2017 should be a year of small profits for most container carriers but there will be very little room for error, according to shipping consultancy Drewry.
The short-term outlook for the container shipping lines looks good as the worst seems to have passed, Drewry said.
Drewry initially expected industry operating losses to be in the realm of around USD 5 billion in 2016. However, given a better than expected fourth-quarter, when carriers collectively just about broke-even, combined with favourable revisions to both Drewry’s loaded container and average revenue per TEU estimates, Drewry believes industry operating losses in 2016 were closer to USD 3.5bn.
The freight rates are continuing to slowly climb off the floor and the demand is recovering in 2017.
However, Drewry warns that it would not take too much – say a sudden spike in bunker costs or more rate wars in the key trading corridors – to condemn the carriers to another loss-making year.
Taking a longer view, with fewer competitors thanks to the recent M&A wave and the ability to manipulate the supply and demand balance more in their favour through newbuild delays, there is a big upside there for the taking. Whether they do or not is another matter, Drewry said.
Last year was a bad one for ocean carriers, but as painful as it might have been, it did give the industry the wake-up call it needed to mend some of its ways. The days of propping up failing carriers need to be a thing of the past, Drewry said.