Drewry forecasts box shipping profits in 2017 to hit US$5 billion
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Drewry forecasts box shipping profits in 2017 to hit US$5 billion

CONTAINER shipping lines are finally recovering their strength on the back of improved market fundamentals and greater pricing discipline.

14 September 2017 - 20:00 - Update: 15 September 2017 - 17:24

Most carriers returned to profitability in the second quarter, but the recovery is even more broad-based, according to London's Drewry Maritime Research.

This time last year most carriers were drowning in debt with revenues plummeting faster than they could reduce costs, as well as having to deal with the repercussions of Hanjin Shipping's bankruptcy, reported World Maritime News.

Fast-forward 12 months when the merger and acquisitions bandwagon, that had already begun before the market hit the bottom of the current cycle, gained even greater momentum and carriers are getting back on track.

"Even greater pricing discipline should prevail as more lines emerge from their own troughs, which combined with a brighter market outlook and a smaller field should ensure the recovery is more sustainable than before," Drewry analysts said.

First half income statements from 16 of the largest companies show that industry-wide revenue has risen 18 per cent year on year, while operating margins recovered from minus 4.8 per cent in 1H16 to 2.4 per cent in 1H17.

"The industry [is] on track to meet our forecast that it will make a collective operating profit in the region of US$5 billion this year, after losing a similar amount in 2016," said Drewry.

The reasons for carriers' reversal of fortune are threefold: a shrinking pool of competitors, improving supply and demand fundamentals that went through the gears, and the fact that carriers used this newly-found pricing power to good effect.

 

 

 

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