Liner spot freight rates have recently defied traditional and current logic, reaching record levels. In early-March 2020 most freight analysts predicted Armageddon for the liner sector with cargo volumes falling off the proverbial cliff. What has since transpired?
Liner operators have decided on their strategies to cater for the IMO’s low-sulphur regulations from January 2020, but their commercial reactions and costs will vary, and so will impact on profitability next year and beyond.
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The latest round of tariff increases imposed by the US on Chinese-made goods will, we believe, impose different levels of potential risk on the major liner operators. Second-time around, the wider market ramifications could also be more significant.
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Is it business as usual for ocean carriers as they continue to buy large vessel assets? In a rapidly changing market, it is important that shipping lines have sufficient liquidity to pay for assets that some would argue are, in certain cases, not even required.
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This week's Insight has come from one of our new colleagues and industry veteran Neil Dekker, formerly of Drewry and the Informa and Safmarine groups, who has covered the liner sector for over 25 years.
The way in which ocean carriers price their services has significantly changed in 2019 because of new IMO low sulphur fuel regulations due to be enforced on 1 January 2020. The companies are now more cost-driven and will focus on yield management in an effort to drive profits – after what will inevitably be a poor 2018 financial performance for the majority.
Topics: Insider
