Digital Edition

April 1 2019

Issue link:

Contents of this Issue


Page 14 of 47

April 1 2019 | The Journal of Commerce 15 International Maritime lion profit, its first profitable year since 2010. Industrywide profitabil- ity figures aren't available for 2018, but service levels, as reflected in schedule reliability, have frustrated beneficial cargo owners (BCOs). On-time performance in the major east-west trades last year ranged from 34 to 70 percent, according to SeaIntelligence Consulting. Supply and demand should be more balanced this year, providing the US doesn't experience a major recession, and true balance will be achieved in 2021, Jensen said. Global container capacity is rising at a slower pace than demand, unlike last year when the global fleet expanded 6.2 percent and volumes rose 4.8 per- cent, according to the orderbook and IHS Markit forecasts. Container ca- pacity this year will increase 2.6 per- cent, while volume is expected to expand 5.5 percent. Next year, demand is forecast to exceed capacity growth again, 5.3 percent compared with 2.5 percent, respectively. In the trans-Pacific, after carriers successfully managed capacity in 2018 to match demand through blank — or canceled — sailings and extra-loaders, BCOs should expect more of the same, Jensen said. "Blank CONTAINER CARRIERS WILL be able to achieve steady profitability if they can concentrate on improving services rather than overextending to try to become integrators, as supply and demand tracks toward a relative balance within three years, according to a former shipping exec- utive-turned-consultant. Lars Jensen, CEO and co-founder of SeaIntelligence Maritime Con- sulting and onetime Maersk Line executive, downplayed concerns that carriers wouldn't be able to pass along the higher costs of meeting the global low-sulfur fuel man- date, which takes effect on Jan. 1, 2020. The International Maritime Organization (IMO) mandate is expected to increase the industry's annual operating costs by $13 billion to $15.7 billion, according to various estimates. "The industry is not under threat. This is a vibrant industry. The individual carriers may be under threat, but not the industry," Jensen told the 2019 TPM Conference in Long Beach in March. After several years in which demand growth lagged growth in available capacity, the global liner industry in 2017 registered a $7 bil- Operational tune-up Container carriers pressed to focus on service and not a shi to integrators By Bill Mongelluzzo SeaIntelligence Maritime Consulting says on-time performance in the major east-west trades last year ranged from 34 to 70 percent. sailings are here to stay," he said. Uffe Ostergaard, president of North America at Hapag-Lloyd, told TPM that volume growth will be soft in the first half of 2019 because of the front-loading of imports in late 2018 as retailers and manufacturers pro- tected themselves from threatened tariffs on US imports from China. "The third quarter will be stron- ger, so there will be better balance then," Ostergaard said. Eastbound volume is projected to increase 3.9 percent in 2019, and carriers have announced no new services this year, he added. In annual service contract nego- tiations taking place now with their customers, carriers will seek rate hikes from last year, and rightfully so because the industry can't continue to lose money and remain viable, Jensen said. However, if BCOs suc- ceed in putting a lid on contract rates, which last year were about $1,200 per FEU to the West Coast and $2,200 to the East Coast, carriers will reduce weekly service offerings, which will harm BCOs even more than higher contract rates. There has been a good deal of pos- turing about when and how high fuel surcharges will go as carriers comply with the IMO's low-sulfur fuel man- date, which requires a reduction in the sulfur content of marine fuel from 3.5 percent to 0.5 percent. Here, Jensen sees no room for give 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 2018 2019(f) 2020 (f) 2021 (f) Container capacity Demand Demand forecast to outpace container capacity Source: IHS Markit © 2018 IHS Markit IHS Markit forecasts and analysis of orderbook

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - April 1 2019