Assignment on Market Scenario for Container

Market Scenario for Container in shipping industry

1)      Ship Owner’s Profit and Loss

           The whole shipping industry is trying to enhance business operations in various geographical segments with the aim to participate in the long-term game plan. According to the Drewry Maritime research, companies such as CMA, CGM, MSC, and evergreen are operating in the shipping industry with 35%, 49%, 15, and 2%, order book in China, South Korea, Japan, and other countries respectively. Market analysis present that shipping companies are saving fuel and extra-motion to control transportation expenses. The firm delivers 73,530 teu by containers around the world. However, the fleet of the firm is 22.9 mteu.

            According to the analysis of annual reports published by Drewry Maritime Research, the rate per day varies from size to size. The rate for the size of 5000-7500 (dwt) is 6,400 per day. While rates for 10,000-15,000 and more than 20,000 size (dwt) are 7,400 and 7,600 respectively. Here the mentioned below table represents rates per day in accordance with the time duration.

 Apart from these other costs and expenses for the container shipping industry includes sailing cost, fleet development expense, oil cost, and transportation cost. Transpiration cost for container shipping industry includes operating cost, voyage cost, and capital cost. Total transportation cost depends upon distance per round trip or miles. The following graph represents the transportation cost.

Analysis indicates that currently cost and expenses are increasing for the shipping of containers. Considering an increase in cost overall profit margin is decreased for the container shipping industry. The official report presented by the Drewry Maritime predicts that cost and expenses of transportation will be increased for containers shipping as a result of new IMO’s regulation implementation in the fuel market. According, to the analysis containers, need to cover a high margin of fuel cost to ensure profitability growth. Although, a decrease in transportation and fuel cost will support the companies of the container shipping industry to avoid financial losses in the future business operations. Additionally, increasing cost of freight is also an indicator of profit in the near future. Container shipping industry would be able to generate 1.1 billion dollar profit from the execution of the container's business if the container shipping industry covers at least 65% fuel cost in the transportation process. Although, control of fuel cost by 75% would increase billions of dollar profit. However, in case, the companies manage to control other expenses and cost to increase profit margin then the profitability of the companies would benefit to ensure business growth. Conclusively, the profit of ship owner depends upon the management of cost and profit.      

2)      Market Forecast in shipping industry

Drewry Maritime researchers are expecting to have major changes in the market. According to the analysis, the container shipping industry is expecting to face an increase in fuel cost and oil prices. Uncertain economic conditions will have an impact on the business outcomes and market condition of the container shipping industry. According to the analysis of the report published by Drewry Maritime research in November 2019 and October 2019. IMO 2020 entrance in the container market will have an impact on supply and demand balance. Drewry Maritime research report has developed a forecast that IMO new regulation introduction and freight rate increase will hit the profit margin in future years.

In 2020, the container shipping industry will perform better than previous years as sales revenue will be supported by an increase in freight rate. Container shipping of orders is also showing a positive trend. According to the analysis of historical performance, Drewry Maritime research shows gradually increase in orders from January to December. In 2018 and 2019, cumulative new orders supplied by container shipping was limited to below 300,000 teu. However, in the month of October cumulative new orders recorded for 2018 and 2019 are above 1,200,000 teu. Considering the previous trend of cumulative new orders in November and December cumulative orders increased up-to the limit of 1,200,000 teu.

See the presented below table to view forecasted supply of cumulative new orders in December 2019. Considering the average difference in the monthly performance of 2018 and 2019 a forecast is developed. According to the calculations, forecasted cumulative orders for the month of November and December are $1,000,000 and $1,100,000.

 

	2018 Y	2019 Y	Difference
July	500	$               400.0	$         100.0
Aug	700	$               650.0	$           50.0
Sep	1000	$               610.0	$         390.0
Oct	1200	$               910.0	$         290.0
Nov	1250	$            1,000.0	$         250.0
Dec	1250	$            1,100.0	$         150.0
		Average Difference	$         205.0

    However, market analysis based on the market demand shows that overall demand for the global container handling at ports is decreeing continuously in 2019. According to Drewry Maritime research percentage of decrease from August to September are around 2% and 6 mteu (Supremefreight.com, 2019). Although another market research report by (Sand, 2019), overall demand for container shipping in 2019 is higher than in 2017 and 2018. According to this market, research demand is expected to increase for container shipping as in both 2017 and 2018 November and December had growth rate around 9%-10%. See the presented below graph for global container shipping demand.

 

Throughput growth container ports situation in September 2019 are Shanghai, Ningbo, JNPT, and Singapore fluctuating continuously. Because of changes in the market demand east-west routes are also changing which can put pressure on the future demand and outcomes of the container shipping industry.

Conclusively, analysis suggests that the container shipping industry will have positive behaviour in the revenue generation capacity even demand factor is dynamic and competitive powers are influencing business operations. By all manner, the container shipping industry will forecast an increase in the profit and stability in the market of global container shipping for the month of December 2019

 

From the above bar chart it is evident that the amount of fleet is experiencing positive trend. The deliveries however experiencing fluctuation from October 2018 but the overall trend of the deliveries remain positive.

From the pie chart it is quite clear that the South Korea has the largest share in order booking which is 51% the second largest order booker china with 31%. Japan is the third largest country having 16% share.

Supply

In the above line chart the new orders are presented. The new order for containers in the year 2018 were higher than the new orders I the year 2019. It can be said that more cumulative order are made in 2018 than 2019.

 

The order booking of containers has shown downward trend from the last year. From the month of October 2018 to October 2019 the order booking regarding containers has declines up to lot of extent.

 

Asset Market Activity in shipping industry 

The above table is describing the asset market activity regarding containers. The overall asset market activity has shown weak performance or in other words negative trend can be seen in asset market activity.

Rates and Asset Prices in shipping industry

 

Container Demand in shipping industry 

 

The container handling at the ports has increased which means that the demand of the containers has raised in the year 2019.  It means that the demand of the containers have remained high in the year 2019n than 2018.