DREWRY CONTAINER FORECASTER PDF

Drewry: Container carriers have not yet rid themselves of self-sabotaging traits. The collapse of freight rates during the second half of last year, far out of line with the underlying supply and demand fundamentals, suggests that carriers have not yet rid themselves of certain self-sabotaging traits and that talk of a new golden age for carriers was perhaps exaggerated. However, despite the recent developments, in the latest Container Forecaster report Drewry retains its view that the carriers are heading towards a brighter future, while also acknowledging there are several temporary factors that have created a bump in the road to recovery. One area that might have been expected to have provided a more immediate benefit was the significant consolidation occurring in the market. The latest consolidation wave has barely become operational, with most transactions either just concluded or still pending. Figure 1: Nominal capacity shares, active containership fleet, October Source: Drewry Maritime Research Following completion of the outstanding deals that will see OOCL become part of Cosco, and the three big Japanese carriers merge their container operations to form the Ocean Network Express ONE , the leading seven carrier groups i.

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Drewry: Container carriers have not yet rid themselves of self-sabotaging traits. The collapse of freight rates during the second half of last year, far out of line with the underlying supply and demand fundamentals, suggests that carriers have not yet rid themselves of certain self-sabotaging traits and that talk of a new golden age for carriers was perhaps exaggerated. However, despite the recent developments, in the latest Container Forecaster report Drewry retains its view that the carriers are heading towards a brighter future, while also acknowledging there are several temporary factors that have created a bump in the road to recovery.

One area that might have been expected to have provided a more immediate benefit was the significant consolidation occurring in the market. The latest consolidation wave has barely become operational, with most transactions either just concluded or still pending. Figure 1: Nominal capacity shares, active containership fleet, October Source: Drewry Maritime Research Following completion of the outstanding deals that will see OOCL become part of Cosco, and the three big Japanese carriers merge their container operations to form the Ocean Network Express ONE , the leading seven carrier groups i.

Figure 2: Herfindahl-Hirschman Index HHI based on nominal capacity, October Notes: Based on nominal capacity as of Oct, with carrier groups treating subsidiaries as part of the parent i. OOCL within Cosco and creation of Japanese ONE ; No accounting for slot charter agreements; The Herfindahl-Hirschman Index HHI is a commonly accepted measure of market concentration, calculated by squaring the market share in this case the effective headhaul capacity as a proxy of each company competing in a market, and then summing the resulting numbers, ranging from close to zero to 10, indicative of a monopoly.

The higher the number the lower the competition, or more concentrated a market is considered to be. Nonetheless, we believe the inclusion of the missing data would not drastically alter the findings.

Based on the known ship data series, remarkably there were different vessel operators, all bar 31 of which garnered less than 0. More likely, the leading carriers will look to lines in the next tier down that have a little more substance. To try to give a glimpse of the future, we ran two scenarios in which the top 7 carriers control percent of capacity, again based on the October fleet. In the first case we evenly distributed the capacity from outside the top seven among the leading carriers, and in the second case we assigned it all to the current market leader Maersk Line.

Interestingly, in both cases the level of market concentration does not surpass the 2, threshold that would signify a highly concentrated environment. Figure 3: Herfindahl-Hirschman Index HHI for selected container trades, based on effective headhaul capacity, October Figure 3: Herfindahl-Hirschman Index HHI for selected container trades, based on effective headhaul capacity, October Notes: Based on effective capacity as of Oct, treating subsidiaries as part of the parent i. Source: Drewry Maritime Research While the overall picture appears to indicate that shippers have nothing to fear from consolidation, the competition levels do differ markedly at the trade route level.

The Container Forecaster keeps on top of the shifting market concentration levels for key East-West and North-South trades by applying effective capacity i.

Our view: The industry is heading towards a scenario whereby a small handful of dominant carriers dictate matters, but there is still healthy competition in most trades for now. Shippers will need to stay watchful for deals that impact their main routes.

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Ocean Cargo Supply Chains Require Coordinated Response, Says Drewry Communication and understanding will be essential to keep the supply chain rolling as smoothly as possible. The only certainty is supply and demand volatility. Production outside China is also starting to be hit. That will only become possible when these key questions can be answered: Will the virus spread with the same force in every geographical region? When will the virus be contained so that normal social and economic activity can be resumed? Will government rescue measures be sufficient to prevent a permanent scarring of the global economy? Regrettably, Drewry has no special insight into these questions that have thus far eluded experts in the fields of epidemiology and economics.

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Drewry: Modest Outlook For Container Market

However, this anticipated recovery needs to be put into perspective, according to Drewry. While average freight rates are expected to improve next year, this will follow several years of negative returns and will still leave pricing well below the average for Fuel prices are also on the increase and carriers are extremely wary of costs, Drewry says. This may support higher freight rates via the bunker surcharge mechanism, but it also increases operational costs. The fact that the orderbook is at a virtual standstill is a major positive as is rapidly increased scrapping, Drewry notes.

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