Ocean carriers’ earnings, which hit a two-year high in the third quarter, will deteriorate in the final three months of 2012, with most lines booking losses due to slumping freight rates and declining capacity utilization levels, according to industry analyst Alphaliner.
The improved third quarter, which included an average four percent operating margin, was driven by rising freight rates across all main long-haul routes, lower bunker prices and cost-cutting measures, including additional slow steaming and redelivering excess chartered tonnage.
But rates in the fourth quarter are down by over 20 percent from their July peak, and utilization levels have fallen below 75 percent in certain trades at the onset of the winter slack season.
“Earnings are expected to slip into the red again for the majority of the carriers, given their failure to hold freight rates at above breakeven levels,” Alphaliner said.
Although some carriers are cutting excess capacity for the winter, the withdrawals have not been sufficient to keep rates from falling to their lowest levels since February and will remain under pressure until the end of the year.
“Prospects for rate increases planned for mid-December on both the Asia-Europe and Asia-US routes are looking increasingly slim, with vessel utilization levels staying stubbornly low,” Alphaliner said.
Carriers are hoping for a year-end cargo rush, but it will be too late to improve their prospects of turning in a positive fourth quarter, the analyst said.