Analysis by Drewry Maritime Research
Carriers can still make money despite falling freight rates, according to Drewry‘s latest Container Annual Review & Forecast 2014/15. Surprisingly, some medium-sized lines retain unit cost advantages.
Second-quarter income statements show that more ocean carriers are emerging from the red. From the 15 of the “top 25” carriers (as measured by operated vessel capacity) that publish quarterly financial results, the number of profitable lines doubled from five in the first quarter to 10 in the second quarter. However, the distribution of profits was still extremely uneven and insufficient for most to eradicate their first quarter losses.
The long road back towards profitability is now a very familiar one for most carriers – sizeable reductions to unit costs to compensate for lower unit revenues. To clarify – even though unit revenues are down by an estimated 4% year-on-year for the first six months of this year, the positive is that unit costs have been reduced by 6%.
What separates the carriers is the speed of those reductions to rates and costs and when the journey started. For example, Maersk and CMA CGM were the first to lower slot costs through their larger fleets of Ultra Large Container Vessels (ULCVs) so that by moving a lot more boxes at a profit they are gapping their rivals in the profit stakes.
Carriers must continue to lower unit costs to be profitable in the short-term as freight rates will decline. For more sustainable industry profits, carriers will need to reverse the unit revenue trend at some stage.
Source and Image Credit: Drewry
