Container lines could reduce their overall losses for the year as a whole to $1.3 billion or even turn a profit of $1.3 billion, depending on the overall development of costs, particularly fuel, according to the latest Drewry Container Forecaster.
After total carrier losses of more than $6 billion in 2011 and what Drewry called an “appalling” first quarter this year, most container lines are operating above the break-even level on the major east-west trades because of the successful implementation of significant rate increases, the quarterly publication said.
This should provide a decent platform for 2013 when demand will improve slightly.
“Responsible commercial pricing will eventually help to iron out the huge volatility we have seen since 2008, creating a more stable service platform as carriers will be less likely to pull services quickly when they become unprofitable,” said Neil Dekker, head of Drewry container research.
He said shippers will pay more for their transportation in 2013, “although anecdotally we hear positive feedback about the influence that the Daily Maersk service is having in the Asia-Europe trade on shippers’ supply chains.”
Nevertheless, freight rates are likely to erode in the Asia-Europe trade during the summer months because of the worsening economy in Europe and a weak peak season.
“Evergreen’s decision to launch another weekly loop this month is not a positive, and the Asia-Europe trade is most at risk because of the need to fill more 12,000-plus-TEU ships every week,” the publication said.
Carriers took enough vessel capacity out of the major trades during the winter months to ensure that the services they recently reactivated have not caused too much damage to the supply-demand balance and that load factors in the eastbound trans-Pacific remain strong.
“It is too early to determine if carrier strategy has truly changed toward profits, but the signs are that they remain determined to keep rates at as high levels as possible,” the Forecaster said.
Yield management and the movement of rates to more acceptable levels are key aims for all carriers, and if spot rates hold for the rest of the year, carriers will be in a strong position for the renegotiation of shipper contracts in 2013.
Drewry is forecasting global container volume growth at 4.3 percent for the year as a whole. “Capacity management throughout the second half of 2012 is crucial if carriers are not to undo all of their efforts to force rates back up to profitable levels,” it said.
The main reason for the recent spot rate successes has been the universal determination of all lines, and rates have more than tripled in the Asia-Europe trade since March.
The industry has started to find a new equilibrium, and it needs to settle down and continue to create an environment of stability.
“Since we do not see significant demand growth in the head-haul east-west trades next year, the industry must refrain from ordering new ships in the next 18 months to enable a return to a more normal supply-demand balance in the medium term,” Drewry said.