DHL Global Forwarding

OCEAN FREIGHT
MARKET UPDATE
November 2020
publication date October 30th, 2020
DHL Global Forwarding - Excellence. Simply delivered.
OCEAN FREIGHT MARKET UPDATE - NOVEMBER 2020
CONTENTS
TOPIC OF THE MONTH
Demand peaks despite COVID-19
HIGH LEVEL DEVELOPMENT

MARKET OUTLOOK

ECONOMIC OUTLOOK & DEMAND DEVELOPMENT

CAPACITY DEVELOPMENT

CARRIERS

RULES & REGULATIONS

DID YOU KNOW?

Up-date scrubber fitted container vessels

DHL Global Forwarding | OFR Market Update | November 2020 2

Demand peaks despite COVID-19
TOPIC OF THE MONTH
Surprising turnaround : capacity demand peaks despite COVID-19
Looking back, the lockdowns in many countries severely impacted
consumption, industrial production and, in a ripple effect, world trade. In
expectation of stagnating and decreasing volumes, carriers issued profit
warnings and started to reduce drastically their offer on numerous long
haul routes through services closures, loop mergers and successive blank
sailings.

Then, as the lockdowns were eased in several countries, demand started to

rise without rational explanation at first sight. This prompted carriers to
resume suspended loops and organize extra loops that progressively
mopped up most of the surplus capacity. The inactive fleet as fallen to
around 430,000 TEU as per late October’s count (1.8% of the world fleet),
down from a peak at 2.70 MTEU at in late May (11.6% of the world fleet).

The reason for this sudden resumption in container shipping demand are multiple : a catch up effect, dislocation of air freight markets benefiting
seaborne transport, a hefty rise in demand for hygiene products, and people spending money on consumer goods rather than travelling.
Government’s efforts to avoid economic meltdown and a loss of confidence have so far paid off. With the 2nd wave which arrived in many countries,
uncertainties are growing however. Visibility is low. Liner operators are taking advantage of the moment. Spot rates are at all times highs on
several key trades. Carriers have so far resisted the urge to increase the speed of their vessels to augment their transportation capacity.

Source: Alphaliner, Dynaliners, carriers

DHL Global Forwarding | OFR Market Update | November 2020 3

HIGH LEVEL MARKET DEVELOPMENT
ECONOMIC OUTLOOK DHL TRADE
GDP GROWTH BY REGION1) BAROMETER2)
CAGR
2021F 2022F 2023F 2024F 2025F 80
(2022-25)
70
Our Trade Barometer stands for accuracy,
AMER 3.3% 3.8% 3.1% 2.5% 2.3% 2.6% reliability & credibility. However, the
ASPA 5.2% 4.6% 4.5% 4.5% 4.4% 4.5% 60
analyzed data is unable to assess the impact
EURO 4.2% 3.3% 2.1% 1.8% 1.7% 1.9% 50 of such disruptive events as Covid-19. This
Ocean
MEA 3.2% 3.2% 3.3% 3.1% 3.2% 3.2% 40
is why the update for Q2 ’20 is postponed.
Global

30
DGF World 4.2% 3.9% 3.4% 3.1% 3.0% 3.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
’17 ’18 ’19

WORLD CONTAINER SHANGHAI CONTAINERIZED BUNKER

INDEX (WCI)3) FREIGHT INDEX (SCFI)4) PRICES5)

3,000 1,600
2,500 1,400
2,000 1,200
1,500 1,000
1,000 800
Actual Actual
500 600
Forecast Forecast
0 400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
’19 ’20 ’19 ’20

1) real GDP, Copyright © IHS Markit, Q3 2020 Update 25 Aug `20, Venezuela is excluded from aggregates due to hyperinflation . All rights reserved. 2) DHL Global Trade Barometer Dec19, index value represents weighted average of current growth
and upcoming two months of trade, a value at 50 is considered neutral, expanding above 50, and shrinking below 50. 3) Drewry, in USD/40ft container, including BAF & THC both ends, 42 individual routes, excluding intra-Asia routes. 4) Shanghai
Shipping Exchange, in USD/20ft container & USD/40ft ctnr for US routes, 15 routes from Shanghai. 5) Source: DHL.

