THE 3 RD INDUSTRIAL REVOLUTION By : Parakrama Dissanayake WILL SHIPPING LINES MANAGE SUPPLY IN...

THE 3RD INDUSTRIAL REVOLUTION

By : Parakrama Dissanayake

WILL SHIPPING LINES MANAGE SUPPLY

IN RELATION TO DEMAND

CILT International Conference 2012

SHIPPING DEMAND – DERIVED DEMAND

Stems From

Demand For Goods

DEVELOPMENT OF TRADE <> ECONOMIC GROWTH


CHINA’S GROWTH GLOOM

China’s economy slowed for a 7th straight quarter

Missing governments target


INDIA –

“Hindu rate of growth’’ A decade ago 3 to 4%

Zoomed to approx. 9%

And now down at around 5.4%

IS IT IN SEARCH OF A DREAM?


AMERICA’S FISCAL CLIFF

USA is the largest importer of goods

With effect from Jan. next year US Fed tax increase and spending cut equivalent

This will raise taxation by US$ 3500 per household.

Will result in a fiscal restriction of US$ 600 billion in a single year.

Unless Democrats and Republicans agree would not Consumption decrease?

WILL IT AFFECT SHIPPING?

of 5% GDP will come into force.

Would not demand for Trade decline ?


EUROZONE SOVEREIGN DEBT CRISIS

Are we seeing the light at the end of the tunnel ?


NOW US BUSINESS

Coca Cola moving offices of huge bottler from Greece.

FORD estimated loss 1.5 Billion – Closing 2 plants in UK , 1 Plant in Belgium

Dow Chemicals – Close 4 plants in Europe.

Kimberly Clark – Lay off 1500 jobs in Europe.

- Lay offs 6200 workers

FLEEING SLUMPING EUROPE


WORLD ECONOMY

Potential for growth in both advance and emerging economies permanently

People will be poorer and budget deficits more difficult to close

IMF PROGNOSIS SEES LONG TERM PAIN

damaged


GLOBAL TRADE

The G20 economies have added 124 new restrictive measures affecting about

Staggering increase in protectionism in recent months with a 25% rise in trade

Mounting trade tension between China and USA.

China telecoms Huawei and ZTE “A Threat to Security” USA.

PROTECTIONISM IS RAISING ITS UGLY HEAD

3% of global imports and nearly 4% of G20 trade.

restrictive measures.

“As long as politicians in the worlds big three economies continue to dither another global recession is possible. Judging by politicians behavior – the world economies could slow a lot further. It could even tip into recessions in 2013”. The Economist


CONTAINER SHIPPING LINES PROFITS PLUMMETS

• Loss > US$ 16 Billion2009

• Profit > US$ 16 Billion2010

• Loss > US$ 6.3 Billion2011

Top 20 Carriers


ASIA-EUROPE / MEDITERRANEAN

Asia – Europe

Asia – Mediterranean

STEEP DECLINE IN CONTAINER VOLUMES

Declined by 10% in August 2012 as against 2011.

Minus 20% in August 2012 as against 2011.


ASIA – MEDITERRANEAN RATES PLUNGE

US$ 1892 Per Teu

JUNE 2012

US$ 1204 Per Teu

OCT 2012

Shanghai Container Freight Index Spot Rates

Fall 36.3% in a single quarter

Terminated

AE5 service(8) 6500 TEU

Ships

Terminated

AE9 Service(1

1) 8000 TEU

Ships

MAERSK LINE CUTS 19 SHIPS

21 % Capacity Reduced

ON ASIA / EUROPE SECTOR

HANJIN / EVERGREEN

Among 13 voyages scheduled from October to December,


Lloyd’s Loading List

CUT ASIA - EUROPE CAPACITY

the companies have decided to skip three, which is a 23% capacity reduction in total.


