA) predicted that 13.5 million people would take a cruise worldwide in 2009.6% Inland Water Transport 6. The cruise segment has grown significantly over the current performance period supported by the increase in disposable income from Asia Pacific and Middle Eastern countries. an increase of 2.SEGMENTATION Global Logistics . International Passenger transport accounts for 11. increased value-for-money and the rise in the number of home ports for liners.3% of industry revenue and are usually provided for by cruise ships. The shipment of goods via the ocean is the cheapest mode of transport for cross border transportation and can accommodate bulky commodities that are not supported by air transport. Cruise ships are floating resorts that tend to offer round trips of three days or more. Greater © Copyright 2010. generally referred to as cargo.55 billion tons in 2006. by an overwhelming margin. This segment refers to the transportation of goods by sea between domestic and foreign ports. IBISWorld Inc. The world seaborne trade was around 7. occupying 69. The strong interest in cruising was mainly attributed to higher disposable income globally and innovative facilities and amenities. the ability of shippers to adapt to demand changes through various shipment offerings such as round-the-world tri-continental services and traditional end-to-end services provide greater flexibility to customers. The competitors in this product segment are from the Air Freight and Couriers industry that charge a premium for their services. This product segment is expected to increase over the outlook period. 8 .7 billion tons in 2007. particularly as disposable income increases following the resolution of the global economic crisis. passengers are charged more due to the amenities and service offerings provided by cruise liners. More than 90% of goods traded between countries are transported by sea. This growth ensures that it remains.3% Other 3. Furthermore. Increased shipping activities will lead to greater support services. Inland Water Transport on the other hand.0% Containers 21. promotion of sustainability in transport and the reduction of greenhouse gases. such as ferry. The Other product segment refers to activities not specifically covered by the above. The demand for "short-sea shipping" that is the movement of cargo and passengers by water between point situated within close proximity to one another is slowly increasing.9% Dry Bulk 36. For instance. IBISWorld Inc.2% of industry revenue. 2008 Units Number Units % of world fleet General Cargo ships 18982 37. The 130. tugboat and piloting services).Shipping 22 January 2010 interest from developing countries such as China to experience ocean based rather than land based vacation also fueled revenue growth in this market. Ships in world fleet. provides a further boost to the cruise market in China over the medium term. It also includes units mainly engaged in chartering or leasing ships with crew.8% Other 1943 3.6% Bulk Carriers 6890 13.5% 9 . for any period.g.6% Others including Passenger © Copyright 2010.000 square meter Shanghai Port International Cruise Terminal. Coastal Freight and Passenger Transport refers to the operation of vessels for the transportation of passengers or freight by sea between domestic ports.8% Ship Type Source: Clarksons Research MAJOR MARKET SEGMENTS Market Segment Liquid Bulk 36.9% Passenger ships 5957 11. Share 5. barge shipping is prominent in US waterways to ease traffic congestions in highways. for use in coastal sea transport. improve utilization of waterway capacity. It is used to reduce the reliance on congested road transport and bottlenecks. refers to the operation of vessels for the transportation of freight or passengers in harbors or inland waters.6% Container ships 4170 8.SEGMENTATION Global Logistics . Revenue from this segment depends on Government's initiative to promote environmentally friendly water transport (and ease road congestion) in the passenger market and the level of shipping activity. IBISWorld believes that both these segments represent 16. scenic and "other" associated services (e.3% Tankers 12583 24. usually within 32 kilometers of shoreline. completed in 2008. The "Others" segment represent 5. vegetable oils. water and wine. Handymax (35. liquid chemicals. which typically are passenger or passenger-cargo vessels transporting passengers and often cargo on longer line voyages. The size of the order book has been rising from 25% in mid2003 to 57% of the existing fleet in June 2007.000200.324 TEUs in 2006. the composition of vessels is based on tonnage. INDUSTRY CONCENTRATION Industry concentration is medium Industry concentration indicates the extent to which major players dominate the industry. Panamax (65. which are vessels for day or overnight short-sea trips moving passengers and in some cases.000 TEU in capacity are the "Feeder" container ships generally operated on an intra-regional basis. Handysize (10. In the Shipping industry. which typically transport passengers on round-trips.000 DWT) and very large bulk carriers of over 200. petroleum products. IBISWorld Inc.000-80.Shipping 22 January 2010 The major market segments for this industry are based on the types of ships used to transport cargo. Dry bulk vessels transport non-containerized cargo such as coal and coke. limestone and cement. In both these markets. Liquid bulk cargo consists mainly of crude oil.000-65000 DWT).000 DWT. These vessels are designated as Panamax or Post-Panamax according to their ability to transit the Panama Canal. however smaller ships can be serviced by around 8 personnel.SEGMENTATION Global Logistics . IBISWorld believes that both dry and liquid bulk vessels represent 72. The containers market is estimated to account for 21.000-35. It is capable of carrying a cargo value of around $300 million. There are also certain ships manufactured for both dry and liquid bulk known as combined carriers. Both the dry and liquid bulk markets are expected to encounter challenging times during the outlook period. beam (breadth). In 2006. The crew of a typical bulk carrier may consist of about 20 to 30 seafarers. reflecting the need to commission larger ships to achieve economies of scale. 10 . and ores and scrap.9% of total revenue. IBISWorld determines industry concentration by such measures as the proportion of industry revenue earned by the four largest industry players. Passenger ships include many classes of vessels designed to transport substantial numbers of passengers as well as freight. Ships come in many sizes and can be measured in terms of overall length. vessels are identified based on their carrying capacity. © Copyright 2010. amidst a climate of increasing financial strife. Bulk carriers come in a variety of sizes from small (less than 10. A ship is defined as a large watercraft capable of offshore navigation. however the majority of containers currently in use are 40 feet. The capacity of container ships are measured in twenty-foot equivalent units (TEUs). Greece.5% of total revenue and includes passenger ships and barges.000 DWT). Ship sizes of container vessels have continued to increase with the average capacity of ship growing from 2. depth (distance between the crown of the weather deck and the top of the keelson). draft (distance between the highest waterline and the bottom of the ship) and tonnage. (2) ocean liners. Civilian ships by convention are measured by gross tonnage.235 TEUs in 2005 to 2. Passenger ships include: (1) ferries. and (3) cruise ships. Deep sea container ships of 3.000 DWT). and China are the top three owners of bulk carriers with around half of the world's fleet. It is estimated that global shipping capacity expanded by 13% in 2008 alone. in which the trip itself and the attractions of the ship and ports visited are the principal draw. vehicles. length of the waterline. Japan. The biggest container ship is the Emma Maersk.500. liquefied gases. Capesize (80. Ships below 1. The majority of containerized cargo consists of manufactured and semi-manufactured products. a Denmark flagged ship with a maximum TEU of 14. These trades are affected by general economic conditions.6% of total revenue.000 TEUs and above are generally responsible for serving East-West trade routes. The largest share of the charter owner container ship fleet is owned by German ship owners.000 DWT). often "feeding" cargo within a region from or to main port hubs served by main-lane trade routes. grains. the world container fleet was 98% larger than in 2000 and new ships are still being built at a fast rate. IBISWorld believes that the level of industry concentration in the Shipping industry is medium. K. beyond the top 10 companies in this industry that holds more than 60% of industry revenue. and (2) the vast number of markets covered by the industry. Maersk acquisition of P&O Nedlloyd saw their market share in the container market increase from 12% in 2000 to over 18% in 2006. The increase in mergers and acquisitions (M&A) has also pushed concentration higher over the current performance period. It is estimated that there are more than 10. Higher levels of competition and bunker oil prices will push margins lower in the industry. Partnerships and alliances such as the New World Alliance are helping shipping companies share their costs and better utilize their assets. IBISWorld believes that the medium level of concentration is attributed to: (1) the number of players in this industry. 11 . the company was the largest container ship operator at the beginning of 2007 but does not feature anywhere else within the top 10 players in the other market segments. a rise of around 2. the market is highly fragmented with a large number of small regional players or family owned operations.S. Fixed costs are expenses that need to be incurred prior to the delivery of a service and are independent of output. microeconomic and policy-oriented factors. warehouse leasing. makes it difficult for a company to be a prominent player in all markets. Top 5 Operators by company. especially in the coastal and inland water transport segments. Another major player in the Shipping industry. IBISWorld believes that concentration will increase during the outlook period.0% on the 2006 figure.SEGMENTATION Global Logistics . The rise in shipping activities is the result of the interplay of macroeconomic.3% of global industry revenue in 2009. in addition to the availability of port capacity. increasing the possibility of further M&A activities as companies seek to expand their geographical reach and distribution networks by acquiring struggling firms. The global economic troubles that commenced in 2007 have not had a major impact on industry concentration as of early 2010. Numerous companies will be driven to the wall during lean times for the industry. For example.000 shipping companies in the world. stevedoring.Shipping 22 January 2010 IBISWorld estimates that the top four industry players will account for an estimated 48. It can also act as a barrier to entry as incumbent firms that have already incurred fixed costs and have large levels of output will be able to produce at a lower per unit cost. Again. IBISWorld Inc. Lines 145 CMA CGM 234 NYK Line 119 Evergreen 160 "K" Line 92 Hapag Lloyd 128 Zodiac Maritime Agency 62 Containerships Source: Various industry sources © Copyright 2010. China's entry into the World Trade Organization saw transport and logistic requirements blossomed in the country. though most are small local operations. 2007 Units Vessels Bulk Transport Units Vessels Maersk 505 COSCO 324 MSC 282 Mitsui O. Firms will only provide a service if there is a sufficient market. A cargo operator's decision to sail to a destination is determined by the level of fixed costs to operate a particular route. World trade is facilitated through the elimination of trade barriers and the liberalization and deregulation of markets. using Maersk as an example. and various ancillary services are also taken into consideration before a network route is determined. Other costs such as port. The Shipping industry covers a vast number of markets (refer to market segmentation) and therefore. Nippon Yusen Kabushiki Kaisha (NYK) was ranked third in bulk transport and tenth in container transport. However. leaving them ripe for acquisition. around 90% of European Union (EU) external trade and more than 40% of its internal trade is transported by sea. The Marco Polo Programme is an EU run initiative to provide funding to projects that will result in an important transfer of freight off © Copyright 2010. It has a merchant fleet of more than 900 ships with a capacity of around 7. and the level of trade and growth within industries that use ships as a mode to transport cargo. the Mediterranean-Asian route via the Suez Canal.2 North America 8.5 billion tons of goods and 350 million passengers per year. the South African route linking Europe and America with Africa. Short sea (coastal) shipping (SSS) is also prominent in Europe. and the South Pacific route from western America to Australia. between Europe and eastern North America.SEGMENTATION Global Logistics .5 South East Asia 9.2 North Asia 26. In 2008. but the highest volume and value routes are primarily in Europe. Indonesia. and the EU has set up a program to support SSS in Europe.3 By definition.2% of total revenue. The average age of EU ships was 9. Europe also roughly has 270 international sea ports and 210 inland ports. Based on data from the European Commission. Greece has the largest number of vessels and represents slightly more than 16% of the total ships in terms of deadweight tonnage. while the fleets of countries of Central and Eastern Europe dropped marginally. European shipping controlled 40% of the global merchant fleet. and southern Asia. the Panama Canal route connecting Europe and the eastern American coasts with the western American coasts and Asia.7 South America 1. SSS represents around two thirds of the entire EU-25 maritime transport of goods.7 years. 12 . Europe The Shipping industry in Europe represents an estimated 43.5 million deadweight tons. IBISWorld Inc.4 Africa & Middle East 6. It corresponds to over 3. the global shipping network covers the entire globe. the North Pacific route linking western America with Japan and China.8 India & Central Asia 2. North Asia and North America. The EU defines short sea shipping as the movement of cargo and passengers by sea between ports situated in geographical Europe or between those ports and ports situated in non European countries having a coastline on the enclosed seas bordering Europe. New Zealand.Shipping 22 January 2010 GEOGRAPHIC SPREAD Year: 2009 Geographical Spread by Revenue Region Percentage Europe 43. Some of the major waterways in the world are: the North Atlantic. The performance of this industry depends on the same broad factors that determine economic performance such as GDP. the South American route from Europe and North America to South America.9 Oceania 1. 13 .3 billion barrels of oil in 2008.500 km. platinum and iron ore.Shipping 22 January 2010 heavily congested roads to more environmentally-friendly modes of transport. with orders worth more than $22. IBISWorld believes that they will play an even bigger role in the Shipping industry.8 million cruise passengers embarked on their cruises from European ports in 2005. It is also a major source of inbound tourism as over 2. the processing and manufacturing of goods have taken a high proportion and brought significant demands of shipping in both import and export. In Russia (for reporting purposes. One of the major factors for the high proportion of revenue in this region may be attributed to China. About one third of the vessels are used for international freight transport. India focuses on the energy trade with tankers as well as wet and dry bulk such as iron ore. IBISWorld Inc. Based on industry sources.SEGMENTATION Global Logistics . Unlike China. It was expected that this trade © Copyright 2010. A study by the United Nations showed that the Trans-Pacific trade between Asia and North America represented 20. Asia features strongly in the shipping industry due to its strong economic growth. tin material.8% as of the beginning of 2006. close to 80% of ships were built in South Korea. Novorossiisk Sea Shipping (Novoship) and Far East Shipping (FESCO). 16 projects were selected amounting to $27. shipping companies in that region are global players such as Sovkomflot. It is also arguable that countries and/or regions with a strong shipbuilding base have contributed significantly to the Shipping industry in those nations. Singapore.000 km of navigable inland waterways of nearly 14. fertilizers and grain as their main market segment (as compared to manufacturing that utilizes containers). South East Asia and India & Central Asia) represents 38. 11 of the world's 12 highest tonnage ports were located in Asia. China is the world's top consumer of iron and steel. China alone imported over 1. followed by China and India. Japan and China. copper products. The EU also has a strong cruise market as they are the leaders in cruise ship construction and refurbishment.4% of estimated industry revenue in 2009. The majority of players in Russia are involved in the tanker and general cargo market. and their huge fleet of ships still makes them a prominent player in the industry. the dominant countries in that region are India and Turkey. Europe was the largest shipbuilding region in the world. This is partly attributed to their rich energy and commodity resources. Centres such as Hong Kong. Its percentage share of world trade generated in terms of volume was 1. By 2007. The high proportion of vessels used for short sea transport is mainly attributed to the smaller sized shipping companies in India and the vast coastline of 6. In Central Asia. In particular. India is also one of the few countries that promote fair and free competition from obtaining cargo. enormous consumer market and relatively cost competitive labor resources. In 2006. North America The North America region is represented by the US. should they become part of the EU in the future. Prior to the 1970s. As of the end of 2006. Turkey is in the top 10 shipbuilding nations worldwide and holds a strong position in small vessels. Canada and Mexico. It is worthwhile to note that the proportion of commodity trade is a lot higher than service trade and the former accounts for the largest share of total trade volume. They are also the second largest consumer of oil. with the remainder plying coastal and inland routes. India had a shipping fleet of over 600 vessels in 2006 with a capacity of around 6. Turkey plays a small but important role in this industry as they are an up-and-coming nation in the Shipbuilding industry. a figure which continues to rise. aluminum and lead due to their strong manufacturing base.3 billion up to 2010.3 million TEU in 2007. coal.62 million tons Gross Registered Tonnage (GRT). Europe includes Western and Eastern Europe and Russia). Taiwan and Korea started this cycle with its strong manufacturing base (with the exception of Singapore). Asia The Asian region (for the purpose of this report includes North Asia.6 billion. Asia-Europe.4 million TEU as compared to 4. and the company's home port has recorded a sharp rise in shipping traffic over the past decade. has grown in importance as an east-west hub in the Shipping industry. Africa and Middle East The Middle East. Growth in North American cruise passengers is expected to grow at a rate of 4. One of the world's largest port operators (DP World) is based in the United Arab Emirates. container flows from Asia to North America totaled 15. up from 9. It is also worthwhile to note that there is an imbalance of trade on this route. 14 .67 million in 2005. and to a lesser extent Africa. and North America-Europe) between 2002 and 2015.5% per annum among the three major East-West trades (namely. The Middle East's position as an important trading region has been boosted by the region's continuing infrastructural development and diversification into non-oil products and services. The reason for the expected robust growth in shipping activity in this region is similar to Europe.9 million TEU in the opposite westbound direction.25% per year between 2005 and 2020. and North American economic problems are ongoing. IBISWorld Inc. Many companies in the manufacturing sector in the US and Canada are outsourcing their production process to developing Asia such as China and Vietnam. This is likely to continue in the outlook period especially when China has a strong trade surplus with the US.6 million by the end of 2007. While expanding. For example. Passenger numbers increased to approximately 10.18 million North Americans in 2006. © Copyright 2010. The Cruise Lines International Association reported that their member lines carried 10. such as technology. many industry experts believe that it will face challenges in overcoming bureaucratic and regulatory obstacles and in the provision of expertise in supply chain management and cargo security.Shipping 22 January 2010 route would exhibit the strongest growth of 6. in 2007.SEGMENTATION Global Logistics . An industry source revealed that up to 30 brand new vessels will enter service between 2007 and the end of 2010. Asia-North America. 