FIATA World Congress 2015

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FIATA World Congress 2015

Trends in Global Transportation and Logistics

Presented by Bronson Hsieh

Vice Group Chairman, Evergreen Group

2015.9.10

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1. Global Economic Outlook

2. Container Shipping Trends

3. Air Freight Market Trends

4. Logistics Market Trends

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Global Economic Outlook

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• IMF World Economic Outlook

• China's New Economic Strategy

• Free Trade Development


• World economic growth rates at similar levels during 2013 - 2014. • A trend of stable recovery. • Stronger outlook is forecast for 2016.

IMF World Economic Outlook Projections Jul 2015

Area╲Year 2013 2014 2015 2016

World Output 3.4% 3.4% 3.3% 3.8%

United States 2.2% 2.4% 2.5% 3.0%

Euro Zone -0.4% 0.8% 1.5% 1.7%

Russia 1.3% 0.6% -3.4% 0.2%

Brazil 2.7% 0.1% -1.5% 0.7%

China 7.7% 7.4% 6.8% 6.3%

Oil prices -0.9% -7.5% -38.8% 9.1%

Commodity prices -1.2% -4.0% -15.6% -1.7%

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• Boosted by shale oil production and manufacturing recovery,

the U.S. has reduced trade deficit to a new low since 2008.

• Strong US dollar will increases its purchasing power.


Area╲Year 2013 2014 2015 2016

World Output 3.4% 3.4% 3.3% 3.8%

United States 2.2% 2.4% 2.5% 3.0%

Euro Zone -0.4% 0.8% 1.5% 1.7%

Russia 1.3% 0.6% -3.4% 0.2%

Brazil 2.7% 0.1% -1.5% 0.7%

China 7.7% 7.4% 6.8% 6.3%

Oil prices -0.9% -7.5% -38.8% 9.1%



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• Euro Zone economic growth rate turned positive to 0.8% in 2014,

forecast to grow 1.5% in 2015 and 1.7% in 2016.

• We are seeing a slow upward trend.


Area╲Year 2013 2014 2015 2016

World Output 3.4% 3.4% 3.3% 3.8%

United States 2.2% 2.4% 2.5% 3.0%

Euro Zone -0.4% 0.8% 1.5% 1.7%

Russia 1.3% 0.6% -3.4% 0.2%

Brazil 2.7% 0.1% -1.5% 0.7%

China 7.7% 7.4% 6.8% 6.3%

Oil prices -0.9% -7.5% -38.8% 9.1%



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• Due to tumbling oil prices, Russian economic growth rate is

forecast to drop to -3.4% in 2015.

• US and EU sanctions will also affect Russian imports & exports.


Area╲Year 2013 2014 2015 2016

World Output 3.4% 3.4% 3.3% 3.8%

United States 2.2% 2.4% 2.5% 3.0%

Euro Zone -0.4% 0.8% 1.5% 1.7%

Russia 1.3% 0.6% -3.4% 0.2%

Brazil 2.7% 0.1% -1.5% 0.7%

China 7.7% 7.4% 6.8% 6.3%

Oil prices -0.9% -7.5% -38.8% 9.1%



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• Shrinking commodity demand impacted South American economy.

• Brazil's economy grew by 2.7% in 2013 but downgraded to -1.5 in 2015.


Area╲Year 2013 2014 2015 2016

World Output 3.4% 3.4% 3.3% 3.8%

United States 2.2% 2.4% 2.5% 3.0%

Euro Zone -0.4% 0.8% 1.5% 1.7%

Russia 1.3% 0.6% -3.4% 0.2%

Brazil 2.7% 0.1% -1.5% 0.7%

China 7.7% 7.4% 6.8% 6.3%

Oil prices -0.9% -7.5% -38.8% 9.1%



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China's New Economic Strategy IMF forecast

Year 2010 2011 2012 2013 2014 2015 2016

GDP growth 10.6% 9.5% 7.7% 7.7% 7.4% 6.8% 6.3%


China's economic growth slowed down in the past few years. To boost economy, China initiated "One Belt, One Road" strategy.

By helping other countries build infrastructure, China can expand markets for its production across Eurasia, Africa, etc.

China initiated AIIB (Asian Infrastructure Investment Bank) with 57 founding members to provide financial support for the projects.

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Free Trade Development

• Several free trade agreements are taking in recent years. • The economic cooperation will remove trade barriers, facilitate commercial trade and boost cargo growth.

Free Trade Agreement member states Global GDP %

TPP Trans-Pacific Partnership 12 38%

RCEP Regional Comprehensive Economic Partnership

16 30%

TTIP Transatlantic Trade and Investment Partnership

29 46%

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Container Shipping Market Trends

• Vessel Upsizing

• Alliance Development • Panama Canal Expansion

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Container Shipping - Vessel Upsizing

Capacity growth rate of Ultra Large Container Ships is 71.9%, much higher than those of other vessel types.

ULCS are deployed to Asia–Europe trade, smaller vessels are cascaded to Trans-Pacific, Middle East, South America, etc.

In view of cost benefit, carriers are building bigger vessels.

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Container Shipping - Alliance

Background

• To produce the cost benefits, ULCS have to be fully loaded.

• Carriers are motivated to join alliances to raise utilization.

Benefits

․lower slot costs

․comprehensive network

․more sailings

․less transshipment costs

Major Shipping Alliances

Alliance Member Line

2M Maersk, MSC

O3 CMA CGM, CSCL, UASC

G6 Hapag Lloyd, OOCL, NYK, Hyundai, APL, MOL

CKYHE COSCO, YML, K Line, Hanjin, Evergreen Line

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Container Shipping - Panama Canal

• Currently Panama Canal can handle ships of maximum 5,000 teu.

