Drewry: Better in 2010, but not much - stand by for asset sales

CARRIERS should expect demands for all-in rates in the transpacific springtime talks and a 14 per cent improvement in rates this year but based on a 26 per cent decline last year, according to Drewry Shipping Consultants' Container Forecaster.

The report said the worst of the recession was over and forecasted global container traffic to increase by 3.4 per cent this year.

"Carriers have to substantially improve revenues in 2010 and this means that the transpacific rate negotiations with shippers this year are the most crucial ever," said Neil Dekker, editor of the monthly report.

"There are no real signs yet of US consumers changing their spending habits, and it will be very much a case of shippers bailing out the carriers. The big question is how much will they acquiesce to the rate demands of carriers," Mr Dekker said.

If revenue fails to increase, carriers could be forced to sell assets, like terminals to stay in business, he said.

"Even if the industry can secure the same amount of fresh cash in 2010 as it received from shareholders in 2009, it will not be sufficient cash to cover its needs," he said. "Another estimated $1.4 billion of cash may need to be found from other sources to keep the carriers trading."

"Several large container operators would have gone to the wall in 2009 if major benefactors or governments had not stepped in to bail them out," he said.

"What would happen if the banks or the shareholders refuse to inject more cash? There seem to be three scenarios: either the carriers are liquidated, causing financial harm to shareholders, suppliers and banks; or carriers walk away from vessel orders with shipyards, causing damage to the shipyards or governments are forced again to rescue the carriers," he said.

"There is a strong argument for thinking that if a major carrier had been allowed to fail, the market would have had a much better opportunity to correct itself and lay the foundations for a more profitable industry in the long-term," he said.

Source: www.schednet.com