3% in 2009.Global Civil Ship and Boat Building for further details). As at January 2008.0% increase on an annualized basis. Commodity prices endured significant price falls in 2008. The majority of seafarers are from China. has been a key driver of shipping activities worldwide.Shipping 22 January 2010 Market Characteristics MARKET SIZE The global shipping industry is now at a major crossroads. The average revenue per establishment is estimated at $4. This represents a 5. and the future is uncertain. The global economic crisis has made credit hard to obtain. Establishments are anticipated to increase by 0.8 million. © Copyright 2010.815 establishments and 10. which has been a welcome occurrence due to the profit squeeze that had been caused by fuel costs in recent years. IBISWorld estimates that there will be 28.5% respectively in 2009. IBISWorld estimates that establishment numbers will fall by 2. The average industry wage is about $32. IBISWorld Inc. 15 . the world trading fleet was made up of 50. IBISWorld projects that employment and wages will decrease by 4. followed by the Philippines. Wages are higher in developed and unionized countries as compared to emerging countries.525 ships. The industry portrays moderate labor expenses with wages accounting for 36. partially offset by a slowdown in establishment growth in North America and Western Europe.690 enterprises in the industry by the end of 2009. damaged business and consumer confidence.48 billion by end 2009.26 billion in 2004 to $138. where years of rapid growth appear to be at an end.0% and 5. shipping lines are cutting routes.225. as an industry shakeout gains pace. The merchant fleet experienced further increases in 2008 and 2009 due to orders previously under construction by Shipbuilders around the world (refer to report C2541 . Establishment numbers in the past five years have been fueled by new participants especially in developing regions such as Asia and the Middle East. major companies placed ambitious orders for new ships as they struggled to build their capacity to meet demand. indicating that it has been a good period for the industry overall. despite the alarming change of fortunes between 2008 and 2009. The fall in commodity prices has also meant a fall in fuel costs for ships. During this period. cutting staff. IBISWorld estimates that industry revenue will decline by 14% in 2009. Now that the demand has fallen away. Total real revenue in the Shipping Logistics industry is estimated to increase from $108. The charter price of ships worldwide fell by astonishing amounts between May and December 2008. and reduced freight volumes on key routes.6 million people at a cost of $50. reflecting the moderate level of skills required by this industry. but the ongoing medium term demand for resources in developing countries looks to be a ray of hope for the shipping industry.000 gross tones. bitten both by falling volumes and weak charter rates. particularly between 2006 and early 2008.6 billion by the end of 2009.540. and contemplating pulling some of their fleet out of the water in order to remain viable businesses during the downturn.5% of revenue. with a combined tonnage of 728. Strong global demand for commodities.4% over the current performance period. and is set to rise again in 2010. Total employment is estimated to reach 1.MARKET CHARACTERISTICS Global Logistics . These figures have been increasing over the current performance period. passenger ships. fireboats. It is a cyclical industry and to a certain extent depends on trade cycles. For instance. economic growth is a major influencer but movement of cargo is also facilitated by trade treaties.Global Wholesale Trade Wholesalers use sea freight logistics (especially bulky products) to transport goods into the country. improved US-China trade relations brought about the export of wheat which in turn led to increased demand for bulk shipping services between these two countries.g.Global Manufacturing Shipping providers transport a variety of manufactured goods such as clothing. F4311-GL . Heavy and low value commodities are exported and imported in bulk vessels. fiscal policies. cargo ships. book and track shipments. DEMAND DETERMINANTS The demand for shipping activities is determined by several economic and political factors. Strong real GDP growth has led to an increase in merchandise trade whereas growth in disposable income has increased leisure activities such as cruising. In addition. H4913-GL . shipping is a derived demand).Global Civil Ship and Boat Building The Shipbuilding industry manufactures barges. In addition. partly due to their entry into the World Trade Organization (WTO). tariff regulations and political understanding. whereas lighter and high value commodities are exported and imported on container ships.Global Marine Port Operation The industry provides wharves and docking facilities for ships to interface with land based transport. the production of steel in China has generated coal and iron ore movements into China. C-GL .fuel: The increase in fuel prices will have a positive effect on demand as water transport is the cheapest form of cross border transportation against other modes.e. Movements in freight rates can influence shipping line choice and national flagged shipping face strong competition in this regard from flag of convenience (e.Global Internet Service Providers Various online softwares are available to assist importers/exporters to schedule. container ships. ferryboats. Passenger shipping is represented by cruise operations and its demand is determined by demographic and income factors. patrol boats and tankers for the logistics Shipping industry. Bahamas and Bermuda) ships.Shipping 22 January 2010 LINKAGES Demand Linkages B-GL .Global Mining The mining sector is a major user of water transportation services to transport cargo around the world. apparels and accessories. fishing boats.MARKET CHARACTERISTICS Global Logistics . Demand for bulk shipping fluctuates according to demand for commodities (i. the factors influencing demand for the Shipping industry include: Real GDP growth and Disposable income: An increase in economic activity and disposable income will lead to greater demand for goods and logistic services. Generally. computers and in-process goods around the world. © Copyright 2010. economic environment. Exogenous Shocks . 16 .. Supply Linkages C2541-GL . I5121-GL . the level of crude oil production determines domestic deep-sea crude oil movements. IBISWorld Inc. with the Baltic Dry index plunging 79% in the space of one month. Many ships on international routes carry cargo intended for domestic destinations along the way. © Copyright 2010.5% in 2006. Seasonal Factors: Depending on the region. A similar trend was also seen in the dry cargoes segment where ton-miles rose by 5. Weakening demand in developed countries. This may be attributed to many of the manufacturing and production facilities relocated from Western nations to Asia. For example. Routes and destinations offered by operators: The higher number of routes and destinations offered by shipping providers will likely increase demand. Global demand for shipping has increased over the majority of the last five years. an overall measure of commodity shipping costs on different routes and ship sizes. The World Trade Organization (WTO) reported that world merchandise trade grew by 6.76 billion tons in 2006. That said. realignments in exchange rates and fluctuations in the prices for commodities (such as oil and gas) introduced uncertainties into the global markets in 2007.5%. Baltic and Black Seas are increasingly being sourced from Europe and North America and from West Africa to Asia.500 billion ton-miles in 2001 to 3. there is no doubt that shipping is a highly internationalized industry. Crude oil from the Barents. This indicates that crude oil supplies were moving longer distances in larger volumes. Commercial services exports were up by an estimated 11% and reached $2. 17 . IBISWorld Inc.140 ton-miles in 2005. For example. world seaborne trade amounted to 8. Merchandise trade by dollar value increased 15% to $11. These growth figures can also be partly attributed to productivity and prosperity gains made by some of the larger developing countries.MARKET CHARACTERISTICS Global Logistics . were cited as factors responsible for the fall. the monsoon season. advancing.Shipping 22 January 2010 Price of commodities: Demand for commodities is linked to price. and a similar thing can be said for international multi-leg passenger cruises that offer packages for transit between two points within the same country. On the other hand. while tonnage transported increased by 3.76 trillion in 2006. in Asia. With billions of tons of cargo being transported across borders each year by companies with global reach. down from 8.71 trillion in 2006. calculating an exact figure for trade is difficult due to a number of reasons. seasonal and weather conditions can affect the demand for shipping. strong global demand for crude oil resulted in ton-miles for this commodity rising by 4.g. Many operators have catered for this increase by adding more vessels into their fleet and forming partnerships (e. DOMESTIC AND INTERNATIONAL MARKETS Domestic and International Markets Trade Trade in this industry is high The trade trend is steady Domestic and International Markets Analysis IBISWorld measures the level of international trade in this industry based on the international routes and the level of traffic (in terms of tonnage) operated by shipping transport operators. and global commodities prices trending downwards. this had all changed.0% in 2007. By late 2008. which was the second highest since 2000 due to strong global real GDP growth. the price of coal had been increasing since 2001 which also saw the Baltic Dry Index. up from 7.7%. For example.2% in 2005. which occurs from October to March can slow down the voyage of vessels and impedes chartering operations. Around 90% of international trade is transported by sea and is largely due to a shipper's ability to cover more than one geographical area at any given time. The increase in price also saw world seaborne trade in coal rise from around 2.02 billion tons in 2007. the Grand Alliance) to ensure high utilization and coverage of vessels. 76 N/C 2005 7.4%.8% Source: United Nations COMTRADE database BASIS OF COMPETITION Industry competition is high Industry competition is increasing The global Shipping industry has a high level of competition.8 5.6% and 86. developing countries' share of both exports and imports were 32% and 30.4%). In terms of developing countries. 2007 (Top 5) Exporters Billion Dollars Value Percentage Share Importers Billion Dollars Value Germany 1326. Europe was the largest dry cargo market for exports and imports with 1.2% 2006 7.Shipping 22 January 2010 The share of developed market economy countries in goods loaded and unloaded in 2005 were 33.1% of the world total respectively.9% for crude oil and 50.4 9.3 million tons (4.9 million tons (28. IBISWorld Inc.3% and 53.1 Japan 621.6% of imports. The combined share of petroleum products and crude oil exports by developing countries represented 67.65 7. the share of seaborne exports was 49%. In terms of imports. The dry bulk segment has the largest share of industry tonnage in terms of dead-weight tons.4 4.5% respectively. The US. It has been relatively stable but the share of products differs markedly.5 8.2% of world imports) respectively. Australia and New Zealand were also large exporters of dry shipments. The industry does exhibit © Copyright 2010. Leading exporters and importers in world merchandise trade.3% and 42.5% for petroleum products. Europe was the most important exporter of crude oil and petroleum products.07 billion tons or (22.5 million tons (10.7 Source: World Trade Organization World Seaborne Trade 2004-2007 Billion Metric Tons Billion 2004 6. with the level on the increase due to over-supply and weak demand as a result of both a cyclical downturn in the industry. with a total of 105. The variations between developed and developing countries in the crude oil and petroleum product segments reflect the Gross Domestic Product of these regions.6% 2007 8. coal and grain.6 USA 1162. the shares of crude oil and petroleum products were 26.51 billion (32.3 China 956 Japan 712. crude oil and petroleum products accounted for 5.6 Total 4972.8 8.4 China 1217.7% of world exports) and 1.5 USA 2020.2% and 21.5% respectively. The share of global shipments of developed market economy countries was 54% of exports and 55. For these countries.0 UK 619. 18 . while imports accounted 66.1%). while imports were 30.11 5. The largest importer of crude oil and petroleum products was North America with 681. In the dry bulk sector.5% of the total world exports.9 100 Total 5275. This is largely attributed to the rich resources inherited by these countries: iron ore.3% of the world total).1 France 553.2%). Canada. followed by Europe with 542. and Japan with 247.02 4.MARKET CHARACTERISTICS Global Logistics .4% in 2005.7 Germany 1058. Among the market economies.9 million tons (22. and the global economic crisis. fertilizer. pool profits. Greece. and tax provisions. Quality of Service: Shippers that provide reliable service and good reputation can have a competitive advantage in this industry. Furthermore. Generally. Liberia. the more routes and destinations offered by shipping companies. The nation of registry requires the shipowner to comply with specific manning. operating and berthing costs that can fluctuate according to both capacity and demand. ports of call and other minimum service levels. the more likely shippers will seek their service as better freight and charter rates can be negotiated. However. Adaptability is necessary to minimize lost revenue possibilities that will arise. Notwithstanding the obvious competition between the conference and non-conference operators. Price of Charter: The majority of operators lease and own their vessels. or is proposed to include.MARKET CHARACTERISTICS Global Logistics . many of the world ships are registered in these countries. Internal Competition Internal competition in the global Shipping industry stems from both conference and non-conference operators. These vessels might not always be of low-cost. The excess capacity that shipping lines are predicted to have from 2009 onwards will also serve to drive prices down and increase competition. Tramp ships are generally not controlled by a specific route with a single commodity. there are no extra costs borne by new entrants that are not borne by incumbents.Shipping 22 January 2010 high initial investment costs. Large oil tankers that are built for time charters for specific origin-destination markets are the exception. it is not uncommon for conference members to compete with each other on providing better service levels in an attempt to introduce product differentiation on a small scale. © Copyright 2010. a conference is a particular type of agreement being: a route-specific agreement between carriers to charge common freight-rates. rates tend to fall. but that is a basic trade-off to being flexible. Rates are based on the type of cargo transported and the weight/volume of the cargo. 19 . Internationally. For this reason. The internet is used for bookings and payments as well as cargo tracking services. Operators that can rent vessels at a lower price will enable them to be more competitive in the industry. optimal design for any of the movements. Freight rates are usually negotiated between shippers and shipping operators. safety. the provision of liner cargo shipping services. Conferences also compete with "Tramp" shipping. Geographical Coverage: Larger freight companies that have a bigger fleet and brand recognition will be able to gain a higher market share as they can offer their services at a lower cost or even charge a premium for services to areas which are not provided by other carriers. as volume increases. grain. which reduces costs for both the supplier and consumer. A conference is conventionally defined as an unincorporated association of two or more ocean carriers carrying on two or more businesses each of which includes. pool revenue and costs. though it remains legal for conferences to operate in many parts of the world. and Panama are nations imposing relatively loose requirements in such areas. This is especially true when there is excess capacity in the industry and rate cutting is common. Conferences also set out the schedule of sailing. and timber in the same year. The EU ruling in October 2008 to ban conferences operating out of its ports was designed to increase competition in the future. IBISWorld Inc. and engage in capacity management. Specific factors that influence competition in this industry are: Price (Freight charges): Shipping companies compete on the freight rates charged. The basic tramp vessel might haul coal. Technology: The use of the Internet to reach the customer has also been a successful competitive strategy deployed by most operators. A major consideration of tramp owners is the nation in which the ship is registered. 20 . such as marketing and capacity sharing arrangements.Shipping 22 January 2010 Partnerships and Alliances: International alliances between domestic and foreign shippers. External Competition The industry is also affected by substitutes such as road. Competition is higher in the international shipping segment as compared to coastal and inland water transport. an example being Maersk with the acquisition of P&O Nedlloyd in 2005. © Copyright 2010. This is to ensure that local players can have a 'fair go' in this industry. The major competition is from rail services and pipelines. foreign providers can obtain access to destinations in which they would otherwise not be able to access. IBISWorld Inc. rail and air transportation. Many of the alliances were only formed recently (in the last decade) as companies look at ways to improve operations in a relatively competitive environment. Joint ventures in this industry are also prominent for companies to expand their geographical reach and share the costs associated with shipping.MARKET CHARACTERISTICS Global Logistics . have significantly increased competition in international markets. Over the past five years. Through code sharing arrangements. profits being squeezed. The industry is determined by the demand for water transport which picked up since the economic downturn in 2002. Major players have further expanded their market share in this industry. At this point. Domestic water carriers compete for traffic with other modes and to a limited degree with other water carriers. though the sharp rise in oil prices between 2005 and mid 2008 hit this fuel-intensive mode of transport quite hard. Mergers and acquisitions are prominent in this industry. Just-in-time production and inventory management policies have added impetus to the demand for air freight. Air freight competed on the grounds of having a superior level of service that is often preferred by customers who are moving small volume. and expected to undergo a shakeout from 2009 • Technology improvements on ships have been moderate and the classification of ships has not changed materially. time-sensitive and valuable freight. value added growth has been above real US GDP growth on an annualized basis. Product offerings are clearly segmented in this industry Life Cycle Analysis IBISWorld believes that the global Shipping industry is in the decline phase of its economic life cycle. LIFE CYCLE Life Cycle Stage This industry is in the decline stage of its life cycle Life Cycle Reasons • Industry revenue and value added has been growing at or above real GDP growth during the current performance period. and a number of operators being forces from the industry due to dwindling revenue and fierce competition. The bubble finally burst in mid 2008. the industry switched into a decline that may well take a number of years to play itself out. though this is set to cease from 2009 • Mergers and acquisitions feature prominently in this industry as firms compete for market share • The number of establishments in the industry has only increased marginally over the past five years. remaining robust for a number of years following. with shipping prices plunging at alarming rates. Rail and road competition is for dry-bulk traffic while pipeline competition is directed at the movement of bulk liquids. Coastal and inland water trades in some countries such as the US and Australia is protected. the level of globalization in this industry was moderate. ship operations remain relatively unchanged. Establishment numbers are expected to grow by a mere 0. 21 . increase trade with China has led to greater investments into US ports in the Far West to ease congestion. For example. nations will favor their own flagged vessels rather than a foreign flagged vessel to transport goods. especially in developing countries (as witnessed by Korea in the 1960s and China in the 1990s) as it promotes employment.MARKET CHARACTERISTICS Global Logistics . Over the last five years there have been new trade routes opened and capacity and service quality has changed according to derived demand. with many domestic operators competing with foreign firms. While demand for shipping services increased during most of the current performance period. Europe and Asia have been the largest shipbuilding nations over the past fifty years and feature prominently in the list of the top 10 shipping lines in the world. © Copyright 2010. While ships are more sophisticated. IBISWorld Inc.Shipping 22 January 2010 Many governments support their local shipbuilding industries. There has been a slowdown in new technology and systems in this industry.4% over the current performance period. When demand for maritime transport increases. IBISWorld believes that margins in the Shipping industry are declining. equipment and support services that goes with shipping. the over supply of ships and volatile bunker fuel prices have been affecting profits in this industry. It may be difficult for start-ups to obtain qualified maritime personnel and may need to invest further by providing additional training to new recruits. The increasing demand for express door-to-door integrated service (Couriers) is also slowly gaining market share from this industry further increasing the level of competition and hence barriers to this industry. If the entrant wishes to enter the tramp market. Many major cargo carriers are relying on long term contracts to increase revenue and market share in this industry. 