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OSLO, Norway: August 29, 2017. Despite improvements in container shipping over the past year that have seen rate increases of 120 percent, the future remains uncertain due to a looming shadow on the horizon says Xeneta CEO Patrik Berglund:

"From a 2016 that saw the collapse of Hanjin and the top 20 market players posting combined net losses of US$5 billion, 2017 is shaping up to be a bumper year.

"Maersk's recent 2017 Q2 financial report provides an interesting snapshot of the industry. Higher freight rates propelled revenues upwards by 8.4 percent to almost US$10 billion for the quarter. Meanwhile, reports suggest that Hapag-Lloyd will triple its earnings this year.

"Rates have jumped since their historical lows last year. For the Chinese main port to Northern Europe route last May, the three-month rolling average for long-term rates for a 40-foot container stood at US$655. This May it was US$1,438, an increase of 120 percent, and the same average is now up at US$1,618.

"Meanwhile we see U.S. containerized ports are busier than ever, handling a projected 1.75 million TEU this month alone, the most on record. This comes despite the uncertainty caused by president Trump's 'America First' doctrine and his withdrawal from initiatives like the Trans-Pacific Partnership. U.S. container imports actually seem to be growing."

"Strong consumer demand, the restructuring of industry alliances – 90 percent of all container ship traffic is now accounted for by three major alliances (THE Alliance, OCEAN and 2M) – and Hanjin's demise all help push up utilization and rates, but the industry may be unwittingly planning to sabotage its own success.

"We remain optimistic with regards to the remainder of 2017, but the longer term becomes more complex due to the increase in mega-ship capacity.

"A staggering 78 new mega-ships are due to come online for the Asia-Europe trades over the next two years, pushing capacity up by over 23 percent. Mega-ships make obvious sense in terms of economy of scale and optimizing transport costs, but when you have this much of a capacity injection it requires a huge demand increase... and, well, where will that come from?

"Mega-ships of 18,000 TEUs need to command utilization rates of at least 91 percent to achieve cost-savings. Even in the high volume Asia-Europe trades that is difficult and may necessitate lower than average rates for some volume, which, inevitably, will hit overall rate development.

"Each of the key alliance partners is playing catch up with one another, trying to reap the mega-ship benefits. In doing so they're going to flood the market with new capacity and risk reversing current positive trends. This is a potential mega-problem waiting to happen.

"This sector, just like the global political scene, can be highly unpredictable and the only way to counter that is by accessing the very best inside intelligence."

Xeneta gathers global shipping data from a community of over 700 leading businesses, covering more than 160,000 port-to-port pairings and over 35 million contracted rates.

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