“The party is over” and the pressure is on

In the words of Hapag-Lloyd’s CEO, the party is over. As has been noted in this column previously, we are headed back to the old normal in the maritime industry with greater volatility in demand and revenue. The new normal of the Pandemic has not survived that global crisis. Charter rates have plummeted, and new orders of mega containerships are being delayed, and in some cases we have seen containership orders being converted to tankers.

The Drewry World Container Index fell below the US$2,000 per FEU mark for the first time since July 30, 2020 and it has done so with a wallop with the composite global spot index sinking to US$1,997.22 per FEU in early February, after peaking in September 2021 above US$10,300.

The recent news of the dissolution of the 2M alliance of Maersk and MSC will surely increase the competitive pressure for global carriers as they begin to work out what this means for the industry as a whole. Both Maersk and Hapag-Lloyd have already indicated that this will lead to market share battles as they will struggle to fill their ships. No doubt MSC will be a strong competitor.

Most of the large carriers are already sending out warning signals about their 2023 revenues, with Maersk indicating a drop of over 80 per cent. Japan’s ONE, meanwhile, recorded a 50 per cent quarter-on-quarter drop in profits. One thing that is for certain is the opportunist newcomers that joined the market with high charter rates will disappear and we may even see some mergers and acquisitions.

The port sector will suffer revenue losses compared to 2022 as increasing numbers of ships fail to be visible due to missed sailings and temporary lay-ups. Cargo volumes in the first half of this year will be substantially down with growth coming in the third quarter. It remains to be seen whether that growth will be mild or explosive out of recovery. The war in Ukraine will likely play a role in helping to determine this. We should also be careful with the port statistics from China which seem to pretend that there is no significant drop volumes. Back to the old strategy of State misinformation.

Batten down the hatches!