‘MAKE OR BREAK’ YEAR FOR BOXSHIPPING

Container shipping lines are set for a “make or break” year in 2015 with the number of profitable carriers predicted to increase. The latest edition of Drewry’s Container Forecaster report predicts that declining operating costs, thanks in a large part to lower fuel costs, and freight rates slipping at a lower level, will push the overall shipping line industry into profitability for 2014. Looking to the year ahead the consultant expected more carriers would return to the black, pointing out that anecdotal evidence suggests that carriers intend to increase annual contract rates with their key beneficial cargo owner clients in 2015.

Improved network planning, slow steaming and the introduction of the four mega-alliances are other measures that will help shipping lines improve profitability, the consultant said.

There were some headwinds that may have a negative impact on improvements, though.

“Carriers are winning the battle between rates and costs,” said Drewry’s Director of Container Research, Neil Dekker. “However, there are issues such as port congestion which are both costly and outside the direct control of carriers.” Supply is expected to increase ahead of demand. The global boxship fleet is expected to grow 7.2% this year with 1.7m teu of capacity due to be delivered. Demand meanwhile is predicted to increase by only about 5%.

The level of profitability achieved by the shipping lines also depended on continuing carrier focus on vessel deployment; fuel costs remaining low; recovering demand; successful outcome of annual contract negotiations; and new operational alliances delivering greater market stability. Drewry acknowledged that container carriers have a habit of “undoing good work with poor discipline” but it felt the influences that are shaping the industry, including recent consolidations, prove that carriers have “pushed profitability and value for money up the board room agenda. This is a lot to ask for from an industry with a poor track record of profitability. But there are signs that carriers are starting to believe in themselves and are backing up their positive rhetoric with actions,” Drewry said.