Global idle capacity reached a record high

More freight routes fell to 5-year low, most of the container business is running at a loss.
April 28, 2016 evening, China COSCO announced 2016 first quarter results, said the report period, the Company realized a net loss excluding non-recurring gains and losses attributable to shareholders of listed companies 2.144 billion yuan.
The company explained the performance loss due to:. “The first quarter of 2016, the international shipping market downturn, a serious imbalance between supply and demand of container shipping market, freight rates continued to decline presents a rare situation.”
According to the China Ocean insiders to the “Securities Daily” correspondent said, even if the company divested bulk business, but overall in the international shipping market downturn, the company’s container business is also a loss. “Due to fierce competition in the market, shipping prices have dropped to the lowest point, so now most of the container business is running at a loss.”
Shipping oversupply
It is understood that the first quarter of 2016, COSCO Container shipping revenue realized 10.01 billion yuan, down 9%.
“As the market continues to slump, freight rates continued to decline, COSCON 2016 a quarter of the average single-box revenue fell about 20%, but the decline was less than the market average tariff levels decline.” According to the China Ocean insiders to the “Securities Daily” reporters explained that the first quarter of 2016, overall container shipping market is still showing the imbalance between supply and demand situation, demand remained weak.
The source said, “the traditional peak shipping sign before the Spring Festival holiday is not obvious, only Pacific routes, Asia-Europe and a few other routes appeared tight space phenomenon, most other cargos no improvement. Festival, slower volume recovery , although the market took a massive off-season program suspended, but still can not change the market oversupply situation “fundamentally.
In the case of tariff stumble endlessly, the major shipping companies began outage part of the vessel. Making the global idle capacity at record levels.
Insiders told the “Securities Daily” correspondent analysis, early March 2016, the global 500TEU idle capacity more than 352 ships, 1.57 million TEU, the total capacity of 7.8%, reaching the highest level since records began. But the current high level of idle capacity, enough to change the fundamentals of supply and demand.
“Despite the fluctuations in oil prices to help shipping companies to save costs, but the face of market freight rare decline in the trend, the majority of shipping lines performance is still not optimistic.” The industry source said.
Multi-operating actively reduced losses
Despite the recent supply and demand imbalance, unprecedented freight market downturn, but still China COSCO has taken many measures to reduced losses. Among them, including China COSCO as scheduled actively promote the restructuring included.
According to company insiders, the first quarter of 2016, China COSCO has sold Florens Container Holdings Limited and an operating loss of COSCO Bulk Shipping (Group) Company 100% equity according to plan. In addition, this year March 1, COSCO and CSCL signed a lease contract a series of container ships and container, marking the formal implementation of the two companies restructuring. Up to now, the company has acquired more than 30 domestic marketing network the company is completed.
At the same time, while the container business losses, in order to reduced losses, China COSCO will cost control work in a prominent position. According to the China Ocean insiders said, in March 2016, set a new single-box network transport costs, container management costs and empty container transportation costs were decreased compared with last year.
In addition, in the shipping industry as a whole downturn, a number of shipping giant began an alliance hold together for warmth. April 20, COSCON and France to fly vessels, Evergreen, OOCL and signed a memorandum of cooperation in a new coalition OCEAN Alliance (Marine Union). Future new alliance will work closely with more than 40 routes operating.
According to informed sources revealed to reporters: “After the approval of the relevant regulatory authorities, the new alliance plans to start operations from April 2017, will initially invest more than 350 container ships, efficient and coordinated, the new coalition operations in route delivery, service frequency and coverage is an industry leader, providing customers with more choices of services and improve global service. ”
Difficult plight of the shipping industry in the short term
Insiders told the “Securities Daily” correspondent analysis in 2016, the world economy will continue to show weak recovery trend is expected for some time groupage market situation is still grim, supply and demand imbalances continue, freight rates in the doldrums. Industry in the short term is still difficult to get rid of the current predicament.
However, insiders said the first quarter of this year, overall container shipping market is not very satisfactory, a number of routes tariffs repeatedly record low, but also pregnant with great opportunity. “Employment, consumption and other data showed the US economy is good, the market demand is expected to rise. Meanwhile, the recent efforts of the US manufacturing industry to the inventory, but also bring business opportunities to the shipping industry, according to Drewry expects the 2016 Pacific eastbound shipments grew 3.8 % (18.25 million TEU). ”
In addition, China “along the way” global strategy to gradually fall flowering, the shipping industry is expected to increase the supply of goods is expected to exceed the flow structure.
It is noteworthy that, in 2016, the European economy will slow recovery of the shipping industry is also good news. According to Drewry expects, by 2016, North-West Europe route westbound shipments grew 1.9% (9.88 million TEU); Mediterranean routes westbound shipments grew 2.0% (4.88 million TEU).
Insiders to the “Securities Daily” correspondent pointed out that the main reason for the downturn of the shipping industry is overcapacity. If the shipping industry practitioners to be highly self-discipline, through various means digestive capacity (eg: withdrawal line and classes, postpone delivery capacity, idle capacity, etc.), regulation of actual capacity scale operations, is expected to pick up the shipping industry will have a positive impact.