22 . it would need long term contracts if it is to survive. While labor in this industry is moderate compared to many other industries. with strong price pressure set to occur in coming years. new players may find it difficult to get the returns necessary to survive in the current life cycle stage of the industry in 2009 and 2010. therefore having a strong reputation with freight forwarders. While many major and existing players should be able to accommodate this working environment.INDUSTRY CONDITIONS Global Logistics . the number of qualified seafarers and marine personnel have been declining especially in developed nations such as Europe. second-hand equipment may be adequate. Ships are also becoming bigger and more technologically advanced. there are no extra costs borne by new entrants that are not borne by incumbents when the company is up and running.500 TEUs. and whether they are comparable to the standards set by other operators in the Conference. ground logistics companies and custom service is essential for participants in this industry. however in 2007 it reached 14. but also the technology. Increasing regulations pertaining to environment protection may also constitute a barrier to entry. The majority of routes are determined by demand and supply factors which is usually volatile. Many network routes are established or suspended because of demand. In this market. However. While revenue had been increasing strongly due to high demand for shipping services until mid 2008. The price of a new oceangoing vessel costs anywhere between $120 million and $400 million. The opportunity for a new entrant to join a Conference would be based on the service levels that the operator wishes to offer.500 TEUs. the largest container ship was at around 4. it will also have to compete with strong competition from lines with flags of convenience. © Copyright 2010. with fast increases in price over 2008-2009. Significant capital investments are not only required for vessels. Membership of the Conference system offers considerable advantages in terms of stability of rates. IBISWorld Inc.Shipping 22 January 2010 Industry Conditions BARRIERS TO ENTRY Barriers to entry in this industry are medium These barriers are increasing The high start-up costs of equipment (vessels) are a formidable barrier to entry for the global shipping industry. In 1990. although depending on the trade or market that the new entrant wishes to enter. technical co-operation. regulations and benchmarks are set by the International Maritime Organization (IMO). and income tax. REGULATION AND DEREGULATION The level of Regulation is medium The trend of Regulation is steady The Shipping Logistic industry is moderately regulated. the reduction in general tariffs on goods carried by water will facilitate international trade and therefore influence demand for international shipping. property tax.INDUSTRY CONDITIONS Global Logistics . Taxes that typically make up significant proportions of industry operators' tax bills include fuel tax. though some issues are of greater relevance to this industry. The majority of government regulations is enforced by the nation's Department of Transport and is similar in each country. IMO's main task has been to develop and maintain a comprehensive regulatory framework for shipping and its concerns today include safety. Adopted in Geneva in 1948. 23 . Critics of such schemes cite the lack of incentive to operate in an innovative and efficient manner. IBISWorld Inc. INDUSTRY ASSISTANCE The level of Industry Assistance is low The trend of Industry Assistance is steady There are no specific tariffs for this industry This industry is not directly affected by tariffs. When implemented in the correct manner. Cabotage Law Many countries enforce cabotage laws. Cabotage laws such as the Jones Act in the US do not provide a direct subsidy to domestic water carriers. maritime security and the © Copyright 2010.Shipping 22 January 2010 TAXATION Being a global industry. Industry assistance over the past few decades have been provided through the liberalization of the shipping market and international trade. excise tax. these laws provide safe. However. reliable and cost effective transportation options to shippers. payroll tax. the operations of shipping logistics companies are taxed through hundreds of different local taxation regimes. On a global scale. International Maritime Organization Regulation in the Shipping industry is governed by the International Maritime Organization (IMO). industry taxation regimes in each region/country don't differ markedly from those in the broader economy. Standards and regulations are set by both national government authorities and industry associations. such as fuel and security. Generally. The broad purposes cited by all countries for cabotage laws are to assure reliable domestic shipping services and the existence of maritime capability that is completely subject to national control in times of war and national emergency. legal matters. but they do provide a monopoly for US coastal and intercoastal carriers. environmental concerns. domestic trade. the International Convention on Search and Rescue and the International Convention on Oil Pollution Preparedness.S. and (3) to the Convention on the Prevention of Maritime Pollution (MARPOL 73/78). Response and Co-operation. construction. storage. the Bureau of Customs and Border Protection (CBP) has enforced a rule requiring ocean carriers to electronically submit the names of the "actual shipper" of containerized cargo destined for the United States. 24 . (2) Certification and Watchkeeping for Seafarers (STCW) which establishes basic requirements on training. Other cargo ships had to be ISM certified by July 1.S. Some of the measures undertaken by IMO include: (1) prevention of accidents. the National © Copyright 2010. Passenger ships.S. operation and manning . substances and wastes. The inspection and monitoring of the above requirements are the responsibility of member states but the IMO has an extensive technical co-operation program for undeveloped and developing countries. IMO's specialized committees and sub-committees are the focus for the technical work to update existing legislation or develop and adopt new regulations. United States The Oil Pollution Act of 1990 (OPA-99) mandates that single-hull tankers serving U. certification and watch-keeping for seafarers. (2) rules concerning distress and safety communications. Some examples of proposals made by the IMO include "Goal-Based Standards (GBS)". IMO regulations for tankers serving foreign ports require that new tankers delivered after July 6th 1996 have doubled hulls and that 25 year-old single-hull tankers be retro-fitted with double hulls beginning in 1995. including standards for ship design.Shipping 22 January 2010 efficiency of shipping. Some of the initiatives and on-going projects by the IMO include: (1) the International Convention for the Safety of Life at Sea the International Convention on Standards of Training. 1998. At the end of 1998. ISM certification has not restricted the shipping capacity available for the deep-sea trade. bulk carriers. So far. and high speed cargo ships had to be ISM certified by July 1. IBISWorld Inc. In terms of safety the IMO Safety of Life at Sea (SOLAS) conventions requires that all ships of at least 500 gross registered tons meet International Safety Management (ISM) mandated safe-management standards. beginning in 1995. which aimed to strengthen safety management at sea. and protocols to prevent air pollution arising from ships' exhausts. and (3) conventions which establish compensation and liability regimes . 2002. ports be phased out in stages. equipment. the MARPOL convention for the prevention of pollution by ships and the STCW convention on standards of training for seafarers. state. Vessels that did not have ISM certification were denied access to U. local and foreign environmental laws and regulations relating to the discharge. Firm operations are also subject to and affected by a variety of federal. ports.including the International Convention on Civil Liability for Oil Pollution Damage. Parties affected by this ruling such as the World Shipping Council. As part of its implementation of the Trade Act of 2002 and the Maritime Transportation Security Act. The Jones Act (Section 27 of the Merchant Marine Act of 1920) precludes foreign owned. which required double hulls on all tankers. The U. CBP issued a rule requiring carriers to provide the names of all foreign shippers of inbound containerized cargo 24 hours prior to the vessel's departure from the port of loading. These initiatives were prompted by representatives of the US.S. From March 2004. treatment. Clarkson's Tanker Register (a comprehensive registry of seagoing tankers) reported that only 26% of the world's tankers were equipped with double hulls. based on age and size. investigation and remediation of certain materials. the convention establishing the International Fund for Compensation for Oil Pollution Damage and the Athens Convention covering liability and compensation for passengers at sea. disposal.key treaties include SOLAS. The following analysis will therefore concentrate on industrialized nations (US and Europe) that are the heaviest regulated in the world.INDUSTRY CONDITIONS Global Logistics . Response plans are required by law for each vessel owner or operator of hazardous shipments. Coast Guard's Office of Response is responsible in administering Oil or Hazardous Material Pollution Prevention Regulations for Vessels. foreign built and foreign flagged vessels from participating in the U. tankers. Europe Regulations relating to shipping or maritime matters in Europe are part of the body of law and treaty developed by the European Community. The ILO hosts the International Labour Conference in Geneva every year in June. capacity. Since then. The IMO in conjunction with various Federal Governments are taking action to reduce its CO2 emissions such as CO2 indexing. Shipowners are also required to keep their ships sea-worthy and certificates are issued after periodical inspections during ship surveys. The Conference also makes decisions on the ILO's general policy. etc for a certain trade to reduce volatility and price competition. the EU was looking to the discussions in IMO on the revision of MARPOL to come forward with measures to reduce air emissions by the end of 2008. 2007. As of January 1. strengthen fundamental principles and rights at work. coordinating between sectoral policies and piloting the development of cross-cutting policy tools. of their "customers' customers". security and human dignity. In October 2008. the environment and pilotage. From that date. in some cases. congestion in ports). vessels that operate on the navigable waters of the US must be equipped with and operate electronic charts.Shipping 22 January 2010 Industrial Transportation League. The carriers must now publish their own freight charges and the various surcharges (for terminal costs. it seeks to promote employment creation. the EU ended the anti-trust immunity that allowed shipping lines to organize themselves into conferences. Founded in 1919. In relation to air emissions. European shipping conferences involved shipping lines applying joint tariffs for transporting containers to and from the European Union. the commission has set up a maritime policy function with the task of analyzing maritime affairs and the policies affecting them. COST STRUCTURE Year: 2009 © Copyright 2010. the EU stopped allowing the issuance of certificates in respect of the vessel belonging to a "conference line". fluctuations in fuel and exchange rates.INDUSTRY CONDITIONS Global Logistics . The groups objected to provisions requiring ocean carriers to obtain and provide the names. work program and budget. IBISWorld Inc. Others The International Labour Organization is a specialized agency of the United Nations that is devoted to advancing opportunities for women and men to obtain decent and productive work in conditions of freedom. On December 1986. equity. The conferences tended to make agreements on tariffs. the National Customs Broker and Forwarders Association of America. The reduction of air emissions from ships has become a major focus of regulatory attention in the Shipping industry. the Council of Ministers adopted four Regulations which lay the foundations for most of EC shipping law such as liner conferences. who can be foreign vendors and suppliers that do business with ocean consolidators (known as NVOCCs) and are not directly involved in a commercial relationship with the carrier. Conventions and Recommendations are crafted and adopted by majority decision. Environmental concerns are major issues in this industry. The industry is also committed to reducing carbon emissions. The organization plays a huge role in the lives of seafarers by ensuring their fair treatment and safety. emission trading and differentiated harbor dues. At the Conference. and the Retail Industry Leaders Association asked the government to revise the text of that rule. 25 . For vessel-owner operators. and shipping companies have been putting in strong orders for vessels during most of the current performance period to meet this regulatory requirement. While the price for commissioning a newly built ship is much lower in 2009.8%* Profit 2.INDUSTRY CONDITIONS Global Logistics . and paying in installments into 2009.Shipping 22 January 2010 Item Cost % Wages 36. as revenue has fallen by a larger percentage than what has been saved through staff cuts. 26 . IBISWorld Inc. materials. Bunker fuel is one of the most significant expenses for a shipping company (within the "purchases" segment). and the level of prices charged for products. at a fixed price. The price of new ships has been another main upward driver of shipping costs in recent times. the services offered by the company. many shipping companies are locked into very expensive contracts that were signed in 2007 and 2008. by working longer hours and operating services at higher fees. this industry is vulnerable to fluctuations in the prices of materials and supplies. Many smaller companies lack the financial resources and expertise to buy fuel in bulk. effective route and schedule management and sourcing seafarers from cheaper overseas countries can lead to efficient management of labor expenses.2%* Depreciation 6. Shipbuilding costs in 2006 were about 25% higher than in 2005. on a future specified date) and lack the negotiating power to incorporate fuel cost adjustments or escalation provisions into long-term contracts.5%* Purchases 32. During the current performance period. © Copyright 2010.2%* IBISWorld believes that the cost structure of companies in this industry varies depending on the size of the company. All tanker vessels are expected to be double-hulled by 2010. capacity utilization.5%* Rent 4. but from late 2008 has settled at a more moderate level. the value of contracts gained. and these prices soared even further until the economic crisis of 2008. geographical spread of customers. indicating that the industry is labor intensive. equipment and bunker fuel. Purchases account for around 32.2% of industry revenue.5% of revenue. are likely to be unionized.5%* Other 16. Larger firms tend to have higher costs because they have broader service lines. The expenditure on fuel that companies were forced to make during 2007 and 2008 fluctuated wildly. In general. bunker prices rose by an average 26%. cover a wider geographical area and in more industrialized nations. For larger companies. often accounting for around 20% to 30% of all operating expenses for firms in this industry. enter into forward purchase contracts for fuel (whereby they agree to take delivery of a set amount of fuel.3%* Utilities 1. A major expense in this industry is purchases which include the acquisition of vessels. labor costs are more difficult to control and owners can generally only increase revenue (and reduce the proportion of labor expenses to revenue). Because these costs are relatively large. Labor costs as a proportion of revenue have increased from 2008. labor costs makes up the single largest proportion of an entity's expenses at 36. Fuel prices and availability are subject to wide price fluctuations based on geo-political issues and global supply and demand over which no one company (or country) has control. ships became bigger and more expensive as firms sought to expand their fleet size to exploit economies of scale. Between 2005 and 2006 alone. Another driver of insurance premiums in 2008 and 2009 has been the increased incidence of piracy off the coast of Somalia. This means that for every dollar invested into plant and equipment. This was increased to $515 per month by the International Labour Organization (ILO) effective January 1. technological advancement in ship operations has allowed multi-skilling to take place and therefore has reduced labor input but increased the skill level required by laborers. depending on the type and size. which account for around 16. advertising. repairs and maintenance of vessels. 2001 on the US and the subsequent war against terrorism. Prior to the beginning of 2007. once purchased. 27 . Water carriers are not highly labor intensive in terms of their movement operations but may require more labor in terminal areas for certain types of freight. In addition. capital investment within the industry is likely to increase as competition becomes more intense and there is a greater demand for high quality. ships are becoming more sophisticated with high value vessels such as Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) vessels having the best safety record with the best crews and officers.60 is spent on labor. labor requirements are much higher in cruise ships as compared to other carriers due to the amenities and service offerings provided by cruise liners to their passengers. cleaning costs. It is also worthwhile to note that in most cases. However. It is however important to note that while vessels are becoming more sophisticated and modern seafarers are required to do multiple tasks. In addition. labor input is required Capital costs are less significant in ship management segment The handling of cargo requires less labor as compared to passengers due to the technological advancement in the tracking and handling of goods Technological advancements have reduced labor input The industry is moderately labor intensive with wages accounting for 36. because industry competition is fierce. many industry positions are as low skilled deck hands or hospitality workers. Labor costs have not moved higher over the last five years as there is a large pool of seafaring labor readily available from developing countries. Finally. As firms attempt to gain an advantage in the market. with numerous carriers expected to record a substantial loss in 2009.2%. per year. IBISWorld Inc. with a typical firm in the industry using approximately 5. however. offset by the less capital intensive segment of ship management. approximately $5. wages accorded to seafarers are still considered low. The cost of new builds.8% of industry revenue. Since the terrorist attack of September 11.Shipping 22 January 2010 Other expenses include insurance. ship management services providers do not actually own the vessel that they are operating. The major players have passed this cost increases to their clients in the form of surcharges. safe and environmentally sound travel options.INDUSTRY CONDITIONS Global Logistics . and a large proportion of positions are part time in nature. CAPITAL AND LABOR INTENSITY The level of Capital Intensity is medium • • • • The cost of buying and/or leasing vessels and other equipment is high. Over the longer term. 2007. operators must constantly update their advertisements.6 units of labor for each unit of capital. In addition. Costs for storage during repairs (such as dry dock) can be prohibitive. reflecting the skilled nature of maritime work. can vary between $120 million and $400 million. the minimum salary for a seafarer was $500 per month. advertising and promotion costs increase.5% of revenue. costs relating to insurance and security of cargo have increased.500 per person. Sightseeing firms will be able to © Copyright 2010. The average industry wage is moderate at around $32. average returns within the industry have fallen to around 2. The industry portrays a medium level of capital intensity owing to the high costs involved in ship acquisition. Trade fluctuations are caused by a number of factors such as exchange rates. While it does not usually occur very often. security. TECHNOLOGY AND SYSTEMS The level of Technology Change is medium Technology is focused on maintaining a competitive cost structure by controlling acquisition and operating expenses. the participants are creating web-based applications that can speed the delivery of important information amongst themselves and their customers. The shipping transport industry caters for a diverse range of clientele. 