April 1 2019
|
The Journal of Commerce 15 www.joc.com
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.
Shutterstock.com
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
