Retired NOL Group President and CEO Ron Widdows, decrying the steep rate-cutting that is crippling the shipping industry’s financial health, said he expects container lines to idle a large swath of capacity next year in response to deep losses.
“I do believe there will be a substantial amount of capacity that will be parked,” Widdows told apparel importers in a candid and often grim look at market conditions on Tuesday.
Freight rates have fallen too much this fall, he said, for carriers to maintain existing services, and shippers face the prospect of a new round of ship idling reminiscent of the idling that laid up hundreds of vessels during the 2009 economic and trade downturn.
“You should be really pissed off by a carrier community that behaves this way,” Widdows told the annual Textile and Apparel Importer Trade and Transportation Conference in New York. “Your service delivery is going to be affected because the only action the carriers can take is to lay up capacity.”
Spot rates for Asia-to-U.S. container shipments have fallen some 30 percent over the past year, according to measures by Drewry Shipping Consultants and the Shanghai Shipping Exchange.
Widdows, who retired this fall as president and CEO of Singapore-based NOL, the parent of container line APL, said he expects the slashed spot pricing to have an impact on next year’s contracting for trans-Pacific services unless tighter capacity changes market dynamics.
“That huge bump in ship idling we saw before, something like that will happen again. Will it happen before the trans-Pacific contracting period? It could, but probably not,” he said.
Carriers say services already are being trimmed in line with demand. “Over 10 percent of the capacity in the trans-Pacific has been withdrawn since September,” Erxin Yao, president of OOCL (USA), told the importer conference. That amounted to more than 86,000 20-foot-equivalent units of capacity.
Some of the mega-ships that carriers have ordered in the past two years might never hit water, Yao noted. “People are looking at the order books,” Yao said, “but whether all those orders will get financing is another question.”