28 . industry output is driven by the contraction or expansion of international sea travel. Some of the other on-going technology improvements made on ships are propulsion. The GMDSS is used for maritime safety information.Shipping 22 January 2010 gain an advantage in the market by increasing investment in technologically advanced vessels with on-board communications and entertainment equipment (cruise liners) and improved route and schedule planning programs. domestic demand for imports and income levels. which has been expanding for over 20 years. pricing levels of commodities. and investing in global standardization. The demand for ultra-sized container ships (vessels over 12. information technology infrastructure and product development.600 TEU) surged at the end of 2006. Many ships have lost their cargo due to rough weather. leading to relatively stable demand over time. One of the major technological developments associated with liner shipping has been the design of the ships themselves. Through Information System Agreement (ISA) the world's major ocean carriers are co-operating to promote Global Electronic Commerce in the Maritime Industry. shock and vibration controls. Based on industry sources. as measured by world GDP. which allows another 10% of cargo to be carried. The demand for such vessels is due to strong growth in containerized cargo trades and substantial expansion on container fleets due to competition among the global shipping lines. In the passenger segment. it is therefore less volatile. noise. As world economic growth is more stable than the GDP growth of individual countries. container losses at sea does occur. fixed lashing structures as opposed to old-style lash-ups of chain and wire. Industry output is affected by economic activity. global demand for these vessels totaled 80 ships as compared to 0 in the same period in 2006. which should limit the degree of revenue volatility. Modern container ships make use of rigid. and are very reliable in shallow waters and tight waterways such as paths through coral reefs and other reefs. Shipping is the cheapest form of cross-border transport. These digital charts provide greater accuracy than paper charts. With the advent of the internet. Efficiencies in ship operations and design include the burning of low-sulphur bunker oil which can reduce fuel use by 10%. Vessels today are also becoming much larger. INDUSTRY VOLATILITY Industry revenue volatility is medium In theory. ISA has been a leader in developing standards for electronic data interchange (EDI). International trade has been increasing throughout the current performance period. The use of satellite communications is another major technological advance in the industry facilitating the Global Maritime Distress and Safety Signals (GMDSS) system. IBISWorld Inc. Paper navigation charts have been replaced with electronic chart display systems. satellite and navigational equipment and electrical equipment and power supply.INDUSTRY CONDITIONS Global Logistics . The design of new cargo ships has reduced the number of pillars in the structure. this industry should not display high levels of volatility. to communicate with land and to provide search and rescue information. © Copyright 2010. The level of international trade will influence the demand for shipping logistics. as of August 2007. Ships with more fuel-efficient engines and shallow draughts have helped the industry to be more competitive through cost savings. transmission and engine room equipment. and will continue to haunt the industry until at least 2011. Foreign flagged ships carry significant tonnage.Shipping 22 January 2010 However despite all of this. COSCO Container Lines (China). During periods where shipping activity are low. Moller . foreign built and foreign flagged vessels from participating in the US domestic trade. China Shipping Container Lines (China). the charter rate for dry bulk ships fell by 79% in the wake of the global economic crisis. with the majority of the industry's major companies operating in multiple geographic regions. In 2006. a score of between three and 10 points indicates a medium level of volatility. the leading 10 container service operators as of 2008 were: A. Moller Maersk Group (Denmark). There are two major shipping alliances.1 over the current performance period. In October 2008 alone. For instance. Maersk Logistics and P&O Nedlloyd Logistics were integrated under the brand name Maersk Logistics.Maersk A/S acquired Royal P&O Nedlloyd N. This creates regular supply/demand imbalances. NYK Group (Japan). IBISWorld measured industry revenue volatility at 6. APL (Singapore).V. the industry does indeed exhibit high revenue volatility. 29 . alliances allow carriers to meet demand without facing the intense fixed-cost investments. It is this constant battle to accurately predict economic and demand conditions years in advance that makes it difficult for shipping lines to match their fleet levels with demand levels that is a key driver of the revenue volatility that is currently being witnessed.US) precludes foreign owned. For example. © Copyright 2010. To honor P&O Nedlloyd's commitments to various conferences and consortia.A. The global financial crisis had not caused any major companies to topple by early 2010. The acquisition of P&O Nedlloyd by Maersk has led to increased competition in this industry and the importance of alliances and partnerships. the Grand Alliance and New World Alliance. Mediterranean Shipping Company S. A.P. This is largely attributed to the diversity of operators from various countries. IBISWorld Inc.P. which have a big impact on shipping rates and hence revenue. (Switzerland). after which Maersk Sealand and P&O Nedlloyd was branded under the new name of Maersk Line. Consolidation within this industry is also increasing the level of globalization. and (2) the level of foreign interaction by local operators in a particular country. with the market shares of the major global players remaining relatively stable during the worst of the downturn. the top 35 maritime countries according to deadweight tonnage registered controlled over 95% of the world merchant fleet. Because of the length of time that it takes to order and build a ship. the shipping industry tends to either overshoot or undershoot on its demand forecasts for its fleet. and Hanjin Shipping Group (Republic of Korea/Germany). P&O Nedlloyd and Maersk Sealand continued to operate separate shipping lines until February 2006. Shipping alliances enable carriers to realize economies of scale while providing customers with more frequent sailing and quicker transit times. yet the world shipping fleet is set to grow by over 10% in both 2008 and 2009 as pre-existing orders are delivered to their new owners. GLOBALIZATION The level of Globalization is high The trend of Globalization is steady Globalization measures the extent to which this division operates on a global scale and is determined by: (1) level of foreign operators. CMA-CGM (France). particularly in the international shipping segment.INDUSTRY CONDITIONS Global Logistics . Hapag-Lloyd (Germany). The level of foreign interaction by local operators in a particular country is also considered medium and increasing. In late 2005. The full integration was completed end 2006 (Refer to Major Players for further details). Many operators also have associated shipping businesses such as piloting and port operations of which firms within the alliances can share assets to further reduce operating costs. IBISWorld rates the industry as having a high level of globalization. The Jones Act (Section 27 of the Merchant Marine Act of 1920 . while domestic and coastal shipping are normally restricted to vessels registered and owned by operators from the domiciled country and/or region. Evergreen Group (Taiwan). coupled with strong international trade performance has translated into a positive trend over this period for the global Shipping Logistics industry. Africa and the Middle East. significantly exceeding average trade growth over the last decade. Top 5 maritime fleet countries. In real terms. 2006 Country Units Vessels Tons Deadweight Tonnage Greece 3027 163394 Japan 3091 131703 Germany 2786 71516 China 2893 65488 United States 1679 46927 Source: United Nations COMTRADE database © Copyright 2010. IBISWorld Inc. More than 90% of goods traded between countries are transported by sea. 30 . The sustained economic growth experienced by the world economy over the majority of the last two decades.INDUSTRY CONDITIONS Global Logistics .0% in 2008. Asia and the Commonwealth of Independent States countries reported the strongest growth followed by South America. world merchandise trade rose by 6.0% in 2007 and 2.Shipping 22 January 2010 The lifting of many trade restrictions and the promotion of free trade has proved to be beneficial for this industry. North America and Europe. IBISWorld Inc.Imports) An increase in trade activities will push the demand for shipping freight logistics services higher. • Market research and understanding An intimate knowledge of the market so that vessels may be deployed efficiently. 31 . An increase in real GDP growth will lead to an increase in demand for shipping freight logistics services and also cruise activities.Crude Oil The increase in the price of crude oil will have a negative impact on the industry. thereby increasing utilization rates. Air transport is a direct substitute of water transport in the realms of international trade.Airline Traffic Usage The industry is highly sensitive to the level of airline traffic usage. Advancements in technology in ships and shore activities have all assisted in reducing unit costs and improve ship turnaround times. Transport Infrastructure .KEY FACTORS Global Logistics . • Prompt delivery to market Competition is fierce in this industry. • Ability to expand and curtail operations rapidly in line with market demand Establishing flexible capacity to meet troughs and peaks in demand. For example. © Copyright 2010. allows profitability to be maintained.Goods . as the general community increasingly demands more environmentally friendly vessels.Shipping industry are: • Ability to accommodate environmental requirements An essential requirement in the 21st Century. The inability to deliver products on-time may result in lost sales to a competitor. merchandized trade volumes impact on containerized traffic and are significant user of liner services. Bigger ships for example can carry more cargo to promote economies of scale.Balance (Exports . World Markets . KEY SUCCESS FACTORS The key success factors in the Global Logistics . Merchandise Trade .Water Transport The improvement in water transport infrastructure will lead to greater demand for shipping services.World GDP The industry is most sensitive to the level of GDP growth.Shipping industry include: Growth (GDP) & Inflation .Shipping 22 January 2010 Key Factors KEY SENSITIVITIES The key sensitivities affecting the performance of the Global Logistics . Transport Infrastructure . Operating costs for industry participants will increase which will affect prices and decrease the demand for air transport. KEY FACTORS Global Logistics . IBISWorld Inc.Shipping 22 January 2010 • Ability to pass on cost increases Operating costs in this industry are high. • Access to the latest available and most efficient technology and techniques The use of up-to-date technology such as the internet and loading facilities will help improve efficiency in this industry. 32 . • Membership of an industry organization Securing a membership of a conference in operating liner services can enhance a company's client base. © Copyright 2010. Transferring cost increases to the client can assist firms in maintaining their profit margin. which was acquired by A. combines the operations of Maersk Sealand and Royal P&O Nedlloyd.P. Headquartered in Copenhagen. Moller . ship repair yards and towage and salvage operations. Denmark.1% A.P.7% (2009) PLAYER PERFORMANCE A. The container and shipping activities is the largest business segment of Maersk that includes Maersk Line.K.P.P. Moller's grandmother. It operates more than 260 vessels and rigs.000 employees and offices in 130 countries. Ltd. part of the energy business segment was established in 1962 when the company was awarded the concession for oil and gas exploration and production in Denmark.0% (2009) Other 43. The shipping and offshore business is slightly different to the container segment in that it provides services predominantly to the oil and gas sector. The name Mrsk was taken from Mr A. Damco. Maersk retail and other business division includes supermarkets (Denmark.P. the Maersk Group is a global organization with around 110. oil rigs. 33 . Maersk Oil. (1) container and related activities. Kiersten Pedersdatter Mrsk. founded by A. 9. The company is listed on the Copenhagen Stock Exchange. Lines. It is considered a mid-size player in the oil and gas industry with around 600.000 million cubic feet per day. Finally.3% (2009) Carnival Corporation 8.S. Germany. South America and the Gulf of Mexico. The business segment operates more than 550 container vessels.P. and (4) retail and other business. launched as a brand in 2006.KEY COMPETITORS Global Logistics . APM Terminals. (2) energy. Poland and Sweden). Moller . The company is one of the largest shipping companies and is also involved in a wide range of activities within the energy shipbuilding. (3) shipping and offshore. IBISWorld Inc. Maersk Container Industri and Safmarine. United Kingdom. West Africa. The four business areas operated by the company are. Algeria and Kazakhstan with exploration sites in the North Sea.5% (2009) Hapag-Lloyd AG 9. drilling contractors and supply service. plastic products. Møller .000 barrels of oil production per day and gas production of up to 1. such as tankers. North Africa.Mærsk A/S 20. Yearly Performance © Copyright 2010.Maersk in 2005. Maersk Logistics.Maersk (Maersk) was established in 1904.Mærsk A/S Market Share: 20. Qatar. Møller .4% (2009) Mitsui O. the Middle East. Maersk Oil participates in production activities in Denmark. Maersk Line. UK.Shipping 22 January 2010 Key Competitors MAJOR PLAYERS Market Share Major Player Market Share Range A.1% (2009) Nippon Yusen Kabushiki Kaisha 9. retail and manufacturing industries. of which 140 is owned by the business segment. Moller and his father. Central Asia. The 2007 year proved to be a strong one for Maersk. improved schedule reliability. the freight volumes handled by Maersk Line and subsidiaries increased by 2.4 billion from $1. much of it due to the oil and gas business. Results for Maersk's shipping activities were affected by higher fuel costs through much of the year. The tankers. About half of the company's revenue was generated by container shipping and related activities. Container shipping returned to marginal profitability after a $568 million loss the year before. revenue rose 30% to $30. For the financial year ended 2006.0% excluding the Bunker Fuel Adjustment Factor) compared to 2006. partly the result of Maersk's closure of a number of US inland destinations during 2007. Maersk Line implemented a restructuring process and a number of improvements under the headline streamLINE. prompted by higher oil © Copyright 2010. The party ended for Maersk in mid 2008. Increasing freight rates in the first half of the year boosted revenue. Net profit rose to $2.0% during the second quarter compared to last year. IBISWorld Inc. The $569 million deal gave Maersk a combined owned and chartered fleet of 138 vessels excluding ships on order. offset by lower freight rates for the period. Maersk Tankers announced a takeover of leading Swedish operator Brostrom. as oil prices at this time were reaching unprecedented highs.000 containers.4 billion (aided by the slump in the US dollar relative to the Danish currency). In total. In the tankers. with the company believing that the fall in shipping rates had created an unsustainable situation.0% increase in average rates (or 4.1% growth on 2006. with the percentage growth in the retail arm of the company expanding by over 36%. Trans-Pacific volume fell 7. Results for the full year saw a 19. with years of capacity expansion being swapped for a strategic cutting of services. a move that made Maersk a world leader in the product tanker segment.Shipping 22 January 2010 For the first six months of 2008. and a marginal increase in net profit. surpassing the $50 billion mark for the first time.21 billion.0% higher at 6. while tankers generated around 20% of revenue. fewer errors. The container and related activities division was up 17% from the previous year due to higher volumes. The division sold 15 old container vessels during the financial year but was replaced by 17 new ships capable of handling more than 80. The Asia . These process improvements were undertaken with the aim of creating cost reductions. increased 16% on a volume 4. The company was able to derive a 5. partly offset by a decline in freight rates for tankers. the company announced in October that it would remove 7. Revenue at Maersk. revenue increased by over 25% as the world economy continued its march. with consolidated revenue derived by Maersk up 17%.Europe route was particularly targeted. offshore and other shipping activities segment. although to a larger extent than previously. Also in 2008. and ended the year at $61. Strong real GDP growth especially in Europe and developing Asia together with the integration of P&O Nedlloyd increased the coverage under Maersk Line which contributed to higher volumes. The company said volume in the Asia-Europe trades increased 1. 34 . All major segments of the company grew their revenue figures. It was however. the company was able to reduce the impact of this through fuel surcharges on freight rates.2 million TEUs.KEY COMPETITORS Global Logistics .800.600 twenty-foot equivalent units (TEU) per week from its network. The market for drilling rigs was also strong due to the high activity level within exploration and production of oil and natural gas.0% in the first half of the year but slipped 2. The company's total operated tonnage was more than 470 vessels. In a response to the global economic downturn. with fuel costs (USD per ton) increasing on average by 10% compared in the year. the world's largest container carrier.6 billion in the first half of 2007. Each of the four business segment recorded an increase in revenue during the financial year. which was 10% lower than 2005.5% increase in revenue. though the fall in freight volumes on major routes by the fourth quarter caused rates to fall.73 billion. offshore and other shipping activities business unit recorded revenue growth from the sale of ships. with a total capacity of over 1. and greater customer satisfaction. The positive result from this division was due to rates above or at the level of 2005. revenue rose by 20.0%. The rise in oil prices created a shift in the company's cost structure.4% to $3. Net income increased for the first time in three years. recording a 25.0% in 2007.000 TEU (Twenty-foot Equivalent Unit). but second-quarter volume was up 5% from a year ago. In the retail segment. Employment increased to 67.KEY COMPETITORS Global Logistics . In 2006. positive market trends in Europe and continued growth for discount stores in the EU saw revenue from retail activity increased by 89. As a result. supported by higher revenues from Maersk Contractor and Maersk Supply Services.2% increase in revenue. the company recorded a net loss of $568 million from this division compared to a profit of $1. IBISWorld estimates that around 52. Tankers. High oil prices and rigging activities also saw revenue from the Oil and Gas division increase.5% for the financial year 2005 due to strong revenue growth from Stan Air A/S. robust demand for contractors and a strong market to the USA during the summer.000 TEU engaged in the container business. Demand for container capacity was high throughout the year. which contributed to the fall in net income.28 billion (after conversion) due mainly to the appreciation of the US dollar.3%. further increasing its capacity for the period. This was however offset by high fuel prices as well as a general continual upward pressure on other costs. The container division recorded a strong 36. Other revenue from this division namely. and (3) high oil prices that positively affected oil and gas and tanker shipping activities that was partially offset by higher taxes and depreciation of the US dollar.5%. Revenue for the financial year ended 2004 increased by a solid 10. an increase in depreciation due to the acquisition of P&O Nedlloyd and lower freight rates. Martin Air Holland N.0% increase in volumes partly due to the scarcity of capacity. In Danish Krone (DKK).01 billion from $4. (2) gains from the sale of vessels. The purchase offer for Royal P&O Nedlloyd was made in May 2005 which saw more than 500 vessels with a capacity of more than 1. due primarily to a decrease in net profit from the container shipping and related activities division and to a lesser extent discontinued operations. In 2005. Container shipping was negatively affected by high oil prices that pushed operating costs. The effect of the positive supply and demand relationship was however dampened © Copyright 2010.8% to 108. Good results were achieved from crude oil tankers even-though rates were lower than the previous year as demand remained strong. Container shipping and related activities represented the largest portion of consolidated revenue during the year and increased by 15. In addition.6% in 2006. Profit was lower in many of the divisions except tankers. Maersk Logistics and APM Terminals also saw an increase in both revenue and volume.9% to $3. IBISWorld estimates that Maersk had a market share of 19.5%. revenue increased by 31. Revenue increased in all business segments due to higher volumes and activities. Consolidated net income for the period fell by 22.37 billion.Shipping 22 January 2010 prices. Product carriers were however more or less the same as 2004.1% of revenue derived by Maersk was related to this industry in 2006. of which 64 are outside Denmark. making it a central driver of the company's growth during the period. the Roulunds Group together with certain assets from Maersk Aviation was sold in the 2006 financial year.498 for the year ended December 2005. revenue fell marginally to $4. offshore and other shipping activities and retail activity. the number of employees in Maersk increased by a huge 60. with good growth in the central container markets. volume growth was seen from Asia to North America.3% in 2005. The division also took delivery of four new ships and another 22 on long term time charter contracts. Other operating income rose by 9. Dansk Supermarked established 75 new stores. The total number of stores after the expansion was 1. Net income for the year ended 2005 fell by 27. Danske Bank. accounting losses in P&O Nedlloyd and high expenses relating to the integration of P&O Nedlloyd. Asia to Europe and Europe to North America.530 at the end of 2006. It was also positively affected by the acquisition of Kerr-McGee Corporation in November 2005.300. offshore and other shipping activities rose by 17.8%.125. The results were affected by accounting losses in the oil interests purchased in the UK. Safmarine. The strong global demand for container capacity led to a shortage of tonnage and increased rates throughout the year. giving it a market share of 19. Finally. The strong increase in revenue was due to numerous factors that included: (1) higher volumes from both containers and tankers and rates from tankers.5% to $34. In terms of trade. As a result of the full integration of P&O Nedlloyd.V. 35 .28 billion in 2005. IBISWorld Inc. which also saw freight rates rose by 10%.84 billion. Maersk Sealand recorded a 6.9% in the period. revenue increased 8. and the Rosti Group.7%. Revenue from the oil and gas sector rose a significant 51% due to higher oil prices and acquisitions. bulk ore. high fuel prices and a general pressure on costs.5 3151 N/C 63161 N/C 4672 48.6 2617 -22. Its first overseas liner service began in 1875 between Yokohama and Shanghai and by 1896. The market for large tankers was strong due to increased oil consumption in the US and China. Mærsk . tugboat operations and restaurants.5% Nippon Yusen Kabushiki Kaisha (NYK) was formed in 1872 when the Tosa Clan established Tsukumo Shokai Shipping. IBISWorld would like to highlight that the depreciation of the US dollar has made growth rates higher in US dollar terms as compared to the local Danish Krone currency. Services from Asia to North America and Asia to Europe showed continuous growth whereas cargo volumes from Europe to North America only increased moderately.4 2005 34843. Net profit for the period surged in 2004 to $4. employment fell 1. bulk carriers. High container rates together with high oil prices contributed to the rise in net income for the period. (4) logistics and terminal and harbor transport services.4% to 623.0 N/C 26490.2%.67 billion. It was during this period that the company changed its name to Nippon Yusen Kabushiki Kaisha when Nippon Yusen Kaisha became a joint-stock corporation.8 2007 2008 51218. © Copyright 2010. It includes container ships.6% due to high level of activity from crude oil carriers and product tankers. The shipping segment comprises of three areas: liner trade . tankers. (3) cruise services.5 3329 1.KEY COMPETITORS Global Logistics . and tankers . The company's first overseas branch was open in London in 1896.3 62300 -1.3 108530 60.3% on the previous year.000 partly due to the divestment of Maersk Data.financial performance Year Million Dollars Revenue % change Growth Million Dollars NPAT % change Growth Units Employees % change Growth 2003 2004 23970.0 17.0 117000 7. The largest business segment within the company is shipping.8 61211. In retail.0 19.8 120000 2. 