Drewry: Carriers Adapt to Oversupplied Market

Image Courtesy: MSC

In an oversupplied market carriers have proved to be fairly adept in manoeuvring capacity around, creating fertile conditions for rate increases, according to shipping consultancy Drewry.

After five months of 2017 Drewry’s Global Freight Rate Index stands 37% higher than it was in the same period last year as carriers adapted to the conditions, formulating a five-part trick that has allowed them to emerge intact.

Namely, they opt to scrap as many of the least desirable ships as possible, while other ships that have no immediate requirement are idled. Additionally, the owners choose to defer deliveries of new ships that were ordered when expectations were more bullish, reducing the inflow of newbuilds so that changes to the existing service network can be kept to a minimum.

The carriers also manage whatever is left in active service on a trade-by-trade basis through the cascade of ships into new territories without saturating them, and finally, they anticipate monthly tradelane slot requirements and take capacity temporarily out of the system through void sailings.

“Carriers have thus far shown themselves to be well-skilled in the art of capacity management, but it will not get any easier with millions of TEUs of newbuild capacity due to hit the water over the next few years,” according to Drewry.

“They will have to keep up the juggling act for some time to come, until demand reaches a level that can accommodate all of the capacity in the system without any need for adjustment.”

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