DHL Global Forwarding | OFR Market Update | November 2020 4

MARKET OUTLOOK NOVEMBER 2020 month-on-month development
MAJOR TRADES
EUROPE NORTH AMERICA
Import region Capacity Rates Import region Capacity Rates
AMNO + = EURO - =
AMLA = = AMLA = =
ASPA - =/+ ASPA = =
MENAT - =/+ MENAT = =
SSA = = SSA = =

ASIA PACIFIC SOUTH AMERICA

Import region Capacity Rates Import region Capacity Rates
EURO - ++ EURO = =
AMNO = + AMNO - =/+ ECSA only
AMLA = + ASPA = =
ASPA + ++ MENAT = =
MENAT - ++ SSA - =/+ ECSA only
OCEANIA = ++

KEY Strong increase ++ Moderate increase + No change = Moderate decline - Strong decline --

Source: DHL

DHL Global Forwarding | OFR Market Update | November 2020 5

MARKET OUTLOOK NOVEMBER 2020
OCEAN FREIGHT RATES – ASIA-PACIFIC EXPORTS
• ASPA- Fast pick up of the market after the short Golden week break leading into a tight space and equipment situation.
EURO Carriers deploy equipment in the highest paying trades creating a shortage for other trades. More blank sailings
announced by the carriers for November.

• ASPA- Strong recovery from post China holidays. Demand is very strong and spot rates expected to increase further due
to overall tight space and equipment situation in Asia.
AMNO

• ASPA- Outlook on space and equipment remains tight through end Nov particularly to SAWC.
AMLA

• ASPA- Strong market expected to persist for November with no sign of downtime post October Chinese holidays. All
MENAT Carriers reporting tight equipment situation across Asia and not just limited to China. Carriers report vessels space
fully utilized and rolls expect to persist till at least mid November.

• ASPA- Capacity within Intra Asia Trade is back to normal. That said, shortages of all container types across Asia continue to be a
challenge. FAK rates are strictly subjected to space and equipment availability. For IPBC, carriers reported having
ASPA approximately 6 weeks rollover at transhipment ports. Although there are new services introduced into India West Coast
and Pakistan in November, space will be prioritized to clear the outstanding backlogs, therefore rates will continue to hover
October rates level.
Source: DHL

DHL Global Forwarding | OFR Market Update | November 2020 6

MARKET OUTLOOK NOVEMBER 2020
OCEAN FREIGHT RATES – OTHER MAJOR TRADES
• EURO- 2M increased vessel-capacity (+16%) but still blank TA4. The Alliance did charter an extra-loader short notice but
AMNO still plan to blank some sailings as announced. Overall space remains tight and rates can not be expected to move.
Post strike congestions in Canadian ports remain, but situation improving.

• EURO- Several new blank sailings for November (Golden week) and December being announced, mainly by the Ocean
ASPA Alliance. Space is getting tight on selected services. Rates remain stable or increasing slightly. For SPAC, space is
+MEA getting tight, rates are increasing; congestion at POD Sydney still ongoing. Equipment becoming a serious issue.

• AMNO- Market rates are stable while carriers continue to have blank sailings through the end of the year.
EURO

• AMNO- No increase in rates due to no GRI/PSS and no change in capacity.

ASPA

• AMLA AMLA – AMNO, EURO, MENAT & SSA : Despite challenges w/blank sailings, equipment shortages and high demands, rates remain stable with the exception of the ECSA
AMLA – ASPA : Strong exports projected to continue through next couple of months, especially out of Brazil. Tight space situation continues to affect the market due to
Exports blank sailings. Hamburg Sud continue to reposition voids from other regions into Brazil to meet the demands of reefers, which remains heated. In view of the current
demand vs. available inventory scenario, carrier is working with priority list on the 40'DC /HC releases. Some carriers will release 40´HC no more than 7 days before
cargo´s cut-off due to lack of equipment in all Brazilian ports. Due to lower import volumes in WCSA are affecting equipment supply, with some countries like Colombia
now imposing a ‘pick up‘ charge at certain depots.
Source: DHL

