(Drewry) – Further widening of the supply-demand imbalance on the commerce route stage and inadequate measures to scale back ship capability will result in an acceleration of freight price reductions and industry-wide losses in 2016, in accordance with the most recent Container Forecaster report printed by world delivery consultancy Drewry.

The decline in world container delivery freight charges is anticipated to have been as nice as 9% final yr and Drewry is forecasting that service unit revenues will decline additional in 2016, albeit at a barely slower tempo. Excluding 2009, the previous 12 months has seen the bottom spot charges in most main commerce lanes and all on the identical time. This shouldn’t be solely as a result of basic provide/demand imbalances brought on by weak volumes and over provide.

End of yr 2015 spot charges from Asia to the US West Coast and US East Coast have been round $815 and $1,520 per 40ft container respectively. These have been simply the bottom since 2009 and with respectable cargo development and cargo components of over 90% to the US west coast, the speed deterioration emphasise that carriers have been combating for market share and are positioning themselves additional for the potential shifting of cargo from the West to the East Coast after the Panama Canal widening. Spot charges of beneath $200 per 40ft container within the Asia-North Europe commerce throughout June 2015 have been additionally unprecedented. While spot charges have staged a restoration for the reason that begin of 2016, Drewry believes that these positive factors will show short-lived.

Many stakeholders level to the truth that bunker costs of for instance $140 per tonne in Rotterdam (IFO380) are clearly contributing to decrease total container freight charges, however Drewry believes {that a} new and worrying pattern has turn into obvious for ocean carriers. Our most up-to-date knowledge means that they’re not capable of minimize prices quicker than the prevailing declines seen within the freight price market. Drewry believes that oil costs have most likely hit the market backside proper now and prices for the positioning of empty containers and vessel lay ups will enhance this yr. Our newest calculation is {that a} 10,000 teu vessel would incur a minimal of $450,000 in reactivation prices if laid up in Asia for 3 months or extra. It also needs to not be forgotten that many strains not even quote a BAF on some commerce lanes. The consequence of that is that Drewry expects {industry} losses to widen to over $5bn in 2016.

Ocean carriers consider they’ve taken quite a lot of corrective motion through the remaining three months of 2015 so as to elevate very low freight charges. But the removing of six main east-west providers and the blanking of 32 voyages in November and 21 in December did comparatively little to enhance commerce route provide/demand balances. At the start of October 2015, common headhaul east-west load components have been solely 85%, in comparison with 94% one yr earlier.

The GRI initiatives applied in late 2015 didn’t work for carriers on many commerce lanes and in some instances have been suspended or postponed as a result of circumstances have been just too feeble. Drewry believes that extra must be executed by the {industry} to result in any sort of stability. Proposed or forthcoming {industry} consolidation might nicely scale back the variety of huge market gamers and enhance particular person firm effectivity, however this is not going to scale back {industry} vessel capability in any manner.

With the idle fleet touching a million teu in late 2015, or simply below 5% of the worldwide fleet, selections have to be taken by strains to take away extra vessels and re-structure extra commerce lanes with new operational agreements. Big vessels not assure respectable profitability and will Asia to North Europe contract charges be signed at a mean $900 per feu (and this could possibly be too optimistic) for 2016, this equates to an estimated $1.4 billion loss for the carriers on one commerce lane.

Neil Dekker, Drewry’s director of container analysis, mentioned: “Comparisons are being made to 2009 when approximately 1.3 million teu was removed from a considerably smaller fleet. The mass scale lay ups were triggered by the fact that lines ran out of cash. The industry is not there yet as some lines are still making a profit and the very low fuel prices are propping them up. But a further two or three quarters of declining financial profitability may trigger a notable rise in the idle fleet as we enter the second half of 2016.”

Source: Drewry Maritime Consultants