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Not much relief for box carriers

DETROIT, MI: Advisory firm AlixPartners says the global container shipping industry continues to struggle financially with no clear end in sight.

In an annual review, the company notes the industry will continue to face supply and demand imbalances for years to come: "The recent and dramatic decline in fuel prices—while a welcome respite—is probably not going to relieve the industry's financial pain in the longer term.

"That said, many carriers are doing the right thing by shedding peripheral assets in favor of focusing on core container shipping operations. Successful carriers will likely match this focus on investment with an in-depth understanding of profitability at the trade, route, and customer levels," it adds.

MOL SamsungAccording to its report, the world's publicly traded ocean carriers reduced their debt 15 percent by the end of the third quarter of 2014 to US$91 billion from US$107 billion a year earlier. Capital expenditures fell 14 percent to US$18 billion from US$21 billion in 2013 as industry operating expenses dropped 4.0 percent, or US$7.6 billion, for the period.

Total revenue of the 15 major ocean carriers studied fell 3.0 percent in 2014 and the figure remains 16 percent off the 2008 peak of US$200 billion. As a percentage of revenue, cash from operations increased from less than 5.0 percent in 2012 (US$9 billion) to nearly 9.5 percent (US$16 billion) in 2014.

The report notes that despite declining overall revenues, the carriers achieved an average 7.0 increase in EBITDA over the same period following an increased focus on core business, cutting costs and selling assets. Only five of the 15 carriers showed EBITDA growth between 2012 and the end 2014 – all based in Asia.

According to AlixPartners, since the end of 2013 the average size of a vessel operating in the Asia-North America trades increased 9.0 percent to 6,566 TEUs while containerships operating on Asia-North Europe routes increased in size by 4.0 percent to 10,559 TEUs. And with the number of ships with more than 13,300 TEU capacity expected to double by the end of 2017, the company says the combination of over supply and a lag in demand is likely to see more Hapag-Lloyd/CSAV-type mergers in the future.

In March Mitsui O.S.K. Lines announced a deal with Samsung Heavy Industries for the construction of four 20,150 TEU ships for delivery in 2017. They are largest container vessels ordered to date.

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