The container market has seen an inflection point in late 2016, with demand rising above supply during the fourth quarter, ushering in the start of a period of strengthening earnings for carriers, Danish boxship giant Maersk Line believes.
As a result, Maersk Line predicts that carriers’ earnings could improve in 2017.
The Danish shipping major expects its net earnings to recover by over USD 1 billion from an underlying loss of USD 384 million in 2016 to a net profit in 2017. The improvement is based on the company’s assessment of a recovery in seaborne container transportation that is expected to increase by 2 to 4%, Alphaliner said in its latest weekly report.
Maersk saw an encouraging growth of 4% in global container demand in the fourth quarter of 2016 and it increased own liftings by 12%, in line with its strategy to gain market share.
Although Maersk said that container demand rose on a global scale, this has not translated in demand for containerships, Alphaliner explains.
Global demand for boxships has dropped together with supply growth, with average demand in the fourth quarter of 2016 decreasing to 0.6% from 1.6% in the first quarter of the year. Vessel supply growth went down to 2.2% in Q4 from 7.9% in Q1 of 2016, according to Alphaliner.
This has resulted in an increase in the average idle fleet in the last quarter of 2016 to 1.48 million TEU.
The gap between vessel demand and supply has narrowed in the first quarter of this year, with demand growth rebounding slightly to 1%, compared to supply growth of 1.2%. The average idle fleet for the first five weeks of 2017 stands at 1.34 million TEU, the report further reads.
However, other industry players have different projections. Singapore’s container port business trust Hutchison Ports cautioned that box volume growth in 2017 remains uncertain due to the “policy stance of the new US administration” and the “continued weak consumer sentiment and high unemployment rate” in Europe that could hinder the pickup of the European trade, according to Alphaliner.
What is more, Japanese shipping company Mitsui O.S.K. Lines (MOL) said it anticipates freight rates to decline in March and the carrier adjusted earnings projections downward for its fiscal year forecasts through March 2017.
“Apart from the uncertainty over demand growth, competition among shipping firms remains intense, ahead of the new Transpacific service contract season, starting on May 1,” Alphaliner said.
Namely, various carriers plan to set up new Transpacific services in the next two months, while the 2M alliance will also launch a new high capacity Far East-North Europe string in April this year.