How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...
MergeGlobal - 2009 Containerized demand in main markets presentation final
1. c a p i t a l a d v i s o r s
April, 2009
Containerized Sea
Freight Demand:
Drivers and Outlook
2. 2
Primary Containerized Ocean Freight Flows in 2008
EuropeNorth America
Latin
America
Africa
Asia
Middle
East
Intra-Asia
31%
69%
42%
58%
56%
55%
64%
3.4
Asia
6.9
North
America
20.1
3.4
69%
Other
Consumer Spending
64%
2008 GDP
Trillions of US$, current prices
16
51%49%
4.5
Source: IMF World Economic Outlook , Bureau of Economic Analysis, Eurostat, The Economist, MergeGlobal analysis and estimates
Global containerized sea freight flows are concentrated in three regions
Freight Flows
Millions of FEU
6.3 DestinationOrigin
1.5
1.4
1.0
1.2
1.0
0.8
GlobalContainerizedFreightFlows
6.3
3.2
6.3
3. 3
Demand-pull is the most meaningful way to think about global container
flows
Key Points
Demand-pullConcept
1 IMF estimates as of October, 2008.
Source: IMF World Economic Outlook , Bureau of Economic Analysis, Eurostat, The Economist, MergeGlobal analysis and estimates
Global economic activity is
disproportionately concentrated in
North America, the European
Union and Asia
The consumer-driven portion of
economic activity is even more
concentrated in North America
and Europe
Not surprisingly, global container
flows are primarily driven by the
fronthaul lanes from Asia to North
America and Europe
These two lanes effectively drive
supply, pricing and, ultimately,
profitability in the container
shipping industry
This presentation will thus focus
on the 2 most important markets
and how they influence industry-
wide decision making
39%
61%
31%
69%
16
NA
42%
58%
23
Europe
49%
51%
15
Asia
8
Rest of
the world
Other
Consumer
Spending
87%
World GDP by Area: 20081
Trillions of US$, current prices
15% 15%
16%
Into NA
18% Into EU
Into AsiaInto RoW
36%
Intra-
Asia
2008 Intercontinental and Intra-Asian Containerized Flows
FEU (55 mil total)
17%
23%
18%
Into NA
25%
Into EU
Into Asia
Into
RoW
17%
Intra-Asia
FEU-Km (605 bil total)
70%
From Asia:
68%
From Asia:
81%
From Asia:
80%
From Asia:
4. 4
Households are the most important component of the demand-pull
concept
Source: U.S. Census Bureau, European Commission, MergeGlobal analysis and estimates
Domestic
Production
Import
Substitution
Supply
Residential
Food
Non-food
Consumables
Services
Transportation
Household
Expenditures
Income
Savings
Fixed Assets
(e.g., housing)
Credit
Investments
Household
Capacity to Spend
Demand
FEUs per
household
North America
9 Mil FEU
126 Mil HH
.07
Europe
10 Mil FEU
187 Mil HH
.05
TheKeyRoleofHouseholds
Import FEUs per household
5. 5
Households make consumption and other financial decisions based not
only on ―money‖ but also on ―confidence‖
Key Points
1 At current prices, excluding food.
Source: Census Bureau, Office of Federal Housing
Enterprise Oversight, Bureau of Labor Statistics, Bureau of
Economic Analysis, Federal Reserve, MergeGlobal analysis
Much of the current discussion about
timing the bottom of the recession has
centered around consumers’ and
businesses’ incomes, balance sheets
and, crucially, access to credit
However, sustained household
consumption stems from both money
and confidence, which are
interrelated but in ways that are not
always clearly understood
Money and confidence can only be
assessed in a multifactorial way:
– Retail sales
– Unemployment
– Housing starts
– Home prices
– Savings rate
– Household net worth
– Others (e.g., consumer prices)
