Container Sector Feels Recession Heat

Tuesday, July 07, 2009

Drewry’s latest Container Forecaster analysis predicts casualties and continued unsustainable freight rates unless the industry market share mind-set is discarded. According to Drewry’s analysis, there will be a 10.3% contraction for containers by the end of 2009 followed by a mere 1% growth next year. For one of the most competitive trade routes, Asia-Europe, three years of demand growth have been wiped out. Drewry predicts that global container handling in 2009 will be 27 million TEU less than 2007. This in itself is also bad news for the port investment sector. Reflecting the same picture, the Drewry global/supply demand index, one of the industry’s key measures, is set at 83.4 for this year, and will likely fall to 79.6 in 2010.

According to Container Forecaster, the business model of some of the smaller operators is proof that companies can operate profitably and are quietly expanding. Larger companies need to focus on sustainable solutions and try and resist the temptation for looking over their shoulders at market share.  Launching new services in the hope for a summer peak will put even more pressure on the current rate restoration initiatives going on in many key trades. Selling vessels may reduce the strain for individual fleets, but the overall fleet size, and therefore the problem, remains. Apart from the obvious cutting of unwanted costs, Drewry suggests, ocean carriers should review their relationships with customers.

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