NINETY per cent of ships in the Asia-Europe trade are losing money because of historic low rates, said Drewry Maritime Research, and while low fuel prices and cost cutting have compensated, they have not restored profitability.
As of April 16, the World Container Index (WCI) benchmark put average rates at US$480 per TEU, although lower prices will have been available to the market, reported Newark's Journal of Commerce.
The two 2M carriers, Maersk and MSC, have the largest market share, but their break-even line per box is lower than rivals because of their bigger ships, Drewry said.
The G6 and CKYHE alliances have comparable market shares to the Ocean Three, but their ships are smaller.
"While carriers have shown an ability to raise spot rates almost as fast as they have fallen, they will need to repeat that trick pretty quickly,?said Drewry's Container Insight Weekly.
"If they can't, they risk the wrath of their customers that have signed contracts at higher rates and who may well want to renegotiate to get closer to the spot market. A prolonged spot rate downturn will force carriers to consider the nuclear option of laying up ships."
Even if the ships were full, said the newsletter, 85 per cent of them would be losing money on each voyage.
The London research house's idea for carrier recovery has focussed cutting costs faster than rates can fall - and it worked last year, with industry making a collective year-on-year 122 per cent profit increase to US$6 billion.
But Drewry conceded that those profits were sparsely spread between carriers and the overall margin was roughly 2.8 per cent of industry revenue.
"We do not expect carriers to deviate from their cost-cutting plans, but the lack of attention paid to lifting rates is threatening to send many carriers back to the red," Drewry said.
"At present, we think carriers can make similar overall profit as last year as costs are being helped by lower bunker fuel and some network improvements through the mega-alliances.
"However, this forecast could easily be derailed as freight rates in many Asia export trades are in a tailspin, and if this persists we will undoubtedly have to trim it back significantly," Drewry said.
Rate erosion was most on the Asia-North Europe route, with the Shanghai to Rotterdam assessment of the World Container Index falling for 11 consecutive weeks to its lowest point since December 2011.
WORLD SHIPPING
21 April 2015 - 18:59
90pc of ships on Asia-Europe route are losing money, says Drewry
NINETY per cent of ships in the Asia-Europe trade are losing money because of historic low rates, said Drewry Maritime Research, and while low fuel prices and cost cutting have compensated, they have not restored profitability.
WORLD SHIPPING
21 April 2015 - 18:59
90pc of ships on Asia-Europe route are losing money, says Drewry
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