[150413.EN.SEA] Drewry: Profitability Rests On Sticking To Rates And Cooling Capacity

SHIPPING lines have every chance of making money this year if they refrain from old habits, stick to set rates, and maintain capacity discipline, says Drewry Maritime Research.

Despite the unenviable supply-side pressures, carriers do have the fundamentals to be able to make money in 2013, said the report.

"The chastening boom and bust experiences of the last five years should motivate them to do what is in their best interests," said Drewry's latest Container Forecaster report.

Cost optimisation will need to be maintained and intensified if carriers are to see improved profitability in 2013, it said.

"We do expect carriers to make money this year, but carriers themselves are the biggest risk. If lines were to lose their pricing discipline and enter into a new rate war, heavy losses will follow," said the report.

Drewry's latest Container Forecaster report reviews 2012, giving an industry-wide operating profit estimate of US$280 million for 2012. While a poor return for moving 170 million TEU of loaded containers, any profit seemed highly unlikely after the losses of the first quarter of 2012, said the report, adding that this came after the estimated $7.7 billion loss in 2011.

"Our previous forecast for 2012 profitability did anticipate a weaker fourth quarter, but judging by the sample of available results we were slightly too optimistic," said the report.

Drewry estimates that the average operating margin of carriers in the fourth quarter shrank to 0.1 per cent, down from 6.6 per cent in the third quarter, as spot rates plummeted on the key westbound Asia-Europe (-23 per cent quarter on quarter) and eastbound transpacific (-11 per cent Q/Q) trade routes.

Only three major carriers, CMA CGM, Maersk Line and OOCL, returned a meaningful operating profit for the full year, although Hapag-Lloyd did salvage a tiny profit of $3 million, said the report. Ultimately, these select few "winners" neutralised the losses accrued by the rest so that our industry average balanced out at close to zero.

Source : HKSG.