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Consulting firm, AlixPartners said the 2018 outlook for global container carriers is decidedly mixed. Although the industry enjoyed modest improvement in 2017, it still needs to address the dual challenges of rising costs and over supply- driven mostly by fleet expansion- to keep the momentum going.
“The industry’s financials showed some improvement in 2017, though they remain at relatively low levels. Freight rate were stronger in the first half of 2017, but they remained low in a wider historical context. Generally, they’ve settled back to where they were before the Hanjin Shipping bankruptcy in late 2016. Demand is growing slowly but steadily, and after a brief lull, fleet capacity is once again on the rise.
Estimates of growth in fleet capacity for 2018 range anywhere from 4% to more than 5% compared with 3.3% in 2017. Total new-container ship capacity of around 1.3 million TEUs is due for delivery in 2018, and approximately 30% of that new capacity will be for megaships of 18,000 to 25,000TEUs”.
Rate will continue to be squeezed as long as supply continues to out space demand for containerized services. Consequently, total demand- at the very least – will have to meet expectations of a 4 to 5% increase to provide any real opportunity for margin growth.
“Shippers will have to be knowledgeable about their regional trades so they can know how each market is doing; rate volatility won’t happen on a global level but, rather, on a trade-by-trade basis,” it suggested, adding that with the expected rate volatility in 2018, carriers might consider allocating a portion of their business to the spot market rather than going all-in on long-term contracts.
