Because carriers are “going to the well” again for rate increases, almost every maritime “consultant” is predicting a big 2013 for the container industry. Cargo Business Newswire put out the following report on January 10th, though, and it contradicts the rubbish disgorged by those expert consultants.

“Report: Higher container carrier GRIs unsustainable due to weak demand.”

“Despite attempts by container carriers to increase profits by upping freight rates and pulling capacity from east-west trade routes, the increased container freight rates will likely drop due to sustained weak demand, according to an industry report. The newest quarterly Container Forecast from Drewry Maritime Research notes that since the huge success of the March 2012 GRI increase, there have been seven other attempts to lift rates, adding up to a grand total of approximately $ 2,800 to $ 3,000 per FEU on the Asia-to-North Europe route. However, rates have actually dropped from $ 2,700 in early March to $ 2,400 in January 2013, the report said.

“The report asserts a fundamental weakness in the market exacerbated by low volumes after a non-existent peak season in 2012. There was also reluctance by carriers to pull enough capacity. Average headhaul load factors have remained at the 75-to-85-percent range for most of the second half of 2012.

“The report says the strategy of missing sailings has proven unsuccessful in improving freight rates for any long-term period. With another 40 ships of at least 10,000 TEUs to be delivered this year, the supply/demand balance will be tipped in the wrong direction, and operational alliances across all global trade lanes will increase, the report predicts. ‘The emphasis on this tactic (missing sailings) will only lead to severe volatility in the spot market,’ said Neil Dekker, Drewry’s head of container research, ‘with carriers reacting to weaknesses on a temporary basis, with the GRIs essentially being used to prevent further rate erosion, rather than advancing them by any sustainable margin.’

“Drewry also forecasts a global demand to increase by 4.6% this year. However, the research notes capacity growth at the trade route level will strongly challenge carriers and the ability of the growing north-south trades (such as Asia-to-Latin America) to offset the losses is being questioned. Because of successes of the second and third quarters of 2012, container lines are forecasted to make around $ 1.5 billion collective profit. Drewry said carriers could make a profit near $ 5 billion in 2013 if they quickly react to the new reality of weaker demand growth in an era of growing capacity.

“‘Carriers’ obvious reluctance to pull capacity in the core trades since October suggests that many still have an eye on trade share,’ said Dekker. ‘Carriers seem to want to have it both ways. The core trade lanes are undergoing a major upgrading process with over 40 10,000 TEU vessels delivered in 2012, but at the same time they are refusing to lay up or idle significant storage.'” –

[“Trade share” my eye. This is all about the corporate fanning of feathers.]