Ocean Cargo: Moody’s downgrades container shipping forecast

Bulk and breakbulk carriers are also suffering the consequences of too much capacity
By Patrick Burnson, Executive Editor
July 12, 2011 - LM Editorial

The container shipping industry is not the only segment of ocean carriage under severe pressure, said Moody’s Investors Service. Bulk and breakbulk carriers are also suffering the consequences of too much capacity.

According to reports on yesterday’s teleconference, it will be at least a year before demand catches up with supply in nearly all niche categories of vessel operations.

“The current dry-bulk order book is equal to approximately 46 percent of the tonnage on the water, and around 80 percent of these vessels are due for delivery over the next two years, creating a supply-demand imbalance that will continue to depress freight rates,” said Moody’s Corporate Finance Group vice president / senior credit officer Marco Vetulli.

On the container side, Moodys stated that the downside risks associated with oversupply have recently heightened on the back of a surge in orders for new vessels, “which is a significant contributor to the negative outlook.”

This mirrors recent reports in LM which noted that a mass movement toward fleet building in recent years has softened the revenue model.

“The deilemma is that each carrier is aware that its top priority is to be cost-competitive, even if the collective impact of individual orders for lower unit-cost vessels is weakening the market,” said Neil Dekker, editor of the Drewry’s Container Forecaster.
 
Moody’s expectations for the second half of 2011 remain neutral, however. Its report added that Japanese shipping conglomerates were feeling less of an impact because of their scale, diversification and strong relationships with customers act as mitigating factors.

For related articles click here.



About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Seasonally-adjusted (SA) for-hire truck tonnage in July headed up 1.3 percent on the heels of a 0.8 percent increase in June. The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, was 133.3 in July, which outpaced June’s 132.3 by 0.8 percent, and was up 2.8 percent annually.

Volumes for the month of July at the Port of Long Beach (POLB) and the Port of Los Angeles (POLA) were mixed, according to data recently issued by the ports. Unlike May and June, which saw higher than usual seasonal volumes, due to the West Coast port labor situation, July was down as retailers had completed filling inventories for back-to-school shopping.

With a 0.8 cent decrease, this week’s average price per gallon is $3.835 and stands as the lowest price since hitting $3.844 the week of November 25, 2013.

LTL carriers are rapidly investing in expensive, on-dock, three-dimensional size measurement capturing machinery, and they are hoping one day of being able to more accurately charge shippers rates based on the actual dimensions of their shipments, rather than the traditional weight-and-distance-based formula that has been in effect since the 1930s or even earlier.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) recently reported that its Freight Transportation Services Index (TSI) dipped 0.9 percent from May to June.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA