27-12-2017

2018 seen tough for cargo shipping as overcapacity threat heightens

 With more than 220 cargo ships scheduled for delivery in 2018, realisations of container shipping lines across the globe are expected to come under pressure next year because of oversupply.

“2018 is going to be a tough year for container shipping lines as some players are acting bullish and adding capacities which could put freights down in the coming months,” Audrey Dolhen, managing director, French shipping line CMA CGM Agencies (India) Pvt Ltd told Business Standard.

The year 2017, however, has been a market of improvement for container business segment, said industry officials as cargo demand picked up across the globe with trade showing some upswing.

“Container shipping lines will have to act cautiously next year as any kind of aggression in adding capacity will only hurt the business,” said Subrata K Behera, manager (ports and containers research), Drewry, a UK-based maritime consulting company.

For India, however, the impact is expected to be minimal as select bulk commodities are also getting containerised leading to increased demand for the container business in the domestic market. “Steel, scrap metal and even iron ore is getting containerised in Indian market. Due to this, the impact of overcapacity globally will have very limited impact on India’s container business in 2018,” said Hitesh Avchat, senior manager, Care Ratings.

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In 2016, India’s container market witnessed a growth of about 10-11 per cent, while in 2018 growth is estimated between 8 and 10 per cent.

“We are growing cleverly. We want to keep the market stable and strong. And for that we don’t plan to add new capacities yet, but we plan to grow our services on the range of capacities we have,” said Dolhen of CMA CGM.

Analysts are of the view that opting for demolishing older vessels could help maintain some balance in the market in the demand-supply equation along with some amount of deliberate idling.

“Idling of a vessel also comes at a cost, hence cannot be done frequently. But such a move can be made taking into consideration other business indicators,” said Behera.

In India, global shipping lines such as CMA CGM, Maersk Lines, and Geneva-based Mediterranean Shipping Company SA have presence in container segment with Shipping Corporation of India being among the domestic players.

Source: Business Stnadard

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