Monday, June 18, 2012

Will ocean carriers hold the rates?

 The Journal of Commerce Online - News Story- this analyst believes the carriers will finally
maintain the fortitude necessary to not decrease rates, even when there is excess space.

This is a nice thought, but somehow I don't think all the carriers are this strong willed, and
as soon as one breaks rank, the others will follow.

These next 6 months will be worth watching. 

This is from the The Journal of Commerce
RS Platou Markets analyst doubts container carriers will engage in rate war
Concerns over a slump in container freight rates are overstated because lines are desperate to avoid a rate war and will suppress box slot supply to maintain profits, according to one leading expert.
Rahul Kapoor, a Singapore-based shipping analyst at RS Platou Markets, said concerns about demand were valid but he doubted whether carriers, after already booking poor results in the first quarter of this year, would resort to the same market-share-seeking pricing tactics that pushed them to the brink of collapse late last year.
“We believe the concerns of a rapid decline in freight rates from current levels are greatly exaggerated,” he said, adding that he thought carrier earnings had turned a corner in the current quarter and the industry would see modest profits over 2012.
“We do not see a sharp decline in rates as we believe that market share fights are no longer an option even for the biggest player, Maersk Line,” he said.
“Our view is that the industry cannot fund another price war, the cash buffer in 2012 is absent unlike the start of 2011 when the industry was coming out of a record 2010.”
The formation of four alliances controlling some 85% percent of weekly Asia-Europe capacity should also help maintain liner discipline.
“The alliance partners are not incentivised to undercut prices and benefit from better capacity utilisation and cost efficiencies,” he said.
This would see lines idle ships again after the European peak season, creating a buffer on active supply.
“We expect Asia-Europe spot rates to find support at $1,500 per TEU and see rates closer to those levels for the remainder of the year with still some upside left for Transpacific rates,” he said.
He was positive on trans-Pacific demand, with a demand recovery gaining a foothold as a nascent housing market recovery boosts imports, but warned there remained the possibility of negative demand growth on the Asia-Europe trade.
“A resolution of the European crisis remains the key for global container shipping recovery,” he said.

Thursday, June 14, 2012

CMA CGM downgraded by S & P

Update - see post CMA CGM- 2015 3rd quarter results

The Journal of Commerce reports

S&P Downgrades CMA CGM Credit Ratings

The Journal of Commerce Online - News Story 

Issues ratings remain on CreditWatch
Standard & Poor’s Ratings Services on Thursday lowered its long-term corporate credit rating on CMA CGM’s debt to “CCC plus” from “B minus”, saying its liquidity position deteriorated in the first quarter of 2012.
“We expect that it will remain under strain over the coming months in the absence of corrective actions,” S&P said in its announcement.
The French carrier posted a first-quarter loss of $248 million earlier in June but said it expects to make a full-year profit.
S&P also lowered its issue ratings on CMA CGM’s debt to “CCC minus” from “CCC”. The ratings remain on CreditWatch with negative implications, “reflecting the possibility of another downgrade within the next three months.”
“The recovery rating on the debt is ‘6’, indicating our expectation of negligible (0 percent to 10 percent) recovery in the event of a payment default,” S&P said.

CMA CGM has stated they expect to make a full year profit, but in my opinion, this is wishful