Container ship lines face continued supply-demand pressures at least through 2014 and probably into 2015, and must control capacity to avoid losses, Drewry Maritime Research warned in its annual Container Market Review and Forecast.
Demand is expected to remain weak on core headhaul routes for at least the next 15 months, charter markets show no sign of a pickup, freight rates are under pressure and the cascade of vessel tonnage is starting to cause problems for carriers, Drewry said.
Carriers’-deployed capacity on core headhaul routes in July was 5 percent less than a year earlier, but despite successful general rate increases last spring, average Asia-North Europe spot rates have declined by 40 percent since May, the report said.
Even with the sharp increase in rates early this year, Drewry forecasts container lines will operate at close to break-even in 2012.
Neil Dekker, Drewry’s head of container research, said carriers face weak growth prospects on east-west trades and must realign capacity and operational alliances to reduce pressure on rates.
“Now is the time for carriers to deploy service patterns seriously aimed at stabilizing freight rates, or else the industry will be caught up in a current of falling rates while using the GRI mechanism to paddle upstream against industry fundamentals,” he said.
Drewry cited forecasts that volume from Asia will decline this year by 1 percent on routes to North Europe and 10.5 percent to the Mediterranean. The London-based firm’s report said a planned general rate increase of $500 per 40-foot-equivalent unit on Asia-North Europe routes is unlikely to stick unless carriers cut capacity more aggressively.
“Given the number of factors shaping the industry, carriers seem to want the best of both worlds,” Dekker said. “They firmly believe that deploying ever-bigger ships across all the major trade lanes is the way forward, and yet by doing this they cannot forget the likely negative influences on freight rates.
“The industry faces the fundamental challenge of aligning supply with demand in order to keep freight rates at healthy levels, and yet at the same time relatively few carries are prepared to take the lead and adjust capacity – or if they do, it is always on a reactive basis.”