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Today's Feature

 

Container shipping volatility to continue for two more years, expert says

1619

THE container shipping industry will endure a further two years of volatility due largely to the ongoing supply surplus in the market, says SeaIntel Maritime Analysis senior consultant Thorsten Boeck.

"The overall capacity situation is driven by the fact that there are large numbers of very large vessels that are coming into the market over the next couple of years, and they are pushing out what used to be large vessels, of around 9,000 TEU, onto secondary services.

"We are already starting to see this happen and it will happen increasingly over the coming years. Capacity is growing more than demand, and we believe the market is in for a rough, volatile ride for at least three years,” Mr Boeck told The Container Shipping Manager.

Some industry insiders and analysts have expressed hope that the current mismatch between supply and demand will be resolved later this year; however, SeaIntel’s outlook indicates that we will not see a turnaround at least until 2016.

If this is an accurate assessment, one would imagine that the liner landscape that we see today will be drastically altered by that time.

Simply put, carriers will not be able to sustain losses for another three years. Some lines did manage to post a profit last year, but many did not. For the companies that were able to earn money in 2012, these would be the likely candidates to survive the current turbulence, but for those that are still in the red, they could very well be gone, or merged into more financially stable companies by that time.

Of course this is all speculation at this point in time, and for Mr Boeck, three more years of volatility does not necessarily preclude the possibility of some positive stretches along the way, it simply means that these stretches will likely be short-lived at best.

"I think it is obvious to everyone that the cycle has shortened tremendously and they are still shortening. We saw a catastrophe in 2009. We saw a best ever year in 2010, and then a new catastrophe in 2011. So the cycle is already down to two years [from seven years historically].

"In 2012 alone we saw a peak and a bottom. We believe that the volatility is driven by overcapacity and as this gap widens in the coming years, we see that those cycles will become even shorter,” he said.

Mr Boeck believes that while the market will be more volatile with potentially multiple peaks and troughs within a year, the ups and downs of the market may not be as steep as they have been historically.

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