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Hapag-Lloyd at the
Gemini Shippers Association
Annual MeetingJune 6th 2017
Hardy Pearson – SVP Area Midwest/Northeast P.J. McGrath – SVP Transpacific Trade
2
Industry Update
Hapag-Lloyd in a Nutshell
Trade Update
Agenda
A.
C.
B.
3
A. Industry Update
4
Present and future trends (and challenges) in liner
shipping
Alliances
Prevailing
Losses
Consolidation
Ship Size
What trend will change our business most on the long run?
Digitalization
Cost Cutting
5
100
150
200
250
300
2018E2017E20162015201420132012201120102009200820072006200520042003200220012000
Demand: Container shipping remains an industry
with healthy growth and balanced trade dynamics
Container shipping volume and global GDP growth
Global GDP
Transport volume
+4.7% +3.5%
6 2000-2008 2010-2015 2016-2018E
2.1x 1.3x 1.2xGDP
multiplier
Source: Clarksons (April 2017), IMF WEO (April 2017)
+4.2%
+4.6%
+3.1% +3.5%+3.6%
+3.5%
+4.3%
+9.1%
6
Supply: Capacity growth is slowing –
very few deliveries post 2017 expected
Orderbook-to-fleet [TEU m, %] Orders placed by year [TEU m]
Vessel deliveries by year [TEU m]
0
5
3
2
1
6
4
8
7
28%27%
4.3
2011
38%
3.9
2010
50%
5.0
2009
61%
6.0
2008
6.5
2007
19%
3.8
2015 2016
16%
3.23.4
21%
2014
18%
3.3
2013 2017E
21%
3.6
2012
3.1
15% Apr17
YTD
0.0
2016
0.2
2015
2.2
2013
1.1
2014
3.2
1.2
2007
0.1
2008
0.6
2009
1.8
2010
0.4
2011
2.0
2012
2011
1.2
2010
1.4
2009
1.2
2008
1.4
2007
1.4
2017E20162015
1.2
2014
0.9
2013
1.7
2012
1.51.3 1.3
+33%
Source: Clarksons (April 2017), Drewry
15,300 TEU
7
Global Supply and Demand Growth
Reducing Gap between Supply and Demand
05/06/2017 Shipping, Trade & Economy Master Slides GI Feb17
Source: Clarksons 1Q17, Drewry 1Q17
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
2018e
4.5%
4.6%
2017e
2.7%
4.2%
2016
1.2%
3.4%
2015
8.4%
2.2%
2014
6.3%
5.3%
2013
5.5%
5.1%
2012
6.1%
3.1%
2011
8.0%
7.8%
2010
9.7%
13.7%
2009
6.8%
-9.2%
Demand
Supply
8
Why are mergers and larger alliances needed …
05/06/2017
… because carriers have no choice.
9
CSCL
0.6
APL
0.6
Hanjin
0.7
Hapag-
Lloyd
0.7
COSCO
0.8
Ever-
green
0.8
CMA
CGM
1.5
MSC
2.3
Maersk Hyundai
0.3
ZIM
0.3
K-Line
0.3
PIL
0.4
Yang
Ming
0.4
OOCL
0.5
Hamburg
Süd
0.5
NYK
0.5
MOL CSAV
0.3
UASC
0.30.5
2.5
Carrier capacity [TEU m] and global capacity share [%]
1.0
MOL / NYK
/ K-Line
1.4
COSCO
/ CSCL
1.7
CMA CGM
/ APL
2.2
MSC
2.9
Maersk /
Hamburg Süd
3.7
Hapag-Lloyd
/ UASC
1.6
ZIM
0.3
PIL
0.4
Hyundai
0.5
Yang Ming
0.6
OOCL
0.6
Evergreen
18% 15% 11% 8% 8%
5% 3% 3% 2%
7%
14% 13% 8%
4% 4% 4% 4% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 1%
2% 1%
We believe that going forward there will be 5-7 significant global liner
shipping companies – Gap to the rest is widening rapidly
Consolidation wave leads to higher concentrations
Rankin
g a
s o
f 2017
Rankin
g e
nd o
f 2013
Note: Diagram assuming that all currently announced mergers (Hapag-Lloyd & UASC; NYK & MOL & K-Line, Maersk & Hamburg Süd)
will receive regulatory approvals and are executed as announced. Simple sum of stand-alone operating capacity as of December 1, 2016.
