Global Container Shipping Outlook 2017

The carrier community’s ability to drive rate levels higher into the transpacific contract negotiations will likely decide whether 2017 will be the turning point the industry desperately needs - or just another bad year in a growing string of losses. By AlixPartners

 

The outlook for global container carriers remains grim at the outset of 2017.

The industry continues to be plagued by the same challenges since the onset of the 2008 financial crisis.

Sluggish demand levels are exacerbating supply-and-demand imbalances.

Meanwhile, megavessels continue to join the growing global fleet.

Events like Brexit and the new US administration’s policies threaten to add insult to injury as they inject even more uncertainty into the future of global trade.

Spreading protectionist stances could reverse the past several decades’ steadily easing trade barriers that have supported the growth of containerization since the 1950s.

Yet hope remains for the shipping industry.

Rate levels on major East-West trades improved - dramatically in some cases - in the fourth quarter of 2016.

At the tail end of peak season, Hanjin Shipping Co. filed for bankruptcy, sending shock waves through spot rate markets and exposing the flaws of the alliance system in the process.

The bankruptcy helped create a rare seller’s market that lasted through the close of 2016.

Carriers managed to sustain those higher rate levels because of an unusually early Chinese New Year, which should buoy financial results for the fourth quarter.

Although carriers will struggle to improve their financial performance this year, they can take clear steps to shore up balance sheets in this difficult environment.

They should remain laser-focused on eliminating costs from their core shipping business.

For those involved in the wave of consolidation sweeping the industry - which is just about everyone at this point - it is imperative to consider taking advantage of every opportunity to save costs through effective postmerger integration and seize this unique opportunity to rationalize the global fleet.

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