Drewry Forecasts East-West Rates to Fall 7 Percent

Drewry Shipping Consultants is forecasting average ocean freight rates on major east-west trade lanes will decline 7 percent this year as large ocean carriers once again gear up for a fight for market share.

In its latest quarterly Container Forecaster, the London-based consulting firm said carrier profitability will fall back to around $8 billion following an estimated $13 billion in profits last year, “although this could be considerably lower if carriers’ pricing and capacity discipline weakens further.”

Ocean carrier profits rebounded strongly in 2010 thanks to careful management of vessel capacity, but Drewry warned this discipline appears to be waning.

“Unfortunately, the desire to maintain market share seems to be the primary driver in the east-west trades at the moment since carriers have resolutely refused to take out capacity from the market place despite the fact that headhaul utilization factors were in the low 80’s (in mid-December),” said Neil Dekker, editor of the Container Forecaster.

The Drewry report estimates the global container fleet will grow 8.5 percent in 2011, with much of the gain coming ships more than 8,000 20-foot equivalent units of containers capacity. Carriers will need to be “extremely careful in their deployment strategies if they are not to upset the supply/demand scenario,” the report said.

Several large carriers have started ordering new ships again, which the firm said was raising risks for the operators too soon after the global downturn.

“The fact that no major companies went to the wall still seems to have insulated the industry from the despair of 2009 and there is now the feeling that perhaps the dark days did not happen,” Drewry said.
(Source:www.joc.com)