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Container shipping to see another year of excess growth: Drewry

Container shipping to see another year of excess growth: Drewry
Container shipping is expected to see another year of excess growth in relation to demand, as there has been no let-up in big ship deliveries and newbuilding ordering frenzy, according to Container Forecaster published by Drewry Maritime Research.

Container carriers will find it hard to repeat the estimated 92% load factors across the main headhaul East-West trade lanes achieved in 2014, Drewry noted.

Meanwhile, new orders for ULCVs of at least 18,000 teu are pushing back the date when supply and demand can be expected to meet and at the individual trade route level this is now seemingly unachievable.

There have been around 40 ULCVs ordered since January, mainly for 2017 delivery and this does not include any provision for Maersk and Cosco orders yet to be finalised.

“The industry paid a heavy price for the huge ordering it undertook in 2006/07 and it seems that four years after Maersk spent $3.8bn on its Triple Es, history is repeating and many lines are entering or are about to enter this now not so exclusive club. The one difference this time around is that the operational agreements should mean that not all top 20 lines will make this big step”, commented Neil Dekker, director of container research at Drewry.

On a positive note, the 30% fall in bunker fuel prices has been an unexpected boon, even though most carriers still recorded lower average freight rates last year, Drewry mentioned.

Current spot rates of around $1,000 per feu from Asia to North Europe are below breakeven levels for the carriers and consistent declines over the last 10 weeks will concern volume shippings that have signed up for higher contract rates this year.

Another positive development for the industry is the recent resolution of the US West Coast between the PMA (Pacific Maritime Association) and the ILWU (International Longshore and Warehouse Union), according to Drewry. But it estimated that it will cost a combined $150m during the last three months of 2014, without taking into account the associated supply chain impact.

Drewry added that the underperformance of the trades to East Coast South America is another concern for the global cascade of vessels over 8,000 teu.

“The decision by Maersk and MSC (Mediterranean Shipping Company) to downgrade the average size of ships on one of their European strings to the East Coast of South America from 9,000 teu to 5,500 teu may not seem particularly important in the grand scheme of things,” Dekker highlighted.

“But all ocean carriers have argued that deploying new and big ships across every trade route is strategically critical. This is the first sign that on routes where trade growth is weak, the lower slot cost per unit argument is simply not enough because freight rates dive to well below sub-economic levels.”