39%
19%
17%
21%
44%
60%
2017E2013
RemainingTop 6-10Top 5
Global capacity share [%]
Source: Drewry (Forecaster 1Q17), MDS Transmodal (April 2017, October 2013)
10
Liner Shipping is a capital intensive industry
Vessel investment Container investment
Total number of containers needed: 150,000 TEU
Price2 per container (40HC): 3,825 USD
Total container investment: 287 mio USD
10 vessels are needed for one Asia-US EC Loop
Price1 per vessel: 93 mio USD
Total vessel investment: 930 mio USD
1Source: Clarksons Mar 17, 2source: Harrison Consulting 1Q17
Capital cost for one Asia-US East Coast loop with 10,000TEU vessels = USD 1.2 billion
without considering all operating costs such as port & terminal costs, bunker, channel passage, crew etc.
11
• Increased reliability for key slings by specializing port
coverage
• Carriers exiting chassis provision business
• Carriers more selective in targeting inland locations
• Reduction in demurrage / detention exceptions – the
real cost is missed opportunities on strong leg
• Need to recover bunker cost fluctuations
Trends in the Market
05/06/2017 Insert Presentation Title here "Insert > Header and Footer > Apply to All"
12
B. Hapag-Lloyd in a Nutshell
13
Hapag-Lloyd / UASC merger creates a top tier pure-play carrier
Strengthened
market position
Well-balanced
trades
Large,
young fleet
Strong
partnerships
Significant
synergy effects
Deal rationaleAt a glance
Combined
Entity1)
Corporate
HQHamburg Dubai Hamburg
Alliance
membership
G6(until
31 March 2017)
Ocean 3(until
31 March 2017)
THE Alliance(since 1 April 2017)
Ships [#] 172 58 230
Capacity
[TEU m]1.0 0.6 1.6
Container
[TEU m]1.6 0.7 2.3
1) Sum of stand-alone figures as of 31 March 2017 (rounding differences may occur)
14
The combined company is steered from Hamburg –
Dubai becomes HQ for the new Region Middle East
Regions
Central functions
Executive Board
Ex
ec
utiv
e C
om
mitte
e
CCO
Thorsten
Haeser
CEO
Rolf
Habben Jansen
CFO
Nicolás
Burr
COO
Anthony J.
Firmin
Trade
Management
Martin Rolf
Global Sales
Hans Schäfer
Operations
Glenn Hards
Network
Ulf Schawohl
Global Markets
Thorsten Haeser(interim)
Michael Pradel
Europe
HQ:
Hamburg
Wolfgang Freese
North America
HQ:
Piscataway
Lars Christiansen
Middle East
HQ:
Dubai
Andrés Kulka
Latin America
HQ:
Valparaíso
Joachim Schlotfeldt
Asia
HQ:
Singapore
15
Fleet – The combined company will operate a
younger and more efficient fleet
Average fleet age Fleet ownership Average vessel size [TEU]
7.47.68.38.58.7
7.2
8.5
-1.3 yrs
Co
mb
ined
CO
SC
O
CM
A C
GM
Top 1
5
Maers
k
Hap
ag
-Llo
yd
MS
C
Co
mb
ined
65%
35%
CO
SC
O
60%
40%
Hap
ag
-Llo
yd
57%
43%
Maers
k
53%
47%
Top 1
5
49%
51%
CM
A C
GM
46%
54%
MS
C
36%
64%
6,8396,1815,970
5,2815,163
5,858
5,038
+982
CM
A C
GM
Maers
k
Top 1
5
Hap
ag
-Llo
yd
CO
SC
O
MS
C
Co
mb
ined
16
Keep it simple and efficient – from door to door
▪ One-stop service covering the complete transportchain – even across borders
▪ Extensive intermodal network in the USA andCanada for service to and from all key locations
▪ Experienced, trained at motivated staff at localoffices
▪ Save time and costs by avoiding delays in yoursupply chain
▪ Handling of all customs and clearance formalities
▪ Tailor-made inland solutions by our experts
Easy. Fast. Ecofriendly.
