Poor growth outlook forces lines to continue cost-cutting

There have been no big surprises in the container industry in the first quarter of 2015, with business moving much as had been forecast. “We did see imports improve significantly in the first two months of the year,” said Matt Conroy, Maersk Line’s South Africa trade and marketing manager. “This was definitely welcomed in light of the dramatic decrease in import volumes during 2014. While we have seen an improvement it is, however, still too early to say if this is a trend that will continue throughout the rest of the year.” Conroy said exports remained depressed. “Exports are still showing negative growth. The commodity prices are still under heavy pressure and it is definitely impacting on volumes. We are still seeing the movement of cargo between container and breakbulk shifting quite a bit and that also impacts on the volumes. We are, however, not seeing the export growth that we would have liked to see at present.” He said none of this, however, was a surprise to the industry. “I think expectations are very conservative and it is clear that the days of relying on markets to save you are over. Back in the day, if the market improved the business would improve. That is no longer the case.” Conroy said it was therefore imperative for container shipping lines to remain on a cost-cutting drive regardless of whether markets were improving or not. “Rates are still under pressure and supply is growing at a faster pace than demand. Globally we are forecasting a demand of between 3 and 5% while the outlook for supply is between 5 and 7%.” According to Conroy initiatives to contain costs and even decrease them would remain in place across the container shipping industry. “This is what has allowed us to keep delivering results. It is also not just slow steaming of our vessels that we are talking about, but optimising networks. This means having the right vessels and filling them up in the right places. We have far more of a round trip approach than ever before.” Conroy’s sentiments are shared across the industry. In its latest container shipping outlook report, Alix Partners stated supply and demand imbalances would probably remain for years to come. According to shipping consultancy Drewry, the profitability in 2015 is expected to improve but this was provided a number of tailwinds prevailed. These include continuing carrier focus on vessel deployment, fuel costs remaining low and operational alliances delivering greater market stability. The consultancy is forecasting 1.7 million TEUs to be delivered to the global fleet during 2015. INSERT & CAPTION It is clear that the days of relying on markets to save you are over. – Matt Conroy