Sluggish demand and rising costs will take their toll next year, claims analyst
Container shipping will need further consolidation to cope with sluggish demand and sustained high vessel-operating costs, an independent analyst has warned the industry.
In his latest quarterly Macro Report, consultant Philippe Hoehlinger says: “Most macro-economic indicators have turned orange or even red, which is not expected to change before the second quarter of 2012.”
The report looks at a basket of macroeconomic variables relating to cargo trade growth and load factors and concludes that the latest figures provide “a deteriorating picture in demand”.
Writing before the announcement of the strategic alliance between container lines MSC and CMA CGM, Hoehlinger said: “Market analysts currently bet on industry consolidation in the near future to stop the bleeding and reduce costs.”
The report estimates that freight rates on transpacific and Europe-Asia trades are 20-30% lower than they were a year ago, with new vessel capacity on those trades creating a “fierce market-share war”.
The report also expects the gap between available vessel capacity and ships in use to reach 1.4 million teu in the first half of 2012 – 9% of the total available fleet – with the containership orderbook expected to remain at around 30% of existing fleet in the coming year.
“Oversupply is now characterising the liner industry throughout most of 2012, even if at a lesser extent than in 2011,” Hoehlinger said.
He added that operating costs remained “a threat”, with bunker prices now representing 50-70% of carriers’ operating costs – up 40% on a year ago.
“I believe further consolidation needs to happen, as it is the only way to reduce costs, through economies of scale,” Hoehlinger said.
“We already see some casualties in the industry, such as MISC withdrawing from shipping activities, and there are many more companies that faced, and will continue to face, significant losses. The situation is not expected to improve before spring 2012.
“Even if the immediate consequences of consolidation are sometimes difficult, this is now a question of survival.”
Source: IFW
