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THE SHIPPING INDUSTRY IN A CHANGING ENVIRONMENT

THE SHIPPING INDUSTRY IN A CHANGING ENVIRONMENT . DRAFT. PROPELLER CLUB BASEL November 13th 2008. Jean Philippe Thenoz. SUMMARY. I. What have been the changes affecting the shipping industry during the past decade ?. 1. Change of ship size / Change of ship characteristics.

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THE SHIPPING INDUSTRY IN A CHANGING ENVIRONMENT

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  1. THE SHIPPING INDUSTRY IN A CHANGING ENVIRONMENT DRAFT PROPELLER CLUB BASEL November 13th 2008 Jean Philippe Thenoz

  2. SUMMARY I. What have been the changes affecting the shipping industry during the past decade ? 1.Change of ship size / Change of ship characteristics 2. Importance of terminal / Strategic approach 3. Role and importance of intermodal 4. Impact of bunker in shipping operations 5. Change of legal environment 6. Environment requirements II. CMA CGM snapshot

  3. 1.Change of ship size / Change of ship characteristics

  4. The following vessels already ordered, are under construction : 2008 / 2009 : 11 000 TEU class and 11 400 TEU 2009 / 2010 : 12 600 TEU + class 2004 : 8500 teu class 2001 : 6500 teu class 2006 : 9400 teu class 2008: 11 000 TEU class A brief history

  5. Main characteristics

  6. Principe de propulsion

  7. Propulsion principle The easiest solution : One main engine slow speed (about 100 rpm), 2 stroke engine - A shaft line - A propeller

  8. 2. Importance of terminal / Strategic approach

  9. Terminals networking • Shipping lines having a worldwide coverage were pushed to invest into terminals to secure berth windows and give a dedicated fully integrated service to customers • The shipping industry went into a vertical integration : terminals being a key element of their operation. • This strategy is especially valid in a hub port operation concept on East / West route Malta Free Port, Malta

  10. Terminals networking • Let’s take as an example what CMA CGM group has been doing the past 7 years : • Terminal Link S.A. • Subsidiary of CMA CGM group, incorporated in 2001 • MRS development team of 15 + CMA CGM support • Terminal Link holds ports interests of CMA CGM • dating before 2001 and has now interests in 17 ports • with an estimated total throughput in 2006 of 4.7 millions TEUs. • Terminal Link’s Assignments : • External growth: • Invest in multi-user container terminals in appropriate locations • Develop green sites or brown sites projects, buy stakes, tender for concessions • Internal growth & development: • Leverage on synergies with CMA CGM and market terminals world wide • Optimize management of container terminals by using and developing modern state-of-the-art container handling equipment and IT systems

  11. 31 DECEMBER 2006: 17 TERMINALS Rotterdam Dunkerque Malta Anvers Zeebrugge Le Havre Odessa Montoir Marseille Tanger Tianjin Fos Busan Mobile Damiette Um Q’sar Casablanca Wenzhou Houston Xiamen Miami Guadeloupe Caï Mep Lomé Martinique Guyane 31 OCTOBER 2008: 26 TERMINALS

  12. 3. Role and importance of intermodal

  13. Intermodal strategy in Europe

  14. Door to door advantages • Priority loading in the port for containers under Rail C.H • Easier documentation and Customs formalities at sea port • Customs clearance at destination done by customer • Competitive combined tariff “door to door” • Storage facility at Rail terminal with free days • Empty pick up or drop off for merchant haulage from / to inland terminal without any extra cost

  15. Our rail & barge product today and coming plans Gdynia Hamburg Manchester Bremerhaven Liverpool Poznan Felixstowe Rotterdam Warsaw Cardiff Tilbury Duisburg Southampton Zeebrugge Antwerp Koln Gliwice Dourges Prague Mannheim / Ludwigshafen Le Havre Paris Strasbourg Stuttgart Wien Bratislava Munchen Sopron Budapest Salzburg Basel Montoir Clermont-Ferrand Milano Lyon Bordeaux Triestes / Koper Bradu De Sus Padova Bucarest Livorno Genoa Constanza Toulouse Fos/Mer Marseille Barge Rail Link shuttles Combined Rail/barge Service Partners’ rail services Development Rail Intermodal Dpt

