Drewry: Liner focus returns to market share

Drewry: Liner focus returns to market share    London-based Drewry Shipping Consultants said this week the liner carrier industry has returned to 'normal operating conditions' after a bumper 2010, meaning its has refocused on market share and away from individual profitability.
   In its latest Container Forecaster publication, Drewry said, 'the fact that no major companies went to the wall still seems to have insulated the industry from the despair of 2009 and there is now the feeling that perhaps the dark days did not happen. In essence, Drewry observes that it is back to normal operating conditions. A number of carriers have come back into the newbuild market, believing it is the right time to buy again despite the fact that bank financing is now much more circumspect.'
   Among those cited by Drewry as placing 'significant' orders are Hapag-Lloyd, CSAV, OOCL and Hamburg S'd, 'and we are awaiting AP Moller – Maersk to confirm its supposed order for a number of huge 18,000-TEU vessels from a South Korean yard, which will take the industry into new territory.' Maersk, incidentally, denied to American Shipper last month that it has placed such an order.
   'Other players, including Hanjin, CSCL and Evergreen, have indicated that they will also place further orders, and a new breed of Greek owners, attracted by potential healthy returns when compared to the now moribund tanker and bulk markets, are coming to the fore,' Drewry said.
   The consultant said this ordering activity indicated a brewing fight for market share in 2011, 'which will inevitably lead to a decline in freight rates.' Also ratcheting up the grab for market share has the entry of several smaller lines in the east/west trades, which has made major carriers increasingly wary, Drewry said.

Dekker

   'Unfortunately, the desire to maintain market share seems to be the primary driver in the east/west trades at the moment since carriers have resolutely refused to take out capacity from the market place despite the fact that head-haul utilization factors were in the low 80s (mid-December) and spot rates were falling steadily week by week,' said Neil Dekker, editor of the Container Forecaster. 'Although carriers have released record or near-record financial results for 3Q, this is not a time for complacency, concentrating on market share instead of profitability. The trends being displayed are the same as have been evident in recent times, and are usually the precursor of a downwards spiral in the market.
   'Perhaps the biggest carriers are happiest with no long-term profitability as long as they have market share. However, the utopia of freight rate stability sought by shippers seems a long way off if carriers abandon their short-lived prudence and profitability.'
   In the latest Container Forecaster, Drewry projects the global fleet forecast will grow 8.5 percent in 2011 and much of this capacity in the 8,000-plus-TEU sector. The report also said, 'current behavior suggests lines are reluctant to shed excess tonnage, and we do not expect the same intensity of lay ups as previously seen.'
   Drewry projects a 7 percent decline in average east/west rates, excluding fuel, this year. ' Eric Johnson