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Drewry says more container liners to collapse this year

Drewry says more container liners to collapse this year

London: The analysts at Drewry Shipping Consultants are expecting more container ship operators to collapse in 2009 just like Eastwind Maritime did recently, writes PortWorld.

A slump in revenues so huge that even cost saving measures cannot mitigate the effect was given as the reason.

According to Lloyd's List, Drewry has forecast that container lines will suffer collective losses amounting to some $20 billion this year compared to an overall profit of $5 billion last year.

The $25 billion change in the bottom line reflects an approximate $55 billion plunge in freight earnings that will only be partially offset by some $30 billion in budget cuts.

Overall, Drewry is expecting global container traffic to shrink by a little over 10% to 471 million twenty-foot equivalent units (TEUs) this year, a figure which does not bode well for port and container terminal operators too.

Slashing freight rates in order to secure market share and volumes has been identified as counter-productive, while a sharp focus on customer relationships and revenue preservation should be priorities, according to Drewry.

Meanwhile, latest estimates from ship brokers Barry Rogliano Salles suggest that global container liners already suffered record revenue losses for the first quarter (Q1) of this year.

The world's 11 largest container liners earned combined revenues of $14.45 billion in Q1 2009, down 35% from the $22.40 billion they earned in the same period last year.

Players say that steadily rising bunker prices during Q1 2009 exacerbated profit losses caused by slumping traffic and slashed freight rates.

Such figures have apparently prompted Taiwan's Evergreen Marine Corporation to withdraw 31 of its oldest ships from service.

Most of them will be scrapped, chairman Chang Yung-Fa was quoted saying, to help chip away at what he described as a "gruesome" excess of vessel capacity in the container ship industry.

Drewry echoed Chang's sentiment when it warned that the container industry will have to learn its lesson from this downturn, and in future choose business models that protect profits rather than risk-taking expansion and market share.  [08/07/09]