Troubled Ocean Carriers Must Regroup

Average container freight rates have plunged to their lowest levels in history, with room to fall further as the market enters the traditionally slow winter season

By Patrick Burnson, Executive Editor

November 05, 2015

If supply chain managers needed any more proof that ocean container lines are “on the ropes,” the latest move by Maersk demonstrates just how dire their situation has become.

In a conference call conducted earlier this week, the Danish giant disclosed that it would eliminate “at least,” 4,000 jobs, reduce capacity and cancel options for six mega-ships in an effort to shield its leading share of a moribund ocean container market.

“It is regrettable that we have to adjust our expectations for the 2015 result, said Group CEO Nils S. Andersen. “All of our business units delivered a positive result in the third quarter, despite difficult conditions across our industries,” says

The announcement came scant surprise to analysts at the Paris-based consultancy, Alphaliner, who noted that average container freight rates have plunged to their lowest levels in history, with room to fall further as the market enters the traditionally slow winter season, according to market.

The China Containerised Freight Index (CCFI) fell to only 752 points last week, the lowest level on record since the index was first published in 1998, Alphaliner said.

The CCFI then dropped below its previous nadir of 763 points, recorded in June 2009, amid the depths of the financial crisis .

“The dire conditions were mirrored by preliminary third quarter operational data from Maersk, OOCL and Hapag-Lloyd, which all reported significantly lower average freight revenue,” said Alphaliner.

Maersk’s rate average fell to $1,082 per twenty-foot equivalent unit (TEU), 19 percent lower than in the same quarter last year, and 4 percent lower than in the preceding quarter.

OOCL reported similar drops of 14 percent and 4percent, respectively, while Hapag-Lloyd’s average revenue for July and August was 17 percent below the third quarter of 2014 and 5m percent lower than in the second quarter of this year.

Alphaliner expects freight rates to remain weak in the next two months, despite various attempts to impose general rate increases (GRIs) in early November.