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Ports & Maritime Trade Outlook

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					Ports & Maritime Trade Outlook

Russell Smith

29 April 2008
AGENDA

     1. Introduction
     2. Global Maritime Trade – Historical Themes
     3. Global Maritime Trade – Dry Bulk
     4. Global Maritime Trade – Containers
     5. Global Maritime Trade – Liquids
     6. B&B’s European Ports Portfolio
     7. Future for European Ports Growth
     8. Questions




 2
GLOBAL MARITIME TRADE - HISTORICAL THEMES

 • No substitution to shipping for the global transport of goods
 • Global seaborne trade has grown at a factor above GDP.
 • Driven by global and regional GDP growth factored by:
     - the continuing and growing dislocation between location of resources
                 - the location of manufacturing bases and
                            - the location of key areas of consumption in the developed world.




                         CAGR = 3.7%
                                                                      Forecast European
                                                                      maritime trade CAGR to
                                                                      2030 is 3.3% (HWWI)




 3
GLOBAL MARITIME TRADE - HISTORICAL THEMES
                                                    Freight Transport - EU25 (tons-km)

     4000

     3500

     3000

     2500

     2000

     1500

     1000

     500

       0
       70


              72

                       74


                              76


                                     78


                                            80

                                                   82


                                                          84


                                                                 86

                                                                        88


                                                                               90


                                                                                      92

                                                                                             94


                                                                                                    96


                                                                                                           98


                                                                                                                  00

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                                                                                                                                              08


                                                                                                                                                     10
     19


            19

                     19


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                                                                                                                                            20


                                                                                                                                                   20
       Source : EU
                                          Road          Sea      Rail        Inland Waterways            Pipelines



                   Since 1984, freight transport demand inside the EU25 has grown at
                                     CAGR 2.5% (maritime 3% CAGR)


 4
GLOBAL MARITIME TRADE - HISTORICAL THEMES




                      Source: Morgan Stanley research
 5
GLOBAL MARITIME TRADE - HISTORICAL THEMES

     After five strong years of growth, global GDP is slowing:
     • International Monetary Fund (IMF) recently cut its GDP growth estimates to 3.7% in ’08,
       down from 4.7% last year. Emerging markets remain bullish at +6.7% in ’08 growth.
     • Slow down led by the US. European trade showing no signs of slowing however back end
       of 2008 and first half 2009 are the telling times.

                                          GDP Forecasts
                              CY06          CY07            CY08E        CY09E           CY10E

             Japan            2.2%          2.1%            1.7%          1.0%           1.6%

             US               2.9%          2.2%            0.8%          0.9%           2.7%

             Europe           2.9%          2.6%            1.3%          1.1%           2.0%

                                                                    Source: Citi Investment Research




     • Premature to be talking of European freight traffic slowing as figures don’t yet support this



 6
GLOBAL MARITIME TRADE – DRY BULK

Bulk cargo seaborne trade volume (mn MT)                               Industrial production (Japan, US and Europe)




                                                                        Source: Ministry of Economy, Trade & Industry, Federal Reserve
       CAGR                  Total     Iron Ore    Coal     Grain       Bank, European Central Bank


       Past 20 years         4.3%          4.4%    5.1%      2.1%

       Past 10 years         5.4%          6.4%    5.6%      2.7%

       Past 5 years          6.7%          10.1%   5.8%      1.5%

                                                   Source: Fearnleys


  7
GLOBAL MARITIME TRADE – DRY BULK

     • Bulk traffic remains strong
     • Growth rates in constituent cargo traffic for Chinese crude steel production including iron
       ore imports, which slowed in January, are on the rise. Iron ore imports in Q1 up >10% over
       last year.
     • India iron ore import growth should be around 15%-20%
     • December–March weakness in Australian coal export shipments and curbs on Brazilian iron
       ore export shipments are gradually improving
     • Contracts struck through iron ore price negotiations between the Australians and the Asian
       Steel producers should underpin global trade for at least the next few years in Asia
     • The current strong commodity prices across the board signal likely strong commodity
       demand globally, however cargo volume could still be suppressed as Australia and China
       have not yet reached agreement on iron ore prices
     • Domestic Asian traffic remains strong with the bulk ports in China and India particularly
       benefiting



 8
GLOBAL MARITIME TRADE – DRY BULK
Underlying Bulk Cargo Demand Outlook                                                                                             Source: Morgan Stanley

 (mt)                                                                   2004           2005      2006     2007        2008E       2009E       2010E

