A FUTURIST'S VISION FOR THE GLOBAL SHIPPING INDUSTRY - IN THE AGE OF THE FOURTH INDUSTRIAL REVOLUTION Marine Money New York, 20 June 2017
DISCLAIMER The persons named as the authors of this report hereby certify that: (i) all of the views expressed in the research report accurately reflect the personal views of the authors on the subjects; and (ii) no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the research report. This report has been prepared by Danish Ship Finance A/S (Danmarks Skibskredit A/S) ( DSF ). This report is provided to you for information purposes only. Whilst every effort has been taken to make the information contained herein as reliable as possible, DSF does not represent the information as accurate or complete, and it should not be relied upon as such. Any opinions expressed reflect DSF s judgment at the time this report was prepared and are subject to change without notice. DSF will not be responsible for the consequences of reliance upon any opinion or statement contained in this report. This report is based on information obtained from sources which DSF believes to be reliable, but DSF does not represent or warrant its accuracy. The information in this report is not intended to predict actual results, and actual results may differ substantially from forecasts and estimates provided in this report. This report may not be reproduced, in whole or in part, without the prior written permission of DSF. To Non- Danish residents: The contents hereof are intended for the use of nonprivate customers and may not be issued or passed on to any person and/or institution without the prior written consent of DSF. Additional information regarding this publication will be furnished upon request.
HEAD OF RESEARCH Christopher Rex, research@shipfinance.dk ANALYTICAL TEAM Ninna Kristensen, Senior Analyst Jonas Munch, Analyst Sara Møller, Analyst Caspar Wergeland, Analyst
TAKEAWAYS FROM TODAY 1. Structural overcapacity looms across most ship segments because supply has not yet adjusted to a changed demand outlook. 2. Improvements within renewable energy are changing the outlook for ships transporting fossil fuels i.e. Crude Tankers, Product Tankers, Gas Carriers and Dry Bulk vessels. 3. Manufacturing is being moved closer to consumers due to technological innovations in robotics, artificial intelligence and 3D printing. The long-term outlook for large Container vessels is structurally reduced. 4. The industry expects seaborne trade volumes to grow by an annual average of 2-4% but we anticipate that growth could slow to only 1% between 2016 and 2030. 3
THE GLOBAL SHIPPING INDUSTRY IS A SERVICE INDUSTRY 4
THE ARCHITECTURE OF THE WORLD ECONOMY IS GRADUALLY CHANGING WITH THE EMERGENCE OF THE FOURTH INDUSTRIAL REVOLUTION 5
THE FOURTH INDUSTRIAL REVOLUTION The fourth industrial revolution is increasing the efficiency and productivity of the world economy. Do more with less. Cut out the middle man. The consequence is likely to be fewer jobs and lower resource demand per dollar growth. 6
THE ARCHITECTURE OF THE WORLD ECONOMY IS CHANGING We are seeing significant changes in the way not only energy but also goods and services are produced, supplied and consumed. These are: 1. Redefining the relationship between world GDP growth and growth in seaborne trade volumes. 2. Technology is raising the barriers for job creation and is therefore reducing the long-term outlook for inclusive economic growth. 3. Lowering the long-term outlook for seaborne trade volumes. DRIVERS OF CHANGE DEMOGRAPHY TECHNOLOGY CONSUMER PREFERENCES BUSINESS MODELS 7
THE ARCHITECTURE OF THE WORLD ECONOMY IS CHANGING = THE INFRASTRUCTURE OF THE WORLD ECONOMY NEEDS TO ADAPT 8
THE GREAT CHALLENGE FOR THE SHIPPING INDUSTRY
THE GREAT CHALLENGE FOR THE SHIPPING INDUSTRY Overcapacity may become structural in the short to medium term: Most ship segments are geared towards growth in seaborne trade volumes. Based on a 15-year projection, we expect that seaborne demand will grow by approximately 1% per annum until 2030. There is little to indicate that seaborne volumes will increase significantly above the trend or travel longer distances in the long term. Supply could end up being ahead of demand for the next three to five years or maybe longer. Regional seaborne transport volumes could decline, leaving some ship segments exposed to overcapacity for longer. 10
THE NEXT 30 YEARS WHAT NEEDS TO BE DONE? 11
WE NEED TO ADD EXTRA LAYERS TO THE CURRENT OPERATION WE NEED TO TRANSFORM ORDINARY SHIPPING INTO EXTRAORDINARY SHIPPING 12
THE VALUE PROPOSITION OF THE PAST The asset play has been a central part of the value propositions of the past in the shipping industry: Buy low and sell high. and do not run out of cash before the next supercycle emerges. 13
A WAY OUT OF THE WOODS
NEW BUSINESS MODELS The Shipping industry needs to create new business models that tap into value far beyond the current scope. Digitalisation can offer cost reductions but the potential is much greater. The champions of disruption are the ones that are creating a new and significantly enhanced value proposition for customers. These forces hold the potential to blur the boundaries and definitions of industries, and make more extreme outcomes part of the strategic calculus. 15
Takeaways from today 16
TAKEAWAYS FROM TODAY 1. Structural overcapacity looms across most ship segments because supply has not yet adjusted to a changed demand outlook. 2. Improvements within renewable energy are changing the outlook for ships transporting fossil fuels i.e. Crude Tankers, Product Tankers, Gas Carriers and Dry Bulk vessels. 3. Manufacturing is being moved closer to consumers due to technological innovations in robotics, artificial intelligence and 3D printing. The long-term outlook for large Container vessels is structurally reduced. 4. The industry expects seaborne trade volumes to grow by an annual average of 2-4% but we anticipate that growth could slow to only 1% between 2016 and 2030. 17
SHIPPING MARKET REVIEW We apply our macroeconomic perspectives to the long-term outlook for the individual ship segments. Anything but business as usual. We predict significant changes to the way not only energy but also goods and services are consumed and supplied. The world economic outlook is shrouded in uncertainty since everything we know about economic growth, from labour markets to trade relations, is about to change. www.shipfinance.dk 18
THANK YOU FOR YOUR ATTENTION