DHL Global Forwarding | OFR Market Update | November 2020 7

ECONOMIC OUTLOOK & DEMAND EVOLUTION
Recent resilience in world trade has been encouraging, but challenges to
globalization remain
The sharp rebound in global trade volume has been encouraging. After steep declines in spring, many indicators of world trade rose by record
amounts during summer. While IHS Markit predicts the drop in global real GDP during the current crisis to be nearly three times as large as
during the global financial crisis (4.5% versus 1.7%), they expect that the decline in the exports of goods & services should be almost the same
as during the global financial crisis (10.5% versus 9.6%).
There are three key reason for the relatively smaller impact on trade this time:
• Nontrade services are disproportionately larger impacted by the pandemic than manufacturing. This effect is evident in the smaller
expected drop in industrial production in 2020 (6.0%), versus 2009 (9.0%).
• During the financial crisis, trade finance froze up, severely hampering global commerce. The overwhelmingly large liquidity measures by
the US Federal Reserve and other central banks this year have limited the damage during the present crisis.
• The early and strong rebound in mainland China’s economy has boosted both its imports and exports, helping overall world trade.
The global supply chains has been flexible enough to adapt, supporting the strong recovery in trade and manufacturing.
Going forward, IHS Markit considers the outlook gloomy. The welcome rally in trade could be part of the broader “bounce and fade” pattern of
the global recovery. Similarly, the surge in mainland China’s imports and exports could be temporary. Mainland China’s current-account
surplus is rising, suggesting its recovery is not helping other economies much. Most troubling of all, rising trade imbalances, along with the
festering trade and technology conflicts, could well lead to further actions to limit trade, not just by the US but also by key economies in
Europe and Asia.
During the coming decade, IHS Markit expects neither a collapse in globalization nor the type of boom we saw in the 1990s and 2000s. The
downside risks are almost entirely related to protectionist policies. The upside risks are from technology (especially digitization) and the
potential for closer and broader global trade integration.

Source: IHS Markit

DHL Global Forwarding | OFR Market Update | November 2020 8

CAPACITY
Direct shipments between the UAE and Israel has become possible as both countries recently entered into the ‘Abraham Accords Peace
Agreement’. The deal, which aims to normalize trade relations, was signed on 15 September in Washington. The new agreement has allowed MSC
to ship the first containers from the UAE to Haifa on its ‘Indus Express’. The first such shipment arrived in Israel beginning of October 2020.
Also Israeli carrier ZIM will soon begin offering liner services to and from the United Arab Emirates (UAE). For the first time in its history, ZIM will
carry UAE cargo under its own name. The new service, which marks a historical step for Zim, will be offered through slot agreements for the time
being. After Egypt (1979) and Jordan (1994), the UAE have thus become the third Arab country to formally normalize relationships with Israel.

The 2M partners Maersk and MSC have extended again the temporary suspension of their Transatlantic ‘TA4/NEUATL4‘ service. The service was
suspended in end April in response to a drop in demand related to the COVID-19 pandemic in the western world. MSC confirmed end of September
its continuous prudent approach to capacity management during the COVID-19 crisis by blanking all voyages of the ‘TA4/NEUATL4‘ service for the
rest of the year. On the other hand, the 2M partners continue to deploy larger ships on their 3 remaining North Europe – US East Coast services.
Average weekly nominal capacity for the 3 Transatlantic 2M services is expected to increase up to 16% in November.

ZIM has re-entered the Australia trade in mid-October after a hiatus of more than 5 years. After a continuous presence of almost 20 years, the
Israeli carrier had left the trade in Jan 2014. For its return, ZIM has introduced a direct China – Australia service ‘China – Australia Express‘ (CAX).
Gold Star Line participates and markets the offer as its ‘GCA‘ service. The new service comes during the peak season in the trade that is expected to
run until the end of the year.

Source: Alphaliner, THE LOADSTAR, Dynaliners, carriers

DHL Global Forwarding | OFR Market Update | November 2020 9

CARRIERS 1/2
Hapag-Lloyd has increased its profit forecast for the full year after preliminary figures showed a 17% year-on-year jump in EBITDA for the
3rd quarter. The carrier now expects to report EBITDA of EUR 650 M for Q3, up from EUR 554 M in the same period 2019. EBIT is expected to
be EUR 350 M (2019: EUR 253 M). The strong result came despite a 3% fall in volumes compared to last year. Hapag-Lloyd said demand and
volumes in the period were significantly stronger than in the 2nd quarter of this year. Results were strengthened by the impact of Hapag-
Lloyd’s Performance Safeguarding Program, created in Q1 2020 to manage costs and revenues. Hapag-Lloyd has now revised the full-year
2020 EBITDA forecast to EUR 2.4 – 2.6 Bn. It booked EBITDA of EUR 1.98 Bn in 2019.

