Container shipping profits will improve this year and could make a major jump in 2014 and 2015 if lines do not start placing major orders for new vessels, according to one analyst.
A new report from Nomura — Trends in Transport — said liner efforts to reduce supply and return to profitability from the second quarter of last year boded well for 2013.
“Assuming this pattern continues through 2013, then profits will be higher than 2012 by dint of not losing the sums of money they did in, although the industry will still be producing a return some way below its cost of capital,” said Nomura.
“We are, however, becoming more interested and bullish on 2014 and 2015, when we would expect further increases in the rate of demand growth and supply growth to fall below 5 percent in both years.
“Importantly, given the newbuilding lead times of two years or more, unless there is significant new ordering in the next six months, we see little that can disturb that upturn in those years, which could be significant.”
Global container volumes grew at some 3 to 4 percent last year, albeit with significant regional variations and with growth slowing as the year progressed. This year Nomura expects volumes to grow at about 5 percent if the economic situation in Europe does not deteriorate, the U.S. recovers and Asia and emerging markets remain robust.
“This requires significant discipline by the operators, some not usually seen in container shipping for any period of time,” Nomura said. “Services continue to be cut as we move through the seasonal low period before the end of Chinese New Year in early February and we think the acid test will be carrier behaviour beyond that.
“So far the signs are good, but the latent capacity in the market is some 20% and any ill discipline would quickly destroy a fragile balance, in our view.”
Contact Mike King at firstname.lastname@example.org.