107 TH AAPA ANNUAL CONVENTION OCTOBER 9, 2018 Lars Ostergaard Nielsen Valparaiso, Chile
| 2 | 2 A Snapshot of Shipping Today Financial pressures Global trade More consolidation Increased focus Increasing costs levels – on freight rates in the past two on the role of from sustainable impacted by yearsthan the past technology and shipping external factors twenty digital in supply chains
| 3 Industry moving towards more consolidation
| 4 Top 5 share is growing
| 5 Nominal supply growth increasing in Q2 2018
| 6 Headwinds from external factors in H2 2018
| 7 Freight rates in ocean down 1.2% compared with Q2 2017
|8 Freight rates have been decreasing, but in 2017 they reversed also ahead of bunker cost Maersk Line freight rate (USD/FFE) Market bunker price (USD/ton) 800 3,500 CAGR 12Q1-16Q4 16Q4-17Q4 Freight rate -8% 7% 3,000 700 Bunker price -18% 24% 2,500 600 2,000 500 1,500 400 +210 USD/FEE Maersk Line bunker cost 2016: 202 USD/FFE 1,000 300 2017: 308 USD/FFE 106 USD/FFE increase of which 93 USD is bunker price driven 1 500 200 0 100 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 Maersk Line freight rate (LHS) Full year averages (LHS) Market bunker price (RHS) Note: (1) Rest is bunker consumption driven. Maersk Line freight rates excludes Hamburg Süd. Bunker price is 380cst Rotterdam Source: Maersk, Clarkson
|9 Why digitisation – removing barriers to global trade More than USD 4 trillion Over 80% of international By reducing barriers within Estimated costs to all parties value of goods are shipped world trade is transported by the international supply in the supply chain arising each year sea chain, global trade could from limited visibility and increase by nearly 15% , lack of standardisation boosting economies and averages one-fifth of the creating jobs overall cost of goods Source: “Enabling Trade – Valuing Growth Opportunities”, industry report by World Economic Forum. “Trade Cost”, research paper by Ander son & Wincoop
| | 10 Blockchain technology With the 17 Shipping Information Pipeline it would look like this: From Kenya to Europe, the travel of Kenyan Farm fills out the 1 Phytosanitary these documents looks like this: Certificate and gives it to a FreightForwarder Farm fills out Freight forwarder Courier brings them Courier brings them Original documents Phytosanitary fills out Certificate for approval to the back to Nairobi for airfreighted to Certificate of Origin Mombassa Port copying and European Freight Freight Forwarder fills 2 regarding cargo authorities archival Forwarder out Certificate of Origin 1 2 3 4 5 Freight Forwarder 3 uploadsboth documents into thecloud. Shipping InformationPipeline 6 7 8 9 10 Courier transports Courier that If documents are in Transports it to a Documents in them to a consulting transports them to order, a truck driver Dutch customs order? Container company to prepare Antwerp port picks up the controlled area for released to and package with terminal gate container phytosanitary customer other import related inspect paperwork Consumer Forwarder Authorities Shipping Trader Grower company
| 11 IMO 2020 Regulations As of 1st January 2020, new global regulation require all vessels to emit less sulphur particles from the fuel they burn. Whereas today the limit is 3.5% sulphur, the new sulphur cap will be 0.5% 3.5% 0.5% SULPHUR CAP AT PRESENT 2020
IMO 2020 REGULATIONS | 12 Helping the generations to come with the IMO 2020 regulations Major health & environmental • benefits from 80% reduction in sulphur pollution from shipping (particularly for people living near ports and coasts) Avoidance of premature deaths • Reduction in childhood asthma cases •
| 13 How can shipping lines comply? THERE ARE THREE WAYS IN WHICH SHIPS CAN COMPLY WITH THE NEW RULES Install scrubbers (exhaust gas Use alternative fuel Use fuel with 0.5% Sulphur cleaning systems) onboard
| 14 What does this mean for Maersk? Around 90% of the global fleet will comply by using Maersk Line expects its extra fuel costs could exceed low-sulphur fuel by 2020. This is also the case for USD 2 billion . Container shipping industry costs could Maersk Line’s fleet rise up to USD 30 billion 0.5% 2020
| 15 What are we doing to prepare? Maersk is looking into all possible and available options to comply with the 2020 sulphur cap, that is compliant fuels, LNG, and scrubbers Various initiatives are being taken to secure compliant fuels through others own blending and storage $ capacities. Investments have been made in scrubbers for a limited number of vessels in our fleet of around 750 ships To enable customers to plan for 2020, Maersk has introduced a fair, predictable surcharge (BAF) to recover the extra costs To ensure a level playing field, Maersk is advocating strong enforcement of the new rules
| 16 Our commitment to sustainable shipping: Enabling a low carbon future by low impact shipping Maersk Line has set a Innovation: A modern Since 2007, Maersk bold 2020 target of fleet, radical vessel Line has reduced the reducing CO 2 upgrades, leading CO 2 emissions per emissions per network efficiency and container transported container moved by cutting-edge fleet by 43% (as of 2017) 60% (baseline 2007) performance management are key
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