Drewry: Layups the only answer

Drewry: Layups the only answer    Widespread laying up of container vessels by liner carriers is the only way to redress floundering ocean freight rates on key east/west trades, according to London-based Drewry Shipping Consultants.
   In Drewry's latest quarterly Container Forecaster report, the consultant said that recent orders for mega-size container vessels are only adding to the sentiment that there is too much capacity in the market.
   'The dilemma is that each carrier is aware that its top priority is to be cost-competitive, even if the collective impact of individual orders for lower unit-cost vessels is weakening the market,' said Neil Dekker, editor of the Container Forecaster.

Dekker

   Drewry calculates that 2 million TEUs of capacity have been ordered in the last 12 months, with 80 percent of that capacity tied up in vessels of 8,000 TEUs or larger.
   'The industry knows that laying up ships is the answer and that attempts in withdrawal of limited capacity from the main east/west trades is not enough corrective surgery,' Drewry said. 'The fact that many ships are just being recycled into other trade lanes is also merely transferring the pain elsewhere. The deployment of 13,000-TEU ships, as is happening at the moment, into trades with load factors of 80 to 85 percent will not realize the savings and economies of scale that were envisioned when the orders were originally placed.'
   Barring a huge demand surge in the second half of 2011, Drewry is forecasting losses for the industry during the current year.
   'Container operators will find it a very challenging environment this year in which to make money, but there is a major difference between this year and the recession ravaged 2009,' Drewry said. 'We are forecasting an 8.1 percent growth in global container traffic for 2011 and so, other than rising fuel costs, responsibility for the inability to run their business models profitably can only be laid at the feet of the carriers themselves.'
   During 2009, liner carriers idled significant portions of the global fleet (up to 12 percent at one time), while current idle levels are below 1 percent.