End of the horror show for box shipping

News 9 Jan 2017 by WCN Editorial

Alkmaar (Netherlands) -based Dynamar expects container shipping companies to post better fiscal performances this year than they did in 2016.

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“We believe that 2017 will be better financially than last year’s horror show,” Dirk Visser, senior shipping consultant and managing editor of the maritime intelligence and advisory group, told WorldCargo News. “The absence of an excessive orderbook with the prospect of reducing overcapacity leading to higher rates and the additional effect of consolidation that translates into less choice and also higher rates will help.”

Entitled “Top 25 Container Liner Operators”, the report which is in its 14th year, mainly reviews developments in 2016, a year described by the publisher as seeing further consolidation, carriers’ financials turning a deeper and darker shade of red and too much capacity in service.

“A deluge of large newbuilds combined with a faltering market resulted in severe overcapacity and induced a bitter rate war and dramatic losses,” said the report. "It is the price of having too many big ships in the market.”

Visser believes carriers have “slowly learned the lesson” and he thinks there is less chance of “following the leader” as happened when Maersk Line started phasing in its first E-class ships in 2006.

“Yes there are some dangers: newcomers, which may order big ships to reach a par with the competition and some alliances that are pursuing homogenous strings (all ships same capacity) may order some additional ULCS to achieve this objective when existing tonnage doesn’t suffice,” he said. “But the ordering of large ships in 2017 will be limited.”

Visser also thinks capacity differences between merged and planned merged entities, such CMA CGM and APL, the Chinese and Japanese carriers and Hapag-Lloyd and UASC, will make life difficult for smaller carriers in the east-west trades.

“The principal ones that will have to act are Evergreen Line, Yang Ming and OOCL,” he said, “but Pacific International Lines, Wan Hai Lines, Zim, because of Israel’s political situation, and Hyundai Merchant Marine, because it still has to prove its financial viability.”

Consequently, Dynamar sees consolidation as still being a strong driver of change in 2017. “In the course of the sweeping and powerful changes in 2016, smaller liner companies are under great pressure to consider consolidation and 2017 promises to be another exciting year.”