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Container income down $65bn

Container income down $65bn
Container lines face a combined loss this year of $32bn if conditions remain as they are.

Container lines face a combined loss this year of $32bn if conditions remain as they are.

Container lines face a combined loss this year of $32bn if conditions remain as they are.

That is the latest projection from Drewry Shipping Consultants in a fast-moving marketplace where forecasts are having to be adjusted almost daily.

Carriers will not be able to make anything like enough cost savings to offset a massive slump in revenue as cargo volumes and freight rates collapse, according to Drewry"s liner shipping director Mark Page.

The firm estimates that container operators" income could be down by between $65bn and $68bn this year, on a very basic calculation, wiping out the industry"s 2008 operating profit of $8bn when revenie totalled around $220bn. Potential for budget cuts is far less than the possible revenue drop, leaving a gap between the two adjusted figures of some $40bn.

Addressing the Trans-Pacific Maritime Conference on Monday, Mr Page said that Drewry"s forecast of 2.8% container trade growth for 2009, made in December, now looked ?hopelessly optimistic?. The latest forecast is for a decline in volumes of between 5% and 7.5%.

The collapse in freight rates has been sudden and brutal, with eastbound transpacific rates dropping by more than a quarter in the first eight weeks of the year.

That decline has been accompanied by a contraction in the spread of rates offered by quality and low cost operators to just $150 per 40 ft container as lines that had tried to hold their prices capitulated at the start of the year rather than lose customers to cheaper rivals.

Rates are still far higher than in the Asia-Europe trades where levels have collapsed by 50% since October, with Mr Page forecasting a 15% slide in spot Asia-US west coast rates this year, and a 5% drop on the Asia-US east coast trades.

Spot cargo only accounts for a small share of the total, with annual service contract rates not necessarily falling by as much. But a great deal will depend on utilisation rates and lines" ability to remove more excess tonnage fast enough.

For the industry overall, serious over-capacity will remain a feature for several more years, said Mr Page, citing a recent broker report which put the number of slots that would have to be removed to bring supply and demand back into balance equal to every boxship of 15 years old or more.

The speed of the market collapse has ?overwhelmed the carrier community,? he continued, with those lines that have yet to respond likely to ?regret not taking radical action sooner.?

Even if the industry is approaching the bottom of the cycle, Mr Page warned that double digit growth, which trades such as the eastbound Pacific corridor had enjoyed in recent years, was certain to be ?a thing of the past?.

www.TurkishMaritime.com.tr

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