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Difficult times ahead for container carriers, says BlueWater Reporting

Author: Posttime:2018-10-09 08:44:20

OCEAN carriers blamed weak financial results on higher bunker costs and low rates when standard fuel (IFO) 380, ran at US$485.50 per tonne, up from $328.50 while Shanghai Shipping Exchange rates averaged $821.18 at the end of June, down 10.6 per cent year on year. 

Yet Drewry's World Container Index (WCI), posted $1,378 per FEU during the last week of June, only down 0.2 per cent year on year. 
Looking ahead, carrier earnings are likely to suffer from the challenges brought on by the UN's International Maritime Organisation's (IMO) impending sulphur cap January 1, 2020.
But containership demolition is expected to pick up in 2019 after slowing int 2018 though volumes may weaken between the United States and China, given current trade tensions.
The chart below illustrates that the liner carrier industry saw a lot more red ink in the second quarter of 2018 compared to the year before. 
The IMO's 2020 sulphur cap will likely cause bunker prices to climb with low sulphur fuel costing 50 per cent more than standard bunker. 
The liner industry has been seeing high demand from China to the United States in recent months from shippers moving their goods on this route as quickly as they can due to tariffs, although this high demand will likely be short lived.
It appears growth in global volumes may start to slow, considering the World Trade Organisation (WTO) projects merchandise trade volume growth will slow between 2017 and 2018, as well as between 2018 and 2019. 
Merchandise trade volume growth was up 4.7 per cent in 2017, and the WTO expects merchandise trade volume growth to total about 4.4 per cent for 2018 and four per cent for 2019. However, the WTO said in April that a continued escalation of trade-restrictive policies could lead to a significantly lower figure.
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