The reintroduction of idled container ships is the biggest threat to a lasting freight rate recovery and the return to profitability of lines, according to Janet Lewis, head of Asia shipping research for Macquarie Capital Securities.
She said that the box shipping industry has a “singularly poor” track record for capacity management and, in contrast to the rate recovery of 2010, when some 12 percent of the fleet was laid up, at present most idled vessels are not in cold lay-up but instead fully crewed and positioned to return to the fleet when carriers add new strings for the spring-summer season. “A number of carriers and alliances have indicated an intention to add services,” she added.
Rising fixtures are also indicative of ships being brought back to service, while on-schedule deliveries of newbuildings by yards — and in some cases to efforts by lines to speed up deliveries of fuel-efficient ultra-large container ships — could also put downward pressure on freight rates.
“The key driving forces that are likely to keep rates close to breakeven in our view are the over-supply of capacity and the weak tenor of demand from developed markets in Europe and the US,” she said.
“Ultimately, the behaviour of the carriers will determine whether they return to profit. We believe the level of idled vessels needs to rise above 8% and preferably to 10% to sustain rates at recent levels, but the latest Alphaliner stats on idled vessels showed a 0.5% decline in the idle fleet to 5.3%, with most of the decline coming from operators.
“Further, a record 11 new mega-ships were delivered in March. This reinforces my view that further rate hikes, needed to restore profits for many carriers, will prove elusive.”
Contact Mike King at email@example.com.