Will the Container Industry stay Profitable?


According to Drewry Shipping Consultants’ latest insight report, carriers weathered a storm of low rates in Q1, 2015 to deliver some of the best profits in recent times. However, the analysts ask if this will be the peak of profitable activity following new-build deliveries and rising costs.

Q1, 2015 was the most profitable for the container industry in four years with a preliminary estimated operating margin of about 8%. Unlike in previous quarters when only a handful of lines – usually Maersk Line and CMA CGM – made significant headway.

PTI previously reported on the operating profit of various container lines amid strong performance in the container industry, with Maersk Line leading the way.

Carriers’ success in the first three months of 2015 was achieved on the back of continued lower unit costs that have offset weakening freight rates.

Drewry has calculated that average unit revenues were down by 6% year-on-year, but this was more than covered by an 11% fall in unit costs.

Volumes that decreased in Q1, 2015 will pick up as the industry moves into the traditional second and third quarter peak seasons but the number of newbuild ships that are scheduled to be delivered from June onwards will weigh heavy on the supply-demand balance.

From June onwards there will be a minimum of 100,000 TEU per month joining the world containership fleet with July seeing twice that amount. The data in the below chart does not include 28,000 TEU that as of yet we’re not certain of the delivery month.

Global shipping lines currently account for 90% of the world’s container trade, with the top 10 companies owning more than 60% of this amount in TEU terms.

After two months of Q2, 2015 the World Container Index is averaging 28% lower than it was for Q1, 2015, whereas IFO 380 in Rotterdam has increased by 15%.

According to Drewry, the pressure to fill those new ships and maintain market share will continue to supress freight rates through the remainder of the year. With costs now rising the chances of carriers beating their first quarter performance seems remote.

The Drewry View: By focusing on costs, which are largely out of their control, carriers are subject to the whims of the energy market. They will need the peak season to exceed expectations to achieve ship load factors that would support rate increases. Otherwise their income statements will turn red once again.

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