36 .0 10.0 3271 25. crude oil and petroleum and chemical products. Other divisions within this segment such as the Maersk Sealand Agencies. This growth was primarily covered from the Arabian Gulf.container transport operations.0 2006 43763. wood chip carriers. real estate and (6) others which include technology. APM Terminals and Safmarine Container Lines also recorded positive revenue growth. IBISWorld Inc. The disposal of companies and sale of rigs and wells also contributed to the net profit result. Other operating income was down slightly divestments and negative results in some of its business lines namely Maersk Container Industri. The increase in oil prices also led to modest gains in the Oil and Gas activities segment which rose by 14. as production peaked in the North Sea and the Mexican Gulf.5 3370 -27. Finally. up 48. Logistics. (5). NYK has four major business segments namely.Liquefied Natural Gas (LNG). (1) global logistics business that incorporates container and car transport. coal and car carrier operations. the US and Australia.Shipping 22 January 2010 by higher time charter rates (part of the fleet operated by Maersk is leased). revenue growth in Dansk Supermarked contributed to revenue growth due primarily to increase in the number of stores and the development and adjustment of product range. offshore and other activities division recorded revenue growth of 11.0 31.3 25. The tankers. NYK is one of the largest marine providers in the world with a fleet of around 770 vessels.6 Source: Annual Report Nippon Yusen Kabushiki Kaisha Market Share: 9. (2) bulk and energy transport business. the company expanded its routes outside Asia to Europe. LNG carriers and cruise ships with close to 48 million dead weight ton (DWT). specialized carriers . and the Odense Staalskibsvrft A/S Group. Today.9 67498 8. the company also negotiated new and medium-to-long term contracts with customers in Japan and overseas to boost revenue growth for the future. During 2008. 37 . There were certain cost increases. Due to favorable market conditions. the increase was limited to 11. and the company reported unprecedented high demand for dry-bulk carriers. primarily in China. and increasing cargo volume made possible by fleet expansion. consolidated revenue climbed 13% against the same period in 2007. 2009. Cruise services were also higher due to the warm winter months in North America that promoted more cruise activities. The number of LNG carriers in the fleet also expanded by 25%.1% growth in revenue was accompanied by a 79. and 59 others. Net income for the financial year ended 2007 amounted to $550. these two business segments account for almost 60% of total revenue. NYK's fleet comprised of 113 car carriers.4% from © Copyright 2010. social. Overall. Texas. freight movements continued to be strong due to higher transport demand and tonnage supply. In the bulk cargo market. when prices and demand were still high. NYK's American logistics division acquired Bruni International. though the company was well aware at the end of 2008 that its year ending March 2010 figures were unlikely to be as good. The list selects the top 100 companies from various industries that display a better ability than their industry peers in handling non financial corporate values. the segment recorded increased revenue. with the biggest increases coming in container ships and Panamax and Handysize bulk carriers.333. responding to significant demand growth for this type of shipping. This was attributed to sharp rises in bunker oil prices and inland trucking and railway charges.7%. The 35. NYK was included in the "Global 100 Most Sustainable Corporations in the World" list by Innovest Strategic Value Advisors Inc. and a decline in freight rates and handling volumes. followed by liner trade and logistics. and warehouse. Cost of sales increased 15. 450 bulk vessels. coal. a weakening of container transport levels. and Corporate Knights Inc. freight forwarding. such as environmental.7% increase in net income. The two remaining business segments (real estate and technology) were higher for the period as rentals and demand for ad-hoc services increased. Freight rates were also strong. For the financial year ended March 2007.6 million.Shipping 22 January 2010 Yearly revenue In the second quarter of the 2008 calendar year. robust demand. such as a surge in bunker-oil price. In addition. Freight rates were higher on the European trade and together with strong load factors on the Australian trade.and distribution-services company based in Laredo. In the container liner trade segment (within the global logistics business). and corporate governance issues that affect risk management. a customs brokerage. Profitability was slightly higher than the previous year. During the year ending March 31. In January 2008. steel products and cement. Third quarter results were also strong across most business segments. The logistics and terminal businesses recorded good revenue growth over the fiscal year due to new customers in North America and Europe together with improvements in cargo handling charges. the global economic downturn had precipitated a steep drop in the dry bulk market. but in total.KEY COMPETITORS Global Logistics . consolidated revenue derived by NYK increased 12. The company's total fleet increased by 34 to 777 during the year. This was largely due to the company carrying out contracts that were signed in the previous quarter. During the financial year ended March 2008. During the year. despite the commencement of a sharp global economic downturn. freight movements were steady.3% to $18. the company's largest source of revenue was bulk shipping. The move was made with a view to strengthening NYK's ability to compete in the movement of goods between Mexico and the US. the company reported its biggest revenue growth in recent years. lower than the previous year.9 million. increased the freight movement of steel materials. the small increases in freight rates from trunk trade routes were not enough to offset the rise the expenses. 155 container ships. reflecting substantial revenue growth in the shipping segment. IBISWorld Inc. The tanker segment also remained strong for the financial year ended 2007 due to favorable demand for gasoline but turned sluggish in the second half due to a warm winter in the US and production cuts from OPEC. By the end of the company's financial year. grains. In the car transport business. 7% in 2004 to 10. The company's cruise segment recorded a drop in revenue for the financial year.8% as a result of gains from wholesaling and travel agency services.3 1739 -3. The cruise business was also stronger during the year as the company solidified its presence in the US market and increased its service offerings. IBISWorld estimates that NYK had a market share of 8. Revenue from other services was also up by 2. In 2005. consolidated revenue increased by 12. Car transportation remained at high levels for the year due to a reduction in vehicle tariffs especially in the Asia Pacific region.720 in 2006. NYK Line .3%. tugboat operations maintained revenue levels but earnings were down. Consolidated revenue for the financial year ended March 2006 rose by 9.32 billion.04 billion to $1. The increase in global trade led to a significant rise in shipping revenues for the financial year. bulkers and tankers also recorded robust revenue growth during the period due to strong demand for raw materials and petroleum products.3 N/C 1878 N/C 2004 13236. Liner trade on North American routes was strong and shipments on European routes were robust.669 employees in 2007. up around 11% from the previous year.7 2005 14933. down slightly from the previous financial year.5% increase in revenue in the bulk and energy transport segment.739 in 2005 to 1.8 663.9 © Copyright 2010. The cost cutting effort also saw a decline in employee numbers. net income for the period rose by 101.4% in 2007.0 329.33 billion in the financial year. offset by a decline in real estate and tugboat operations.KEY COMPETITORS Global Logistics .6% 'Forward 120' was a plan initiated in 2003 for the company's 120th anniversary in 2005 that amongst other things looked at stabilizing profitability in the container transport business.2 101.2 1809 -3.Shipping 22 January 2010 the previous year due mainly to bunker oil prices.9 million for the financial year. Net income for the year improved 18% to $782.8% in 2005. In the 'Other' business segment. Demand for liner and specialized carriers increased and this enabled the company to push up freight rates to offset the impact of higher fuel prices. As a result of the strong surge in revenue and lower interest expenses and other non-recurring items.93 billion. manufacturing and shipping agency businesses posted gains due to robust real GDP growth in the Asian region. while a strong Australian economy supported solid shipping demand in Oceania. It is worthwhile to note that operating income from shipping activities decreased in the financial year from $1. The company employed 1. Revenues from shipping services increased to $8.5 27.7 N/C 119. however the trading. Intensive cost cutting initiatives by the company improved the operating margin to 6. which fell 3. In the other shipping segment. Performances in the logistics and terminal and harbor transport segments were also stronger during the financial year due to strong demand from North America and favorable cargo movements at its terminals. 38 . Real estate on the other hand recorded lower revenues due to restructuring. It was however offset by a slight drop in revenue from the tanker business due to higher charter prices incurred by the company (around 41% of tankers was leased).8% to $14.40 billion as a result of higher expenses from the container shipping business rather than bulk/energy shipping.5 176. The robust rise in net income also saw return on equity (ROE) increase from 4. The company also added a total of eight new tankers and bulk carriers which contributed to an 18. This was primarily due to robust revenue growth but was offset by high bunker oil prices and increases in North American inland rail transport prices that caused expenses to rise 24.5 12. Passenger demand was low from the aftermath of the September 11 terrorist attacks.financial performance Year Million Dollars Revenue % change Growth Million Dollars Operating Profit % change Growth Units Employees % change Growth 2003 10423.9%. IBISWorld Inc. The logistics and terminals divisions both recorded strong revenue growth as the company gained new contracts.3% to $16. Freight shipping was strong in the financial year but was hampered slightly by high oil bunker prices. The number of employees fell slightly during the financial year from 1. Fleet expansion also pushed up revenues in the liner trade and other shipping segments. the war in Iraq and the severe acute respiratory syndrome (SARS).2%. KEY COMPETITORS Global Logistics - Shipping 22 January 2010 2006 16321.7 9.3 782.9 18.0 1720 -1.1 2007 18333.6 12.3 550.9 -29.6 1669 -3.0 2008 24737.6 34.9 571.6 3.8 1643 -1.6 Source: Annual Report Hapag-Lloyd AG Market Share: 9.4% Hapag-Lloyd AG was formed in September 1970 through the merger of the shipping lines Hamburg Amerikanische Packetfahrt-Actien-Gesellschaft and Norddeutscher Lloyd. Prior to this, the two organizations have been in operations since 1847 and 1857 respectively. The company is a leading player in the global integrated logistic transport industry and handles complex logistics packages along the transportation chain. Since the 2005 acquisition of CP Ships, the Canadian container line, the company has become one of the world's five largest lines. The fleet is made up of 128 container ships with a total transport capacity of 492 000 standard containers. The ships operate globally in the Far East, Trans-Pacific, Atlantic, Latin America and Australasia. CP ships started operations in 1886 through the incorporation of Pacific Railway in 1881 when it transported tea from Asia to Canada with the first ocean-going vessel chartered by Canadian Pacific Railways. Its Trans-Atlantic operations started a few years later in 1903 and not long after entered into the cruise business in 1922 with the "Empress" liners. The company's container transport business started in the mid-1990s and by 1964 had container ship each carrying 12 boxes. Since then, CP Ships grew through acquisitions and since 1993 has acquired as many as 10 companies, including Canada Maritime, Lykes Lines and Italia Line. Montreal Gateway Terminals are also run by CP Ships which is one of the largest container terminals in Canada. In late 2008, TUI sold the majority of its ownership of Hapag-Lloyd, returning the container shipping company to effective independence. TUI TUI AG (TUI) was formerly a mining, primary products and technology group. It was reorganized to a tourism and shipping company when the management of Preussag made its first investment into the tourism business with the acquisition of Hapag Lloyd in 1997. The next year, Preussag bought shares in Touristik International GmbH & Co (TUI), Europe's biggest travel company who later adopted the same name. TUI Travel is a recently formed company through the merger of First Choice Holidays PLC and the Tourism Division of TUI AG (initially formed in 1923). The company has close to 200 brands and consists of a network of 3,600 retail travel stores throughout Europe, together with a fleet of 150 aircraft. It is a leading leisure and entertainment company with operations in 17 major markets and employs more than 15,000 people across 18 brands. It is important to note that the majority revenue derived by this company is not part of this global industry. The company's cruise division is the largest in Europe with four cruise liners namely; Europa, Hanseatic, Bremen and Columbus. The Europa was also ranked as the world's finest cruise ship for seven years running by the prestigious Berlitz Cruise Guide. Hapag-Lloyd provides container line transport and logistics services for container transport in over 100 countries. The company divested the majority of its stake in Hapag-Lloyd in 2008. Yearly Revenue The global shipping slump has hurt Hapag-Lloyd particularly hard, with its owners sufficiently alarmed by the company's financial plight that they announced an intention to make a 923 Euro cash injection into the company in August 2009. © Copyright 2010, IBISWorld Inc. 39 KEY COMPETITORS Global Logistics - Shipping 22 January 2010 Industry sources around that time suggested that the company was on target to record a second half operating loss in excess of $700 million. In October 2008, TUI agreed to sell its Hapag-Lloyd shipping subsidiary in a 4.45 billion Euro deal that will keep the company in German hands and see the tourism group retain an interest through a minority stake in the buyer. A consortium of Hamburg businessmen won the race to acquire Hapag-Lloyd after Singapore's Neptune Orient Lines dropped out of the auction. In the 2008 financial year, turnover by the container shipping component of TUI's operations increased by 4.0%. This growth came on the back of a 2% increase in volumes, and, importantly, a 12.7% increase in freight rates to a yearly average of $1590 per TEU. At the end of 2008, Hapag-Lloyd's fleet stood at 128 ships with a combined capacity of 492,000 TEU. In the 2007 financial year, turnover by the shipping division declined slightly by 0.8%, with container shipping (which comprised 97% of TUI's shipping division) dropping by 1.2%. This decline was primarily attributable to the weakness of the US dollar exchange rate against the euro. Shipping volumes rose by 9.0% to 5.5 million TEUs. Average freight rates rose substantially in all trade lanes in the second half of the year. However, average freight rates for the year as a whole still fell 1.3 per cent short of 2006 levels. The company's strategy for this period centered upon process optimization and productivity enhancements, following the completion of the integration of CP Ships in 2006. For the financial year ended 2006, revenue was up 7.7% from 2005. Revenue growth from the tourism division was modest (increasing by 1.2%), despite the divestments of the business travel activities as well as the majority interest in TUI InfoTec, both shown in the other tourism sector. The small increase in revenue was achieved from robust sales in both the agency and hotel business. In terms of the shipping business, revenue increased 65.9% and represented 30% of consolidated revenue. The primary reason for the strong revenue growth was due to the additional turnover volume of CP Ships which merged with Hapag Lloyd in 2005. IBISWorld believes that the deployment of new vessels such as the "Tsingtao Express" and additional services between Europe and Asia led to the increase in revenue. Hapag Llloyd is also part of the Grand Alliance consortium formed in 1998 and agreed to extend their co-operation for another 10 years to 2017. The Grand Alliance members deploy in their services a total of about 140 vessels with a capacity of between 2,700 and 9,000 TEU offering 20 services, mainly on major east- west routes. The company recorded consolidated net loss of $1.06 billion and stated that the losses were primarily due to the impairment of goodwill. The shipping division also contributed to negative earnings as a result of difficult market environment in the container shipping industry. It was impacted by the fall in freight rates together with high fuel costs. IBISWorld estimates that TUI AG had a market share of 9.3% in 2006. Consolidated revenue for the period ended 2005 was in the order of 24.4 billion. Revenue from shipping activities rose by 58.8% as at the end of the financial year; both Hapag-Lloyd and CP Ships operated a total of 133 vessels. The transport volume in the shipping division totaled 3.1 million standard containers, exceeding the previous year by 27.3% with average freight rates for the period up by around 8.0% year on year. The strong revenue growth from shipping also reflected the integration of CP Ships into the overall business. The tourism division also recorded positive revenue growth of 5.8%, with customer numbers up by 9.1%. The company mentioned that all sectors of the division recorded year on year increases with the largest from Western Europe at 9.9%. Revenues from destination and 'Other' tourism also rose due to improvements recorded by hotel companies and commissions. While revenue increased, net profit for the year fell to $485.9 million. This was primarily due to higher expenses as cost of materials and personnel expenses rose by 41.1% and 68.9% respectively. The number of employees in 2005 increased to 61,559 from 57,716 in 2004. Other expenses also rose by 7.0% as a result of the acquisition of CP Ships. IBISWorld believes that TUI AG had a market share of about 6.4% in 2005. Hapag-Lloyd AG - financial performance © Copyright 2010, IBISWorld Inc. 40 KEY COMPETITORS Global Logistics - Shipping 22 January 2010 Year Million Dollars Revenue % change Growth Million Dollars Operating Profit % change Growth Units Employees % change Growth 2005 24400 N/C 485.9 N/C 61559 N/C 2006 26276 7.7 -1059.1 N/C 53930 -12.4 2007 29978 14.1 323.6 N/C 68521 27.1 Source: Annual Report Mitsui O.S.K. Lines, Ltd. Market Share: 9.3% Mitsui O.S.K. Lines (MOL) was established in 1884 through the formation of Osaka Shosen Kaisha. After a few decades of regional shipping, the company began expanding services to the US, between Yokohama and New York. Consolidation within the shipping industry in Japan in the 1960s led to the merger of Japan Line, Ltd. (JL), and Yamashita-Shinnihon Steamship Co., Ltd. (YSL), thus creating Mitsui O.S.K. Lines Ltd. The company ventured into the petroleum shipping market in the 1980s and the leisure cruise market in 1989. MOL is now one of the largest marine transport companies in the world with a fleet of more than 800 vessels and an overall capacity of some 53 million deadweight tons (DWT). The operations of MOL are very similar to Nippon Yusen Kabushiki Kaisha (NYK) in that they provide liner, bulk, car, Liquefied Natural Gas (LNG) and tanker transportation in the shipping segment in addition to logistics and associated businesses such as port operations, warehousing and air-cargo transport. In the bulk and container shipping market, MOL transports 30% of Japan's raw material imports and serve around 70 routes all over the world. The company is also one of the leading LNG and petroleum transport provider in the world with 162 tankers. In addition, the company is Japan's largest ferry and domestic transport operator. Shipping revenues represented around 89% of total income. The logistics segment was formed to maximize synergies with other MOL business segments. It has core operations comprise of investments in China and the ocean consolidation business that provides optimal logistics solutions to meet the demand for high-value