Box carriers must cull fleet to survive

Failure to take the bold steps required to eliminate unwanted containerships will drive some lines out of business. That is the verdict of Drewry Shipping Consultants in a report that urges ocean carriers to “act now” in order to survive the crisis which has seen freight rates plunge after a collapse of cargo volumes.

Box lines will have to lay up the biggest ships in their fleet and should be prepared to cancel newbuilding orders even if that means forfeiting down-payments. “Operators who move fastest and are the most radical will be best placed for recovery in the long-term,” Drewry predicts.

Even so “we still expect some major operators to fail this year”, the firm warned after analysing how the industry has reacted to global recession. The conclusion that not enough has been done to tackle the crash coincides with new trade data which confirms the downturn is worsening. European Liner Affairs Association statistics show that box volumes from Asia to Europe plunged in February to 576,700 teu, down 32% compared with liftings a year earlier. That followed a 17% year-on-year drop in January.

Lines have responded to the industry’s worst ever slump by cancelling or combining services and leaving tonnage idle. However, Drewry has castigated carriers for “shirking painful decisions that are needed”. In particular, they have been reluctant to sideline their largest vessels.

“When we drill down, we have only identified 48 ships of 249,000 teu removed from the main east-west trades and laid-up,” said Drewry’s Neil Dekker. Many removed have been cascaded elsewhere. “This suggests carriers are still reluctant to lay vessels up despite the desperate trading conditions and that other means of capacity management are more prevalent. So far, no carrier has been bold enough to mothball newbuilds of 10,000 teu or larger.”

Figures from Lloyd’s MIU show 406 ships representing almost 9% of the total have not moved in the last 19 days, of which the largest is the 9,572 teu Xin Beijing , while the 9,469 teu Cosco Ningbo is also stationary. Altogether, six ships of 8,000 teu or more are idle, while another 20 of between 6,000 teu and 8,000 teu are inactive. The 10,061 teu Cosco Africa has been anchored off Shanghai since the end of March.