SeaNews Turkey - Drewry: Mega-ship craze risks lay-ups in any rate war

Home

FAQ

RSS

Links

Site Map

Contact

Sunday, 26.May.2013, 01:57 (GMT+3)

Keyword:

[Advance Search]

All News

COLUMNISTS

»	CAHIT ISTIKBAL

»	NILUFER ORAL

»	STEVE PELECANOS

»	SULEYMAN SAVAS

WORLD SHIPPING

SHIPPING NEWS

»	TURKISH STRAITS

»	HELLENIC SHIPPING NEWS

»	CRUISE NEWS

»	PILOTAGE&TOWAGE

»	SAFETY&SECURITY

»	Environmental

»	Towage & Salvage

»	Anatolian Agency

»	Hurriyet Daily News

»	HDAILYNEWS

LLOYD'S LIST

INSIGHT/OPINION

SHIPBROKER REPORTS

Poll

What you expect from freight market in 2013?

	Better than 2012.
	Worse than 2012.
	Continue recovering.
	Steady up.
	Rapid rise.
	None

MARKETS

Drewry: Mega-ship craze risks lay-ups in any rate war

THERE is uncertainty over how shipping lines will manage to cascade bigger ships into North America trades, according to London's Drewry Maritime Research paper, "Unmasking Freight Rates".

"In the best case scenario (ie, better capacity management and cascading, less emphasis on market share, more on profitability, and fewer ships orders) we can see carriers being able to maintain load factors at levels that should deliver solid if unspectacular profits over the next few years," said Simon Heaney, one of the authors, according to American Shipper. "In the worst case, we think carriers will be forced into more lay-ups."

Asked about what impact Maersk Line's recent order of 18,000-TEU ships may have on rival container shipping lines, Mr Heaney said: "Logic and the order book are not always in sync. It is unlikely we will see the same deluge as seen in 2006-2007, mainly because financing is tougher to come by and the KG market is much shallower and somewhat humbled.

"That said, ego plays a big role in container shipping and there is every chance that having seen what Maersk has done with its 18,000-TEU order, some rivals will feel compelled to react.

"As 2011 progresses there has been more momentum with orders placed in the big ship sizes: Seaspan, Hamburg Sud and now OOCL. The primary incentive from the carrier perspective is to have ever lower slot costs, but the combined effect on the supply/demand balance at the individual trade route level - given that these ships cannot be deployed on too many routes - could be very different at the time they are deployed. We see this momentum as an increasing threat, especially with more outsiders entering the fray with readily available funds," he said.

Mr Heaney said that central to the report, which looks at prospects over five year, is an attempt to discover how capacity affects rates, chiefly the impact of supply and demand on rates.

"Basic supply/demand economics is the major driver of freight rates," he said. "Our historical analysis shows that the closeness of the relationship varies depending on the time period and trade lane examined and that other factors such as sentiment, new entrants into markets, predatory pricing and future expectation of overcapacity among other modifiers can all have a big influence on prices."

Mr Heaney said there is a floor at which point carriers will remove tonnage in order to boost utilisation and rates. For the westbound Asia-Europe trade, Drewry estimates this minimum to be in the mid-60 per cent range.

Commenting on carriers' earning capabilities in the coming years, Mr Heaney said: "We believe future carrier profitability will be put at risk by repeating the market share grabbing antics that nearly bankrupted some of them in 2009. This is a very real threat as anecdotally we hear that carriers are agreeing to very low freight rate deals in order to tie in volume this year on services where utilisation factors are falling."

