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

People & Company News

Ocean Installer Enters Australian O&G Market

Ocean Installer’s said that it has established office in Perth, Australia to meet demand for subsea construction services.  “This is the beginning of our presence

Nordic Wins with Noble

Nordic Maritime, a leading offshore service operator, today announced a five year time charter for its DP2 IMR Subsea vessel, Mokul Nordic, which has been awarded by Noble Energy,

EUCAP Nestor Train 30 Somali Coast Guards

On 21 October, the European Union’s Maritime Capacity Building Mission in the Horn of Africa and Western Indian Ocean (EUCAP Nestor) celebrated the successful completion of a two month Mentoring,

Container Ships

VT Halter Begins Building LNG-powered ConRo Ships for Crowley

VT Halter Marine, Inc., a subsidiary of Vision Technologies Systems, Inc. (VT Systems), has commenced construction on the first of two liquefied natural gas (LNG)-powered,

NYK Line Joins PNW West Coast Metro Pool

Effective October 20, 2014, NYK Line has become a member of the PNW West Coast Metro Pool (WCMP) operated by Trac Intermodal. The WCMP operates chassis at all major marine terminals,

ISS Manages Heavy-lift Project at Port of Mombasa

Inchcape Shipping Services (ISS) announced it has completed another complex heavy-lift project in Africa, this time at the Port of Mombasa in Kenya. ISS was

News

Total CEO Plane Crash: Russian Prosecutors Detain More Suspects

Russian prosecutors detained four Moscow airport workers and denied bail to the driver of a snow plough which hit a private jet killing the CEO of French oil company Total earlier this week,

Yara Reports Strong 3Q Results

Yara International ASA delivered strong third-quarter results, with record fertilizer deliveries and continued margin benefit from lower European gas price. "Yara

Bright Outlook for BWM Convention

The Danish Maritime Authority informed that the Ballast Water Management Convention is now one step closer to ratification following last week’s meeting of United

 
 
Maritime Careers / Shipboard Positions Offshore Oil Pod Propulsion Salvage Ship Electronics Ship Repair Ship Simulators 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: 0.2157 sec (5 req/sec)