Analyst says container carriers stuck in GRI ‘rut’

   Container carriers “need to rely less on the chronic use of general rate increases (GRIs) and pay more attention to minimizing surplus capacity at the trade route level to stabilize the shipping market,” said the London-based consultants and research firm Drewry.
   “We are stuck in a vicious rut of GRI, followed by rapid rate erosion, followed by another GRI. Carriers cannot achieve market stability unless they are prepared to adjust capacity in line with weak demand and finally accept that we will no longer have 8-10 percent annual demand growth on the east-west trades,” said Neil Dekker, Drewry’s head of container research. “The delivery of ever more 10,000-TEU levels and the recent surge in the orderbook for more ULCCs (ultra-large container carriers) is not helping sentiment. A change of strategy by the carriers is urgently required. “
   Drewry, which has just published its quarterly Container Forecaster, said “future industry health is now being governed by carrier behaviour and psychology rather than the prevailing market fundamentals which we believe will remain weak for the next two years at least.
   “Senior industry figures stated that much more would be done this year to adjust capacity in line with ailing demand through scrapping, slow steaming and idling, but they have not delivered. With global container traffic only forecast to grow by 3.7 percent this year, the carriers need to adjust their deployment at the trade route level and while scrapping levels are high, slow steaming has not increased by any significant level. Global fleet idling in early June was a mere 3 percent and continues to decline when all the signals heavily suggest that carriers should lay up more tonnage,” the analyst said.
   Drewry believes the proposed P3 alliance of Maersk Line, Mediterranean Shipping Co. and CMA CGM and stated intention to actively adjust their capacity in the three main east-west trades “should be seen as a catalyst to try and aid some of the current problems, although these three lines cannot repair the industry damage all by themselves.” – Chris Dupin