17
Hapag-Lloyd shares with supportive tradings
in recent months
60
80
100
120
140
160
Hapag-Lloyd Maersk Evergreen
OOCL DAX Global Shipping
Stock ExchangeFrankfurt Stock Exchange /
Hamburg Stock Exchange
Market segment /
IndexRegulated market (Prime Standard) /
SDAX
ISIN / WKN / Ticker Symbol DE000HLAG475 / HLAG47
Ticker Symbol HLAG
Primary listing 6 November 2015
Number of shares 118,110,917
Share trading
Source: Bloomberg (10 May 2017)
18
e-Business Focus
E-Business
Channels and
Products
Automation of
Processes
Efficiency Digitization
Supply Chain
Cost Cutting
Process
TransparencyStandardization
Customer Hapag-Lloyd
19
Technology Impact at Hapag-Lloyd
New Channels
▪ Presently working on a
number of potential new
channels
▪ Pilot projects ongoing
▪ Once we are confident that
the new channels create
value for our customers we
will announce them
05/06/2017
Hapag-Lloyd App
▪ Mobile retrieval of
schedules, company news,
and contacts
▪ Real-time container tracing
▪ Potential new channels will
also be available for mobile
usage
▪ Ongoing development of
additional features and
usability improvements
New Services
▪ Piloting for remote
container monitoring for
Reefer and Dry
▪ Evaluation ongoing whether
new services generate
value for our customers
and create economical
advantages for Hapag-
Lloyd
▪ Ongoing process of
evaluating digitally enabled
products – announcements
will follow once decisions
are taken
20
Technology Impact at Hapag-Lloyd
05/06/2017
Existing IT - Services
▪ So far not all steps along the
value chain are fully linked
and automated
▪ Target is to provide an
increasingly seamless and
digital interface to customers
who value this approach
▪ Examples:
– Equipment forecasting
– Digital rate delivery
– Online invoicing/payment
– Automated ETA update
Depot Shipper Containerterminal
Containerterminal
Shipper Depot
EmptyContainer(Delivery)
EmptyContainer(Redelivery)
ConsolidationCenter/Factory
Inlandtransport
to port
Exportport
Ocean leg Importport
Inlandtransport toconsignee
DistributionCenter/Factory
Depot Shipper Containerterminal
Containerterminal
Shipper Depot
EmptyContainer(Delivery)
EmptyContainer(Redelivery)
ConsolidationCenter/Factory
Inlandtransport
to port
Exportport
Ocean leg Importport
Inlandtransport toconsignee
DistributionCenter/Factory
Consignee
Only One Shipment File
Export Region Import RegionSimultaneous Access
21
C. Trade Update
22 05/06/2017 Shipping, Trade & Economy Master Slides GI Feb17
Source: IHS Global Insight, May 2017
0
2
4
6
820
15
10
5
0
Growth in %mTEU
2019e
16.3
5.0%
2018e
15.5
6.5%
2017e
14.6
5.1%
2016
13.9
1.4%
2015
13.7
5.1%
VolumeGrowth
-5
0
5
10
15
2010
8
6
4
2
0
2019e
8.72.8%
2018e
8.42.6%
2017e
8.2
7.9%
2016
7.6
17.8%
2015
6.5
-4.6%
Growth in %mTEU
Growth Volume
Eastbound Westbound
The Transpacific Eastbound Trade will continue to be strong
23
HAPAG LLOYD TP TRADE STRATEGY:
3 Core Markets
EAST COAST
▪ Capitalize 10 years growth
▪ Economies of Scale Advantages from 2017
▪ 30% + Deployed TP Capacity
PACIFIC NORTH WEST
▪ Legacy from CP Ships Integration
▪ Complement to Industry Leading Canada Share
▪ Cross Border Expertise
INDIA SUB CONTINENT
▪ Best In Class Indamex Product
▪ Good Mix of Direct Customers and 3 PL
▪ Cost Effective Ship Systems
▪ Almost 15% + Deployed TP Capacity
24
How to differentiate yourself from an increasingly homogenous trade offering?