Tracking the Confluence of Money and Confidence in North America
-12%
-7%
-2%
3%
8%
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Retail Sales1
YoY% , monthly through February 2009
4%
5%
6%
7%
8%
9%
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Unemployment Rate
Monthly through February 2009
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Housing Starts
Millions (SAAR), monthly through Feb. ’09
-12%
-7%
-2%
3%
8%
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
Home Prices, National Average
YoY% , quarterly through 4Q08
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
National Savings Rate
4-quarter moving average, through 4Q08
-20%
-10%
0%
10%
20%
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
Household Net Worth
YoY% , quarterly through 4Q08
AssessingtheStateofHouseholds
6. ForecastForecast
6
1 Numbers in parenthesis are our estimated likelihood for each event.
Source: Bureau of Economic Analysis, Eurostat, MergeGlobal analysis and estimates
3.0%
4.5%
3.5%
2.5%
1.5%1.0%
-1.5%
-3.8%
-6.2%
-0.5%
2.8%
0.9%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
4.5%
3.5%
2.5%
1.8%
-1.2%
2.1%
-1.5%
-4.0%
-6.2%
-0.5%
2.8%
0.9%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
4.5%
3.5%
2.0%
1.0%
-0.2%
-1.0%
-2.2%
-4.5%
-6.2%
-0.5%
2.8%
0.9%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
2.5%
1.5%1.0%
0.0%
-0.5%
-1.0%
-2.5%
-5.0%
-6.2%
-0.5%
2.8%
0.9%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
U.S. Quarterly Real GDP Growth Under Four Different Scenarios: 1Q08-4Q10F
Seasonally adjusted at annual rates (SAAR)1
Upside Surprise (15%) False Start (20%)
Slow Recovery (40%) New Normal (25%)
Forecast Forecast
Highly volatile periods are best analyzed as "shapes" rather than point
estimates
1.8%
1.5%
0.5%
0.0%
-0.5%
-1.5%
-3.4%
-5.8%
-1.1%
-0.4%
2.1%
1.0%
Europe
Near-termMacroeconomicScenarios
7. 7
A significant portion of the U.S. fiscal stimulus package is ―back-end weighted‖
and mid- to long-term focused—the real stimulus to the world economy will come
from the collapse of commodity prices
Key Points
Source: Wall Street Journal, IMF, MergeGlobal analysis
Planning and executing expenditures for $790
billion (as approved by U.S. legislators)
necessarily carries with it a time lag that could
be longer than the time it takes for the economy
to bounce back ―on its own‖
Moreover, by our count, at least a fifth of the
package is devoted to long-term research and
development (R&D) and infrastructure projects,
the impact of which is unlikely to be felt before
the end of 2009
In reality, the true stimulus to the world
economy will likely come from the share-of-
wallet impact of falling commodity prices almost
across the board—notably oil
Wal-Mart (with February same-store sales up
5.1% year-over-year) has already started
showing ―glimmers of hope‖ towards what we
expect to be a consumer-led recovery
9%
R&D and
non-maintenance
infrastructure
20%
38%
Tax credits
and tax relief
Aid to individuals
and states
32%
Other
U.S. 2009 Fiscal Stimulus Package Breakdown
Total Package: $787 Billion
50
75
100
125
150
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
World Commodity Prices: January 2008 – February 2009
January 2008 = 100
Commodity food and beverage
Commodity fuel
Agricultural raw materials
Commodity metals
The―Real‖EconomicStimulus
8. 8
(Production) markets in Asia are primarily driven by external demand
Key Points
Source: Bureau of Economic Analysis, Eurostat, IMF, MergeGlobal analysis and estimates
As the manufacturing epicenter of the
world economy, Asia directly
responds to demand changes in the
main consumption markets of North
America and Europe (up or down)
The bulk of Intra-Asian freight flows
are associated with the transportation
of components and subassemblies
feeding (primarily Chinese) export-
oriented factories
Recent commentary of a ―decoupling‖
of Asian economies from Western
markets is, we believe, premature
The ―shape‖ of recovery in North
America and Europe over the next 12-
24 months will thus be the primary
driver for trade and broader economic
activity in Asia
0%
2%
4%
6%
8%
10%
12%
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08
Developing Asia
Industrialized Asia
EU27
US
Annual Real GDP Growth by Area: 1999-2008
AsiaRespondstoExternalDemand
-10%
-5%
0%
5%
10%
15%
20%
25%
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08
Westbound Asia-Europe
Eastbound Transpacific
Intra-Asia
Containerized Sea Freight Annual Volume Growth by Trade: 1999-2008
10. 10
We expect global flows to rebound in the 2011-2014 period
GlobalVolumeForecast
1 Under our ―Slow Recovery‖ scenario.
Source: MergeGlobal analysis and estimates
World’s Intercontinental and Intra-Asian Containerized Sea Freight Traffic: 1998-20171
Millions of FEU
Forecast
83
79
76
73
68
63
58
55535554
50
46
42
39
36
3333
30
28
’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17
9.2%
7.7%
5.7%
-3.6% 2.9% 5.6% 8.0% 8.5% 7.1% 4.2% 3.9%2.5% 5.4%
Annual %
11. 11
The global volume distribution by trade lane suggests that ―North-South‖ and
―South-South‖ lanes cannot make up for contractions in the Big 3 (AS, NA, EU) in ’09
(not to mention that many of those lanes are themselves connected to the Big 3)
LaneVolumeDistribution
Source: MergeGlobal analysis and estimates
1.2 1.0 6.93.2 1.6 1.5
EU->NA
1.4 1.0 1.03.46.36.9
NA->AS NA->EUAS->NA EU->ASAS->EU All other
To-From AS, NA and EU: 64%
ASME
NALA
LANA
EUME
LAEU
World’s Intercontinental Sea Freight Traffic by Lane: 2008
Millions of FEU
12. 12
World trade has consistently recovered after global downturns in
economic activity over the past 35+ years
TradeGrowth,GDPGrowthandGlobalization
Source: IMF, MergeGlobal analysis
-4
-2
0
2
4
6
8
10
12
14
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
World Trade Volume
World Real GDP
AnnualPercentChange(%)
Trade Avg.
GDP Avg.
Real World GDP and Trade Growth: 1970-2007
Key Points
Global trade has recovered from economic contractions in the past and will do so again this time around (most likely within the
next 18-24 months)
Claims of a ―reversal‖ of globalization are overblown, in our view:
– Deep international linkages are difficult to reverse
– Shippers’ supply chain design and implementation decisions typically carry long-term implications
– Asian economies have based their export-led growth models over the decades not only on labor cost arbitrage but,
crucially, on a highly capable production base