SHIPPING | Container carriers may struggle to break even this year

From Tradewinds | 2011.04.13

A combination of lower rates, poor capacity management and spiraling costs are likely to reverse the huge gains seen last year, consultants Drewry warned in its quarterly Container Forecaster report.

The industry racked up a $17bn profit in 2010, a figure that Drewry predicted in December would fall to $8bn in 2011.

But now it says a number of lines could fall into the red this year unless measures are taken to control supply.

Demand remains strong with Drewry predicting worldwide growth of 8.3% in 2011.

An excess of supply and the re-emergence of a “chasing market share” strategy is to blame for a 40-50% drop in spot rates in the transpacific and Asia-Europe trades since August, Drewry says.

And the analyst said East-west freight rates excluding fuel will fall by 13.2% in 2011.

Matters have not been helped by fuel price rises made worse by political unrest in North Africa and the Middle East.

The report said: “With carriers launching new Asia-Europe and transpacific strings in April and May, it is clear that they are not focused on capacity management and have no intention of laying up tonnage. The market is clearly out of kilter and a correction is required.”

Neil Dekker, editor of the Container Forecaster said: “A large dose of common sense is needed by the container industry and the direction it takes in the second quarter is in the hands of the carriers.”

If the container industry does swing back to deficit it would represent a remarkably short business cycle in the market.

The business will have swung from a $19bn deficit in 2009 to a $17 billion gain in 2010 and back again.

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