January 8 - The container shipping industry should brace for losses in 2016, according to the latest Container Forecaster report released by global shipping consultancy Drewry, which will have a negative knock-on effect on the heavy lift and multipurpose

Drewry says that the decline in global container shipping freight rates was as high as 9 percent in 2015; carrier unit revenues will decline further in 2016, albeit at a slightly slower pace.  Further widening of the supply-demand imbalance at the trade route level, coupled with insufficient measures to reduce ship capacity, will drive industry-wide losses.

End of year 2015 spot rates from Asia to the US West Coast and US East Coast were around USD815 and USD1,520 per 40ft container respectively - the lowest rates since 2009. With decent cargo growth and load factors of over 90 percent to the US West Coast, this rate deterioration demonstrates that carriers have been fighting for market share, while positioning themselves for further shifting of cargo from the West to the East Coast after the Panama Canal widening.

Ocean carriers believe they have taken a great deal of corrective action during the final three months of 2015 in order to lift very low freight rates. Drewry claims, however, that the removal of six major east-west services and the blanking of 32 voyages in November and 21 in December did relatively little to improve trade route supply/demand balances.

Spot rates of below USD200 per 40ft container in the Asia-North Europe trade during June 2015 were also unprecedented. While spot rates have staged a recovery since the start of 2016, Drewry expects these gains to prove short-lived.

Some industry stakeholders point to the fact that low bunker rates are contributing to lower overall container freight rates. However, Drewry believes that ocean carriers are no longer able to cut costs faster than the prevailing declines seen in the freight rate market; the oil price is close to its lowest ebb and the costs for positioning empty containers and vessel lay ups will increase during 2016.

Furthermore, claimed Drewry, with the idle fleet touching 1 million teu in late 2015 - just under 5 percent of the global fleet - decisions need to be taken by lines to remove more vessels and restructure more trade lanes with new operational agreements. Large container vessels no longer guarantee decent profitability; should Asia to North Europe contract rates be signed at an average USD900 per feu for 2016, this equates to an estimated USD1.4 billion loss for the carriers on one trade lane.

"Comparisons are being made to 2009 when approximately 1.3 million teu was removed from a considerably smaller fleet. The mass scale lay ups were triggered by the fact that lines ran out of cash," said Neil Dekker, Drewry's director of container research. "The industry is not there yet as some lines are still making a profit and the very low fuel prices are propping them up. But a further two or three quarters of declining financial profitability may trigger a notable rise in the idle fleet as we enter the second half of 2016."

This forecast will cast a greater shadow over the heavy lift and multipurpose shipping sector, which too is struggling in the face of gross overcapacity. As profitability in the container shipping sector continues to dwindle, lines will chase oversize and project cargoes in a bid to arrest the slump.