Read: 4851 Times-

Drewry, rate war, - Follow @SeaNews_Tr

Rating (Votes: 0)

Add your comment(Existing: 0)

Tell friend

COMMENTS ( 0 Existing)

Related Articles:

» Portuguese Companies Struggling, Minister Says

» Shipyards battle to stay afloat

» Urgent action still required between Asia and North Europe: Drewry

» Maersk posts 30pc group profit loss, but container volumes beat estimates

» LION SHIPBROKERS MARKET REPORT 17 May 2013

» Moody's: Global shipping sector faces risks

» New investors needed to help finance ships below 3,000 TEU: Drewry

» Ship orders show trace of recovery, but no big shift expected soon

» Hong Kong falls 12.2pc in April to 1.7 million TEU, Singapore up 1pc

» BIMCO’s Analyses Show Significant Turn for Shipyard Industry

» Hamburg Süd 2012: Better, but not yet good enough

» PC Maritime ECDIS in 50-vessel China Shipping Group deal

» Tanker market unkind to ship owners during April

» India to Import 1 Million Tons of Iron Ore Each Month

» Norway: WWH’s Q1 2013 Income Declines amid Drop in Shipping Volumes

» Transatlantic clean rates at near 3-month high on firm trade

» Iron Ore Ship Rates Rally Longest Since July as Cargoes Increase

» Norway: Slightly Better Chemical Tanker Market for Odfjell in Q1 2013

» G E Shipping: Crude Tanker Market Continues to Underperform

» US quarterly box growth up 10.2pc, rising for sixth straight quarter

» Mega box ship orders add to overcapacity as rates tumble: Drewry

» Hutchison and CMA CGM bid for Melbourne's third box terminal

» California levies rate hike on harbour users as ports lose market share

» Rotterdam's first quarter containers up 4pc, but empties dominate

» Less shipper choice as smaller lines forced out of east-west trades

» Global container trade growth for 2013 revised down as market mood darkens

» Oil-Tanker Rates Climb as Demand to Book Vessels Seen Gaining

» Transatlantic carriers struggle to make a profit as US imports fall

» Smaller ship sizes and MR product tankers are ship owners' newbuilding focus

» Dry bulk capacity growth slows further, encouraging sign for later half of 2013

» Drewry takes positive view of port prospects, sees 4-6pc growth ahead

» German business expectation forecasts weak shipping demand ahead

» Ore-Ship Rates Climb to a One-Month High as Charters Increase

» Ship capacity grows positively by just 7.1% last week, lowest since 2013

» Dry bulk market rebound may take longer than expected

» Oil Tankers Lose Money for Fourth Week as Ship Surplus Persists

» Cargotec suffers 14pc quarterly revenue decline despite new orders

» Cosco Pacific Q1 profit off 15.5pc to US$68 million as revenues rise 10pc

» OOCL first quarter volume declines 0.3pc as revenues increase 3.6pc

» LION SHIPBROKERS MARKET REPORT 28 April 2013

» Box terminal stake sales show carriers need greater cash reserves

» South Korean Shipbuilders’ Earnings Might Fall

» Shanghai suffers first trade value drop to European Union in years

» Global box volume to GDP relationship uncouples as fundamentals change

» Iranian ports at half capacity, but still make US$1.2 billion a year

» Fujian-Taiwan cross strait first quarter volume up 7pc to 148,486 TEU

» Shanghai's first quarter trade value down 0.9pc - 'first decline in years'

» Experts: China's Q1 trade statistics show signs of falsification

» Fujian seaport quarterly container volume up 10.3pc 2.48 million TEU

» Troubled CSCL to boost container volume 6pc through cost control

Other Articles:
	Asia-Europe bunker rates still on the rise (Thursday,24.03.2011)
	Drewry proposes longer term, index-linked service contracts (Monday,21.03.2011)
	Freight rates ex-Asia hit 16-month low (Saturday,19.03.2011)
	Shipping Rates Poised to Decline 27% After Two-Week Rally (Wednesday,16.03.2011)
	Carriers say 2011 supply and demand will be in balance (Thursday,10.03.2011)
	Baltic sea index stays firm, more upside seen (Monday,07.03.2011)
	Drewry spot rate suffers 3rd week of decline for HK-LA box shipment (Friday,04.03.2011)
	Hanjin announces comprehensive Asia-Europe rate increases (Friday,04.03.2011)
	Deutsche Shipping generates record result in 2010 (Tuesday,01.03.2011)
	Woodchips Carrier "Soul of Luck" was sold to a Turkish Buyer (Monday,28.02.2011)