▪ Continue to Improve in Core Markets. Allow for creative approach and growth well ahead of the market.
– Keep Strategy Consistent
– Stay ahead of competitors in “home” markets
– Compete on Product Not Just Price
▪ Offer mature Markets like Los Angeles and Growth Inland Markets like Dallas and Memphis as
Complementary Services.
Hapag Lloyd offers a full range of TP and Global
products while concentrating on what we do best.
Our primary focus is to offer an opportunity for customers to leverage
Hapag-Lloyd’s expertise and premium products to deliver top quality end
to end logistics networks
25
THE Alliance
Cooperative 5 line approach to implement better network
Development of new, ‘State-Of-The-Art’ Network
THE Alliance TP market Share: 30%
Common Goal
Our Preparation
Our Position
Our Status
Our Objective Satisfy and exceed customer needs
Product Launched April 2017
Our Products Leaner, more streamlined slings
6/5/2017
26
Services [#]Partners [#]
THE Alliance
78
G6
64
Vessels [#] Port Coverage
Source: Transmodal; internal data; Official Carrier information
1) Subject to regulatory approvals and closing; 2) Total operating capacity of THE alliance partners, not all to be deployed in alliance (Hapag-Lloyd including UASC)
Hapag-Lloyd – a strong partner in THE Alliance
▪ Comprehensive network of 32 services will connect more than 78 major ports
▪ Combined capacity of ~3.6m TEU or around 17%2) of world fleet – vessel pool of more than 241 ships
▪ Leading product characterized by fast transit times, broad port coverage & latest vessels
▪ Unique contingency plan – Independent trust fund to safeguard customers’ cargo on board 41%
17%
43%K-Line, MOL, NYK
Yang Ming
Hapag-Lloyd
After Japanese JV1) we are three
partners in THE Alliance:2)
THE AllianceG6
6 3
THE AllianceG6
23 32
THE AllianceG6
200 241
THE Alliance – THE enhanced product
THE Alliance has significantly improved the service product on the East West trade lanes
THE Alliance network offers faster and even more reliable service patterns with modern and most efficient vessels.
32 services with an extended port coverage will help you, our customers, to optimize your supply chains even better.
