Carriers in for a brutal year as capacity floods in
The new tonnage coming online is incredible, but the competition for market share is still trumping any drive to improve profitability.
Alphaliner’s chart of the week focuses on the new tonnage that has been added by the top 20 container shipping lines in the past 12 months. As incredible as the capacity is – 844,000 TEUs for a fleet growth of 6.4 percent – the one carrier that stands out is CSAV.
In the past year, the Chilean shipping company saw its capacity decline by half as CSAV offloads ships to bring its financial troubles under control. The line has seen losses building fast and is US$1.5 billion in the red since the beginning of 2011.
Just a year ago, according to Alphaliner, CSAV had 544,000 TEUs of capacity in operation. On July 1, that had been chopped to 269,000 TEUs as the carrier tries to bring its balance sheet to order.
Also cutting capacity was another loss-making line, Zim. It’s losses are over half a billion dollars since the beginning of last year and the line disposed of 10,600 TEUs in capacity in the past 12 months.
It is encouraging to see these two shipping lines focusing on restoring their financial health rather than getting caught up in the market share business. These are tough times for the container shipping business and this week’s figures show manufacturing activity in China has slowed even further, which means export cargo will follow.
Carriers with excessive capacity on their books are going to face pressure to offer discount rates to fill ships and the cycle of unsustainable freight rates and shipping line losses will be repeated before the year is up.
In its chart, Alphaliner reveals that AP Moller Maersk unsurprisingly leads the new capacity list, increasing its fleet by almost 10 percent in the past year. That’s a massive 232,300 TEUs. MSC is second at almost 11 percent with an equally impressive 217,000 TEUs, and CMA CGM third with a modest by comparison 4.4 percent capacity increase.
These top three carriers have boosted their capacity by more than half a million boxes. Perhaps the line executives know something the rest of us don’t because that is an incredible figure.
What it means is the world’s top three carriers are determined to dominate container shipping for years to come and only consortiums of carriers such as the G6 alliance can compete. The statistic we like to trot out is one given by Maersk a couple of months ago saying that 85 percent of all Asia-Europe container trade is handled by Maersk, the CMA CGM-MSC partnership, the G6 and Green alliances.
For smaller carriers, this is not a good time to be in business and 2012 will end just like 2011 – with mounting losses and a growing unease that the industry’s volatility is here to stay.