Ocean carrier voyage results could soon start appearing in red ink as freight rates flirt with breakeven levels on major east-west tradelanes.<\/p>\n
Although the container spot rate crash appears to have bottomed-out in the past few weeks, annual contract rates are also now in sharp decline.<\/p>\n
According to Drewry\u2019s latest Container Insight report, carriers have \u201clost control of the container market\u201d by failing to manage capacity and will \u201cact on capacity only when they are forced to do so by heavy losses\u201d.<\/p>\n
The maritime research consultant claimed \u201ca deep-seated instinct to preserve volumes has kicked in\u201d, with carriers discounting rates heavily to secure short-term bookings.<\/p>\n
It said that, until a few months ago it was fairly confident the lines would take \u201cthe necessary steps\u201d to reduce capacity before the market got out of control, but now admits it was wrong and that it gave carriers \u201ctoo much credit by thinking they would proactively manage capacity\u201d.<\/p>\n
Drewry said that, after talking to various stakeholders, it had been convinced a structural change had occurred in the liner industry and that \u201cconsolidation and more efficient carrier alliances would help change old habits\u201d.<\/p>\n
\u201cThat was wrong too,\u201d said Drewry.<\/p>\n
\u201cThe price paid for reverting to type is that contract quotations are now being set at a fraction of the levels of a year ago,\u201d it said, adding it had \u201cvastly downgraded freight rates and profitability forecasts\u201d showing that, from Asia to North Europe and Asia to the US west coast, revenues were running at close to round-voyage slot costs.<\/p>\n
Drewry described the scenario on the key tradelanes as \u201cakin to a doomsday clock, counting down the time before carriers incur losses\u201d.<\/p>\n
Meanwhile, anecdotal reports to The Loadstar suggest carriers are \u201cwaiting for more visibility\u201d after the Chinese New Year on 22 January before taking more radical action, such as suspending more network loops, but that they remain optimistic there will be an inventory restocking rebound in demand post CNY.<\/p>\n
Indeed, an investor note from HSBC Global Research say post-CNY it expects \u201ccapacity discipline to keep contract and spot rates above breakeven\u201d.<\/p>\n
It adds: \u201cChina\u2019s removal of Covid-19 restrictions and potential restocking demand could drive a recovery in shipments post-CNY and lift rates in the near term.\u201d<\/p>\n
Nevertheless, it believes there are downside risks, from inflation, on consumer spending that could dampen demand and \u201clikely trigger another round of price competition\u201d.<\/p>\n
Drewry said it still thought there would be a \u201cmajor capacity reconstruction\u201d in the liner industry, \u201cbut it will be carried out to prevent freight rates from falling below breakeven, not to gently ease profit margins above historical averages\u201d.<\/p>\n
It concluded: \u201cWhile cargo demand has contracted at a faster pace than many anticipated, and some action has been taken to address overcapacity, it has been largely too little, too late. Instead, carriers have lost control of capacity and reverted to price competition to retain volumes.\u201d<\/p>\n
Source:<\/p>\n
Wackett, M. (2023, January 5). ‘Doomsday clock’ ticking down as shipping lines lose control of the market<\/i>. The Loadstar. Retrieved January 10, 2023, from https:\/\/theloadstar.com\/doomsday-clock-ticking-down-as-shipping-lines-lose-control-of-the-market\/<\/p>\n Ocean carrier voyage results could soon start appearing in red ink as freight rates flirt with breakeven levels on major east-west tradelanes. Although the container spot rate crash appears to have bottomed-out in the past few weeks, annual contract rates are also now in sharp decline. According to Drewry\u2019s latest Container Insight report, carriers have …<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[78],"tags":[85,89,84],"class_list":["post-2503","post","type-post","status-publish","format-standard","hentry","category-news","tag-container-lines","tag-logistics","tag-maritime"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/posts\/2503","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/comments?post=2503"}],"version-history":[{"count":2,"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/posts\/2503\/revisions"}],"predecessor-version":[{"id":2562,"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/posts\/2503\/revisions\/2562"}],"wp:attachment":[{"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/media?parent=2503"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/categories?post=2503"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ems.cohesionfreight.com.hk:8080\/wordpress\/wp-json\/wp\/v2\/tags?post=2503"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}