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 Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

DP World's H1 Volumes Rise

Ports operator DP World reported on Tuesday first-half 2016 gross container volumes up 1.2 percent on a like-for-like basis and up 2.5 percent on a reported basis.

Samil PwC Okays Hyundai's Management Improvement Plan

Hyundai Heavy Industries (HHI) is notified by Samil PwC, a local member of the global accounting firm PwC, that its 3.5 trillion won worth management improvement

Volvo Penta Names Brown Commercial Marine Sales Director

Dave Brown has joined Volvo Penta of the Americas as director of commercial marine sales.   In this new position, Brown will provide strategic and administrative

Finance

China Joins UN Trucking Treaty

China has taken a major step towards establishing a speedy new "Silk Road" to Europe by signing up to a U.N. trucking treaty.   Fifteen years after joining the World Trade Organization (WTO),

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

Gulf Petrochem Group Expands European Bunker Operations

Gulf Petrochem Group, the UAE based global bunker supplier, has announced that it is now officially offering physical bunker supply in the port of Rotterdam, out of its new office based in Dordrecht.

Container Ships

New Container Facility at Krishnapatnam Port

Krishnapatnam Port, India's largest all-weather; deep water port on the east-coast of India has inaugurated CONCOR’s - Port Side Container facility – a Government of India undertaking.

DP World's H1 Volumes Rise

Ports operator DP World reported on Tuesday first-half 2016 gross container volumes up 1.2 percent on a like-for-like basis and up 2.5 percent on a reported basis.

DP World's H1 Gross Volumes up 1.2%

DP World Limited handled 31.4 million TEU (twenty-foot equivalent units) across its global portfolio of container terminals during the first half of 2016, with gross container volumes growing by 2.

News

NASSCO Delivers Garden State to APT

Marking its seventh ship delivery in the span of just over a year, General Dynamics NASSCO has delivered the newly built ECO Class tanker Garden State for American Petroleum Tankers.

Long Beach Awards Sovcomflot for Green Shipping

PAO Sovcomflot earned the Green Environmental Achievement Award from California's Port of Long Beach, recognizing the shipper for its ongoing commitment to environmental stewardship.

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Naval Architecture Navigation Pipelines Pod Propulsion Ship Electronics Ship Simulators Sonar
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: 0.1238 sec (8 req/sec)