added services. Finally, associated businesses include office and residential building leasing operations of Daibiru Corporation and 'other' shipping related activities such as marine consulting, maritime engineering, trading and temporary staffing. Annual Revenue MOL made a number of revisions to its profit and revenue forecasts since the onset of the global financial crisis. As of October 2008, the company was expecting a recurring profit of around $2.7 billion in the business year to March 2010, which would be a 17% fall from estimates relating to the previous year. Its year to March 2009 profit forecast was also lowered by 6.3% due to weak demand for dry bulk shipping. By January 2009, the company's net income forecast had been revised to a 32% fall on the prior year. The progressive and dramatic profit forecast downgrading underlines just how fast the industry terrain was changing during this time. In the company's native Yen, revenue fell by 4.1% in the year ending March 2009. When converted into US dollars, the figure was 4.2%. Net income fared worse, falling by around a third due to declining profitability in the face of the global financial crisis. MOL's new Jacksonville, Florida shipping terminal was due to commence business during 2009. The 2007 financial year (year ending March 2008) saw the company report very strong increases in revenue and net income, reflecting the robust growth of both the company and the general shipping market over that time period. The container shipping industry worldwide grew by 11% in the period, however MOL was able to increase its own volumes by 13% to 3.2 million TEU due to fleet expansion and the development of new routes. The strongest growth was recorded on the company's Asia-Europe routes, which experienced a 20% increase in trade volume. The company's most successful business segment during the year ended March 2008 was related to the transport of iron ore, coking coal, and other raw materials for steel production. The leading steelmakers in South Korea, Japan and China are the main clients of this © Copyright 2010, IBISWorld Inc. 41 Revenue from ferry and transport also rose in the financial year due partially to the Japanese Government's policy of favoring environmentally friendly modes of transport. India and other Asian markets together with the strong economic growth in the Asia Pacific region.62 billion. Revenue from shipping operations amounted to $11. The growth from the above segments was offset by a decline in revenue from the ferry and domestic transport division. meaning that the Chinese are requiring significantly greater amounts of shipping resources. India and Japan. In the car carrier and container divisions.8% in 2007. freight rates fell but higher volume of containers transported increased its share of revenue from 34% in 2004 to 36% in 2005. the higher cost of bunker and increases in a variety of container ship expenses lowered operating earnings in the container ship division by around 36%. Operating income from this division rose by 11. The remaining logistics and associated businesses performed well due to increased volumes and contracts. The first full year contribution from Daibiru Corporation. IBISWorld Inc.5% to $11.the largest steel raw material carrying fleet in the world. © Copyright 2010. IBISWorld estimates that Mitsui O. In the tankers segment.2 million. Tanker operations increased in 2005 and recorded revenues and earnings above initial targets even-though charter rates for tankers were below expectations (but still high).1%. The success was a result of a balanced portfolio with an emphasis on emerging opportunities in the spot market with flexibility to capture developing opportunities in the marine transport industry.e. Net income for the financial year ended 2006 increased to $1. Another division that saw a decline in operating income was ferry and domestic transport which fell by roughly 76%. strong exports from Japan and China created strong demand for these carriers.82 billion. IBISWorld estimates that MOL had a market share of 8. The increase in Brazilian iron ore exports to China created strong results for MOL.8% from the previous year.Shipping 22 January 2010 segment.4% due to modest real estate and tugboat operations market.KEY COMPETITORS Global Logistics . though this was largely attributed to the high cost of bunker fuel. It is worthwhile to note that MOL was the only international shipping company in the world that recorded an increase in net income during the financial year. The main contribution came from the dry bulk segment which contributed 23% of total shipping revenues due to the strong demand for iron ore in China as it reached 326 million tons in 2006. Employee numbers surged 13. up 5. LNG carriers also recorded revenue growth with LNG consumption increasing.S. The route from Brazil to China is 3 times as long as the route from Australia to China (the other main exporter of ore to the Chinese). MOL added 12 new ore carrying ships during the year to March 2008. The company stated that this was primarily due to cost cutting activities and the focus on fields that have the potential to expand over the long term (i. bringing its fleet to around 130 . A new joint venture with the Leif Hoegh Group of Norway was also formed in 2005. Revenue from container ships and bulk-ships totaled 86% of consolidated income in the 2005 financial year.K. new joint ventures with established companies in China and UAE produced solid demand. consolidated revenue was up 6. In 2005. Net income for the financial year was $968. designed to increase LNG transport activities to the US. which expanded its dry bulk ship fleet from 2002 onwards in anticipation of higher demand. While freight rates declined.351 due to the integration of Daibiru Corporation in the financial year. Consolidated revenue derived by MOL increased in the 2006 financial year by 67. In the container segment. Finally. volumes during the financial year increased.7%. LNG and tanker markets).64 billion.1% to 8. The remaining divisions achieved modest gains. a real estate company. the associated businesses segment also recorded growth of around 13. along with raw materials producers in Australia and Brazil. Lines Ltd had a market share of 8. Similar to the LNG market. Similarly. Income from bulk-ships also increased during the year from fleet expansion and additional new contracts from clients in Qatar.1% in 2006. which become a consolidated subsidiary in 2004 also contributed to higher income from the associated businesses division. The increase in net income was primarily due to higher margins from the bulk-ship segment. 42 . fleet expansion and the utilization of bigger vessels enabled the division to charge higher rates and increase revenue for the period. The container market was supported by the ongoing shift in production to China. Yemen. However. England.1% 8621 3.2 -23.5% 968. Carnival Cruise Lines. Carnival Corporation's success can be attributed to its marketing strategy and service offerings to a range of customers. with a roughly 44% share of the global cruise market . personalized service and exotic destinations around the world. 43 . AIDA Costa Cruises.0% Carnival Corporation is a global cruise company with a portfolio of 12 distinct brands comprised of the leading cruise operators in North America.7% Source: Annual Report Fleet scale and type.1 67. Costa Cruises and Windstar Cruises. They are listed in both New York and London Stock exchanges and are part of the S&P 500 and FTSE 100 index. Seabourn Cruise Line. Windstar Cruises. Carnival Cruises and P&O Cruises both target families. P&O Cruises. Cunard Line. Cunard Line.2% 2008 18602.1% 2007 19420. and there are another 16 ships scheduled for delivery by 2011. In terms of market share.1 N/C 524. The company is headquartered in Miami. It operates a fleet of 85 ships with a passenger capacity of 158. It's Seabourn and Swan Hellenic cruises target upscale clients and offers fine foods. Carnival Corporation and P&O Princess Cruises plc merged via a dual listed company structure. 2003.6 6.9 70.6% 7385 5. Royal Caribbean Cruises.2 -4.far ahead of its nearest competitor.2% 9626 11. The company is also a member of the World's Leading Cruise Line alliance that includes Holland America Line.1 N/C 7033 N/C 2005 10909. Princess Cruises. Yearly Revenue © Copyright 2010. Florida and London. 2008 Type Units Dry Bulk Ships 364 General Cargo Bulkers 135 Containerships 130 Tankers 166 Others 44 Total 839 Source: Annual Report Carnival Corporation Market Share: 8. and P&O Cruises Australia are all included in this group. retirees.0% 2006 11622. Princess Cruises. Canada and the Pacific Coast. and other upper middle class customers with competitively priced cruise packages to popular destinations. On the other hand. On April 17.0 74.000.1% 1646. IBISWorld Inc. Carnival enjoys an enviable position.6 15.Shipping 22 January 2010 Consolidated Financial Performance Year Million Dollars Revenue Million Dollars Million Dollars Net Income Million Dollars Units Employees Units 2004 9440. Carnival is the big fish in the pond.2 5.2% 1265. Swan Hellenic. Holland America Line. Subsequently. Holland America however is known for its scenic cruises in New England. Seabourn Cruise Line.KEY COMPETITORS Global Logistics . Ocean Village. In a business in which size gives a competitive advantage in terms of pricing power with travel agents and the ability to spread fixed costs (such as maintenance and berthing costs) over more ships. P&O Princess cruises plc changed its name to Carnival plc. Europe and Australia.8% 8351 13.6% 915. 253 for the period. In 2007 the company reported strong revenue growth. Carnival Corporation reports that nearly two thirds of the company's passengers are sourced from the US market. and IBISWorld believes that the aging US population will represent a growth market for the company. total consolidated revenue increase by 14. Carnival did well to increase its revenue by 12. IBISWorld Inc. and represents a cost pressure on the company going forward. Net cruise revenues rose by 6. 44 .1 billion. The company suspended its quarterly dividend in October. Operating income for the period was relatively unchanged.1% to $11.3% 2007 13033 10.41 billion.KEY COMPETITORS Global Logistics . as unit operating costs (excluding fuel and currency) rose by only 1.68 billion in 2005. up from $8.2% 75000 5. consolidated revenue derived by Carnival Corporation and Carnival plc increased by 6.4% 2006 11839 6. primarily due to the strong increase in revenue as a result of higher ticket prices and margins. or $626 million higher than 2007.0%.1% increase on the previous year. increasing 5. IBISWorld forecasts that the sharp rise in oil prices during 2008 will deliver an even sharper cost increase for the company. but the profit margin for the company remained strong. Revenues rose due to higher cruise ticket prices primarily from Alaska and European routes.66 billion from $7. Consolidated Financial Performance Year Million Dollars Revenue Million Dollars Million Dollars Net Income Million Dollars Units Employees Units 2004 9727 N/C 1809 N/C 69500 N/C 2005 11094 14. higher onboard revenues and the depreciation of the US dollar relative to the Euro and Sterling currencies.2% to $9.1% 2253 24.7% to $2.1% increase in occupancy.22 billion in 2006. up 24.68 billion.0% to $2. This was mainly attributed to a $66 increase in fuel cost per metric ton.0% 2008 14646 12.1% 2408 5. a 1. Onboard and other revenues also rose by 8. These passengers generated 54% of the company's total revenue.84 billion. higher onboard revenues and a 0. higher dry-dock amortization expense and weaker US dollar. the world's number one cruise market. with a figure of $13.considerably below the rate of inflation. Net cruise revenues for the period rose by 15.7% 2279 1.4% increase in occupancy. IBISWorld estimates that Carnival had a market share of 7.4%. in particular fuel costs that increased by $75 per metric ton.4% 2330 -3.5 billion in 2004. In 2005.5% from 2004. the company had nine ships on order that will primarily source the US market in coming years. A minor drop in net income occurred during the year. The company recorded a net income of $2. Revenue from North America for the period totaled $7.03 billion representing a 10.6% to $8. falling by 1.7% to $5. Operating expenses for the period increased by 13.61 billion. with fuel costs for the year being 55%.7% 81000 8.5% due to increased passenger spending on liners. The peak of fuel prices in the middle of 2008 has a significant impact on the business.2% Source: Annual Report © Copyright 2010. Operating income also grew.6% in 2005. Fleet capacity during the year expanded by 9. The hike in fuel costs experienced by the company in 2007 was 17. Yields in 2005 increased primarily from higher ticket prices. due to orders placed prior to the commencement of economic troubles.6% due to higher passenger spending on ships. Onboard and other revenues also increased during the period by 4.Shipping 22 January 2010 Considering the market conditions that prevailed during 2008. For the year ended 2006.2% 86000 6. This was primarily attributed to higher operating costs. stating that it needed to preserve its liquidity in an environment where credit was very difficult to access. As of 2008.7% to $11.2%.5% 71200 2. Income growth was lower than revenue growth largely due to rises in fuel costs.17 billion in the cruise segment.0% for the period . 38 billion. Net income for the year was modest at $367. financing. but it is believed that China's stimulus package will help to cushion the fall. which is one of the world's leading providers of integrated container shipping services. COSCO Shipping Co.COSCO Group is a dual listed company). demand for container shipping services across the Pacific reported slower growth due to the weak US economy. Shenzhen Ocean Shipping Co. COSCO's rise as a global shipping player continued. Guangyuan Marine Service Company. Used as a listing vehicle. 45 . container leasing and logistics businesses all recorded an increase in revenue due to high freight volumes and movements in China. as conditions became tougher.7 million tons of goods. was established jointly by Guangzhou Ocean Shipping Company. During the year. COSCO Group formed China COSCO Holdings Company to be a leading integrated container shipping operator. Full information on COSCO's 2008 performance was not widely released. including logistics. shipping activities fall under China COSCO Holdings Company and China Corporation (Singapore) Ltd..41 billion. In order to further expand the business. Listed on the Singapore Stock Exchange in 1993. with the company's dry-bulk unit transporting 264. Ltd. with revenue rising 35. Its total capacity reached 5.. followed by the domestic routes which increased by 20. and COSCO Guangzhou International Freight Co.1 million TEU over the same period in 2005. While COSCO Singapore is predominantly in the Ship Building and Repair business.4 million dead-weight tons (DWT). 15. terminal and container leasing services. The company is a major provider of container shipping and its related activities. Volume growth was the strongest between Asia and Europe. shipbuilding.9% respectively. The company specializes in shipping and logistics with services in freight forwarding. The firm expects to achieve lower revenue in 2009. a small part of their operations involve dry © Copyright 2010. Within the COSCO Group.2% to $20. It is now one of the world's leading marine transport companies and operates over 600 ships with facilities in more than 160 countries around the world. China COSCO Holdings Company was established in March 2005 in China. revenue from COSCO Group was $15. but revenue was $21. the COSCO also implemented the shipping capacity upgrade plan with seven new vessels and the optimization of its fleet structure. (Note . This was mainly attributed to strong real GDP growth in China and the increase in the shipping capacity by the Group.09 billion. The dry-bulk service was a major driver behind the profit growth.9%. High fuel prices and vessel leasing fees were experienced by the company during the year. It listed on the Shanghai Stock Exchange in April 2002 and owns around 90 ships with 1. The container shipping division achieved a 12. For the financial year ended 2006. the company undertakes shipping. the company was listed on the Hong Kong Stock Exchange and is the overseas listed flagship of China Ocean Shipping (Group) Company. Ltd. IBISWorld Inc. up 11. The company's fortunes soared in 2007. and net profit rising an incredible 236% to $1.8 million as a result of high operating costs. ship repairing. seeing it placed 405th on the Fortune Global 500 list. It operates a fleet of over 140 container vessels through COSCO container Lines. China Cosco operated 144 container ships and 419 dry-bulk vessels at the end of 2007.7% increase in volume to 5.KEY COMPETITORS Global Logistics .Shipping 22 January 2010 OTHER PLAYERS China Ocean Shipping (Group) Company Estimated Market Share: 5.7% from 2006. ship repair and other shipping related services.1% more than the previous year. with operating costs rising 31. The company's terminal and related business. real estate and IT industry. but demand from other regions for the company's services remained strong.8% China Ocean Shipping (Group) Company (COSCO Group) was founded in 1961 with four ships. In 2007. Net profit is believed to have fallen appreciably.84 billion. China Ocean Shipping Agency Guangzhou. trade. terminal operation. Ltd. especially bunker oil prices. Another wholly owned subsidiary of COSCO Group is COSCO Corporation (Singapore) Ltd.7 million TEUs.5% and 17. 26 billion. US. Europe and South Africa with a fleet of 12 bulk carriers.4%.KEY COMPETITORS Global Logistics . In June.6 million. Crowley Maritime Corporation Estimated Market share: 1% © Copyright 2010. (AET) has since been sold to Malaysia International Shipping Corporation. Annual revenue was up strongly to $9. 46 . vessels operating to the US West Coast were converted to the use of cleaner-burning low sulphur fuel. the company introduced "cold-ironing" for ships calling at California. In July 2008.9% the previous year. During the year. with an average age of just over six years compared with an industry average around 12 years. which contributes the majority of the company's revenue. APL. but recorded a substantial operating loss in the final quarter which severely reduced the Group's overall full year result.8% The Neptune Orient Line (NOL) is a Singapore based shipping company and it operates in the United States through American President Lines (APL). going some way to reversing the decline of the previous year. but net profit fell sharply due to the effect of the global financial crisis on the industry. the company expanded its US West Coast marine terminal. American Eagle Tankers Inc.16 billion in revenue in 2007.7 million due to higher cost of sales and impairment in the value of goodwill due to consolidation. including earnings following the sale of American Eagle Tankers and a write-back of deferred tax liabilities. NOL submitted a non-binding bid for the Hapag-Lloyd container shipping business. Income from dry bulk shipping amounted to $94. In March 2007. US imports from China alone in 2006 grew by 15. Strong freight market raised rates on all operating corridors.1% in 2006. revenue generated by Neptune Orient Line fell marginally by 0. The profit included gains from non-recurring items totaling $120 million. NOL continued to perform strongly in 2005. IBISWorld Inc. Oakland and Seattle to cater for the anticipated increase in demand for shipping services in the future.7% from 2005 boosted by strong global trade. In addition.8% to $363. Around 12% of revenue is derived from dry bulk shipping between major ports in China. creating the world's thirdlargest container carrier. The net profit figure for the year was up 44% to $523 million. up 12%.1 million the previous year. Revenue from the Americas contributed around 58. The Group operated a fleet of 24 modern Aframax tankers. primarily due to its shipbuilding and engineering related activities where revenue jumped 45. in Los Angeles. Consolidated revenue derived by COSCO Singapore in 2006 was $792. Net profit for the year fell by 54. which led to group revenue in 2004 to increase to $6545 million and posted net profit of $943 million. Volume generated from the company's Transpacific and Latin America shipping trade totaled 892.1% to $7. A completed transaction would result in the integration of NOL's container shipping business APL with Hapag-Lloyd. an increase of 1.9 million in 2006. Neptune Orient Line Estimated Market Share: 6. Total net income for the period amounted to $133.29 billion. IBISWorld believes that COSCO Group had a market share of 4. The company reported a record $8.7 million from $96. when it posted net profits of $804 million from revenue of $7271 million. For the financial year 2006.Shipping 22 January 2010 bulk shipping. up 51. The company derived 76% of its 2007 revenue from container shipping.000 FEUs (forty feet equivalent unit) due to strong growth in these regions.2% from the same period in 2005.2% of total revenue up from 57. grew its container volumes by 5%. South America.4% which saw revenue from the Americas increase despite a slight fall in consolidated revenue. allowing NOL's ships to use cleaner land-based power while berthed. 1 million in 2006.000barrel ATBs. Russia and other international markets. The company's history began in 1892 when founder Thomas Crowley purchased one 18foot Whitehall boat to provide transportation of personnel and supplies to ships anchored on San Francisco Bay. The utilization rate of vessels was also higher in 2006 as compared with 2005. Central America.9 million in 2005.8 million. This was due to an overall increase in demand for the company's tug and barge fleet for the year. with the largest increase coming from petroleum services. Puerto Rico.000barrel articulated tug barge (ATB) tank vessels and four 185. consisting of rate increases for services and fuel surcharges. or TEU.3% to $223. All four of the company's business segments recorded an increase in revenue. the Caribbean. 