Xeneta: Will container shipping ‘sabotage its own success’?

Despite a positive outlook for the rest of the year in the container shipping industry, the 78 new mega ships in the orderbook will likely push capacity and rates over the edge, according to market intelligence platform Xeneta.    Xeneta, a rate benchmarking and market intelligence platform for containerized ocean freight, says the container shipping industry “may be unwittingly planning to sabotage its own success.”
   Xeneta CEO Patrik Berglund said the company maintains a positive outlook for the rest of 2017, as Maersk recently posted increased revenues due to higher freight rates – which jumped 120 percent in May in the Asia to Europe trade lane – and Hapag-Lloyd expecting earnings to increase as the year goes on. But the increase in mega ship capacity in an already flooded market will be an issue for the long term.
   “A staggering 78 new mega-ships are due to come online for the Asia-Europe trades over the next two years, pushing capacity up by over 23 percent,” said Berglund. “Mega-ships of 18,000 TEUs need to command utilization rates of at least 91 percent to achieve cost savings. Even in the high volume Asia-Europe trades that is difficult and may necessitate lower than average rates for some volume, which, inevitably, will hit overall rate development.
   “Each of the key alliance partners is playing catch up with one another, trying to reap the mega-ship benefits. In doing so they’re going to flood the market with new capacity and risk reversing current positive trends. This is a potential mega-problem in waiting,” he added.
   Strong consumer demand, the consolidation of carriers into three main alliances and the collapse of ocean carrier Hanjin last year all helped push up vessel utilization and freight rates, Berglund says, but uncertainty remains.
   “This sector, just like the global political scene, can be highly unpredictable, and the only way to counter that is by accessing the very best inside intelligence,” Berglund said.