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Sunday, September 24, 2017

Report Says Trade Slows for Container Shipping Businesses

October 8, 2008

Maritime consultants Drewry Shipping Consultants has launched its ‘Annual Container Market Review and Forecast 2008/09.’ Now in its ninth year, Drewry’s Review is the liner industry’s leading commentary and forecasting tool for both global and individual trade lane supply, demand and pricing analysis.
What is clear from Drewry’s Report it that the strong growth in the container shipping sector is now going into reverse as the credit crunch impacts all the major economies. Using Stock Market Indices as a barometer of economic performance and sentiment, it can be seen that every country/region of critical importance to growth rates of container traffic volumes has suffered a major loss of confidence since the beginning of the year. The Indian market has suffered above average falls and emerging markets (including ) have generally had a particularly difficult year. Any sense that some nations could be immune to, or disconnected from, the fate of the western economies seems to have been clearly refuted by developments.
Generally, with the supply/demand balance weakening, the management of capacity will become crucial for carriers over the short and medium terms. Cascading of ships to smaller trades will be a key focus for carriers in the next 18 months and the laying up of tonnage is not out of the question.
The report indicates that despite the gloomy forecast there are some market positives.
There is strong growth on US backhaul trades to north Europe, the Mediterranean and that has helped reduce container imbalances and re-positioning costs. Some routes have seen robust growth including Asia to Mid-East and , and East Coast South America.
The strategy of slow steaming adopted by container fleets and encompassing global trades will soak up some overcapacity.
Ocean carriers and shippers are sharing the cost of higher fuel prices on many trades in the form of a floating BAF; “all-in” rates are far less prevalent. Although historically high, fuel prices have fallen since July 2008. Further, some airfreight is switching to maritime container transport (low volumes).
Cutting unprofitable routes may ease some of the pain but container businesses have to contend with other negatives apart from falling rates and weakening headhaul demand on all three major east-west routes. These include waning ocean carrier profitability with instability in the market as demonstrated by the recent demise of a few minor operators. More carriers may possibly go under if they do not rein in costs.
There is also expected instability from the termination of conferences in all the European trades. A slowing down of the Chinese economy, higher levels of inflation and higher production costs will continue to impact the country’s ability to remain the ‘factory of the world’.
The 65 new ships in excess of 8,000 teu capacity that will launch over the next two years will struggle to find sensible and effective employment. Cascading of tonnage to smaller north/south and regional trades will create new supply/demand imbalances and further weaken rates
To cap it all, the lack of improvement of port infrastructure in developing markets will create bottlenecks and increase congestion

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