 Core Bulks
 Iron Ore                                                                 620            692       767       835         921           993      1,065
 % change                                                               14.4%          11.6%     10.8%      8.9%       10.3%          7.8%      7.3%
 Thermal Coal                                                             531            547       589       618         636           660        686
 % Change                                                                5.1%           3.0%      7.7%      4.9%        2.9%          3.8%      3.9%
 Coking Coal                                                              211            218       223       231         234           253        271
 % change                                                                1.0%           3.3%      2.3%      3.6%        1.3%          8.1%      7.1%
 Core Bulk Weighted Average Ton Demand Growth %                           8.7%          7.1%      8.5%      6.7%        6.5%          6.5%      6.1%
 Minor Bulks
 Aluminium                                                                  30             32        34        38          42            45        49
 %Change                                                                10.0%           5.1%      7.8%     10.0%       10.2%          8.6%      7.5%
 Alumina                                                                    64             68        72        80          86            93      100
 %Change                                                                 9.3%           6.8%      5.8%     11.7%        7.4%          8.5%      7.5%
 Refined Copper                                                             16             17        17        18          19            20        21
 % Change                                                                3.0%           3.8%      5.1%      3.9%        3.9%          5.5%      5.4%
 Nickel                                                                      1              1         1         1           2             2         2
 % Change                                                                1.4%          -1.4%     12.4%      0.8%        7.2%          7.5%      6.7%
 Zinc                                                                       10             11        11        12          12            12        13
 % Change                                                                6.8%           3.0%      3.8%      4.1%        4.4%          3.9%      3.5%
 Grain                                                                    275            271       280       287         306           327       347
 % Change                                                                6.1%           3.4%      7.0%      6.1%        6.6%          6.8%      6.1%
 Phosphate Rock                                                             31             31        31        31          33            35        37
 % Change                                                                6.1%           3.4%      7.0%      6.1%        6.6%          6.8%      6.1%
 Minor Bulk Weighted Average Ton Demand Growth %                          8.4%          5.6%      6.1%      9.6%        7.5%          7.8%      7.0%


Dry bulk supply and demand forecasts (1997-2011E)                                                             Source: Nikko Citigroup

 (mn dwt)         99     00      01      02        03      04      05            06       07E     08E     09E       10E         11E
 Demand         1,070   1,183   1,210   1,272     1,348   1.,65   1,560        1,680     1,770    1,840   1,937     2,064     2,203
 YoY %
                -0.1%   10.6%   2.3%    5.1%      6.0%    8.7%    6.5%         7.7%      5.4%     4.0%    5.3%      6.6%      6.7%
 change

   9
GLOBAL MARITIME TRADE – LIQUIDS




 10
   GLOBAL MARITIME TRADE – LIQUIDS

             • Q1 2008 record was achieved despite the downtrend in US imports
             • According to International Energy Agency, demand for crude oil should increase +2% YoY
                   in 2008 and 2009.
             • Should the state of the global economy further deteriorate, this figure would most likely be
                   lower

     Outlook for tanker supply/demand (1999-2010E)
      (mn dwt)              99           00           01           02            03           04        05       06       07E          08E           09E        10E          11E

      Demand           1,548            1,612        1,607        1,586      1,683       1,748        1,790    1,835    1,889        1,918          1,950      2,002       2,047

      YoY %
                       0.8%             4.1%         -0.3%        -1.3%      6.1%        3.9%         2.4%     2.5%     2.9%         1.5%           1.7%       2.7%        2.2%
      change



                                                                     Global Oil Demand Outlook
                                                         2006            2007         2008E                                                             2006       2007        2008E
            2005     2006        2007      2008E        Growth          Growth        Growth                  2005     2006     2007     2008E         Growth     Growth       Growth
                                                         Rate            Rate          Rate                                                             Rate       Rate         Rate

 OECD       49.7     49.3        49.0         49.1         -0.7%        -0.8%          0.2%         OECD      49.7     49.3      -            -         -0.7%          -            -

 Non-                                                                                               Non-
            34.0     35.3        36.4         37.6         3.8%           3.1%         3.1%                   34.2     35.6      -            -         3.9%           -            -
 OECD                                                                                               OECD

 Total 11   83.7     84.6        85.4         86.6         1.2%           0.9%         1.4%         Total     83.9     84.9     86.0         87.3       1.2%          1.3%         1.4%

Source: Energy Information Administration as of 14/04/08                                           Source: International Energy Agency as of 11/04/08
GLOBAL MARITIME TRADE – CONTAINERS

      • Presently have a dichotomy in the container market - whilst bulk is looking strong globally,
         container volume growth is split between US downside and the rest of the world upside.
      • CY07 container volume to North America from Asia only rose 1.0% YoY, but volume to
         Europe from Asia climbed 19% YoY.
      • January–February traffic growth to Europe slowed to 7.4% YoY
      • January–February is a slack period, and includes the Chinese New Year, so it is premature
         to say traffic to Europe has started to slow.
      • On the other hand, our GDP forecasts indicate that container freight volume to North
         America from Asia (the main source for US consumption) is likely be flat or down slightly
         through to CY10.
 Chiwan Wharf – monthly container throughput             SCT – monthly container throughput




