[080519.EN.SEA] FMC Doubts Overcapacity or IMO 2020 Will Cause Carrier Bankruptcies

THE US Federal Maritime Commission (FMC) has assured the industry that it sees no bankruptcies among ocean carriers because of weak rates or stringent clean fuel rules, reports New York's FreightWaves.

"There are not a lot of idle vessels, particularly in the larger vessel-size categories," said FMC analyst Anthony Homan. "So I don't see bankruptcy as an issue."

Abundant vessel space and weak transportation rates to and from the United States should not pose a bankruptcy danger to international containership fleets over the next few years, said the FMC.

Mr Homan noted that some carriers have benefitted from higher volume as a result of shippers attempting to beat tariff deadlines or looking to build inventory ahead of threatened tariffs, particularly in the transpacific trades.

However, "capacity is outgrowing volume year-in year out, so there's ample capacity to serve the industry. If you look at the rate indices, they're much lower than they have been in the past," he said.

The state of capacity supply and volume demand is reflected in spot rates, which the Maritime Strategies International said indicated a "challenging" 2019.

The advisory service forecast round-trip transpacific spot rates at $1,907 per FEU through May and rising to $1,978 per FEU by August.

On IMO 2020 sulphur fuel ban, Mr Homan said the last time regulators ratcheted up fuel standards in 2012, "you had a nice little increase in bunker fuel prices, where it stabilised for a couple of years but then went back down to historical levels a couple years after that."

Mr Homan also expects IMO 2020 will have a ripple effect through the supply chain.

"There's going to be a lot of pressure on middle distillates, like diesel fuel, so there will probably be a bump in diesel prices - which will probably affect trucking. When getting goods to final destination, that could also affect port choice as well," he said.

Source : HKSG.