The ocean container industry may make a “decent profit” in 2013 as average freight rates and volumes are expected to increase 3 to 4 percent and bunker costs to decline 1.5 percent, according to a forecast by Drewry Shipping Consultants.
Container lines can stay in the black in 2013, but only if they refrain from the kind of rate war they waged in last year’s first quarter and “stick to pricing and capacity discipline,” Drewry said in its latest Container Forecaster.
The global container shipping industry barely broke even last year with an operating profit of $280 million. “Clearly, this is a very poor return for moving nearly 170 million TEUs of loaded containers, although any sort of profit seemed highly unlikely after the heavy losses sustained in the first quarter of 2012,” Drewry said.
Though slim, the estimated operating profit for 2012 represents a significant turnaround from the estimated $7.7 billion loss container carriers suffered in 2011.
Drewry said carriers managed to turn their results around last year “through a combination of prudent capacity management and unity on freight rate increases.”
But it said that after a profitable third quarter, many carriers lost money again in the fourth quarter.
Drewry estimates the average operating margin of carriers in the fourth quarter shrank to 0.1 percent, down from 6.6 percent in the third quarter, as spot market freight rates plummeted on the key westbound Asia-Europe (down 23 percent quarter-to-quarter) and eastbound trans-Pacific (off 11 percent quarter-to-quarter) trade routes.
Only three major carriers — CMA CGM, Maersk Line and OOCL — returned a meaningful operating profit for the full year, although Hapag-Lloyd did salvage a tiny profit of $3 million. These select few “winners” neutralized the losses accrued by the rest so that the industry average balanced out at close to zero, Drewry said.
“We do expect carriers to make money again this year, but it should be reiterated that carriers themselves are the biggest risk to this forecast,” Drewry said. “While there are significant profit gains to be had through cost-cutting, if lines were to lose their pricing discipline and enter into a new rate war, heavy losses will undoubtedly follow.”