Excess capacity and insistence on chasing unprofitable market share will cause many container ship lines to lose money this year despite global volume growth of more than 7 percent, Drewry Maritime Research said in its quarterly Container Forecaster.
Drewry said growth in intra-Asia traffic and on emerging trade lanes with Latin America is offsetting weakness in developed economies, but and that this year “should have been much better for the industry.”
“There is every chance that operators will lose significant money in 2012 unless the fundamental trade supply/demand dynamics are pulled into equilibrium. Vessel layups, which will be unwelcome news for independent shipowners, would be an obvious answer, but the amount is still minimal at the moment and it seems unlikely to reach the levels previously experienced in 2009-10,” Drewry said.
The industry’s chronic supply-demand imbalance shows no sign of abating during the next five years, the report said. Orders of 2 million 20-foot container equivalents of vessel capacity since June, 80 percent for which represents ships of at least 8,000 TEUs, have “already done the damage.”
With major east-west trade lanes awash in capacity, carriers are “cascading” large ships onto secondary routes. “Effective cascading is now becoming a problem for carriers as they struggle to deploy ships into smaller trades without inflicting damage,” Drewry said.
Leading carriers clearly “are intent on protecting market share rather than maintaining profitability,” Drewry said. “The resultant erosion of rates means that overcapacity remains a huge concern for carriers and a factor of instability for shippers as well as companies which finance or supply the carriers.”
Drewry said a weaker-than-anticipated peak season has undermined headhaul volumes from Asia to Europe, and especially in on trans-Pacific to the United States. With load factors of only 80 to 85 percent, carriers have failed to push through peak season surcharges and have cut spot rates to unprofitable levels.
“Perhaps it is ‘relatively’ easy for the biggest players to sit back and believe that the smaller carriers will go bankrupt this time round or will re-trench to their regional markets and the industry will re-adjust itself. But a great deal of pain will be experienced even if this process does take place,” Drewry said.
