A mixture of overcapacity, weak demand and aggressive commercial pricing is threatening liner shipping industry profitability for the rest of 2015, according to a report.
Global shipping consultancy Drewry Maritime Research has revised an earlier forecast, to predict that container shipping carriers will be lucky to break even this year.
According to the firm's quarterly Container Forecaster report, average global freight rates will decline at their fastest pace since 2011.
Drewry had said the sector would collectively generate profits of up to $8 billion dollars in 2015, but now says that some lines will be in the red by the end of the year. Carriers would have to take radical action to address overcapacity which is now plaguing virtually all major trade routes, Drewry said.
It estimated each quarter another 10 to 15 ultra large container vessels are coming onto the market, and the resultant extra tonnage into the transpacific, Latin American and Asia-Middle East trades is having a detrimental effect, Drewry said.
Neil Dekker, Drewry’s director of container shipping research, said: “Carriers’ emphasis on ordering so many big ships is starting to backfire and virtually all major headhaul trades are plagued by overcapacity. We are entering a new era which will be dominated by big ships and all ocean carriers need to be thinking of average headhaul trade route fill factors of 80-85 per cent as the norm, rather than 90 per cent or more. They cannot keep adding capacity and expect there to be no substantial impact on unit revenues.”