Shipping lines will do whatever is required to support ocean freight rates at profitable levels this year, according to executives at one leading logistics company.
Rich Bolte, the U.S.-based chairman and CEO of BDP International, believes lines will pull back from a container rate war in the trans-Pacific and in Asia-Europe trades and instead take steps to remove excess capacity from the market if spot rates do not improve in the coming months.
“The long-term trends are not sustainable for lines, with only a handful in profit last year,” he said. “Capacity will naturally outstrip natural demand by 8 percent through 2016 with a glut of new ships coming into the system. But this will be mitigated by slow-steaming, scrapping, etc., so the net effect is more like 2 percent.
“They will find a way to stabilize rates and profits, because they need to.”
With both trans-Pacific and Asia-Europe spot rates stuck in a rut as annual service contract negotiations for eastbound trans-Pacific services draw to a close, ocean carriers are desperately trying to preserve margins as more vessels are added to the global fleet each month.
Richard Strollo, BDP International’s managing director for South Asia, said it is difficult for lines to make money in the current ocean shipping market. “If they go back to a rate war scenario, they could all be in the red,” he said. “They do see this as more serious and dangerous than in the past, so I think they will idle capacity to balance supply and demand.”
Contact Mike King at email@example.com.