  16. Intermodalstrategy in China

  17. A strategic lay out in China Harbin Shenyang Office of China Beijing Dalian Direct ports of call in China Tianjin Shijiazhuang Ports Xingang Zhangjiagang Yantai Zhengzhou Qingdao Jinan Lianyungang Xian Zhenjiang Nantong Nanjing Heifei Shanghai Suzhou Wuhan Chongqing Hangzhou Ningbo Changsha Yiwu Fuzhou Dongguan Quanzhou Kunming Xiamen Guangzhou Shantou Keelung Yantian Shunde Huizhou Zhongshan Shenzhen Kaohsiung Macau Hong Kong 2nd largest carrier from China to North Europe 1st from China to Mediterranean sea Every 6 hours, a CMA CGM ship leaves China. 13 Ports of call in China. 64 agencies throughout China (staff: 1515)

  18. Location of 18 terminals and double-deck block trains planned network

  19. Compared market share of rail container transport As of total railway freight traffic percentage

  20. 4. Impact of bunker in shipping operations

  21. Bunker impact on a voyage 8100 TEUS VESSEL – ASIA / USWC at 22.5 knots (35 days voyage) 5100 TEUS VESSEL – ASIA / USEC at 23.1 knots (56 days voyage)

  22. Bunker prices evolutions YTD 2008

  23. 5. Change of legal environment

  24. The process • 1986 – Regulation 4056/86 passed by European Council • March 2003 – repeal process initiated, ELAA set up • October 2006 – formal abolition of Regulation 4056/86 by European Council • September 2007 – publication of draft Guidelines • Summer 2008 – publication of final Guidelines • October 2008 – implementation of the new law – Guidelines in force

  25. Impact of repeal of regulation 4056/86 • Liner conferences to and from Europe will become illegal • Liner conferences outside European trades remain legal • However, European solution will heavily impact the thought processes of other jurisdictions • Others may follow over time

  26. Impact of repeal of regulation 4056/86 on conference lines • No more : • conference tariffs • conference THCs • conference surcharges such as CAF and BAF • conference business plans • No : • individual capacity discussion • immediate publication of individual market shares

  27. All lines must have their own tariff and/or pricing policy Individual negotiations with customers All elements of the charge are potentially negotiable unless a line decides that certain charges are non-negotiable Structure of charges, i.e. origin THC, ocean freight, destination THC, CAF, BAF is up to individual lines Lines will have to decide their individual policies on THC’s BAF and CAF Charges need not be related to costs – lines are free to charge what they like taking advantage of the market Increases in charges will be subject to lines own discretion and subject to individual contracts – no need, unless the contract says, to give notice What is the new lines environment ? How will they act ?

  28. 6. Environment requirements

  29. Advanced Shipping, Environment Minded • Our policy relies on 3 key axis : • Prevent any risk of pollution and continuously improve the environmental performance of our operations • Develop eco-friendly services and solutions i.e. rail and barge transportation, eco-containers • Reinforce our environmental management system and corporate culture for our employees CMA CGM is member of the Clean Cargo Group and adheres to « Charte Bleue » from Armateurs de France.

  30. Reducing vessel’s ecological footprint • Our new buildings are equipped with the latest proven environmental technologies i.e. electronic injection, fast oil recovery, alternative maritime power, waste heat recovery, non toxic paints…. New Buildings Green Technologies Overview • Ecospeed policy on major lines, weather and fuel routing, optimal trim, are additional operational measures to reduce vessels’ environmental impacts. CMA CGM Fleet Navigation Center

  31. Developing eco-products and services • Development of alternative and eco-friendly transports : Rail and Barge. • Investment in Rail Development in China, India, North Africa notably. • Pioneer and leader in Eco-Containers with bamboo flooring with more than 72 000 TEUs, which represents so far average 10 % of our owned fleet.