• After its expansion project is completed in 2016, it will be able to accommodate new Panamax vessels up to 12,000-teu ships.

Comparison of Panamax & New Panamax Vessels

Dimension＼Type Panamax New Panamax

Length 294 m 366 m

Width 32.3 m 49 m

Draft 12 m 15.2 m

Capacity 5,000 teu 12,000 teu

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Container Shipping - Panama Canal

• Expanded Panama Canal will attract large vessels to USEC.

• USEC ports are deepening channels and enlarging facilities.

• NYC and NFK have deepened channels to 50 feet.

• NYC Port Authority is raising the Bayonne Bridge to allow larger container ships to pass.

Channel Depth NYC BAL NFK CHS SVN HUS

Current 50 ft 47 ft 50 ft 45 ft 42 ft 40 ft

Deepen to 50 ft 47 ft 50 ft 52 ft 47 ft 45 ft

To Complete ready ready ready 2019 2018/19 2018

Note: channel depth based on MLW (mean low water)

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Air Freight Market Trends

• Air Freight Market Outlook

• Evolution of Capacity Supply

• Increase in Belly Hold Capacity

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Air Freight - Market Outlook

IATA Air Freight Market Outlook

Period 2011-2013 2014 2015-2018

annual growth rate 0.63% 4.5% 4.1%

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Air Freight - Evolution of Capacity Supply

․Gray bars - capacity of delivered freighters. ․Yellow bars - capacity of retired freighters. ․The two bars at similar levels. New freighters replace old ones. ․Blue line - capacity of global freighters in service, not increasing. ․Red line - capacity of global freighters in storage, not increasing.

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Air Freight - Evolution of Capacity Supply

․Blue bars - capacity added by belly of passenger jets, increasing .

․Red bars - capacity added by dedicated freighters, decreasing

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Air Freight - Increase in Belly Capacity

․Belly holds of passenger jets offer additional cargo revenue.

․High belly capacity aircraft models: B777, B787, A330, A340, A350.

․Many operators prefer the models with high belly capacity.

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Belly Cargo Payload per Aircraft

Model Boeing Airbus

B747-8 B777-300ER B787-10 A380 A330 A350

Belly cargo payload (ton)

13.2 24.2 19 14.7 17 18.8

Model B747-8 B777-300ER

B777X B787-8/9/10 A380 A330 A350

Order 51 1,092 1,095 317 1,548 782 Delivered 35 588 318 167 1,215 5

Unfilled 16 504 777 150 333 777 * Belly cargo payload has deducted full passenger load and ULD (unit load device) weight.

* Source: Boeing & Airbus

Logistics Market Trends

• Logistics Market Outlook • Value-Added Service

• E-Commerce Business

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Logistics - Market Outlook

Freight Forwarding Market Outlook 2015-2017 Source: Ti (Transport Intelligence)

freight forwarding

marine air freight

annual growth rate 6.7% 7.6% 5.8%

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Logistics - Value-Added Service

• Ti compared major logistics providers’ cargo volumes and revenues.

• Average revenue is going up in spite of fluctuating volumes.

• Higher fee for customized services & logistics solutions.

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Logistics - Value-Added Service

• Same development for logistics providers’ air freight business.

• Higher revenues for customized services & logistics solutions.

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Logistics - E-Commerce Business

• Blue bar: global retail e-commerce sales reach $1.1 trillion in 2013, will more than double in 2018.

• E-commerce accounts for 5.1% in 2013, expect to reach 8.8% in 2018.

• Marked by red, growth of e-commerce retail sales, around 3 times of traditional channels of brick-and-mortar.

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According to Accenture and AliResearch, by 2020 global population of cross-border online shoppers will grow to 943 million.

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Global cross-border B2C volume 2014-2020

Global B2C cross-border e-commerce market will grow from $230 billion in 2014 to $1 trillion in 2020, an annual growth rate of 27.4%.


Logistics – B2C E-Commerce

New Model

• Retailers make sales forecast in advance.

• Products are imported by container and stored in bonded warehouse.

• Upon order, products are delivered from warehouse to consumers.

• This model helps to reduce delivery time and costs.

• Consumers can enjoy fast and inexpensive delivery service.

Traditional Model

After shipping online, consumers need to make shipping choices

• Cost of international express delivery is too high

• Time for container shipping is too long

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Logistics – B2B E-Commerce

B2B transaction

• Higher volume, Bigger amount, Huge growth potential.

• However, decision making process is longer than B2C.

E-Commerce business model is not limited to B2C, but also B2B.

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IT capability is critical for logistics service providers to participate in e-commerce business chain.

Payment protection for buyers, if

• orders are not shipped as promised,

• product quality is not up to standards.

• B2B e-commerce platform offers Trade Assurance service • It is designed to create trust between buyers and suppliers to speed up transactions.


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This model relies on logistics service providers to oversee fulfilment process : • verify product content and quality when needed, • arrange customs clearance and ensure delivery, • update delivery status via IT system connections.

By working with e-commerce platforms, logistics service providers for are able to control the cargo of cross-border on-line transactions.


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If logistics service providers want to stay at forefront of the industry and participate in the growing e-commerce business, they need to embrace the dynamics of these developments and provide effective solutions.

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FIATA World Congress 2015


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FIATA World Congress 2015