PROFITABILITY of container shipping lines is now being driven by cost cutting and the on-going sale of non-core assets - not higher cargo volumes - and while freight rates stay at historically low levels, most carriers end 2013 in the red.
The situation highlighted in Drewry Maritime's fourth quarter 2013 Container Forecaster shows that despite 10 general rate increases (GRI) last year on the Asia-north Europe trade, average spot rates were still US$450 per FEU below January 2013's level.
Ocean liners managed capacity well in the headhaul east-west trades last year, and in October operational capacity had risen by only 0.6 per cent year on year.
Carriers reported decent industry load factors of around 90 per cent throughout the year in spite of the absence of a significant third quarter peak season, but freight rates fell drastically on the Asia-Europe trade to well below break-even levels in June and October.
Many shipping lines this year reported carrying more boxes in 2013, but a third quarter industry EBIT margin of 0.9 per cent (excluding the best performers Maersk and CMA CGM), proves that carriers cannot rely on revenue or better carryings to secure their financial futures.
Slow steaming analysis shows that little was done on this front in 2013 to save further costs or absorb additional capacity.
"The immediate successes of GRI attempts, such as the mid-December implementation in the Asia-Europe trade which has pushed spot rates back up to $3,000 per FEU continues to give false hope to the industry, since the majority of trades remain over-tonnaged," the report said.
"This positive news for carriers is undone by the realisation that many 2014 contracts have been signed with core shippers on the Asia-Europe trade at rate levels of between $300 and in some cases up to $700 per FEU below those signed in 2013. Even with the bigger ships now being deployed, carriers will still find it difficult to make a substantial profit," said Drewry research chief Neil Dekker.
"The industry's major players are continuing to adapt to a new era in the container industry characterised by too many ships and cargo volumes on many trade lanes that refuse to live up to previous expectations...formation of new operating alliances are essential if the industry is to stabilise," Mr Dekker said.
WEEKLY SHIPBROKER REPORTS
19 January 2014 - 16:54
Cost cutting builds profitability, but will not produce cargo: Drewry
PROFITABILITY of container shipping lines is now being driven by cost cutting and the on-going sale of non-core assets - not higher cargo volumes - and while freight rates stay at historically low levels, most carriers end 2013 in the red.
WEEKLY SHIPBROKER REPORTS
19 January 2014 - 16:54
Cost cutting builds profitability, but will not produce cargo: Drewry
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