Analysts Say Container Shipping Industry 2018 Profitability Depends On Capacity Discipline

In an assessment made by shipping analyst group Drewry, container shipping industry profitability in the coming year is dependent on the carrier's ability to maintain the tight capacity management displayed so far in 2017. "A lot will depend on whether the carriers can refrain from undercutting one another and stick to the capacity management they have displayed this year," Drewry senior container researcher Simon Heaney said.

Although there have been large orders of 22,000 TEU ships made recently, Drewry remains largely positive on container shipping prospects. The analyst believes industry consolidation will support higher margins and greater profitability as the larger carriers will have stronger negotiating positions with customers, terminals, and vendors.

Heaney said that while the industry was still competitive, it was within the key revenue generating trades such as Asia-Europe and the trans-Pacific where much of the industry concentration was happening. "Particularly on Asia-Europe where there are only three main alliances and no independents. This is something that shippers need to be aware of because it is a trend that will not reverse anytime soon," he said.

In their review of spot rates, Drewry analysts stated that carriers will end 2017 having recovered almost half of the losses experienced over the past four years, with aggregate freight rates across all trades expected to end the year up 15 percent. Source: Journal of Commerce