  32. Developing environmental partnerships From the beginning, CMA CGM is actively participating to the Ports of Los Angeles and Long Beach environmental programs and initiatives, considered as the most leading and aggressive ports environmental policies worldwide. • Clean Fuel Program participation since July 2008, using ultra-low sulphur fuel in main and aux engines • Green Flag Award compliant for 100 % of our vessels for the 2nd consecutive year, for vessels speed reduction. • Exhibition at Long Beach Green Port Fest : hundreds of people visited our eco-bamboo container as well as the Group environmental initiatives.

  33. II. CMA CGM snapshot CMA CGM MEDEA – 9400 evp

  34. CMA CGM: Number of containers carried (thousand of TEUs) 7700 70006000500040003000200010000 6000 5200 3900 2800 2300 1900 1615 2000 2001 2002 2003 2004 2005 2006 2007 Source: CMA CGM Data

  35. CMA CGM GROUP – EAST / WEST SERVICES 9 services 20 660 TEUs weekly 6 services 4 480 TEUs weekly 10 services 17 420 TEUs weekly Europe ASIA - NORTH EUROPE TRANSATLANTIC ASIA - NORTH AMERICA North America ASIA - MID EAST & MED Asia 8 services 16 060 TEUs weekly ASIA - CARRIBEAN & SOUTH AMERICA 6 services 6 860 TEUs weekly Africa South America Oceania NB : Asia is including Indian Subcontinent

  36. CMA CGM GROUP – NORTH / SOUTH SERVICES 12 services 6 210 TEUs weekly 10 services 6 940 TEUs weekly 20 services 9 830 TEUs weekly 8 services 6 750 TEUs weekly Europe North America EUROPE - CARIBBEAN & SOUTH AMERICA INTRA ASIA Asia EUROPE - WEST AFRICA INTRA CARIBBEAN & S.AMERICA ASIA - AFRICA 8 services 4 290 TEUs weekly Africa South America OCEANIA & RTW Oceania 13 services 8 320 TEUs weekly NB : Asia is including Indian Subcontinent

  37. Fleet volume TODAY (17/10/2008) 397 ships for 1 001 250 TEUs (296 chartered and 101 owned) (396 ships for 986 196 on 02/10/08) GROUP TOTAL

  38. Fleet volume SHIPS TO BE DELIVERED 78 ships on order for a total capacity of 648 679 TEUs (out of which 55 owned) + 2 cruise ships for CIP

  39. TOP 10: Global carriers 1. Maersk Line – Denmark 2 034 000 15.8 % 2. MSC – Switzerland 1 421 600 11.0 % 3. CMA CGM – France 970 300 7.5 % 4. Evergreen – Taïwan 634 100 4.9 % 5. Hapag Lloyd – Germany 501 000 3.9 % 6. COSCO – China 497 300 3.9 % 7. APL – Singapore 482 300 3.7 % 8. CSCL – China 430 100 3.3 % 9. NYK – Japan 416 900 3.2 % 10. MOL – Japan 376 100 2.9 % Source: AXS-Alphaliner dtd October 08

  40. CMA CGM Group Key Figures Turnover 07 Teus carried 07 Vessels Slots available Services Staff Worldwide Staff France Offices Worldwide Ports of call 11.8 billion US Dollars 7,7 million TEUs 394 966,900 TEUs more than 150 16 000 4 200 600 400

  41. A testimonial of the group’s soaring growth FEATURES 147 meters tall / 33 stories high 75 meters in its widest point Total capacity: 2,700 people 15 elevators / 5 parking levels 53,000 m² of total exterior glass surface area Gross floor area: 64,000 sq meters Start of construction: July 2006 Building delivery : 3rd quarter of 2009 Norfolk, USA CMA CGMReal Estate Investments Architect: Zaha Hadid

  42. Thanks for your attention CMA CGM Orfeo – 9700 TEUs passing by Los Angeles break water

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