Transcript THE 3RD INDUSTRIAL REVOLUTIONx - CILT-SL

THE 3RD INDUSTRIAL REVOLUTION
WILL SHIPPING LINES MANAGE SUPPLY
IN RELATION TO DEMAND
By : Parakrama Dissanayake
SHIPPING DEMAND – DERIVED DEMAND
Stems From
Demand For Goods
DEVELOPMENT OF TRADE <> ECONOMIC GROWTH
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CHINA’S GROWTH GLOOM
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China’s economy slowed for a 7th straight quarter
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Missing governments target
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INDIA – IS IT IN SEARCH OF A DREAM?
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“Hindu rate of growth’’ A decade ago 3 to 4%
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Zoomed to approx. 9%
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And now down at around 5.4%
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AMERICA’S FISCAL CLIFF
WILL IT AFFECT SHIPPING?
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USA is the largest importer of goods
With effect from Jan. next year US Fed tax increase and spending cut equivalent
of 5% GDP will come into force.
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This will raise taxation by US$ 3500 per household.
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Will result in a fiscal restriction of US$ 600 billion in a single year.
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Unless Democrats and Republicans agree would not Consumption decrease?
Would not demand for Trade decline ?
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EUROZONE SOVEREIGN DEBT CRISIS
Are we seeing the light at the end of the tunnel ?
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NOW US BUSINESS
FLEEING SLUMPING EUROPE
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Coca Cola moving offices of huge bottler from Greece.
FORD estimated loss 1.5 Billion – Closing 2 plants in UK , 1 Plant in Belgium
- Lay offs 6200 workers
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Dow Chemicals – Close 4 plants in Europe.
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Kimberly Clark – Lay off 1500 jobs in Europe.
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WORLD ECONOMY
IMF PROGNOSIS SEES LONG TERM PAIN
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Potential for growth in both advance and emerging economies permanently
damaged
People will be poorer and budget deficits more difficult to close
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GLOBAL TRADE
PROTECTIONISM IS RAISING ITS UGLY HEAD
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The G20 economies have added 124 new restrictive measures affecting about
3% of global imports and nearly 4% of G20 trade.
Staggering increase in protectionism in recent months with a 25% rise in trade
restrictive measures.
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Mounting trade tension between China and USA.
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China telecoms Huawei and ZTE “A Threat to Security” USA.
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“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
Top 20 Carriers
2009
2010
2011
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•Loss > US$ 16 Billion
•Profit > US$ 16 Billion
• Loss > US$ 6.3 Billion
ASIA-EUROPE / MEDITERRANEAN
STEEP DECLINE IN CONTAINER VOLUMES
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Asia – Europe
Declined by 10% in August 2012 as against 2011.
Asia – Mediterranean
Minus 20% in August 2012 as against 2011.
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ASIA – MEDITERRANEAN RATES PLUNGE
JUNE 2012
US$ 1892 Per Teu
OCT 2012
US$ 1204 Per Teu
Fall 36.3% in a single quarter
 Shanghai Container Freight Index Spot Rates
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MAERSK LINE CUTS 19 SHIPS
ON
ASIA / EUROPE SECTOR
Terminated
AE5
service(8)
6500 TEU
Ships
Terminated
AE9
Service(11)
8000 TEU
Ships
21 % Capacity Reduced
HANJIN / EVERGREEN
CUT ASIA - EUROPE CAPACITY
Among 13 voyages scheduled from October to December,
the companies have decided to skip three, which is a 23%
capacity reduction in total.
Lloyd’s Loading List
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CONTAINER CHARTER PRICES SLIDE
2012 August
2011 August
1000 Teu Vessel
2000 Teu Vessel
• (- 37%)
• (- 49%)
1600 Teu Vessel
3500 Teu Vessel
• (- 41%)
• (- 41%)
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JOBLESS – ARMADA OF SHIPS
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No. of idle vessels as at Sep 2012 is 290 ships / 550,000 Teus
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Biggest vessel without work is 7200 Teu ``SVENDBORG MAERSK”
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MIS – MATCH
CONTAINER DEMAND AND CAPACITY
Round the World
2012
2011
Westbound TEU
Eastbound TEU
25,416,000
24,635,000
25,598,000
24,046,000
Total Trade
50,051,000
49,644,000
1%
781,000
3%
1,552,000
Growth
Imbalance TEU
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ULTRA LARGE CONTAINER SHIPS (ULCS)
April 2012 – Operating - Ordered
Average Size - > 13,200 Teus
No. of Ships - 274
Total Teus – 3,628,100
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95% deployed in Asia to Europe Sector
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7 Ports of calls
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Will South Asia be part of it ?
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MAERSK LINES TRIPLE E 18,300 TEU
ULTIMATE CONTAINER CARRIERS
Maersk Challenge to Port Operators
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6000 Containers per port call 24 Hrs
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250 Berth moves per/hr with 8 cranes
Container Shipping
DEMAND
Consumption
USA / EUROPE
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SUPPLY
Production
ASIA / CHINA
OUTSOURCING MODEL - CHALLENGED
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Increase in costs in Asia
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Loss of jobs in USA / Europe
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Politicians no choice but create jobs in the developed world
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WORLDS FACTORY - CHINA
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Costs soaring by increase in Land, taxes, labor costs
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Southern China labor cost up by 20% a year since 2008
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Nike shifts from China to Vietnam
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American Chesapeake Scented Candles shifts from
China - > Vietnam - > Maryland USA
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Rising labor costs
Increase shipping charges
Supply chain duration – high inventory cost
Respond to trends faster.
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LABOR COSTS – LESS IMPORTANT
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Slicing the Apple I Pad
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Assembled in China
Total Labour Cost
Worldwide $ 33
China $ 8
Source : University of California
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Cannot I Pad relocate assembling in America even at double the cost ?
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LESS WORKERS
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Nissan British Factory in Sunderland
1999
271,157 Cars with 4594 people (1 person - > 59 Cars)
2011
480,485 Cars with 5462 people (1 Person - > 87 Cars)
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PRODUCTION Vs. COSTS
Despite China’s rapid rise
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Americas manufacturing output in Dollar terms same as China
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America achieves this with only 10% of workforce deployed by China
Source : Massachusetts Institutes of Technology
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THIRD INDUSTRY REVOLUTION
1st
2nd
3rd
• 18th century mechanization of textile industry
• 20th Century Henry Ford mastered the moving assembly line
– Age of Mass Production
• Manufacturing going digital through 3 D printers
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3-D PRINTER
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Old way was taking lots parts and screwing or welding
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Now product can be designed on a computer and printed on a 3-D printer
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Designed with software and a cartridge with material in plastic , metal , ceramic
in fine powder or gel
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Already high tech parts of military jets printed using 3-D printer
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University of Southern California – A giant 3-D printer
Lay down concrete foundation
 Put up walls
 Inserts wiring and plumbing
 Construct an entire building
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Will Jobs go back to rich countries ?
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Will this not change the demand model of Shipping ?
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CONCLUSION
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Importance of low cost labour in production will diminish.
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Gradual shift of low cost production from Asia to West.
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Like with Postal mails to E-mails, 3-D printing will completely alter manufacturing
models
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Shipping Line – Ports have to re-assess development of capacity.
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Business models of Shipping Line will alter.
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Thank You
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