AlixPartners: Carriers Start 2017 with Grim Outlook

Image Courtesy: MSC

As the container shipping industry continues to be plagued by the same challenges since the onset of the 2008 financial crisis, the outlook for global container carriers remains grim at the start of 2017, consulting firm AlixPartners said.

Sluggish demand levels are exacerbating supply-and-demand imbalances, while mega vessels continue to join the growing global fleet.

Additionally, events like Brexit and the new US administration’s policies threaten to add insult to injury as they inject even more uncertainty into the future of global trade.

Yet, according to AlixPartners, hope remains for the shipping industry as the fourth quarter of 2016 saw a surge in rate levels on major East-West trades.

Furthermore, Hanjin Shipping’s bankruptcy at the tail end of peak season helped create a rare seller’s market that lasted through the close of 2016.

“Although carriers will struggle to improve their financial performance this year, they can take clear steps to shore up balance sheets in this difficult environment,” the consulting firm said.

Carriers will face some hard decisions in 2017. As they have already taken steps to relieve their financial woes, including slashing CAPEX and OPEX and stepping up scrapping, the companies should continue to drive down costs through effective post-merger integration and fleet rationalization activities that can bring supply and demand back into balance.

Fortunately, spot rates have improved in the wake of the Hanjin bankruptcy, which carriers must maintain at the very least.

The carrier community’s ability to drive rate levels higher into the transpacific contract negotiations will likely decide whether 2017 will be the turning point the industry desperately needs—or just another bad year in a growing string of losses, AlixPartners said.

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