
Container Shipping In 2015 – Year In Review
By Mike Wackett (TheLoadStar) – To quote Charles Dickens: “It was the best of times, it was the worst of times…” This appears to aptly sum up the 2 halves of 2015 for container traces, which started the yr with optimism however are ending it once more wanting right into a loss-making abyss.
Bullish ocean carriers began the yr eyeing improved profitability from higher community optimisation of the brand new east-west vessel sharing alliances, in addition to a discount in unit prices by deploying newbuild 18,000 teu-plus ultra-large container vessels (ULCVs).
A greater-than-expected peak season in 2014, which rippled via to the start of 2015, offered carriers with a very good base for annual contract negotiations – a scenario made rosier by the continued fall in gasoline costs.
Indeed, earlier fears that new laws requiring ships to burn costlier low-sulphur bunkers within the new SECA areas would hit the underside line proved unfounded as oil costs tumbled.
Early January noticed pomp and ceremony in full move because the UK container port of Felixstowe welcomed the maiden name in Europe of the 19,100 teu CSCL Globe. It turned the world’s largest containership for just a few weeks solely, till usurped by the arrival of the 19,224 teu MSC Oscar later within the month.
It was an accolade carriers had been desperate to have, to garner publicity in an more and more aggressive trade. In truth the usually media-shy MSC took full benefit of each PR alternative given by the arrival of its ULCV in North Europe, marking a significant technique change for the privately owned agency.
Meanwhile, protracted labour contract negotiations on the US west coast resulted in a substantial backlog of ships and cargo and spurred diversions to ports on the east coast to maintain provide chains shifting. Some canny carriers had been capable of mitigate the additional prices from delays by providing different sailings from Asia to the US east coast – at greater freight charges.
The west coast difficulties additionally proved to be a silver lining for long-suffering panamax containership house owners, whose beforehand discarded ships had been all of the sudden in demand for extra sailings to the west coast and further east coast voyages through the Panama Canal.
Meanwhile, the members of the 4 east-west alliances – 2M, G6, CKYHE and O3 – had been nonetheless engaged in a race to function the most important ships on the Asia-North Europe market. Increasing numbers of the 8,000-10,000 teu ‘work-horse’ vessels of the commerce had been displaced by the ‘new normal’ 13,000-18,000 teu behemoths as an armada of ULCVs sailed from Asian shipyards.
However, whereas the idea stays that larger ships decrease unit prices and may, due to this fact, provide the next margin for carriers, in observe this solely works if the vessels get pleasure from enough utilisation.
Thus it turned in a race-to-the-bottom scramble for containers to fill these new ships. More so if the service was celebrating the maiden voyage of a brand new ULCV – its decks needed to be full in any respect prices!
The haste through which the brand new alliances , and the substitute of huge ships with even larger ships, contrived to considerably improve the capability on provide on the Asia-Europe trades, which alone would have put down stress on freight charges. But add the Russian financial disaster and a common reluctance by European customers to open their purses, and by early summer season it was apparent that carriers had been crusing at full steam into an ideal storm.
The relationship of spot market cargo to ocean carriers had till now been one in every of an unpalatable different – to be accessed solely as a final resort if there have been blips in common contract buyer necessities, or as top-up cargo.
However, there was a seismic shift in service technique because the battle to fill ships turned acute in the summertime, reversing the stability from a earlier estimated 75-25 ratio, in favour of contract cargo to identify, to a 50-50 degree. In truth, one service informed The Loadstar in July that just about its total allocation on a selected voyage from Asia to North Europe had been sourced from the spot market.
Shippers that had signed annual contracts now started demanding conferences with carriers to renegotiate the phrases, pointing to the truth that spot charges had been significantly under contract charges and that they had been being provided less expensive charges by different carriers – usually from inside the similar alliance.
Unsurprisingly each contract and spot freight charges headed south at a fast tempo, with month-to-month GRIs by carriers being largely ignored available in the market.
Nonetheless, most carriers managed to carry onto sufficient income and had been capable of lower prices on the similar time to document a worthwhile first-half consequence. They anticipated the deteriorating returns to be turned through the peak season.
Unfortunately for the container traces plying the Asia-Europe routes the 2015 peak season proved a really damp squib. The writing was on the wall fairly rapidly: except capability was withdrawn the one manner was down for freight charges that approached document lows.
The downhill velocity of service fortunes within the third quarter was dramatic: Maersk Line reported that its internet revenue had crashed by an enormous 61% through the interval, to $264m versus $685m the yr earlier than. The Danish service was obliged, not solely to situation a revenue warning, however to announce quite a lot of emergency measures, together with the discount of greater than 4,000 workers worldwide – over 15% of its land-based workforce.
Furthermore, the cascading of larger ships onto different trades which didn’t want the additional capability had a detrimental influence, ruining many beforehand worthwhile routes for carriers and additional denting common charges.
Increasingly, month-to-month GRIs had been ignored by shippers, and typically even by the very carriers that had proposed them. Ridiculous as it might now appear, some carriers introduced a cumulative whole of over $12,000 per teu of GRIs over the course of 2015!
With power price erosion and GRIs failing to stay, carriers introduced growing numbers of blanked sailings and momentary service suspensions. But it was too little and too late, and extra just lately bigger ships have succumbed to being idled, together with one in every of Maersk Line’s Triple-Es.
The parlous state of the container liner trade within the second half has resulted within the merger plans of the 2 Chinese state-owned container traces and the proposed acquisition of APL by CMA CGM. However, if, after these restructures are accomplished, the identical variety of ships is deployed on companies then it’s tough to see how prospects might be any higher for carriers within the new yr.
Nevertheless, containers will nonetheless should be moved all over the world in 2016, and for the fittest and most considered carriers it’s a query of toughing it out till restoration comes.
It goes with out saying that it’s within the pursuits of carriers and shippers, in addition to all stakeholders within the trade that 2016 doesn’t see a repeat of the acute volatility we now have seen this yr.
<em>©2015 TheLoadStar</em>