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Drewry warns of 3 more years of financial losses in box shipping

THE container shipping industry is anticipated to face another three years of overcapacity and financial pain on account of the slowdown in world trade and the bloated orderbook for mega ships.

Drewry warns of 3 more years of financial losses in box shipping
30 October 2015 - 20:18

Drewry warns of 3 more years of financial losses in box shipping

THE container shipping industry is anticipated to face another three years of overcapacity and financial pain on account of the slowdown in world trade and the bloated orderbook for mega ships.

Global shipping consultancy Drewry has halved its forecast for container shipping growth for this year to 2.2 per cent and revised down estimates for future years in its latest Container Forecaster report.

Given that 1.6 million TEU of new capacity is being added to the global fleet this year, equating to a growth rate of 7.7 per cent, Drewry's Global Supply/Demand Index has dropped to a reading of 91 in 2015, its lowest level since 2009, reported Lloyd's Loading List.

As a result, spot freight rates across most key trade lanes have declined to historical lows, particularly on the Asia to Europe, Asia to east coast of South America and Asia to Middle East trades. Shipping line's reliance on the monthly general rate increase (GRI) mechanism and void sailings to adjust capacity has not worked.

"Were it not for the recent fall in bunker prices, shipping lines would be losing money," Drewry's director of container shipping research, Neil Dekker, was quoted as saying. "They cannot continue to rely on this unexpected gift to maintain profitability."

With a further 1.3 million TEU due to join the global fleet in 2016, many routes that are currently experiencing problems will be further hindered by new deliveries and the continued global cascade.

Drewry forecasts that its Global Supply/Demand Index will fall to its lowest level on record over the next few years, indicating that the overhang of excess capacity will be even greater than that experienced in 2009.

"The container shipping industry is in the midst of an over-capacity crisis which will worsen next year," Mr Dekker said.

"How carriers and tramp owners address the overcapacity situation will influence the duration of the crisis. Shipping lines will need to idle a much larger portion of the fleet than they have hitherto been prepared to do. Otherwise, short of an unexpected recovery in traffic volumes, container shipping is set for several years of overcapacity and mounting financial losses."

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