27-07-2018

Containers update: New vessels and bunker prices provided additional headaches for most carriers

The 2018 Peak Season is becoming a very different phenomenon than in recent years. In 2017 trade demand returned to levels that meant most carriers produced a profit on their balance sheets. In 2018, it has been well documented that trade demand was forecast to increase by around 4.8%.

The unfolding US trade war with China is causing uncertainty for the container industry’s traditional Peak Season Surcharge Season. One reason is there is speculation further items could be added to the US’ list of 6,000 items that could be subject to a 10% tariff from September 1.

Will the end-users reduce their cargo allocation numbers in August and September to put these levels at risk?

The industry is so far seeing positive trade demand, but the new vessels that are hitting the water along with the increase in bunker prices have provided additional headaches for most carriers. These two predicaments have led to some carriers posting losses for the year to date.

To curb the drain on their bottom lines for the remainder of the year, the alliances have reported either some reduction in capacity or the complete removal of the service for specific lanes for the coming weeks.

You could argue the carriers have consolidated so much there is little room to maneuver now.

The carrier industry is seeing new subset alliances being formed, such as the 2M alliance and ZIM. Cargo utilization rates are in the mid-90s% and carriers are hopeful that box rates will rise further over the coming weeks.

This could provide some respite for the carriers and the wider supply chain knowing that the carriers should stay afloat.

Source: Platts

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