The London-based shipping consultants said about 5 percent of the global container fleet is laid up, but that number could rise in the second half of 2016.
The London-based shipping consultants Drewry is the latest to supply the ocean carrier industry with a grim outlook for the coming year.
“Further widening of the supply-demand imbalance at the trade route level and insufficient measures to reduce ship capacity will lead to an acceleration of freight rate reductions and industry-wide losses in 2016,” Drewry said in a statement accompanying the latest issue of its Container Forecaster publication.
It is predicting industry losses in 2016 will reach over $5 billion.
“The decline in global container shipping freight rates is anticipated to have been as great as 9 percent last year and Drewry is forecasting that carrier unit revenues will decline further in 2016, albeit at a slightly slower pace,” the firm said. “Excluding 2009, the past 12 months has seen the lowest spot rates in most major trade lanes and all at the same time.”
In an article in its Containerization Insight Weekly newsletter this week, Drewry said 2015 was the fourth year in a row containership growth outpaced world port throughput.
At the end of 2015, the “world’s fully cellular containership fleet consisted of approximately
5,200 vessels with an aggregate capacity of 19.8 million TEU. Another
couple of million TEU can be added to the total when container slots
from general cargo ships are included in the calculation,” it said.
In the next few months, pure containership capacity will reach 20 million TEUs, four times what it was in 2000, according to Drewry.
“The gap between supply and demand growths will narrow in the next few years but the accumulated overcapacity will need to be addressed somehow to restore balance,” it added.
But Drewry said in its forecast that the decline in carrier revenues “is not solely due to fundamental supply/demand imbalances caused by weak volumes and over supply.”
“End of year 2015 spot rates from Asia to the US West Coast and US East Coast were around $815 and $1,520 per 40-foot container respectively,” said Drewry.
“These were easily the lowest since 2009 and with decent cargo growth and load factors of over 90 percent to the US West Coast, the rate deterioration emphasize that carriers have been fighting for market share and are positioning themselves further for the potential shifting of cargo from the West to the East Coast after the Panama Canal widening.”
In the Asia-North Europe trade, spot rates of below $200 per 40-foot container during June 2015 were also unprecedented. While spot rates have staged a modest recovery since the start of 2016, Drewry believes that these gains will prove short-lived.
With the idle fleet touching one million TEUs in late 2015, or just under 5 percent of the global fleet, Drewry said “decisions need to be taken by lines to remove more vessels and re-structure more trade lanes with new operational agreements. Big vessels no longer guarantee decent profitability and should Asia to North Europe contract rates be signed at an average $900 per FEU (and this could be too optimistic) for 2016, this equates to an estimated $1.4 billion loss for the carriers on one trade lane.”
Neil Dekker, Drewry’s director of container research, said, “Comparisons are being made to 2009 when approximately 1.3 million TEU was removed from a considerably smaller fleet. The mass scale lay ups were triggered by the fact that lines ran out of cash. The industry is not there yet as some lines are still making a profit and the very low fuel prices are propping them up. But a further two or three quarters of declining financial profitability may trigger a notable rise in the idle fleet as we enter the second half of 2016.”
Drewry: Container shipping companies to lose $5b in 2016
