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Ocean carriers drop US$1 billion

LONDON: A leading maritime advisor says there is a widening gap between the positive results of ocean carriers focused on cutting costs and the rest of the top 20 lines battling against freight rates that are lower than Q2 last year.

Drewry, the maritime research organisation, says carriers on the headhaul transpacific trades have already "given away" US$1.25 billion this year via lower annual contracts signed with Beneficial Cargo Owner clients in May.

COSCOThis follows deals earlier this year on Asia-Europe trades of US$150-US$200 less per 40ft container than in 2013. "On the positive side, they may have secured base cargoes to fill their ships at a low price. But this puts more pressure on carriers to try and recover revenue from the spot market," says the company. Despite the expected volatility, it says carriers able to cut costs are passing the benefits on to their customers.

While industry unit costs per TEU are expected to decline 2.5 percent this year as a result of slow steaming, re-designing networks and buying bunkers in Russia, Drewry notes an equal drop in unit revenues will see carriers "struggling to make a profit".

With China's blocking of the P3 alliance – despite a meeting with the European Commission and U.S. Federal Maritime Commission last year clarifying respective positions – the research firm thinks the industry has missed "an excellent opportunity to help stabilise the main trades in terms of capacity management and efficient use of assets". It suggests the industry needs to find a way to balance the benefits of consolidation while avoiding an oligopoly.

Neil Dekker, Drewry's director of container research says: "It could be that the huge task of adequately matching supply and demand at the global level and on a consistent basis – which ultimately helps to drive freight rates - is simply beyond the industry, and we do not mean this as a condescending remark.

"This is an industry where accurate volumes on many trade lanes are unknown – simply because there is no unified and agreed system of accounting...[and] where relatively few shippers can provide accurate volume forecasts. This is an industry where the constant desire to launch bigger ships in order to reduce unit costs can only ever logically be at odds with the aim of matching supply and demand," he adds.

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