Shipping industry 'cautiously optimistic'

Expect radical carrier action later this year
After a meagre 1.1% growth
in container handling last
year, Drewry Shipping
Consultants is cautiously
optimistic for the year
ahead, predicting growth in
the region of 2.4%.
This after 4%, 5% and
6% throughout the 2000s,
barring 2009 – and Drewry
has been tracking growth
since the latter part of the
1970s, director of container
research, Neil Dekker said
during a webinar aired last
week.
“Last year we were hit
in part by the very weak
performance of Europe
which was impacted by
sanctions from Russia.
Emerging markets like
Latin America and Africa
were also very weak with the
likes of Nigeria and Angola
badly hit by the oil price.”
Port stats also ref lect the
climate with volumes at the
Port of Singapore down 9%
and Hong Kong 8%.
A slight upturn is however
expected for Europe this
year, according to Dekker,
with relatively robust
growth for North America
and some strength in the
Middle East and South Asia.
“But we are entering a
period of double whammy
– weak demand and
overcapacity – which is the
lines’ biggest problem and
something they can control
to a certain degree because
they are ordering and
deploying ships,” he said.
Thankfully the order
book had slowed down since
September last year, said
Dekker. “There have been
only two significant orders
of ships over 10 000 TEUs.”
This after 2m TEUs
were added to the global
f leet last year, which in
Dekker’s view caused a lot
of damage.
“Poor freight rates and
weak demand point to a
very dangerous game the
lines are playing in terms
of trying to maintain
market share. It’s just not
sustainable.
“Global operating
costs are trending above
the average freight rates
for this year. Lines have
already shared the benefits
of low fuel price for the
past 15 months and
stripped a lot of cost out
of their system. Fuel is not
the biggest cost to lines at
the moment.
This year will
be a lot more
challenging
to take out
extra cost.”
Ultimately,
said Dekker,
average
freight
rates would
continue
their
downward spiral.
“Spot container freight
rates have reached new
historical lows that are not
sustainable in the medium
term.
“I believe a trigger point
will be
reached in
late 2016
when radical
carrier action
on the supply
side will take
place,” he said.
“As a result
shippers will
be challenged
by fewer route
choices, more
supply chain disruption and
question marks over carrier
availability.”
INSERT 
This year will be a lot
more challenging to
take out extra cost.
– Drewry “