330.9% due to higher fuel and crew costs. The company has a fleet of more than 400 vessels and more than 100 offices worldwide. CMC is organized to provide services in two major segments of operations. Alaska. In 2007. Crowley Maritime Corporation (CMC) is primarily a family and employee owned company engaged in marine transportation and logistics services. due in a large part to a number of one-off factors such as the sale of a vessel. Growth in CMC's liner business was assisted by an increase of 6. the Caribbean Islands. Liner services for the period increased due to an increase in rates which was partially offset by a decrease in container and non-container volumes.KEY COMPETITORS Global Logistics . The increase in revenues was due to higher demand and utilization for tug and barge fleet in the Gulf of Mexico. Marine Services recorded a revenue increase of 13. CMC's business was strong. logistics. IBISWorld Inc. In 2005. towing. An even greater increase of 80. Crowley Liner Services provides cargo liner services throughout the U. 47 . Central America. For the financial year ended 2006. which are scheduled for delivery by mid-2013.4% growth on the previous year. including marine project management and breakbulk cargo transportation through its Crowley Marine Transport operating division.4% over 2006 in the average revenue per twenty-foot equivalent. it has expanded with the acquisition of Marine Transport Corporation. strong demand for tug and barge fleet in the Gulf of Mexico.9% to $183. (formed in 1997).3% to $1. CMC has expanded its petroleum carrying capabilities in recent years with the construction of four new 155. Group revenue in 2000 was estimated at $1100 million. ship assists.190.47 billion.2% from 2004 to $1. Partially offsetting this gain was a first quarter decrease of 4% in container and noncontainer volume.000-barrel ATBs. Inc. operating revenues from this segment increased by 21.8% during the period as a result of higher vessel-related costs such as fuel. The principal operations of the company are located in the US. The strong rise in revenue led to an increase in the company's operating profit by 1. and northern Venezuela and Colombia.5% in income was estimated to have occurred. West Coast and Alaska. primarily due to a continued downturn in the Puerto Rico market. and breakbulk by ship. Operating income for CMC increased by a huge © Copyright 2010. the company placed orders for three. the completion of a no-cure-no-pay contract by the company's Marine Services business. Total consolidated operating expenses increased by 8. It also provides trucking services. and the settling of a Lloyd's Standard Form of Salvage Agreement or "Lloyd's Open Form" ("LOF") contract. with $1. maintenance and crew costs in addition to higher company-wide insurance expenses. In the Marine Services division. petroleum tanker transportation through its subsidiary Crowley Petroleum Transport. The increase in revenue was attributed to higher rates within the Liner Services segment. In 2007. consolidated revenue of the company increased by 23. and petroleum and chemical transportation and crude oil lightering through its Marine Transport Lines subsidiary. Direct administrative expenses also increased as a result of a rise in administrative payroll expenses primarily as a result of the acquisition of Northland Fuel.9 million in 2005. Consolidated expenses for the year also increased by 6.000-barrel ATBs are on order with a shipyard and scheduled for delivery by the end of 2010. consolidated revenue increased by 20. stronger marine salvage operations and higher rates. compared to $183. whereas Crowley Marine Services provides specialized marine transportation and logistics services on a worldwide basis.Shipping 22 January 2010 Crowley Maritime Corporation transports freight..8 million decrease in revenues from services provided in Far East Russia due to a change in contract work being performed. and marine salvage.S. along the US West Coast and Alaska and the expansion of warehousing and distribution activities in Central America. This was partially offset by a $5. Six more 185.9%.62 billion in revenue representing a 10. petroleum products. Shipping 22 January 2010 178.KEY COMPETITORS Global Logistics .8 million. A stronger waterborne freight market increased revenues in 2004 to $999. partly due to gains from the sale of equipment. Consolidated operating revenues for 2003 totaled $978. land and seven vessels.9 million. © Copyright 2010.6% in 2005.7 million and net income to $24.0 million and net income amounted to $12. IBISWorld Inc. 48 . More accurately. Difficulties in accessing credit. life has got much more difficult for operators in the global shipping industry since the second half of 2008. industrial output and the relative value of world currencies. which strives to have full ships entering and exiting ports to maximize efficiency and revenue. The challenge of remaining viable in a nose diving market is a significant one. while growth of consumer spending around the world aids export markets and hence shipping. The industry is sensitive to real world GDP growth (which is the main driver for ocean cargo growth). Despite these very tough conditions. an over-supply of ships in the world fleet. it was set to receive a billion dollar cash injection from its owners in order to remain solvent. as companies took ships out of service to adjust to lower levels of demand. Major player Hapag-Lloyd's situation has gotten to the point where by August 2009. Over the period. and the bad times since. The currently unprofitable industry is locked in a tussle and jostle between corporate muscle and fossil fuel.26 billion in 2004 to $138. reflecting the significant increase in revenue as compared with the annualized rise in the number of establishments. International cargo volumes depend on changes in income. and is consuming the minds of shipping executives worldwide.the good times until mid 2008. and revenue was far harder to generate than it has previously been. Services were being cut. The global logistics (shipping) industry is expected to record an annualized growth rate of 5. no major global shipping company has yet collapsed. It is estimated that total active capacity amongst the world's 20 largest shipping lines has contracted by over 2% during the year. and major economic problems in most of the world's high consumption economies have laid down a "once in a generation" set of problems for the industry. the level of merchandise trade. and this gloomier tone prevailed for the year. it has been a tale of two very different eras . The industry is heavily influenced by worldwide real GDP growth due to the strong link between consumer confidence and business sentiment and the volume of cargo transported. Total revenue in the Shipping Logistics industry will increase from $108. a significant drop in the value of certain currencies would reduce imports and strengthen export markets. 49 .8 million. water transport infrastructure.48 billion by end 2009. revenue per establishment will likely rise from $3. Passenger numbers are dependent on the demand for cruise travel. IBISWorld believes that the industry is in the mature stage of its economic life cycle. faltering world growth. Expanding industrial production will tend to generate more shipments of export raw materials and intermediate or semi-finished goods.0% between 2004 and end 2009. A rise in the value of the currency of major markets such as the US and the Euro zone would impact negatively on its exports while accelerating imports. Strong economic growth also produces high business sentiment which in turn affects company profits and investment for new equipment. The Shipping Logistics industry is cyclical and is primarily measured by economic activity. IBISWorld Inc. Demand for new vessels remained strong until late 2008. Real increases in domestic consumer income tend to induce increases in imports of household goods. This represents a 5. © Copyright 2010. the price of crude oil and the usage of substitute products such as air transport. prices were sharply down. and the level of disposable income. Industry revenue: the party is over After a lengthy period of robust growth and very high freight rates.0% increase on an annualized basis. Conversely. indicating that it has been a very good period for the industry overall. the global shipping industry entered 2009 with a different reality surrounding it.Shipping 22 January 2010 Industry Performance CURRENT PERFORMANCE After years of easy growth.INDUSTRY PERFORMANCE Global Logistics . This issue is of relevance to the shipping industry.8 million to $4. g. as China cut back its orders of raw commodities. Another concerning development in the second half of the year was a substantial decline in the price of commodities. However. Revenue increased by a further 9. IBISWorld Inc.Shipping 22 January 2010 The nightmare The perfect storm is set to continue for the industry in 2009. a key point to note is that the demand for bulk commodities.000 (hardly more than the wages price of a basic crew). steel and copper) remained strong. high oil prices produced high volumes for the Shipping industry as it is the cheapest form of (cross-border) transport. served to drive the level of international trade upwards. The increase in trade relations and outsourcing activities between Europe and Asia was an important driving force for revenue growth in the region. crude oil. In Europe. the high demand for which had been central to the expansion of the shipping industry in the years prior. Revenue would have had to grow significantly to cover the extra costs involved in having these ships available. the increase in revenue in 2006 was driven by volume rather than prices. which by default are transported by ships (e. The picture is even worse than the 14% suggests. because of the large increases in the fleet sizes of most major shipping lines during 2009. Strong economic growth and stabilized crude oil prices saw industry revenue increase in 2006 by 10. high energy prices led to a sharp rise in © Copyright 2010. and contracts that were signed before the global economy began to sharply decline in July and August. Additionally. service cutbacks. which increased demand for global trade.1% in 2006 (similar to 2004) and as a result. wood. Once these generous contracts expired. The drastic turnaround in industry fortunes is portrayed by the Baltic Dry Index. The saving grace for the industry is that many of the contracts signed in the first half of the year were for services to be delivered in subsequent months. IBISWorld estimates that worldwide real GDP growth increased by 5.2% in 2007. a measure of the cost of hiring different types of ships for private use. By November.INDUSTRY PERFORMANCE Global Logistics . Similar to 2005. In North America. Freight and charter prices began to fall in 2006 due to the oversupply of vessels and capacity. unlike the previous years. Consumer sentiment was estimated to have fallen slightly (0. In addition. as a shortage of ships coupled with high demand to drive prices to unprecedented highs. though this did not immediately translate into crippling the broader national economy. the shipping market picked up as economic growth in the European Union region was solid. however. an index that measures the cost of chartering a bulk ship.4%.000. Data from the World Trade Organization (WTO) shows a direct correlation between real GDP growth and international trade. This was mainly attributed to strong real GDP growth of 4. the daily rate had slumped to as little as $5. IBISWorld believes that higher rates for shipments to Europe (as their demand for Asian products increased) offset the impact of a slowing US economy to a considerable extent. The golden years IBISWorld believes that industry revenue enjoyed its final positive year for some time in 2008. 50 . fuel surcharges that previously added to revenue (if not profit) are lower in 2009. A 10. By August. This 97% fall in the space of five months represents a shift in industry conditions on a scale rarely seen anywhere. there was nothing nearly as lucrative on offer. It is expected that industry revenue will decline by about 14% during the year as a result of weak shipping rates. The managements of these companies have shifted their focus from revenue and market share growth to defending the existence of the companies themselves. In addition. the daily charter rate for a Capesize ship was in excess of $230. it has started to slide again.9%. Margins were reduced as supply exceeded demand. and increased competition. recovering a small slice of what it lost in 2008. grew solidly through the first half of 2009. In May 2008. with a natural cyclical downturn in the shipping industry coinciding with a major recession in key economies around the world. the US economy cooled down late in the year due to the onset of the sub-prime mortgage crisis. so for revenue to fall by such a large amount is a big problem. The Baltic Dry Index.9%) as economic growth slowed. and high oil prices and sub-prime issues remained an ongoing concern.9% rise in industry revenue was estimated to have occurred due to brisk trade in the first half of the year. interest rates rose. meaning that many operators continued to receive strong revenue flows for much of the year. due to the large fall in the price of oil in the second half of 2008. Major shipping lines are cutting routes and staff wherever possible as they attempt to remain solvent during the slump. but in an already weak market it is difficult to raise prices in the event of fuel cost increases. World export of automotive products also increased in 2005 which also led to strong growth in car transport for the year. The increase in both depreciation © Copyright 2010. however. Europe and Asia Pacific region and with China becoming an integrated part of the worldwide manufacturing process and outsourcing needs. which reduces the day to day expenses of the industry. In terms of progress in the various market segments. According to Bloomberg. the strongest increase was recorded in the Middle East. which had increased about 10% per year in overall capacity since the mid 1990s. Elsewhere. Liquefied Natural Gas trades were up 12% while world container trades were up 10. weak demand had caused the price to fall below $300 per ton. Many companies in the industry have procured larger and more fuel efficient vessels to exercise economies of scale in order to remove operating costs and increase margins. the consequences don't take long to make their way to the bottom lines of companies. In late 2008. however high bunker prices and lower charter/freight prices in 2006 reduced margins. however China's deliveries rose by nearly 54% thanks to bulk.INDUSTRY PERFORMANCE Global Logistics . The market's tendency to over-correct shortages and surpluses in the shipping fleet means that periodically there will be very lean years in the water transport industry. the dry bulk sector performed very well due to high demand for commodities especially from Oceania (Australia) and South America. In terms of region. industry revenue increased 11. Profitability Whenever a big shift in charter rates and freight volumes occurs. the main contribution of industry revenue was from Asia. For 2005. compared with US$383 a year earlier.0% in 2005 as a result of high oil prices as jet fuel increased 42%. In the instance that the cost is able to be fully passed on to customers. followed by Africa. By April 2009. key industry figures were reporting that the negative market conditions were "unprecedented" in the industry's history.4%. China's trade flows are focused on the US. product. and now there is an oversupply of ships. Profits were strong up to 2004. as there will be more ships than cargo. and chemical carriers and container ships. These four regions' merchandise exports contain a high share of mining products (ranging from 40% for South and Central America to 70% for the Middle East). Crude oil prices averaged about $49 a barrel in 2005 and this pushed the demand for water transport higher (a trend that began in 2004). This significant volatility in a key cost area is generally passed on to customers through fuel surcharges. while the tanker market was moderate. the rise in price is likely to result in a fall in demand. Larger ships and improvements in technology have allowed staffing costs to be contained. Vessel deliveries during this period increased by 17. The shipbuilding industry was operating at maximum capacity between 2005 and 2008. the surge in maritime transport was due to the rapid growth in container ships. The number of ships scrapped during this period was also at an all time low. IBISWorld believes that revenue was driven by higher oil prices. IBISWorld Inc. The volume of merchandise trade increased 6. brought about by higher outsourcing and globalization activities. 51 . While merchandise trade continued to increase in 2005. which is also a problem for industry profitability. This was seen in many developing countries in Asia and to a certain extent South America.3%. Besides rising fuel costs.3%. the industry was enjoying steady profitability due to global economic growth and a shortage of shipping capacity around the world driving up freight rates. Profitability has also been aided during the current performance period by a decrease in wages as a proportion of revenue.Shipping 22 January 2010 bunker prices that further reduced profitability in this industry. the CIS and South America.0% in 2005 as a result of a decrease in economic activity at the global level that caused a deceleration in the expansion of world merchandise and services trade. Prior to 2008. This forced many manufacturers to shift towards shipping as an alternative mode of cross-border transport. another very strong result for the industry. it provided strong revenue growth in the container segment for time sensitive shipments. especially from Japan. in particular China. Revenue growth in the Air Freight industry was estimated to have grown by a mere 1. the average price of 380 Centistoke (the main marine bunker fuel) was $670 a metric ton in the third quarter of 2008. . have a higher standard of living and are more unionized would attract significantly higher wages.4%. a chief engineer and three assistant engineers. In South-East Asia. three deck officers or mates. Many pirate attacks occur while ships are anchored. Modern pirate attacks tend to involve the ship's crew being held hostage at ransoms of up to $10 million. with particular hot spots in Indonesia. Establishment growth has been minimal in developed countries due to consolidation (U. Nigeria. fishing boats. a radio operator. The skills and experience required by this industry differ by occupation.INDUSTRY PERFORMANCE Global Logistics . A typical international merchant ship has a captain. Seafarers can enter the industry from high school or special training schools whereas ship pilots and captains require specialized training. The increase in demand for shipping services lifted employment numbers during the 2005-08 period. with the pirates armed with guns and rocket-powered grenade launchers approaching in speedboats. Labor costs are the highest in Western Europe followed by Oceania and North America. and Somalia. 52 . This is because entities in these regions can command better economies of scale through better infrastructure.815 in 2009. and a surplus of skilled labor in the industry stifled wage growth. employment. employment is also expected to rise by about 40.S. Wages in 2009 will be similar to 2004. such as able seamen. utilize greater technology. Pirates. The prevalence of pirate attacks worldwide in 2008 was approximately 20% higher than in 2007. Establishments. wages and employment figures were affected by the industry downturn which took hold in the latter part of the year.Shipping 22 January 2010 and profits will be offset by a decrease in wages as a proportion of revenue. Nations in extreme poverty lack the resources to stamp out pirates. During 2008. As the focus of many pirates is taking the crew hostage. largely due to a dip in 2009 as companies cut shifts and staff offsetting previous wage gains. plus six or more unlicensed seamen.283 in 2004 to 28. Cruise ships. countries that provide more high value and movements of cargo (carriers transporting cargo into the country also provides transportation out). if indeed most companies manage to turn a profit in 2009 at all. oilers. as the poor market conditions force some companies to the wall. IBISWorld Inc. its growth rate is expected to be lower than revenue due to the modest wage rates offered by this industry. The small rise in industry establishments is due to the medium barriers of entry to the industry (see Barriers to Entry section) despite strong revenue growth over much of the current performance period. Following the September 11 attacks. and yachts are relatively safe. Industry profits for 2008 and 2009 are expected to be significantly lower than in previous years. This represents an annualized growth of 0. As a result of the increase in establishments during the five year period. For example. and have continued into 2009. IBISWorld believes that the large establishments in Europe contribute significantly more per employee to the industry than other regions.. India and Eastern Europe has helped push overall establishment upwards for this industry. and cooks or food handlers. the US government provided significant financial support and training to South-East Asian nations to assist them to combat terrorism and © Copyright 2010. the particular cargo on board is often of little interest. Tankers and cargo vessels comprise 80% of all pirate attacks. Major companies such as NOL announced significant staff cutbacks.and not an eye-patch in sight An issue for the global industry that has recently risen to new levels of prominence is piracy. While wages are expected to increase in the current performance period. and wages The number of industry establishments worldwide in the Shipping Logistics industry will increase from 28.000. Somalia's lack of a functional central government has meant there hasn't been a coordinated response to piracy in its waters. including information sharing and joint patrols between nations. cost-effective purchasing of equipment and greater utilization of technology as compared with developing regions. Administration and customer service functions however require a pleasant personality and good speaking voice. national naval forces and coast guards have increased their efforts to patrol their waters effectively. Overall establishment numbers are expected to decline during 2009.) and low real GDP growth (Europe) but higher manufacturing and service capabilities from developing countries such as China. The Baltic Dry Index. as seen in the accompanying table. with global shipping capacity failing to keep pace with the booming global economy. The problems that caused the world economy to take a damaging tumble from mid 2008 were particularly acutely felt in the shipping industry. 