Container Industry Stuck in a Vicious Cycle

MarineLink.com
Wednesday, April 02, 2014
Photo: Maersk

The industry is stuck in a vicious cycle, Drewry reports – although new ships may give carriers lower slot costs, the supply/demand dynamics are out of kilter and freight rates remain very volatile.

Drewry Maritime Research’s 1Q14 Container Forecaster report highlights that the industry remains in an extended down cycle. This is being accentuated and extended by the constant delivery of new ships. The global cascade is now hurting the balance of the north/south trades.

Some of these trade routes have also not lived up to expectations in terms of cargo flows and the sharp influx of many new ships of at least 8,000 teu has resulted in significant declines in spot freight rates, particularly on the Asia to East Coast South America trade.

On the one hand, bigger ships may be delivering carriers the lower unit costs carriers seek, but the supply/demand imbalance coupled with the desire by most operators to protect their market share is a toxic mix for overall profitability. This is why all focus is now on reducing costs and Maersk Line remains the “best in class.”

Drewry Maritime Research is forecasting 5.7% global supply growth for 2014, followed by 6.7% next year, with the emphasis on the delivery of 115 more ULCVs and a large number of ships in the 8,000-10,000 teu category. The orderbook’s momentum has not stopped and outside equity is fuelling this. We know NYK will confirm an order soon and Cosco has now re-entered the fray. CMA CGM’s decision to upgrade some of its ships to the 18,000 teu level may also instigate another injection of capacity.

For this year we are forecasting global demand growth of just over 4%, but we do not see any real opportunity for the industry to recover and draw breath until 2016, and this is still dependent on what happens with the orderbook.

Although scrapping rates are at record levels, the delivery profile in the next 24 months will continue to cause damage and carriers will have little if any long-term success with their constant general rate increase initiatives. On the contracting side, we also hear anecdotally that many contracts in the core east-west trades have been signed at the same level as in 2013 or in many cases, significantly lower.       

Multiple levers are being used by carriers to address the over-supply to varying degrees of success – void sailings, scrapping, idling vessels, slow steaming and new operational alliances and mergers. These alone are not enough since freight rates are increasingly being dictated by carrier behaviour and psychology, rather than the fundamentals.

Neil Dekker, Drewry’s head of container research, stated, “Two major fights will continue for the carriers this year – to win contract and spot business. The larger battle will be waged in the spot market arena, which suggests that rate volatility will continue for the time being.”

drewry.co.uk

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

People & Company News

Coast Guard Foundation to Honor Longtime Supporter

National Tribute Set for Thursday, October 9, 2014 The Coast Guard Foundation, a nonprofit organization committed to the education and welfare of all Coast Guard members and their families,

Last Call to Register for SHIPPINGInsight

Maritime industry conference and exhibition opens next week in Stamford, Conn. There’s still time to register online for SHIPPINGInsight 2014, the North American

Aage Hempel to Service and Distribution Simrad Products Aage Hempel Netherlands b.v. signed an agreement with Navico Europe b.v. for service and distribution

Finance

Barge Operator Fined for Releasing Dangerous Gas

The operator of a Portsmouth-based barge has today been made to pay almost £111,000 in fines and costs after pleading guilty to a breach of maritime legislation.

Charterers Remain Optimistic Despite Small Downturn

Overall confidence levels in the shipping industry fell slightly during the three months to August 2014, according to the latest Shipping Confidence Survey from

Insights: New York Canal Director Brian Stratton

Brian U. Stratton was appointed Director of the New York State Canal Corporation in April 2011, to oversee the operation and development of New York’s 524-mile Canal System,

Container Ships

US Sets Import Duties on Chinese Containers

The U.S. Commerce Department on Tuesday set duties on imports of rail and road transport containers from China after finding the goods were produced using unfair government subsidies.

New Rotation of CMA CGM Joint Service Unveiled

CMA CGM S.A. (CMA CGM) announced the rotation of its new service in cooperation with China Shipping Container Lines (CSCL), Orient Overseas Container Lines (OOCL)

Charterers Remain Optimistic Despite Small Downturn

Overall confidence levels in the shipping industry fell slightly during the three months to August 2014, according to the latest Shipping Confidence Survey from

News

Coast Guard Foundation to Honor Longtime Supporter

National Tribute Set for Thursday, October 9, 2014 The Coast Guard Foundation, a nonprofit organization committed to the education and welfare of all Coast Guard members and their families,

Suncor Sends First Tanker of Western Canada Heavy Crude to Europe

Canada's largest oil and gas producer, Suncor Energy Inc, is shipping its first ever tanker of Western Canadian heavy crude from Canada's East Coast to Europe, a company spokeswoman said on Tuesday.

Pivotal to Deliver LNG to Carib for use in Puerto Rico

Pivotal LNG, Inc., a subsidiary of AGL Resources, announced this week a long-term agreement to sell liquefied natural gas (LNG) to Crowley Maritime Corp. subsidiary Carib Energy LLC (Carib).

 
 
Maritime Contracts Maritime Standards Naval Architecture Pipelines Pod Propulsion Port Authority Ship Electronics Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | 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: 0.2318 sec (4 req/sec)