Keep an eye on the container prize
Ports should closely monitor liner markets fortunes
Ports and terminals would be well advised to monitor the potential fortunes of the container shipping sector over the next few months.
There are strong indications that the good times of 2010 – certainly relative to 2009 – might be slipping away in some sectors.
The Far East Europe trade is one cited by some analysts as facing increasing difficulties in terms of retaining stability, and not least due to the direct actions of liner operators themselves.
PR News Service, a reputed source of analysis of liner operations, recently disclosed estimates that confirm that the capacity on the Far East-North Europe and Far East-Mediterranean trade lanes has bounced up by over 30% from Q1/2010 to Q1/2011. Further, in Far East-North Europe trade this trend is continuing strongly – rising over 20% from Q4/2010 to Q1/2011.
In contrast, however, according to PR News, there has only been a 2% capacity increase in the Far East-Mediterranean trade over the same period.
The fundamental question is can such large capacity increases, effectively in both trade lanes be sustained, without significant rate erosion and the consequential damage that this normally involves?
Drewry Maritime Research in its latest Container Forecaster is more forthright in citing the possibility of container lines shooting themselves in the foot.
Drewry contends the fight for market share between lines is back on and that, “ill discipline on rates and capacity management, combined with escalating costs means that many carriers will struggle to break even".
And even more pointedly it says: “A large dose of common sense is needed by the container industry and the direction it takes in the second quarter is in the hands of the carriers.”
Drewry, in common with other analysts, sees the fundamentals of trade as sound; it forecasts growth of around 8.3% this year compared with the record growth of last year with a total container volume of 541.8m teu.
With freight rates, however, it expects a fall of 13+ per cent and underlines that spot rates in the Asia-Europe and transpacific trades have fallen by up to 50%.
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