A leading expert in the container shipping industry, Lars Jensen, is predicting a combined profit for carriers of US$9 billion in 2020.
In his latest ‘Sea Intelligence Sunday Spotlight’ he says when the first estimate of carrier profitability for 2020 was made in early April, two key scenarios were offered.
“Both assumed a 10% loss of volume. One then assumed unchanged freight rates, which would lead the carriers to a loss of US$800 million. The other assumed a “normal” freight rate war leading to a US$23 billion loss.”
This he says, was a key argument in why it should be expected that the carriers would exhibit strong capacity and pricing discipline and losses would be minimised.
“It’s a notion many in the industry did not believe as the carriers have historically always started a freight rate war when ships cannot be filled.”
But two and a half months have now passed, and the carriers have not only maintained rate levels, they have increased them significantly, says Jensen, despite low volumes and plummeting fuel prices.
“The model therefore needed updating. If the carriers are able to hang onto these increases, his profit prediction will hold, but if they decide to launch a freight rate war in Q2 2020 then the loss could still drop to a minus of US$7 billion, but the behaviour in Q12020 favours the positive outcome.”
