Will 2015 be the Year Ocean Carriers Return to Profitability?

Joanna BenechOcean FreightLeave a Comment

Many have asked, “Will 2015 be the year ocean cargo carriers return to profitability?” Many industry analysts think so, and I agree. I have been fortunate enough to be involved in many different trades and markets, and I can tell you that ocean carrier pricing analysts are looking at market trends, historical lifting’s, and financial reports/forecasts very carefully. They’re paying attention to emerging trades, following news on new global shipping alliances, and adjusting their budgets accordingly. All while their top executives are hard at work on seeking deeper cost cuts.

Carriers such as APL and CMA-CGM continue to acquire new “last generation” equipment and rebrand their Reefer solutions. They will definitely work to profit from such large investments. They have announced Peak Season Surcharges in the less than well-known TransPacific trade, such as USWC to Caribbean and back to back rate restorations and “recoveries” in various trades from Asia to the Middle East, Red Sea ports, the Mediterranean, and South America. In addition, TSA also announced its 12 month revenue and cost recovery program for 2014-2015 contracts and is recommending increases to contract rates.

The Truth

The truth is, shippers are waiting to see how the trend towards carriers’ consolidation will play out. This year a few alliances have been announced, one of the most recent announcements was Maersk and MSC, with the implementation of a 10 year VSA on the Asia-Europe, Transatlantic, and Transpacific trades. Yet the expected P3 alliance comprising of the world’s 3 largest vessel owners, Maersk, CMA-CGM, and MSC, didn’t pan out after the Ministry of Commerce in China did not give their approval to the network. However, the pressure remains, and shippers and their logistics providers continue to be an important player in the pricing game. And volume rules the seas – container volume, that is.

Recent Positive Signs

The amplified demand should increase the utilization of containerships. The US economy is the key driver for global growth and despite development being slow, it has also been positive. And although 2013 had an even weaker start, the pace has since picked up through 2014 and analysts agree that we should see an increase of around 6% going into 2015. NOL, the parent company of APL, has reported year over year improvement for 2 consecutive quarters in 2014. Maersk also reported an 11% increase in Q3 profit after cuts countered a decline in freight rates.

Competition grows stronger with the alliances. Carriers compete against each other while sharing space in the many alliance service, and to start the New Year, Maersk has brought back the SeaLand “name brand” and will officially commence their Intra America operations in January 2015.

Joanna Benech

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