CONTAINER CHARTER PRICES SLIDE

2012 August 2011

August

1000 Teu Vessel• (- 37%)

1600 Teu Vessel• (- 41%)

2000 Teu Vessel• (- 49%)

3500 Teu Vessel• (- 41%)


JOBLESS – ARMADA OF SHIPS

No. of idle vessels as at Sep 2012 is 290 ships / 550,000 Teus

Biggest vessel without work is 7200 Teu ``SVENDBORG MAERSK”


MIS – MATCHCONTAINER DEMAND AND CAPACITY

Round the World

2012 2011

Westbound TEU 25,416,000 25,598,000

Eastbound TEU 24,635,000 24,046,000

Total Trade 50,051,000 49,644,000

Growth 1% 3%

Imbalance TEU 781,000 1,552,000


ULTRA LARGE CONTAINER SHIPS (ULCS)

95% deployed in Asia to Europe Sector

7 Ports of calls

Will South Asia be part of it ?

April 2012 – Operating - Ordered

Average Size - > 13,200 Teus

No. of Ships - 274Total Teus – 3,628,100

6000 Containers per port call 24 Hrs 250 Berth moves per/hr with 8 cranes

Maersk Challenge to Port Operators

MAERSK LINES TRIPLE E 18,300 TEUULTIMATE CONTAINER CARRIERS


USA / EUROPE ASIA / CHINA

DEMAND SUPPLY

Consumption Production

Container Shipping


OUTSOURCING MODEL - CHALLENGED

Increase in costs in Asia

Loss of jobs in USA / Europe

Politicians no choice but create jobs in the developed world


WORLDS FACTORY - CHINA

Costs soaring by increase in Land, taxes, labor costs

Southern China labor cost up by 20% a year since 2008

Nike shifts from China to Vietnam

American Chesapeake Scented Candles shifts from

Rising labor costs Increase shipping charges Supply chain duration – high inventory cost Respond to trends faster.

China - > Vietnam - > Maryland USA


LABOR COSTS – LESS IMPORTANT

Slicing the Apple I Pad Assembled in China Worldwide $

33

China $ 8

Cannot I Pad relocate assembling in America even at double the cost ?

Source : University of California

Total Labour Cost


LESS WORKERS

Nissan British Factory in Sunderland

271,157 Cars with 4594 people (1 person - > 59 Cars)1999

480,485 Cars with 5462 people (1 Person - > 87 Cars)2011


PRODUCTION Vs. COSTS

Americas manufacturing output in Dollar terms same as China

America achieves this with only 10% of workforce deployed by China

Despite China’s rapid rise

Source : Massachusetts Institutes of Technology


THIRD INDUSTRY REVOLUTION

• 18t

h

century mechanization of textile industry

1st

• 20t

h

Century Henry Ford mastered the moving assembly line

2nd

• Manufacturing going digital through 3 D printers

3rd

– Age of Mass Production


3-D PRINTER

Old way was taking lots parts and screwing or welding

Now product can be designed on a computer and printed on a 3-D printer

Designed with software and a cartridge with material in plastic , metal , ceramic

Already high tech parts of military jets printed using 3-D printer

University of Southern California – A giant 3-D printer

in fine powder or gel

Lay down concrete foundation Put up walls Inserts wiring and plumbing Construct an entire building


Will Jobs go back to rich countries ?

Will this not change the demand model of Shipping ?


CONCLUSION

Importance of low cost labour in production will diminish.

Gradual shift of low cost production from Asia to West.

Like with Postal mails to E-mails, 3-D printing will completely alter manufacturing

Shipping Line – Ports have to re-assess development of capacity.

Business models of Shipping Line will alter.

models

Thank You


THE 3 RD INDUSTRIAL REVOLUTION By : Parakrama Dissanayake WILL SHIPPING LINES MANAGE SUPPLY IN...

Documents

Transcript of THE 3 RD INDUSTRIAL REVOLUTION By : Parakrama Dissanayake WILL SHIPPING LINES MANAGE SUPPLY IN...