Box Ship Demand Down

Maritime Activity Reports, Inc.

October 30, 2015

Photo: CMA CGM

Photo: CMA CGM

While, weak spot prices and higher futures prices created demand for oil tankers has boomed, bulk carriers have been hit by massive overcapacity, as Chinese demand for such commodities has collapsed, says latest report from the Economist.

The largest container lines are bulking up to try to withstand a fresh downturn, the report said.
The container-shipping business—which carries around 60% by value of all seaborne trade in goods—looked more like that for oil tankers, till beginning of this year.
But since then the industry has been rattled by renewed weakness in freight rates, prompted by a fall in the volume of seaborne trade. The cost of sending a container from Shanghai to Europe, for instance, has almost halved since March, according to the Chinese city’s shipping exchange.
As recently as August last year, demand for container shipping was so high that BIMCO, an industry association, was warning of a capacity shortage. 
And at the start of this year Drewry, a shipping consultant, forecast a bumper year: owners of boxships would rake in profits of up to $8 billion in 2015, they thought, helped by low fuel costs.
As falling volumes and weak shipping rates force the industry to consolidate, with fewer, bigger lines sailing ever-larger ships to fewer, bigger ports, the resulting gains in efficiency should mean cheaper transport costs, bringing benefits for consumers in many places. 
That is, unless the consolidation goes too far, and the surviving lines are able to jack up their rates. The 2M alliance now controls more than 28% of global container-shipping capacity, and almost a third on the Europe-to-Asia route.
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