Liner shipping profits set to rise to $6 billion in 2017

UK-based independent maritime research consultancy Drewry has upgraded its full-year profit forecast for the shipping industry, indicating it could be entering a sustained period of profitability, according to an article posted on Oct. 25 on www.lloydslist.com.
Container shipping is on course to report a combined operating profit of approximately $6bn in 2017 with the figure only set to rise next year in what could become carriers’ most profitable 12 months in nearly a decade, according to Drewry.
In a webinar held on Oct. 24, the London-based analysts reported they had revised their full-year operating profit forecast for the industry from $5 billion earlier in the year, on the back of a faster-than-expected recovery.
Although carriers are not expected to eclipse the profit levels witnessed at the start of the decade, Drewry said that if carriers were able to manage the huge influx of capacity next year, there was every chance that profits would continue to increase.
Drewry research manager Simon Heaney said that for container lines, the collapse of Hanjin Shipping could prove to have been a watershed moment, one that paved the way towards a “liner paradise of sustained profitability.” The swift strategic response to the biggest casualty in the industry’s 60-year history and the unprecedented level of consolidation this triggered was now starting to pay off, he added.
“The creation of bigger alliances and the escalation of M&A to consolidate in what has always been a highly fragmented sector helped the majority of lines to return to the black by the second quarter of this year, in a pretty swift turnaround,” Mr Heaney said.
However, the degree of profitability that carriers can expect would still be dependent on a number of factors. “Competition may be shrinking but there are still too many ships and lots of new units scheduled to follow,” he said.
For example, according to the latest figures from Alphaliner, as much as 1.3m teu of new slot capacity is expected to hit the water next year alone.
“You’ve also got to temper this with potential rising bunker costs in the medium term and higher operational costs that have held back profitability in the past,” said Heaney. “But the big question is whether industry concentration [will] trump capacity or the benefits of consolidation [will] allow carriers to better manage the influx of capacity and secure better profits.”
A lot would depend on whether carriers can refrain from undercutting one another and sticking to the principles they have shown for most of this year to turn things around, he explained. “But for the time being, we are confident in their ability to walk the path they need to walk.”