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Will Ocean Carriers Scuttle Their Future (Again)?

It looks as though we're in for a year of continued economic recovery and how to get viagra job growth, however gradual. That should be good news for ocean carriers - assuming they don't undermine their own success by flooding the viagra blister 4 market with capacity, then engaging in rampant discounting to fill it.

Will Ocean Carriers Scuttle Their Future (Again)?

Which, of course, they’ve always done in the cialis price past.

Carrier executives give lip service to the cialis price in canada need for compensatory rates. Between 2007 and 2012, the top 15 container lines suffered combined net operating losses of $1.1bn. Every major carrier in the Asia-U.S. trades operated at a loss last year. Any quarterly profits they managed to eke out were the result of cost-cutting, slow-steaming and buy cialis overnight delivery service reductions – not revenues.

“Prohibitively low rates prevent long-term reinvestment, hurting carriers and viagra buy now shippers alike,” states a fact sheet issued by the Transpacific Stabilization Agreement, a discussion group of 15 carriers in the trade.

The need for cost control has brought about a wave of giant new containerships and female viagra brand viagra professional mega-alliances among the dominant players in the trade. (Of which there will be fewer and viagra online without a prescription fewer in the years to come, industry observers seem to agree.) At some point, though, revenues have to rise. Carriers can’t go on losing money forever.

The short-term economic numbers, at least, look promising. U.S. containerized imports should grow by 6.7 percent in 2014, to a new peak of 19 million twenty-foot equivalent units (TEUs), according to Mario Moreno, economist with JOC Group, Inc. Total U.S. exports will rise by 1.8 percent, totaling 12.4 million TEUs, he said at the Journal of Commerce’s Trans-Pacific Maritime Conference in Long Beach, Calif.

TSA is forecasting cargo growth of between 4 and 5 percent in the Asia-U.S. trades this year. Moreno concurred, predicting 5-percent growth in the eastbound trans-Pacific trade, totaling 13 million TEUs.

Moreno’s trade figures assume average annual growth of between 2.8 percent and generic viagra online 3.1 percent over the next two years, and 3 percent over the next five.

That’s a reachable target, barring economic shocks caused by natural disasters, terrorism or political upheaval. The real question remains: can ocean carriers handle success?

New containership deliveries will reach a record high this year of 1.6 million TEUs. That translates into a 7.6-percent rise in capacity – well above any projections of growth in demand.

The containership orderbook currently stands at 3.8 million TEUs, according to Neil Dekker, head of container research for Drewry Maritime Research. Of the ships slated for delivery this year, 144 will have capacity of at least 10,000 TEUs. On top of that, expect another 1.7 million TEUs worth of new ship space in 2015, he told the TPM conference.

Between 2010 and 2016, the worldwide fleet of containerships with capacity of more than 8,000 TEUs will grow at the annual rate of 19 percent, Dekker said, versus just 2 percent for ships below that threshold.

Carriers say this picture of unrestrained overcapacity is deceiving. Wolfgang Freese, head of the Americas region for Hapag-Lloyd AG, said industry observers have been overestimating the introduction of new tonnage since 2010. Actual capacity is constricted by water depth at ports, terminal layout and cialis on line purchase the weight of goods being carried, among other things.

Moreover, said Freese, scrappings of older and low price cialis smaller ships have increased “dramatically.”

Michael White, president, North America with Maersk Line, noted a marked change in policy among major carriers. “We’re seeing vessels less than 20 years old going to the scrapyard,” he said.

In addition, the lines have been limiting capacity by withdrawing large numbers of ships from the trade during times of slack demand. “Carriers have actually managed capacity deployment well over the last couple of years,” Dekker said. Six trans-Pacific loops were suspended in the fourth quarter of 2013 alone.

Nevertheless, the arrival of vessels as big as 18,000 TEUs in the Asia-Europe trade is resulting in the “cascading” of smaller (but not small) ships onto other routes, for a net gain of 18 percent in average ship size, said Dekker. The trans-Pacific trade, for one, will likely see more vessels of 10,000 TEUs, presenting West Coast ports with huge challenges in the form of activity surges and guaranteed cheapest cialis severe congestion.

What’s more, the lines appear limited in their ability to stabilize freight rates by withdrawing ships from the market. In recent years, hundreds of container vessels have been laid up in locations such as Singapore while carriers awaited a return of demand. According to a recent report by Drewry, however, the big new ships are too expensive to keep idle, resulting in fewer service withdrawals.

For shippers, service quality is a major concern. Drewry reports that carrier reliability will likely decline in the first quarter of 2014. “Liner shipping is becoming less and viagra no perscription uk less reliable as operators ignore service standards in the rush to cut costs,” it said. “The bad news for shippers is that the situation is only going to get worse.”

In the fourth quarter of 2013, carriers’ on-time average sank below 64 percent, its lowest level in two years. Compared with the same period of 2012, the number was down by a “hugely disappointing” 11.4 points, Drewry said.

What effect all this will have on freight rates in 2014 remains to be seen. In years past, the carriers’ general rate increases have been steadily eroded by individual discounting, even as line executives preach the gospel of pricing discipline.

Dekker said carriers were largely successful in maintaining their GRIs last year, but the effectiveness of their pricing strategies is lessening. They can no longer rely on skipped sailings, slower ships and the salvation of peak-demand periods to stay alive. Of all major container lines, only Maersk has been consistently profitable in recent months.

So what does the coming year hold for ocean carriers? Obviously, they can’t control macro-economic trends or natural disasters. But a significant portion of their fate would appear to rest in their own hands.

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