Drewry: Gradual Recovery Expected in Container Shipping

Image Courtesy: MSC

Despite continuing concerns of weak trade growth and fleet oversupply in the container shipping market, a gradual market recovery is now expected, according to 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 USD 5 billion this year.

“We forecast industry profitability to recover next year, thanks to improving freight rates and slightly higher cargo volumes, and so record a modest operating profit of USD 2.5 billion in 2017,” Drewry said.

While average freight rates are expected to improve next year, this will follow several years of negative returns and will still leave pricing well below the average for 2015, according to the shipping consultancy.

A key unknown remains carrier commercial behaviour which has proven unpredictable and counterintuitive. Fuel prices are also on the increase and carriers are extremely wary of costs.

Drewry said that 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,” Drewry said.

Drewry estimates that revenue for 2016 may reach USD 143 billion, but this compares to USD 218 billion back in 2012.

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