Container Business Faces Test of Resolve

Press Release
Tuesday, April 03, 2012

London - Drewry’s latest quarterly Container Forecaster report highlights that, while carriers have successfully implemented a series of GRIs recently which will improve their battered financial position, there are still a number of threats which could derail this and that healthy industry profitability is by no means guaranteed.

The perception might be that the industry has turned a corner and the extremely low freight rates seen on the Asia-North Europe trade at the end of last year are now behind us. We concur with this general view to an extent, and we forecast that east-west freight rates, including fuel, will rise by as much 13.7 percent this year. But we should not be lulled into a false sense of security by the considerably higher spot rates revealed in the weekly rate indices and think that all is now fixed.

From an industry perspective, it is clear that higher rates enabling ocean carriers to cover their rising costs and turn a profit is a far healthier position. But there are still a number of factors which threaten this. Demand is by no means certain, and we have downgraded our 2012 global forecast to 4.6 percent, largely on the basis of a weak Eurozone, crippled by debt.

Ocean carriers have successfully implemented GRIs on both the head haul Asia to Europe and Asia to U.S. trades this March, which have lifted spot rates above or at least close to the respective trade route break even margins. But until very recently, even the largest 15,500 teu vessels operating on the Asia-North Europe trade were not making money.

The revised assessment within the Container Forecaster is that the industry lost at least $6.5 billion in 2011, in a year which saw global demand growth of 7.4 percent. This was very much a missed opportunity for carriers to build on their surprisingly strong recovery in 2010. This year will mean they will take some time to make up for this lost ground, rather than moving forward, and we still expect 1Q12 carrier financial results to be weak, although their position will improve as the year progresses.

Recent losses and the high fuel prices have forced the industry into a restructuring, which was started at the end of last year. Many carriers have now grouped together on the core Asia-Europe trade to pool their largest ships into fewer services and to share costs. This was unlikely to have happened several years ago.

Nobody saw the huge $800 per teu rate increases coming on the Asia-Europe trade, and the timing of this bemused virtually everyone. Few believed it would be successful. But carriers have stood firm during a period when load factors have not necessarily been in the high 90’s on the head haul leg. It seems that their recovery into profit is very much dependent on this resolve to maintain the GRIs and little else since they resolutely refuse to put significant tonnage into lay-up. This year will see another 59 ships of at least 10,000 teu enter the global fleet.

“Until the inherent structural capacity is truly tackled, we will continue to have periodic and violent bouts of overcapacity, which will keep rates and operating margins yo-yoing up and down,” said Neil Dekker, head of Drewry’s container research.

“It seems evident that carriers do not truly see the severity of their situation, since the number of ships in actual full term lay-up is fairly small. As of early March, the idle or inactive fleet had grown to around 5.4 percent of total global capacity. But only 47 vessels above 5,000 teu were included in this figure and a number of these are being re-deployed on new services.”

 

Maritime Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Russia Ships First Oil From Offshore Arctic Platform

President Vladimir Putin hailed Russia's first shipment of Arctic offshore oil on Friday, saying the platform decried by environmentalists will help Moscow expand its global energy markets share.

Shipping Turns From Banks to Equity Markets for Cash

Shipping companies are turning to equity markets to fill a growing funding gap, betting that investors hungry for decent returns will provide capital to a sector

Keel-Laid for Navy's 10th LCS at Austal Yard

The Navy and Austal USA held a keel-laying ceremony for the future 'USS Gabrielle Giffords', the Navy's 10th littoral combat ship (LCS), in Mobile, Ala., informs

Container Ships

CMA CGM Strengthens Madagascar Presence

Since the creation of CMA CGM Madagascar in 2003, container shipping company CMA CGM Group has continued to develop on the island to move closer to its valued customers

Shippers Turn to Equity Markets as Sector Eyes Recovery

Shipping companies are turning to equity markets to fill a growing funding gap, betting that investors hungry for decent returns will provide capital to a sector

Latest Shipbuilding Contracts Include VLCC Order for Philippine Yard

In the latest Clarkson Hellas S&P Weekly Bulletin newbuilding orders are reported in Far East shipyards for a range of vessels as follows: Bulk carriers Clarkson

News

Crewman Claims Ferry Captain "Rushed Back To Bridge"

The captain of a South Korean ferry that capsized two days ago rushed back to the bridge after it started listing severely and tried in vain to right the vessel,

Canaveral Tops State List for Sand Bypass Funding

The Canaveral Harbor Inlet Sand Bypass Project has earned the top state ranking for 2014/15 inlet management funding. As a result, Port Canaveral is expected to receive $100,

Rotterdam port's throughput almost stable

The Port of Rotterdam’s throughput in the first quarter of 2014, at 109 million tonnes, was 0.2% below the level for the corresponding period last year.Split up by goods type,

 
 
Maritime Careers / Shipboard Positions Maritime Standards Navigation Pipelines Salvage Ship Repair Ship Simulators Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1898 sec (5 req/sec)