OOCL has reported significantly improved liftings and average revenues in its third quarter operating update published on 23 October.
Total liftings increased 9.5% to 1.95 Mteu, with transatlantic volumes recording the largest increase of 22.6%. Overall in the first nine months
of the year, OOCL’s liftings across all routes were up a modest 1.6%, but revenue rose a robust 7.8%.

Maersk group has revised EBITDA forecasts for the full year up to USD 7.5-8.0 Bn, after logging strong preliminary results for the 3rd
quarter. The group previously forecasted a range of USD 6.0-7.0 Bn. The new figure is based on unaudited revenue of USD 9.9 Bn and
EBITDA of USD 2.4 Bn (before restructuring and integration costs) for Q3 2020, which has been driven by a continued recovery in demand
plus the impact of cust cutting initiatives. However, Maersk will have to lay off some 2,000 employees as part of the reorganization of its
Ocean and Logitics & Services divisions announced in September. The group will take a restructuring charge of around USD 100 M in the 3rd
quarter in relation to the redundancies.

CMA CGM is taking advantage of strong shipping markets to sell EUR 525 M of new bonds to replace existing bond debt which falls due on
15 January 2021. The new targeted senior unsecured bonds will expire in 2026, with the issue being handled by BNP Paribas and HSBC
Holdings. CMA CGM is in a stronger financial position. Moody’s recently changed its outlook on the company’s credit from negative to
positive while the company (incl CEVA Logistics) reported a net profit of USD 136 M for the 2nd quarter compared to a loss of USD 109 M a
year earlier.
Source: Alphaliner, Dynaliners, carriers

DHL Global Forwarding | OFR Market Update | November 2020 10

CARRIERS 2/2
Pacific International Lines (PIL) has asked Singapore’s regulators for permission to again delay the filing of its audited 2019 financial
results. PIL is requesting a new deadline while it continues restructuring talks with potential investor Heliconia Capital Investment and 15 of
its key lenders. PIL stated that a new filing delay will allow for the key terms of the restructuring to be considered as part of the financial
statements and allow auditors to verify certain assumptions. Heliconia, a subsidiary of the Singapore government, is expected to take a
potential debt of equity investment in the carrier. PIL earlier confirmed it could default on several loans this year, including its USD 60 M fixed
rate bonds due November.

ZIM has made an offer to buy back up to USD 58.5 M of its outstanding bond debt, as the company takes the next step towards a potential
IPO (Initial Public Offering). ZIM confirms it has retained the services of several investment banks as its explores the possibility of raising
fresh funds on public markets. In the meantime, it will attempt to reduce borrowing costs by tendering for part of its outstanding bond debt
through a Dutch auction. ZIM expects its operational result and free cash flow in the last two quarters of the year to significantly exceed past
results including the 2nd quarter. However the carrier is under pressure to strengthen its capital structure either through the issuance of
public or private equity or more debt. ZIM’s long-term loans, lease and other liabilities as of 30 June 2020 amounted to USD 1,446 M
compared to USD 1,422 M as of 31 December 2019, while total assets amounted to USD 1,900 M versus USD 1,926 M as of 31 December
2019.

Source: Alphaliner, Dynaliners, carriers

DHL Global Forwarding | OFR Market Update | November 2020 11

Did you Know?
Scrubber Fitted Container Vessels Increase to 24% of Total Fleet

The number of scrubber fitted container ships has increased to 652 as at end of
October with only 9 more ongoing retrofits. This represents an increase of 395
scrubber fitted container ships compared to the beginning of the year.
The total capacity of the scrubber fitted container fleet now represents 5.78
mTEU, which is 24.4% of the total container fleet. HMM, Evergreen, MSC and
Maersk have the highest percentage of scrubber fitted capacity in their fleets.
The number of ongoing retrofits has decreased from a peak of 117 vessels in
March to only nine today as carriers want to deploy as much tonnage as possible
on Chinese export trades in view of the high cargo demand.
Investments in scrubbers also reduced as the price difference between VLSFO
and HFO has dropped to USD 50-60 on average, compared to USD 180 in October
2019 and a record USD 285 in the initial weeks of 2020. The smaller this spread,
the longer it takes to earn back the investment in the scrubber.
At the same time the number of LNG powered container vessels has increased
from 9 to 11 this year representing just 0.2% of world’s container fleet.

