Drewry: Container Shipping Industry to Earn USD 6 Bn This Year

The container shipping industry is steaming its way toward making an operating profit in the region of USD 6 billion this year, with that sum rising again next year, Drewry said in its latest report on container shipping industry.

As disclosed, for now, “the industry is moving in the right direction.”

World container port handling rose by nearly 6% in the first half of 2017, although Drewry believes this will slow a little in the second half, giving a full-year rate of 5.5%.

“The recovery of the world’s containerised trade this year has been surprising. Seen through the other end of the telescope, with hindsight we can now fully appreciate the truly appalling state of world trade in the past couple of years,” Drewry said.

At the start of 2017, several political developments across the world including Brexit and the possible break-up of the EU, Trump’s potential reversal of the rehabilitation process between the West and Iran along flow of immigration into Europe, to name just a few, were hindering optimism for any recovery in the sctor.

“Now, at the start of the final quarter of the year, while many of these issues have not completely gone away, none appear critical enough to provoke any economic derailment. After the caution of the previous years, that lagging trade has flowed in to 2017 when economies have simply got back to doing business,” the shipping consultancy noted.

“The world has restocked and normal growth patterns are once again reasserting themselves, but for next year we believe there will be a regression to the mean that will result in lower rates of growth in the short to medium term.”

 Drewry’s weighted global freight rate forecast, 2017-18 (USD per TEU)

                                                            Image Courtesy: Drewry

According to Drewry, the profit outlook for carriers will be heavily tied to what happens in the approaching European contracting season. Drewry’s latest freight rate forecast for 2017 and 2018 is brighter than the picture painted back in June, amid strong fundamentals and improvement of the liner operators’ negotiating position.

The 2017 forecast remains at the same level with blended all-in (spot and contract) rates projected to increase by 15%. Spot freight rates have been helped this year by improved carrier discipline and a return to prudent commercial strategies, Drewry pointed out.

“Rates are expected to rise again next year, but not at anything like the same margin as this year. Many shippers will be reluctant to agree to significant increases for the second year in a row. Ocean carriers may well have negotiated much improved contracts in 2017 across core trades, but that was relatively easy from such a low base. Next year is a much sterner test for them, particularly with slower demand growth and as much 1.3 million teu worth of extra slots hitting the water,” the shipping consultancy further noted.

For the upcoming year the task of dealing with the influx of new tonnage and where to redistribute the existing ships is expected to be a bit tougher than this year.

“But for now we have faith in their abilities to manage the process, something that will become more streamlined as the number of competitors shrinks,” Drewry concluded.