  Source: Company records                                 Source: China Logistics Data

 12
GLOBAL MARITIME TRADE – CONTAINERS
                                                                                                                   North American container liner volume YoY
 Jan-Feb 2008 Chinese container export growth slowed to
 16.8% YoY in the period, compared with 25.7% YoY in 2007.
      • Overall container throughput in Shanghai and Shenzhen
            increased by only 8.3% and 5.3% respectively in the first
            two months. However, they were 20.5% and 14.2%
            growers in 2007.
      • Major US West Coast ports have recorded a 7% YoY
            drop in container throughput in Jan-Feb (Global Insight)

                            Container throughput growth of China’s top 10 ports – Jan – Feb 2008

                                              Throughput (m EURs)                            Throughput (m TEUs)

             Port                  2M08               2M07            % Change              2007          % Change

  Shanghai                             4.18           3.86                8.3               26.15            20.5

  Shenzhen                             3.23           3.07                5.3               21.9             14.2

  Guangzhou                            1.83           1.34               36.2               9.20             39.4

  Ningbo-Zhoushan                      1.65           1.38               20.1               9.36             32.4

  Qingdao                              1.61           1.41               13.9               9.46             22.9

  Tianjin                              1.20           1.00               19.9               7.10             19.4

  Xiamen                               0.73           0.69                5.6               4.63             15.3

  Dalian                               0.64           0.52               23.4               3.81             18.7

  Lianyungang                          0.41           0.25               62.5               2.00             53.6

  Yingkou                              0.29           0.23               26.6               1.37             35.7
 13
  Source: Ministry of Communications
  GLOBAL MARITIME TRADE – CONTAINERS

Outlook for container demand (1997 – 2010E) (‘000 TEU)

                                   97         98         99             00         01         02          03            04      05       06       07      08E      09E      10E

North American routes (Import)
Demand                          4,883      5,825      6.520         7,418       7,520      9,030       9,853      11,31       12,87   14,245   14,38    14,012   13,66    13,815
(YoY % chg)                    13.3%      19.3%        12%         13.7%        1.4%      20.1%        9.1%      14.8%       13.8%    10.6%    1.0%      -2.6%   -2.5%     1.1%
North American routes (Export)

Demand                         3,209       2,761      2,927         3,210      3,199       3,312       3,491      3,728      4,086     4,360    5,075    5,583    6,141    6,755
(YoY % chg)                    2.8%       13.9%       6.0%          9.7%       -0.3%       3.5%        5.4%       6.8%       9.6%      6.7%    16.4%    10.0%    10.0%    10.0%

European routes (Import)

Demand                          2,630      3,160      3,164         3,550      3,533       3,850       4,586      5,295       5,979    6,997    8,330    9,529    10,73   12,110
(YoY % chg)                    13.7%      20.2%       0.1%         12.2%       -0.5%       9.0%       19.1%      15.5%       12.9%    17.0%    19.0%    14.4%    12.6%    12.8%

European routes (Export)
Demand                         1,342       1,329      1,620         1,800       1,861      2,051       2,125      2,602       3,141    3,916    4,394    5,176    6,123    7,557
(YoY % chg)                    0.8%        -0.9%       22%         11.1%        3.4%      10.2%        3.6%      22.4%       20.7%    24.7%    12.2%    17.8%    18.3%    23.4%


Source: Containerisation International, NYK, National Maritime Research Institute, Nikko Citigroup Limited estimates.




       14
     B&B EUROPEAN PORT PORTFOLIO – MARCH 2008
                                                                             •   B&B owns and operates
                                                                                 worldwide a port group handling
                                                               Pietarsaari       annually 185 mill tonnes
                                                                                 including c. 1.5 mill TEU
                                                               Rauma             – UK / Europe / Australia / USA
                               Dundee

                               Edinburgh                                     •   B&B European port operations
                                Teesport                                         are located in 8 countries with a
                                Humber                                           presence in 20 ports and one
                                                                                 inland rail terminal
                      London                         Rostock
                                 Ghent
                                   Antwerp
                                       Meerhout                              •   The group handles in Europe c.
                   Le Havre
                                         Luxembourg
                                                                                 115 million tons:
                              Rouen
                                              Munich                               • Dry and liquid bulks
                                                                                   • Containers
                                Savona               Venice
                                                                     Varna         • General cargo
          Tarragona                          Genoa

Sagunto
(in development)




   15
 B&B EUROPEAN PORT PORTFOLIO
                                                                                Volume Split excluding PD Ports



                                                                         Containers
     Product Diversity                                                                            Heavy Dry Bulk
                                                                            14%
                                                                                                      24%
     • Very diverse array of products (>50)
     • Bulk has longer term contract backing than containers
       or general cargo and therefore more certain
                                                               General Cargo
     • This mix balances the growth and stability of the           31%