Source: carrier, Alphaliner

DHL Global Forwarding | OFR Market Update | November 2020 12

BACK-UP
DHL Global Forwarding | OFR Market Update | November 2020 13
MARKET OUTLOOK NOVEMBER 2020
OCEAN FREIGHT RATES ADDITIONAL TRADES (1/2)
• EURO- Seeing some pickup in ECSA volumes and RFQs. Latam rates are now in place for full Q4 (except ECSA where
AMLA+MX only 30.11) and Mexico is even quoted until 28.02 by some carriers (rate increases expected in Q2). AL4
blankings from The Alliance continue, affecting cooperation to MX.

• EURO- Blanks Sailings to Asia will also affect the ME and IPBC direct capacity. Rates show slight reductions.
MENAT Equipment in north europe getting tight.

• EURO- Rates are remaining stable. Capacity is available. Apapa, Nigeria waiting time is improving with approx. 20
SSA days.

• AMNO- Base OFR Rates in the market are steady. Space is tight out of USEC & USGC Ports due to several sailing
MENAT cancellations on services to M. East & India Subcontinent. No space issues out of USWC except to East Med.

• AMNO- Rates to South/West Africa will remain same. No changes in capacity. Space is available to West Africa but
SSA tight to South Africa.

• AMNO- Overall trade capacity down 7%, no expectations to increase in Q4 or Q1 2021

AMLA Rate development for Q4 remains stable * except ECSA as noted below
Export volumes in 2021 forecasted to exceed 2020, but full recovery over 2019 is unlikely.
No scheduled service changes for carriers serving the trade
Source: DHL

DHL Global Forwarding | OFR Market Update | November 2020 14

MARKET OUTLOOK NOVEMBER 2020
OCEAN FREIGHT RATES ADDITIONAL TRADES (2/2)
• EURO MED- Volumes are on an upward trend. Vessels’ utilization is substantially increasing. Rates are expected to increase
AMNO as of November 1st.

• EURO MED- Nothing to be highlighted.

AMLA

• EURO MED- blank sailings and therefore stable rather high rate level.
ASPA and
MENAT

• EURO MED- Nothing to be highlighted.

SSA

• ASPA- No significant change in market capacity. Market rates continue to increase for Nov’2020 with GRI NEA-AU/NZ
SPAC : USD300/TEU , SEA-AU : USD150/TEU, SEA-NZ: USD300/TEU and peak season is expected to last till end
March’2021. The shortage of equipment in the market becomes an increasing challenge and even allocations
on NACs are facing fulfillment issues due to equipment shortage in the market. FAK rates are subjected to
space, rollovers and equipment availability. Carriers are pushing for premium above FAK for confirmed space.

Source: DHL

DHL Global Forwarding | OFR Market Update | November 2020 15

Lower volumes offset by higher freight rates & lower bunker prices are lifting carrier half-year profits
CARRIER FINANCIAL RESULTS 6 MONTHS 2019-20
Operating Profit
Revenue Operating Profit Margin Net Profit
Carrier 2019 2020 % 2019 2020 % 2019 2020 2019 2020 %

Maersk Group 6), 9) 12’166 11’612 -5% 2’017 2’532 26% 16.6% 21.8% -503 652 230%

CMA CGM 2), 4) 11’711 10’839 -7% 1’443 1’888 31% 12.3% 17.4% -90 236 362%

COSCO SHIPPING Holdings 7) 10’033 10’124 1% 439 357 -19% 4.4% 3.5% 293 274 n.m.

