Forecast reversal! The container shipping market may achieve profitability throughout the year

  • Date: Jun 24, 2020
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  • Categories: News

Forecasts for the performance of container shipping companies this year are being revised, and new evidence shows that the industry’s prospects for 2020 are much brighter than previously expected.

In the early stage of the outbreak of the New Coronary Pneumonia epidemic, the market had expected that both container volume and freight rates might fall, and the entire market would lose more than US$23 billion throughout the year. If operators control freight rates by reducing capacity, in the best case, the market will also To lose 800 million US dollars. However, according to the latest analysis from Seaintelligence, the above assumptions are being revised by some new data, and the overall profit of the operators may even improve on the basis of USD 5.9 billion in 2019.

  Statistics of container shipping volume confirm that the throughput in 2020 has indeed dropped significantly: the first quarter fell by 5%, the decline in April was 16.9%, and the decline in 2020 so far has reached 8.1%. Analysts believe that as the industry’s capacity decline peaked in May, container shipping volume in the second quarter is expected to decline by 15%-20%, and is expected to fall by about 10% for the whole year. However, the freight rate performance is much more positive than previously expected. Despite the decline in freight volume, China’s container freight index is still 7.4% higher than the level in the first half of 2019. That is to say, if the freight rate maintains a growth level of 7.4%, then the total profit of the container industry in 2020 can reach 9.7 billion US dollars. Even if freight rates fall to 2019 levels in the second half of 2020, annual profits will still be $4.5 billion. The worst-case scenario is that operators have abandoned their previous strategy and freight rates have plummeted, but even so, the loss limit has only dropped from US$23 billion to US$7 billion. From the current situation, the probability of this happening is extremely low.

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