                                                                                                  Specialty Dry Bulk
       portfolio                                                                                        26%
                                                                                Liquid Bulk
     • Smallest product class containers is likely to be the                        5%


       hardest hit during a recession
                                                                               Volume Split including PD Ports

                                                                          Containers
     Infrastructure Backing                                                  13%                 Heavy Dry Bulk
                                                                                                      21%

     • Over 22km of berth length
     • Over 1,200 ha of port land (mix of freehold and long    General Cargo
                                                                   19%
                                                                                                      Specialty Dry Bulk
       term concession)                                                                                      14%


     • Over 120ha of covered warehouses
                                                                                   Liquid Bulk
                                                                                       33%


16
FUTURE FOR EUROPEAN PORTS GROWTH

      • European maritime infrastructure expansion continues to struggle to keep up with even
        modest demand growth
      • Development and efficiency improvements continue to match capacity against highly certain
        near-term demand movements. Therefore infrastructure utilisation levels are expected to
        remain high even with a modest slowing of growth in any future recessionary environment
      • Port space is Europe is limited and high barriers to entry for new ports (10 to 15 yr
        development horizon)
      • On the whole, securing port space in a restricted capacity environment is a long term solid
        hedge to overall maritime trade growth, particularly in the sense of non-container ports
      • Whilst there may be short term trade fluctuations within the B&B ports portfolio, in the long
        term we believe that this holding presents a dominant, unique (and growing) infrastructure
        holding within the ports sector of Europe




 17
FUTURE FOR EUROPEAN PORTS GROWTH

      • Volumes across all product lines in B&B’s European ports are not showing signs of macro
        economic slowdown
      • Localised reductions in regions are offset against underlying growth of portfolio
      • Containers we see as the most vulnerable due to their consumer demand relationship,
        however at present our container ports are continuing their growth
      • Any future reduction in container volumes from a slowdown likely to hit secondary
        (overflow) transhipment/intermodal ports hardest.
      • European container volumes depend party on what happens to Russian/Eastern European
        growth which is currently providing step up growth to most major European container ports
      • Bulk volumes under a recessionary tend to remain more resilient because of longer term
        contract base, particularly if a diversified portfolio is retained.
      • Key in a recessionary environment is spreading risk in terms of product base and region.
      • B&B has a portfolio of over 20 terminals in Europe handling over 50 different product types.
      • Longer term European maritime freight growth expected to remain solid and in line with long
        term historical averages (i.e. c. 3% CAGR volume growth over the long term)


 18
FUTURE FOR EUROPEAN PORTS GROWTH

EBITDA               Driver                                  Historical Growth                        Future Growth
Component                                                    (Sources: HWWI & BMT)                    (Sources: HWWI & BMT)

                                                             Volume CAGR of c. 1% 2002 to 2006        Volume CAGR 0.4% liquid bulk to
Bulk Liquids         Fuel and chemical consumption
                                                             through European ports                   2030 through European ports

                                                             Volume CAGR c. 2% 2002 to 2006           Volume CAGR < 2.4% dry bulk to
Heavy Dry Bulk       Energy and metals trends
                                                             through European ports                   2030 through European ports

                     Growth in industrial production and     Volume CAGR c. 3% 2002 to 2006           Volume CAGR > 2.4% dry bulk to
Specialty Dry Bulk
                     agriculture                             through European ports                   2030 through European ports

                     Hinterland consumption growth (no
                                                             Volume CAGR 11% 2002 to 2006             Volume CAGR 7.9% containers to
Containers           transhipment)
                                                             through European ports                   2030 through European ports
                     Short sea and barge container traffic

                     Growth in paper, steel and specialty
                                                             Volume CAGR > 5% 2002 to 2006 for        Volume CAGR c. 5% 2007 to 2017
General Cargo        general cargo that is resistant to
                                                             products through BBI’s ports             for products through BBI’s ports
                     containerisation

                     Growth in European trade volumes        Freight traffic in Europe CAGR of 2.5%   Maritime freight traffic in Europe
Logistics
                     and trade through BBI’s ports           for last 35 yrs                          CAGR of 3.3% to 2030




  19
SUMMARY
  • Historical growth has been steady across all key product segments and strong in dry bulks
    and containers over the last five years
  • US slowdown is causing the first hiccup since 2001, but this slow down is not currently
    extending into European freight traffic
  • Long term forecasts for European trade look steady and short term forecasts still robust
  • Risk however is on the downside in the short term, particularly for those products
    associated with high choice consumer spending
  • B&B’s ports portfolio is heavily diversified in terms of region and product
  • The portfolio is therefore well positioned both to weather any storm if there is a slowdown
    and to capture any upsides in a growing market moving forward
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