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Weak markets bring carrier cost cuts that save US$5.5 billion in fuel

WEAK market fundamentals have induced carriers to focus on cost cutting that has resulted in US$5.5 billion in fuel savings this year, according to Drewry's Container Market Annual Review and Forecast. 

Weak markets bring carrier cost cuts that save US$5.5 billion in fuel
16 October 2013 - 19:58

Weak markets bring carrier cost cuts that save US$5.5 billion in fuel

WEAK market fundamentals have induced carriers to focus on cost cutting that has resulted in US$5.5 billion in fuel savings this year, according to Drewry's Container Market Annual Review and Forecast. 

Drewry said the cost saving resulted from a combination of lower physical market prices, network changes, slow steaming, and the introduction of more fuel-efficient ships as well as increased bunkering in low-cost Russia. 

The importance of bunker savings was clearly demonstrated by Maersk in its surprisingly strong second-quarter financials this year, noted London's Drewry Maritime Research.

There also appears to be considerable gaps between the best and worst performing lines, much of which can be ascribed to cost savings gained by having higher percentage of fuel efficient mega ships reaping economies of scale a benefit not shared by others.

"Good strategies on one side of the equation are being unravelled quickly, carriers cannot have it both ways. Pouring too much capacity into the system means it will overflow," said Drewry container research chief Neil Dekker.

"Although 2013 will turn out to be an okay year for the industry and the main stakeholders should make a small profit, many carriers will still be in the red. Liner companies can no longer treat the ULCVs [ultra larger container vessels] a secure passport to profitability unless they release the pressure elsewhere," Mr Dekker said.

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