Containers Profit Up Thanks to Low Slot Cost

Maritime Activity Reports, Inc.

January 14, 2015

Image courtesy: Maersk

Image courtesy: Maersk

In spite of record vessel deliveries the container shipping profitability is expected to improve in 2015, driven by lower unit costs.

The global fleet is expected to grow 7.2% in 2015, a faster pace than demand which is forecast to expand at a more modest 5.3%. 
But the shipping consultancy Drewry, forecasts that industry unit costs will continue to decline at a faster pace than average freight rates, so raising profitability.
Bunker prices have plunged by more than 50% over the past six months, reducing the largest cost element for ship operators. The anecdotal evidence suggests that carriers intend to increase annual contract rates on all trades with their key BCO (beneficial cargo owner) clients this year.
Neil Dekker, Drewry’s director of container research says that carriers were winning the battle between rates and costs. However, there are issues such as port congestion which are both costly and outside the direct control of carriers. 
Drewry estimates that the industry will finish 2014 in the black, thanks mainly to the contributions of a handful of lines such as Maersk and CMA CGM, while others will have lost money.
More carriers are expected to be profitable in 2015, provided that a number of tailwinds prevail. These include: continuing carrier focus on vessel deployment; fuel costs remaining low; recovering demand; successful outcome of annual BCO contract negotiations; and new operational alliances delivering greater market stability.
CSCL Globe group vice-president Yu Zenggang told reporters in Hamburg yesterday that slot costs on ultra-large container vessels in the Far East-Europe trade have dropped significantly and are now well below average spot freights.
Based on today's bunker prices the breakeven freight rate for the CSCL Globe on a Far East-Europe westbound voyage is just below $600/teu, he said.
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