formation of the new mega alliances and the continued reduction of unit costs, rather than the matching of supply and demand at the individual trade route level.
A different recovery is taking shape, which is unlikely to be built on any improvement in freight rates. Drewry projects that an orderbook that will see at least 53 and 45 ULCVs delivered in 2015 and 2016 respectively, coupled with the delivery of 100 ships of between 8,000 teu and 10,000 teu from the yards at the same time as a similar number of ships being cascaded from the Asia-north Europe trade – will mean both reductions in unit costs and the potential for excess capacity on some routes.
Drewry forecasts that freight rates will decline in 2015 by as much as 3-4% year-on-year. The focus is therefore more on costs than revenue at the moment, and this focus is starting to yield results for carriers and their shareholders. Drewry’s Container Annual Review & Forecast 2014/15 identified three new trends: carrier revenue is increasing again (due to more rapid growth), costs are falling faster than rates, some carriers are coming out of the red.
Even though unit revenues are down by an estimated 4% year-on-year for the first six months of this year, the positive is that unit costs have been reduced by 6%. The formation of the new alliances in the next 3-6 months will hopefully help a number of carriers reduce their cost base further, but Asia to North Europe spot rates have fallen 54% since the beginning of August to around USD 1,300 per feu.
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