Despite Hanjin’s receivership, a weak trade growth[ds_preview] and fleet oversupply a gradual market recovery is now expected, according to the shipping consultancy Drewry.
Worse than expected second quarter financial results will be followed by a better second half-year. But Drewry still expects container carriers to record a collective operating loss of 5 bill. $ this year. But thanks to improving freight rates and slightly higher cargo volumes next year could see a operating profit of 2.5 bill. in 2017.
»Hanjin’s failure is the culmination of several years of poor commercial decisions and mismanagement,
not just by Hanjin, but the industry as a whole«
Neil Dekker, Drewry’s director of container research
However, this anticipated recovery will still leave pricing well below the average for 2015. A key unknown remains carrier commercial behaviour which has proven unpredictable and counterintuitive. Hanjin’s demise may mark a watershed in this regard, but liner complacency on the risks of insolvency may challenge this notion.
Fuel prices on the increase
Fuel prices are also on the increase, this may support higher freight rates via the bunker surcharge mechanism, but it also increases operational costs.
The fact that the orderbook is at a virtual standstill is a major positive as is rapidly increased scrapping. But even so, the next two years will still be very challenging on the supply side with annual fleet growth of between 5% and 6% and many more ultra large container vessels (ULCVs) to be delivered.
In reaction, the industry is rapidly consolidating by necessity rather than by design. Those carriers who can weather this prolonged storm have a chance of emerging the strongest in 2019/20. Revenue for the industry may reach 143 bill. $ in 2016, but this compares to 218 bill. $ back in 2012.
