Cheap Bunker Fuel the Only Thing Keeping Container Shipping Lines Profitable, Drewry Says

By Gavin van Marle, The Loadstar

Just how a lot cash would container delivery traces be shedding if it weren’t for the relentlessly steep decline in bunker costs?

Lots, in keeping with the most recent evaluation from Drewry Maritime Research, which investigated the revenues and margins of 16 of the 20 largest carriers that publish their accounts.

Drewry calculates that the group, which represented 65% of worldwide slot capability, noticed income of round $60bn within the first half of the yr, 5% lower than within the first six months of 2014. Only Taiwanese carriers Wan Hai, a specialist on area of interest trades reminiscent of intra-Asia, and Yang Ming managed to extend gross sales year-on-year.

The decline was the results of low demand mixed with low freight charges.

However, it’s a mark of how decisive gas prices have grow to be to the liner delivery trade that, regardless of this decline in income, noticed working earnings in the identical interval truly triple: the 16 carriers posted mixed working earnings of $3.3bn, in contrast with $1.1bn through the first six months of 2014, as margins elevated from 1.7% to five.6% within the first half of this yr.

In January 2014, the common worth of 1 tonne of IFO380 bunker gas purchased at Singapore or Rotterdam was slightly below $600, a yr and a half later in July, it had dropped by virtually two-thirds to marginally below $250 per tonne.

Drewry wrote yesterday: “The change in path that gas prices has taken implies that carriers’ prices are falling quicker than freight charges, enabling them to proceed posting earnings, albeit shrinking with every passing quarter.

“Drewry estimates that industry-wide unit costs fell by about 11% in the first-half 2015 versus the same period last year, whereas unit revenues were down by approximately 7%.”

It added that whereas few carriers supplied a lot perception into their price constructions, CMA CGM gave an in depth breakdown of its prices in its most up-to-date outcomes:

The desk reveals that the French Line diminished the prices over which it has direct management – wages and workplace bills – however the large affect of the 33% decline in bunker prices mitigated the very fact virtually each exterior provider to the provider managed to extend their income from CMA CGM. It additional demonstrates how carriers have to achieve higher management over pricing and capability within the long-term, ought to gas prices start to ascend to earlier ranges; though Drewry thinks that is unlikely this yr.

“Based on prevailing fuel and rates in the third quarter 2015, we expect the story will be much the same, ie diminishing profitability, meaning that the accumulation over the first nine months will be enough for carriers to walk away with okay sums for the full year, regardless of what happens in the fourth quarter.”

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