2006 4362 June 30. 2009 3005 Source: IBISWorld HISTORICAL PERFORMANCE The history of commercial shipping stretches back millennia. 2006 2964 December 31. 2008 774 June 30. With today's dry cargo being tomorrow's inputs into industrial production. the Black Ball Line started its service from New York to Liverpool on a common-carrier line service on a dependable schedule. A policy of sailing regularly and accepting cargo in less-than-shipload lots enabled the Black Ball Line to revolutionize © Copyright 2010. and hence higher prices for imported and exported goods. 2008 9599 December 31. The losses are all passed onto consumers via higher shipping rates. with the average random sum demanded by pirates actually increasing. The index soared in 2006 and 2007. Since this time. Attacks continued during 2009.Shipping 22 January 2010 organized crime. the index gives a real time insight into the demand for cargo movement worldwide. with demand drying up at the same time as many newly built ships entered the market. It was only in 1818 that an American registered ship. Indonesia's navy and marine police are still under-resourced. The costs of piracy to the industry and the economy in general are considerable.INDUSTRY PERFORMANCE Global Logistics . Commercial shipping up to the 19th Century was owned by the merchant or by the trading company (tramp shipping). it is indeed a useful indicator of where things are headed. Baltic Dry Index Year Year Index Baltic Dry Index June 30. causing cargo owners to attempt to outbid each other to get their products to their destinations. the cost of productivity losses. and pirates continue to prosper in its waters. and why it matters The Baltic Dry Index chronicles the prices paid by dry cargo owners to charter ships on the spot market. IBISWorld Inc. 2007 6278 December 31. This resulted in a phenomenally sharp decline in the Baltic Dry Index. 2007 9143 June 30. and the technology and methods were largely unchanged until quite recently. 53 . Many developed countries invest money and resources in regional co-operative agreements to reduce crime. and higher insurance costs. but the level remains far below its earlier peak. 2009 3757 December 31. rather than a common-carrier service. More sophisticated vessel tracking devices are being used to address hijackings. These costs are incurred through the ransom sums that shipping companies pay. along with electric force fields around the perimeter of ships. These massive prices prompted a rash of new building contracts for shipyards. modest improvements in the index have been experienced. the value of goods stolen. and is seen by many as a glimpse into the future for the world economy. Aggregated from different regions and different ship sizes. In the years from 2003. © Copyright 2010. container ships were moving millions of tons of goods all over the planet. transatlantic and transpacific routes. rather than the container and the wheeled chassis used to support it. 21st century The world economy experienced a bumpy year in 2001. As it turned out. This eliminated wasted space on ships. At the other end. the weight of a ship's cargo. 54 . and then culminating in the massive Super liners which included the Titanic.Shipping 22 January 2010 shipping. These years of easy growth also encouraged shipping companies to make plans to expand their fleets in a major way. recovered thereafter to record a number of very strong years of growth amidst good conditions. were used early in the century. with steam powered ocean liners replacing sailing ships. but it was not until the 1960s that containerization became a major element in ocean shipping. container ships carry containers above deck as well as below. which are designed to have maximum space efficiency for containers of a uniform size. IBISWorld Inc. sealed boxes of standard sizes. what was really happening was the beginnings of a credit and asset bubble that would bring the industry to its knees by the end of the decade. taking advantage of abundant finance and seemingly endless confidence in the business world. passengers. fuel. pioneering the first Atlantic crossing under steam power in 1838. By 1960 these factors had led to the introduction of standardized steel or aluminum containers (8 x 8 x 40 feet in the most common size) into which almost any non-bulk commodity could be stored. By the end of the century. with the high levels of demand starting to drive prices up. This type of vessel remains in use to the present day. due in part to the September 11 attacks. stores. Early container ships were designed to be loaded with railway boxcars. steamboats were used to transport goods. this growth began to use up spare capacity in the production of oil and commodities. 20th century Internal combustion engine and gas turbine came to replace the steam engine in most vessels in the 1900s. This was prominent on trans-oceanic travel. Road-and-rail containers. making possible more frequent trips and minimum lost time in port. and crew when the ship is fully loaded) and a speed of 11 knots. Not long after. and allows the loading and discharge of vehicles without hoisting. Another influential early 20th century innovation was the "ro-ro" (roll on. The boxcars could be moved directly into the shipping yard on wheels. the boxcars could be put back onto the tracks and moved to their final destination. and also paved the way to the development of container ships. and their cargoes are easily loaded and unloaded. The major innovation for global shipping logistics in the 20th century was containerization. moving just the container onto the ship. made possible by new ships specifically designed for container carrying. Large and fast.INDUSTRY PERFORMANCE Global Logistics . This technique was first used on World War II landing craft. and then lifted onto the ship with cranes. The first steam-propelled ship designed as an ocean-going tanker was the Gluckauf. Steamships gradually replaced sailing ships for commercial shipping through the 19th century. In the 1950s. The economy. roll off) type of vessel and cargo. the technique was perfected. It had 3020 deadweight tons (DWT. along with the global shipping industry. built in Great Britain in 1886. It is also worthwhile to note that the event with the Titanic led to the first Maritime Distress Safety System. 5 -3.9 2002 41.190.1 2005 59.081.3 5.3 10.4 2002 84.289.3 2006 133.0 10.181.0 9.4 2007 145.7 N/A 2001 76.0 -18.449.6 -18.3 9.922.INDUSTRY PERFORMANCE Global Logistics .1 11.Shipping 22 January 2010 Revenue (constant prices) Revenue $ Million Growth % 2000 93.175.5 2003 98.191.386.8 8.7 10.1 10.5 2004 108.5 9.541. 55 .7 Revenue Growth Rate Revenue Gross Product (constant prices) Gross Product $ Million Growth % 2000 45.9 N/A 2001 37.0 2010 133.9 18.768.203.0 10.7 17.9 2009 138.853.027.4 2005 120.9 2007 71.8 2008 75.696. IBISWorld Inc.9 2006 65.259.351.7 2003 48.4 2004 53.528.388.2 2008 161.1 -14.5 10.475.9 © Copyright 2010. Shipping 22 January 2010 2009 60. Gross Product Growth Rate 56 .6 -19.INDUSTRY PERFORMANCE Global Logistics .513.7 2010 58.3 -3.141. IBISWorld Inc.9 Gross Product © Copyright 2010. 1 5.7 8.151.949.1 2012 147.5 -3.5 2014 161.5 © Copyright 2010.351.9 2011 61.7 2011 136.5 11.5 2013 72.2 2014 76.5 2012 69.Shipping 22 January 2010 Outlook Revenue (constant prices) Revenue $ Million Growth % 2010 133.4 2013 154.3 -3.9 2.614. 57 .071.642.2 4.8 Revenue Growth Rate Revenue Gross Product (constant prices) Gross Product $ Million Growth % 2010 58. IBISWorld Inc.230.588.633.2 4.OUTLOOK Global Logistics .4 5.1 6.141. which has been a big driver of the shipping industry in recent years. increased globalization and outsourcing activities are expected to continue.Shipping 22 January 2010 Gross Product Gross Product Growth Rate For all the pain that the industry is experiencing in 2009. As © Copyright 2010. which indicates a period of steady recovery from the sharp downturn of 2009. due in part to a surplus of ships. A direct consequence of this is that the level of demand for shipping transport will be weaker than it has been in recent years. Consumer spending and sentiment will remain flat through this period as unemployment in the broader global economy remains high. and competition is set to become fierce in the new global economic environment.7% in 2010. its fortunes will eventually improve. industry revenue is expected to rise from $138. Weak global demand for vessels is expected to continue until at least 2011. and when a recovery does occur. this weaker growth will limit demand for raw commodities in China and elsewhere. Revenue is forecast to fall by 3. On the shipping side. The good news is that the shipping industry remains central to the world economy.47 billion at end 2009 to $161. recovering demand for energy and commodity products. coupled with an oversupply of ships has created a situation for the shipping industry whereby transport prices have plummeted. This represents an annualized revenue increase of 3. and IBISWorld forecasts a return to revenue growth for the shipping industry at this time. IBISWorld Inc. IBISWorld predicts that 2010 will be the worst year during the outlook period for the industry. Currently 2011 looks to be the year that the global economy could meaningfully turn the corner and get back on track. 58 .OUTLOOK Global Logistics . This prediction is based upon improving rates of world GDP growth from 2010 onwards. Despite government investment in infrastructure. shipping will be a beneficiary.63 billion in 2014. Industry revenue During the 2010 to 2014 period. reduce the frequency of their services. with companies continuing to shed staff.1%. the muchanticipated upswing may not occur early enough to save some players in the industry. the traditionally strong demand for cruising activity is expected to diminish somewhat due to economic troubles. and hold some of their ships entirely out of service due to demand being considerably lower than capacity. but not to the same extent as other parts of the shipping industry. All major world economies are encountering significant financial difficulties that are trimming growth rates and constricting demand for goods and services. Throughout the period. and cost increases for crude oil prices. Falling demand. However. demand for commodities is set to remain solid. With annual world growth of 18% and an estimated worth of $17 billion a year. dollar. the demand for transport services.S. dollar. however production capacity is growing in response to the high amounts of capital investment and exploration activity that have occurred over the last few years as a result of the historically high oil prices. and is expected to remain in that area in the short term. In the medium term. baby boomers and retirees. Global demand for energy and commodity products has declined from peaks early in 2008. and is expected to remain below those highs during the outlook period. The cruise segment is expected to grow throughout the forecast period as innovative products attract the affluent young. often up to a decade. and distribution of goods for individuals and businesses around the world. There are a number of key reasons for both prices and demand for commodities being expected to remain moderate during the outlook period. The majority of commodities traded in the open market are transacted in U. such as trade and investment flows. Oil producers have reduced production in light of the global economic conditions. has created more speculators in both the energy and commodity markets. The large scale nature of mining investments creates long lags between investment and production.Shipping 22 January 2010 globalization continues to increase. The globalization index by AT Kearney that tracks components of global integration.S. Once the recovery occurs. especially in the Middle East. especially in the mining industry where demand has long exceeded supply. The increase in anxieties and energy prices has had a knock on effect on the price of other commodities for transportation purposes. The depreciation of the U. Hungary and the Czech Republic also provide attractive outsourcing options for Western European businesses. In addition. assembling. this industry remains an essential element for the sourcing. internet usage and volume of international telephone calls showed that 72 countries ranked in the 2007 Globalization Index account for 97% of global GDP and 88% of the world's population. greater emphasis on environmental issues has also slowed down capacity growth. however prices are unlikely to remain at their late 2008 and early 2009 lows. After dipping into recession in 2009. 62 countries were ranked in the Index and represented 96% and 84% of the world's GDP and population respectively. preventing further drastic falls.S.g. ongoing demand for raw materials and energy products to fuel real GDP growth in developing countries (e. the global economy is forecast to return to growth in 2010 and thereafter. As globalization increases. Revenue growth in each region will depend on the real GDP growth rates in that region. Low commodity and energy prices in the 1980s and 1990s had depressed investments in commodity production. it is envisaged that developing Asia will contribute the strongest increase in revenue growth followed by South America. The net result of this should be a marginal increase in oil stocks. Shipping charter rates for the transportation of commodities (and energy related products) are directly linked to the demand for such cargo. Middle East and Africa. The dollar recovered somewhat against other currencies from late 2008. cruising is one © Copyright 2010. manufacturing. more companies will outsource functions overseas. 59 . and European entities and as risk falls and infrastructure improves. such as shipping will increase due to higher movement of goods. Globalization is increasing and many companies are outsourcing or establishing entities outside their domestic market. especially since 2003 has also been a contributing factor for high commodity prices. Good revenue growth is also expected from Eastern Europe as countries within the Commonwealth of Independent States continue to grow from an influx of investments and oil revenue. IBISWorld estimates that crude oil prices will stabilize during the outlook period. In 2004. Ongoing geo-political tension. Furthermore. albeit not over-heated as it was in 2007 and early 2008. Favorable labor and operational costs in Central/Eastern European countries such as Poland. IBISWorld Inc.OUTLOOK Global Logistics . India is the leading offshore location for many U. China) will act as a price floor. The lack of capital investments has reduced capacity. Low global interest rates and under performing stock markets in the first half of the current performance period sent hedge funds and institutional investors in search of better yields. In the past few years commodities have emerged as an investment asset. with shipping companies set to suffer during the outlook period due to excess capacity. This situation will take quite some time to fully correct itself. Companies will continue to source seafarers. Passenger numbers increased past 10 million in 2007. As of late 2008. Profitability The big challenge for the industry is how to remain profitable with considerably less revenue than has been the case in previous years. excess shipping capacity has developed. Growth in North American cruise passengers (the largest market) is expected to grow at a rate of 4. shipbuilders are staring down the barrel of order cancellations. there was a severe shortage of capacity. and the finance to undertake major projects has become much more difficult to obtain. the prices charged by cruise lines have fallen sharply to entice customers during poor economic times. IBISWorld Inc. Boat builders are cutting staff and trimming product lines. Reducing the speed of a ship from 22 knots to 20 knots has considerable fuel cost savings. Overall industry profitability will be low while the industry adjusts to the new set of market conditions. Even with all this. up from 9. it would appear unlikely that companies will remain anxious on that front.67 million in 2005. When supply of ships was tight. Between 2002 and early 2008. While passenger numbers have continued to grow in 2008 and 2009. IBISWorld predicts that carriers with strong exposure to the Asian region will find it easier to remain profitable during the outlook period. freight rates have nose dived. especially "ratings" staff (deck crew) from Asia where labor is cheap. The challenge for the industry will be to ratchet prices back up when a recovery occurs. pulling ships out of the water. An industry source revealed that up to 30 brand new vessels will enter service between 2007 and the end of 2010.18 million North Americans in 2006. the boom has vanished. world shipping freight rates shot up as trade volumes soared. some shipping lines were reluctant to slow their ships as it meant that it reduced the daily productivity potential of each ship. and undertaking programs to improve efficiency. while IBISWorld expects that a number of mergers and acquisitions will take place during the outlook period as the industry undergoes a new round of consolidation. Another approach that has been used by shipping lines to contain costs (particularly during early 2008 when fuel prices peaked) is to reduce the cruising speed of ships. Companies are cutting routes. and shipbuilders had over three years of work on their books at almost any given time. the world is spiraling into a prolonged slump. there are likely to be casualties who are ill-prepared for the current climate. But suddenly. In some instances. On many of the most critical shipping routes.Shipping 22 January 2010 of the fastest growing sectors in the international tourism market. Companies that have shifted their operations to have a greater LNG and bulk transport focus appear to be better equipped to stay afloat. while dry bulk shipping has a less rosy immediate future due to the recent end of the commodities boom. Now that ships are in over-supply. The increase in establishment numbers will come from developing regions such as North Asia.OUTLOOK Global Logistics . reducing the size of their workforces. Africa and Middle East. employment.25% per year between 2005 and 2020. deep and extended discounting can devalue the worth of a product in the minds of consumers. This all combines to mean that the global Civil Ship and Boat Building industry is experiencing an altered reality. Shipping lines placed huge speculative orders for new vessels. and India and Central Asia who are building better infrastructure to cater for the © Copyright 2010. and wages IBISWorld believes that the number of establishments will increase marginally over the forecast period fueled by higher participants from the Far East offset by a relatively stable/declining number of firms in Western countries due to higher merger and acquisition activities. The Cruise Lines International Association reported that their member lines carried 10. 60 . Establishments. and consumer confidence is down. creating a risk of losing substantial patronage if prices are restored to their former levels. while revenue per employee is expected recover strongly. IBISWorld estimates that establishment numbers will increase by 0.050 to $98. Wages are expected to rise by 2. According to a report by the US Office of Naval Research. Employment is expected to increase by about 1. by 2050 the Northwest Passage through the Canadian Archipelago and along the coast of Alaska will be "ice-free and navigable every summer by non-icebreaking ships. All nations with Arctic borders and interests are becoming increasingly aware of the impending significance of the Northern Sea area. while companies are trying to become leaner. A decline is expected to mostly occur during 2010. If the Arctic ice cap continues to shrink. and scientific reports indicate that the melting is now proceeding at an accelerating rate. rising from $89. Europe.2% per annum.030. The Arctic: The race for pole position Global climate change has been triggering large scale melting of the Arctic polar ice cap over the past decade. and North America. This can be attributed to the higher levels of maritime activity in the Asia region. employment will gradually expand as the industry recovers and increases its capacity. captains) are usually sourced from OECD countries and tend to command higher wages.Shipping 22 January 2010 exports/imports of goods. IBISWorld Inc. 61 .g. and governments and private enterprises will be jostling for position on this matter in coming years.8% during the outlook period to 30. Japan and North America towards the Far East. especially in the Far East.840 in 2014. it will become a major route for international shipping in coming decades. Ship officers (e. Indian subcontinent and Eastern Europe. IBISWorld believes that the pace at which this scenario unfolds could be considerably quicker than that indicated by the Office of Naval Research. A Northern Sea Route that is navigable longer would make the transportation of commodities to international markets easier and significantly reduce transportation times and costs between Asia. as compared with ratings staff that are sourced from Asia." As most government reports of this type are quite conservative. The Arctic Ocean currently has two main sea routes that are open to shipping for about five months of the year with the help of icebreaker ships: the Northern Sea Route and the Northwest Passage. © Copyright 2010. After that point. A study by the Warwick Institute for Employment Research in December 2005 showed that the labor market for seafarers has continued to shift from the traditional maritime countries of Western Europe.0% per annum over the outlook period.OUTLOOK Global Logistics .