MATCHING supply and demand may be beyond the shipping industry, says Drewry, pointing to the quest to buy more cost-efficient, provided they're filled, but expensive and ever larger box ships despite wiping out planned freight rate hikes.
Cementing their demise, weaker contractual rates have been sealed on the Asia-Europe and Transpacific trades.
According to Drewry's second-quarter Container Forecaster report, Transpacific carriers by the end of this year will have given away US$1.3 billion in revenues on freight rate contracts signed on the head-haul trade alone.
On the Asia-Europe trade lane, annual contract rates are $150 to $200 lower per TEU than in the prior year, reported Lloyd's Loading List.
Drewry said the shipping lines had signed the contracts at lower levels to fill their ships, but warned it would put pressure on carriers to recover revenue from the spot market, and it's expected to remain volatile.
The analyst said the lower freight rates would also widen the gap between the financial results of carriers that have focused on cutting costs and the rest of the top 20 lines.
"While supply and demand remain key drivers of freight rates across all trades, those carriers cutting their costs are also better equipped to offer lower rates and in real terms they are in fact passing back these benefits to their customers," it said.
"Industry unit costs per TEU are forecast to decline by 2.5 per cent this year and strategies such as slow steaming, redesigning networks and buying bunkers in Russia are crucial to this, but carriers will struggle to make a profit since we are also forecasting unit revenues to decline by a similar amount."
Drewry director of container research Neil Dekker said, "It could be that the huge task of adequately matching supply and demand at the global level and on a consistent basis, which ultimately helps to drive freight rates, is simply beyond the industry, and we do not mean this as a condescending remark.
"This is an industry where accurate volumes on many trade lanes are unknown, simply because there is no unified and agreed system of accounting.
"This is an industry where relatively few shippers can provide accurate volume forecasts.
"This is an industry where the constant desire to launch bigger ships in order to reduce unit costs can only ever logically be at odds with the aim of matching supply and demand."
Drewry added that the blocking of the P3 alliance by the Chinese authorities was "disappointing for the industry since it was an excellent opportunity to help stabilise the main trades, in terms of capacity management and efficient use of assets."
"That chance is now missed," Drewry said. "A mature debate is required to help balance the benefits of higher economies of scale, alliance consolidation and the need to control an oligopoly of mega alliances."
WORLD SHIPPING
09 July 2014 - 18:58
Supply-demand match out of reach of bloated box ships' industry
MATCHING supply and demand may be beyond the shipping industry, says Drewry, pointing to the quest to buy more cost-efficient, provided they're filled, but expensive and ever larger box ships despite wiping out planned freight rate hikes.
WORLD SHIPPING
09 July 2014 - 18:58
Supply-demand match out of reach of bloated box ships' industry
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