In today’s hyper-connected world, the ocean freight industry is at a crossroads. According to new research released Thursday (May 13) by research company Drewry, the shipping container sector is deep in debt, and today’s climate will either push ocean carriers to success or failure.
The situation is so dire, experts said, that the industry is now $80 billion in debt thanks to a rise in newbuild orders and a spike in demand for ultra-large container vessels over the last six years. Several of the sector’s largest players, including Maersk, CMA CGM and OOCL have all placed big orders for such carriers.
Drewery concluded that an influx in tonnage of product shipping has led to this rise in large carrier demand, leading to a more complex and taxing shipping industry today compared with six years prior.
“Drewry believes the relentless of ULCVs [ultra-large container vessels] into the Asia-Europe trade and the resulting cascading of over-sized vessels into secondary trades will continue to put pressure on the global index in the short term,” the researchers wrote.
A separate report from the World Container Index similarly revealed “significant capacity over-supply” as well as cash flow troubles. “We believe, as the industry is still reeling under high debt, only the strongest players with healthy balance sheets will be able to successfully finance ULCV orders with their own money.”