Hapag-Lloyd 6) 7’047 7’005 -1% 440 563 28% 6.2% 8.0% 165 314 90%

OOCL 10) 3’300 3’430 4% 198 155 -22% 6.0% 4.5% 138 102 -26%

Evergreen Marine Corp. 1), 4), 8) 2’993 2’966 -1% 78 193 147% 2.6% 6.5% 1 106 10500%

ONE 3) 2’875 2’736 -5% n.a. n.a. n.m. n.a. n.a. 5 167 3240%

Yang Ming 1), 4) 2’434 2’255 -7% -9 29 422% -0.4% 1.3% -58 -27 53%

HMM 4) 2’327 2’227 -4% -187 113 160% -8.0% 5.1% -325 -31 90%

Zim 1’631 1’618 -1% 170 242 42% 10.4% 15.0% -19 13 168%

Wan Hai 1), 4) 1’151 1’164 1% 44 77 75% 3.8% 6.6% 57 60 5%

Average 5) 54’368 52’546 -3% 4’435 5’994 35% 8.2% 11.4% -474 1’764 472%
Source: Alphaliner, DynaLiners; n.a. = not available, n.m. = not meaningful; 1) local currency numbers were converted into US$ using the average exchange rate for relevant financial period; 2) shipping activities only, excl. CEVA Logistics; 3) result is Q1 of
Japanese financial year, i.e. Apr-Jun not calendar year; 4) operating profit is "Core EBIT"; 5) Average excluding ONE; 6) operating profit is EBIT; 7) COSCO Shipping Lines and OOCL; 8) not consolidated for Evergreen Group;9) Profit from continuing
operations; 10) excluding Long Beach Container Terminal operation

DHL Global Forwarding | OFR Market Update | November 2020 16

STATE OF THE INDUSTRY
OCEAN CARRIER ALLIANCES

THE ALLIANCE OCEAN ALLIANCE 2M

HAPAG-LLOYD OOCL
ONE CMA CGM MAERSK LINE
YANG MING CHINA COSCO SHIPPING MSC
HMM (from 1st April 2020) EVERGREEN

Source: Carriers

DHL Global Forwarding | OFR Market Update | November 2020 17

ACRONYMS AND EXPLANATIONS
OCEAN FREIGHT GLOSSARY
AMLA - Latin America OWS - Overweight Surcharge
AMNO - North America PH - Philippines
AR - Argentina PNW - Pacific North West
ASPA - AsiaPacific Ppt. - Percentage points
BR - Brazil PSW - Pacific South West
CAGR - Compound Annual Growth Rate QoQ - Quarter on quarter
CENAC - Central Amercia and Caribbean SAEC - South America East Coast
CNC - CNC Line (Cheng Lie Navigation Co. Ltd.) SAWC - South America West Coast
DG - Dangerous Goods SOLAS - Safety of Life at Sea
DWT - Dead Weight Tonnage SPRC - South People’s Republic of China – South China
EB - Eastbound SSA - Sub-Saharan Africa
ECSA - East Coast South America (synonym for SAEC) SSL - Steam Ship Line
EGLV - Evergreen Marine Corp T - Thousands
EURO - Europe TEU - Twenty foot equivalent unit (20‘ container)
GRI - General Rate Increase TSA - Trans Pacific Stabilization Agreement
HMM - Hyundai USGC - US Gulf Coast
HL - Hapag-Lloyd US FMC - US Federal Maritime Commission
HSUD - Hamburg Süd USEC - US East Coast
HWS - Heavy Weight Surcharge USWC - US West Coast
IA - Intra Asia VGM - Verified Gross Mass
IPBC - India Pakistan Bangladesh Ceylon (= Sri Lanka) VLCS - Very Large Container Ship
IPI - Inland Point Intermodal VSA - Vessel Sharing Agreement
ISC - Indian Sub Continent (synonym for IPBC) WB - Westbound
MENAT - Middle East and North Africa WCSA - West Coast South America (synonym for SAWC)
ML - Maersk Line WHL - Wan Hai
mn - Millions WRS - War Risk Surcharge
MoM - Month-on-Month YML - Yang Ming Line
NOO - Non-operating (vessel) owners YoY - Year-on-Year
OCRS - Operational Cost Recovery surcharge YTD - Year-to-Date
OOCL - Orient Overseas Container Line THEA - THE Alliance
Source: DHL

DHL Global Forwarding | OFR Market Update | November 2020 18