Container Shipping: More Ups and Downs Ahead

The container shipping sector faces a challenging future as additional capacity comes into service, threatening the tenuous recovery in freight rates. That’s the conclusion in a recent article by Greg Kowler in the June 2012 issue of Maritime Reporter. The author notes that the container shipping industry lost US$16 billion in 2009, rebounded with a profit of US$20 billion in 2010 and lost $US8 billion in 2011. And 2012? “Break even is about the best prediction availabile even with a surge in freight rates as general freight increases (GRIs) imposed by the carriers in the first few months have largely stuck,” said Knowler.

The reason for this volatility is clear –  too much capacity – and some industry watchers are warning that the market will not be able to absorb the enormous surge in capacity as the next generation of supersized containerships on order are delivered. Maersk Lines will start taking delivery of its 20 18,000-TEU ships next year. OOCL has placed orders for 10 13,000-TEU ships for delivery in 2013-14. Evergreen Marine has 35 8,800-TEU ships on order, with deliveries of one ship per month for the next three years.

The key to profitability will be optimizing utilization. Container lines will struggle to find the right balance of lower cargo loading, scrapping older tonnage, idling some capacity, slow steaming, alternative fuels, better voyage planning, weather routing and other strategies.

The article cites a Maersk Lines spokesman as saying, “In the old days, the most expensive cost was the ownership of your assets and carriers wanted to utilize them to the highest degree possible. But now with bunker fuel being so expensive, we are entering a time when the highest utilization may not be the model that gives a liner operator the best economy.”

Knowler concludes that “Rising bunker prices are hiking operating costs and as trade volume slumps, lines have been forced to focus on trimming costs and improving efficiency.”

Efficiency and cost control are the new imperatives in today’s shipping industry. The SHIPPINGInsight Fleet Optimization Conference, which takes place in Stamford, Connecticut, October 9-10, will provide a forum for discussion of the challenges, strategies and solutions for improving ship and fleet operating efficiency. The two-day conference is sponsored by Maritime Reporter and Maritime Professional.  Registration is open now at www.shippinginsight.com, and discounts are available for early-bird registration.

View the original posting here.