27
THE Alliance is about to implement shortly a new and unique
contingency plan in the unlikely event a member of THE
Alliance suffers a bankruptcy or financial distress
An independent trustee will manage funds to be used in
case of an insolvency within the group
The contingency plan is designed to safeguard THE Alliance
operations and the discharge of customers’ cargo on
board of the affected member’s vessels
THE Alliance reacts to customer demand for a safety net
after the Hanjin bankruptcy in late August 2016 when cargo
got trapped on board of Hanjin vessels for several weeks
The contingency plan of THE Alliance will be the first
of its kind in liner shipping
28
Our new Transpacific Product
General
Improved overall Transpacific product
Product differentiation by high service level, connectivity,reliability
Increased service range with streamlined sling structure
Pacific Northwest (PNW)
We are one of the market leaders in the Canada market,offering an excellent service
Continued service excellence between Canada and USMidwest Inland locations via PNW
Pacific Southwest (PSW)
Improved State of the Art Service Network to and fromPSW ports and inland locations
Direct Japan service re-introduced
Eastcoast
Innovative and expanded service network to and from USand Canada Eastcoast
Increased capacity to and from Indian Subcontinent andMiddle East
29
Comprehensive product portfolio across the Transpacific offering an
outstanding service in this important market
Direct port coverage in Japan, South Korea, China, Hong Kong, Taiwan,
Vietnam, Thailand, Singapore as well as Sri Lanka, Red Sea and Arabian Gulf
locations
A wide variety of weekly services to and via the West Coast of USA and
Canada, linking Asia with Vancouver, Tacoma and Seattle and the ports of
Oakland, Los Angeles and Long Beach
Several weekly services connecting the US and Canadian East coast ports
of Halifax, Boston, New York, Norfolk, Wilmington NC, Charleston, Savannah,
Jacksonville and Miami (seasonal)
A new direct Vietnam – Pacific Northwest connection
Key service strengths on the Transpacific TradeT
HE
All
ian
ce
Se
rvic
es
Transpacific
16 services across the
Transpacific
Services to:
US/Canada West Coast
US/Canada East Coast
30
Our Transpacific Service – Your Benefits
Faster transit timesBetter service level,
connectivity, reliability
One of the bestproducts in growth
markets
Extensive Asian feeder network
Streamlined slingstructure
Greater port coverage
Streamlined terminals
Efficient North American rail
network
Large reefer and special equipment
inventory
31
DISCLAIMER
STRICTLY CONFIDENTIAL
This presentation is provided to you on a confidential basis. Delivery of this information to any other person, the use of any third-party data or any
reproduction of this information, in whole or in part, without the prior written consent of Hapag-Lloyd is prohibited.
This presentation constitutes neither an offer to sell nor a solicitation to buy any securities in the United States, Germany or any other jurisdiction.
This presentation contains forward looking statements within the meaning of the 'safe harbor' provision of the US securities laws. These statements are based
on management's current expectations or beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Actual results may differ from those set forth in the forward-looking statements as a result of various
factors (including, but not limited to, future global economic conditions, market conditions affecting the container shipping industry, intense competition in
the markets in which we operate, potential environmental liability and capital costs of compliance with applicable laws, regulations and standards in the
markets in which we operate, diverse political, legal, economic and other conditions affecting the markets in which we operate, our ability to successfully
integrate business acquisitions and our ability to service our debt requirements). Many of these factors are beyond our control.
This presentation is intended to provide a general overview of Hapag-Lloyd’s business and does not purport to deal with all aspects and details regarding
Hapag-Lloyd. Accordingly, neither Hapag-Lloyd nor any of its directors, officers, employees or advisers nor any other person makes any representation or
warranty, express or implied, as to, and accordingly no reliance should be placed on, the fairness, accuracy or completeness of the information contained in
the presentation or of the views given or implied. Neither Hapag-Lloyd nor any of its directors, officers, employees or advisors nor any other person shall have
any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or
otherwise arising in connection therewith. The material contained in this presentation reflects current legislation and the business and financial affairs of
Hapag-Lloyd which are subject to change and audit, and is subject to the provisions contained within legislation.
The distribution of this presentation in certain jurisdictions may be restricted by law. Persons into whose possession this presentation comes are required to
inform themselves about and to observe any such restrictions. Neither this presentation nor anything contained herein shall form the basis of, or be relied on
in connection with, any offer or commitment whatsoever. In particular, this presentation does not constitute an offer to sell or a solicitation of an offer to buy
securities of Hapag-Lloyd in the United States. Securities of Hapag-Lloyd may not be offered or sold in the United States of America absent registration or an
exemption from registration under the U.S. Securities Act of 1933, as amended. Hapag-Lloyd does not intend to conduct a public offering or any placement of
securities in the United States.
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