Profitability Rests in Carriers’ Hands

Marinelink.com
Monday, April 08, 2013
Source: Drewry Maritime Research (Container Forecaster report)

As expected the industry just about scraped over the break-even line in 2012, albeit only because of the results of a handful of leading lights. There is every chance that lines will make decent money in 2013, but only if they refrain from old habits and stick to pricing and capacity discipline.

Drewy’s latest Container Forecaster report gives our headline industry operating profit estimate for 2012 of $280 million. Clearly, this is a very poor return for moving nearly 170 million teu of loaded containers, although any sort of profit seemed highly unlikely after the heavy losses sustained in the first quarter of 2012.

It also represents a significant improvement on the estimated $7.7 billion loss endured in 2011. Whether or not carriers are satisfied is debatable.

Spooked by that awful start to the year, carriers avoided another 2009 and 2011-esque financial meltdown and turned things around through a combination of prudent capacity management and unity on freight rate increases.

Worryingly for carriers, the revival in fortunes that saw all carriers back in the black for the third quarter has quickly dissipated and many lines lost money again in the fourth quarter.

Estimated carrier industry EBIT profit/loss and EBIT margins, 1Q08-4Q12

Our previous forecast for 2012 profitability did anticipate a weaker fourth quarter, but judging by the sample of available results we were slightly too optimistic. Drewry estimates that the average operating margin of carriers in the fourth quarter shrank to 0.1%, down from 6.6% in the third quarter, as spot market freight rates plummeted on the key westbound Asia-Europe (-23% quarter-on-quarter) and eastbound transpacific (-11% Q/Q) trade routes.

Subsequently, only three major carriers (CMA CGM, Maersk Line and OOCL) returned a meaningful operating profit for the full year, although Hapag-Lloyd did salvage a tiny profit of $3 million. Ultimately, these select few “winners” neutralised the losses accrued by the rest so that our industry average balanced out at close to zero.

EBIT profit /loss of selected carriers in 2012, $ millions

The mixed-bag of results for 2012 tells the tale of how successful (or not) individual carriers were at getting a grip on costs as well as their exposure to high or low yielding trade routes. Unquestionably, that focus on cost optimization will need to be maintained and intensified if carriers are to see improved profitability in 2013.

The slide back into the red during the fourth quarter clearly does not bode well for carrier profitability in 2013. However, there is some cause for mild optimism among carriers. For 2013 we remain optimistic that carriers can return a decent profit as average freight rates and volumes for the year are expected to rise by around 3% and 4% respectively, while bunker costs are predicted to come down by 1.5%, the first year-on-year decrease since 2009.

Drewry container industry profitability forecast, 2012-13

We do expect carriers to make money again this year, but it should be reiterated that carriers themselves are the biggest risk to this forecast. While there are significant profit gains to be had through cost-cutting, if lines were to lose their pricing discipline and enter into a new rate war heavy losses will undoubtedly follow.

With so many variables to consider any industry-wide profit forecast is a hostage to fortune, but we have to believe that ultimately carriers will do what is in their best interest. Particularly so when you consider that the last five years have essentially been a lost half-decade with a cumulative loss of $700 million between 2008-12.

  • Source: Drewry Maritime Research (Container Forecaster report)

    Source: Drewry Maritime Research (Container Forecaster report)

Maritime Reporter April 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Long Beach Picketers Not Striking -Port CEO

Port of Long Beach CEO Jon Slangerup issued a statement addressing the status of picketing truckers at the harbor, pointing out that the demonstration is not a strike.

E-Procurement Streamlined via the Cloud

Marine Procurement Solutions (MPS) has built an electronic platform that aims to enhance the purchasing cycle for the maritime industry. MPS provides software,

Cashman Continues to Expand US Northeast Barge Fleet

Cashman Equipment Corp. announced the continuing expansion of its U.S. Northeast barge and crane fleet for the marine construction market.   Over the past year,

Offshore

BV Upgrades RAM Software

To help offshore operators and contractors get more out of their assets and develop projects more cost-effectively, Bureau Veritas has supercharged its reliability,

Intelligent Fender System Completes Offshore Trial

Strainstall, part of James Fisher and Sons plc, announced the completion of the world’s first Intelligent Fender System (IFS) trial with energy companies SSE and RWE at Suffolk-based wind farm,

Maritime Tension Dominates Southeast Asia Summit

Southeast Asian leaders edged closer to open criticism of China's land reclamation in the disputed South China Sea at a regional summit on Monday, as the Philippines

Finance

US Designates Three Marine Highway Projects

U.S. Transportation Secretary Anthony Foxx has designated three new Marine Highway Projects.   The Mississippi and Illinois Rivers, previously designated as the M-55 and M-35,

Baltic Index Flat on Muted Shipping Activity

The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, remained flat on Monday on muted shipping activity.   The overall index,

Milaha Reports Improved Net Profit for Q1

Qatar Navigation (Milaha) Q.S.C. has announced its financial results for the three months ended March 31, 2015, in which it reported operating revenues of QR 786 million vs.

Container Ships

Bollore Consortium Misses out on Cameroon's Kribi Port Shortlist

A consortium led by France's Bollore failed to make the final shortlist of firms vying to manage a new container terminal in Cameroon's southern port of Kribi,

Long Beach Picketers Not Striking -Port CEO

Port of Long Beach CEO Jon Slangerup issued a statement addressing the status of picketing truckers at the harbor, pointing out that the demonstration is not a strike.

Truckers to Strike Four SoCal Shippers

Truckers who haul freight from the ports of Los Angeles and Long Beach will go on strike against four ground-shipment companies on Monday, a Teamsters union official said,

 
 
Maritime Contracts Naval Architecture Navigation Offshore Oil Pod Propulsion Salvage Ship Electronics 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: 0.3333 sec (3 req/sec)