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  • Writer's pictureAdvantage Worldwide

Bleak Outlook for Container Lines

The remainder of 2023 isn’t looking so rosy for ocean carriers. The deteriorating trading outlook for the second half of the year is causing concern amongst container lines.

container ship
Carriers will have to rely on the profits achieved in quarter one to avoid finishing the year at a loss.

What’s causing the downturn? Consumer demand has reduced, leading to a subdued peak season. This has been followed by a long slack period, causing rates to plummet further. It’s particularly affecting the balance sheets of carriers exposed to east-west trading lines. These carriers will have to rely on the legacy profits achieved in quarter one to avoid finishing the year at a loss.

It's rumoured that container lines are already subject to loss-making transpacific voyages. And the Asia-Europe routes are only scraping a profit thanks to the strong Mediterranean market. It’s looking pretty grim out there.

To make matters worse, the imminent delivery of several 24,000 teu ultra-large vessels could see rates tumble even further in the absence of increased demand. For example, four new 24,000 teu ships are being phased in to replace vessels of 13,400-19,870 teu on the FE3 loop in July and August.

The timing couldn’t be worse, not only for the introduction of mega-ships into a declining market but also for the movement of the incumbent vessels to other trade routes.

Maersk has acknowledged the poor growth expectation in its June Asia Pacific market update:

“Growth in H2 is expected to be much slower than we saw over the previous six months.”

“While the first half of 2023 showed the overall global economy to be more resilient than expected, sticky inflation and residual effects of previous monetary policy leave analysts worried about the second half of the year.”

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