Sunday, October 21, 2012

Update, "Will Ocean Carriers Hold the Rates"

I was looking at some of my old postings, and ran across the one entitled "Will Ocean Carriers Hold
the Rates",  quoting this from the JOC article of June 18, 2012.

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.”

And my comment was..  ".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". 

We are not yet at the 6 months mark, and already the carriers reduced rates, and finally started
once again reducing capacity.  

CMA CGM just got a cash infusuion.   Maersk is saying it will concentrate on other areas of 
their business (off shore drilling), rather than fighting for market share in container shipping.

Rumors abound that  the Chinese lines (Costco and China Shipping) will be forced to merge,
and many think it would be a good idea for the German carriers (Hapag-Lloyd and Hamburg Sud)
to merge as well.

I don't know what will happen.  But, be assured, whatever companies emerge from this economic
downturn will be lean and mean.

There might also be some really good innovations during this difficult time, and perhaps
the carriers will finally be forced to stand up to the ILA and get some decent computer systems
working on the U.S. terminals.

Well, that's enough for today.  I think things will be quiet until after the first of the year.  

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