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News & Media

Home      >       About Us      >       News & Media      >       Ocean Q3 Update

Ocean Q3 Update

Date Added: 02.07.2018

As we approach Q3 2018 shipping lines are looking to mitigate the significant losses the industry has made during the first half of the year. Of the lines that announced their Q1 results the combined balance sheet made for dismal reading – a collective deficit of + 1 bn USD. It is likely that Q2 will continue to reflect challenging operating conditions and could potentially be even worse. Consequently, the Q3 peak will be a critical trading period, the majority of carriers  are taking a hard line on rate recovery and this is being aided by a steady increase in westbound volumes. In addition the port of Felixstowe is experiencing serious congestion caused by the upgrading of the Terminal Operating System.

What has caused the dramatic change in fortune of the industry dynamic following a relatively stable period mid 2016 – 2017 whereby modest profits were reported by the carriers.

Most significantly bunker charges have increased by approx. 40 % in recent months which is putting considerable pressure on operational costs. Furthermore additional capacity has been introduced during Q1 / Q2 on the Asia – North European lanes (approx.. 4%) which has had the effect of causing rates to soften as capacity exceeds supply. The industry is looking to introduce robust measures to mitigate the perfect storm of rising fuel costs and softer market rates.

Across the board carriers have looked to introduce an extraordinary BAF surcharge. This is to off set the rising bunker costs and adjust the contribution to operational costs. This has been introduced over June and July by the vast majority of carriers. This increase was reflected immediately on the Shanghai Containerised Freight Index (SCFI). Pressure on available capacity is being reflected by higher freight rates and all lines are looking to increase their rate offers during July at significant levels.

Therefore Q3 remains a testing time for importers – maintaining a balance between a competitive rate and integrity of supply is a challenge as space becomes tight. Choosing the correct strategy is complex as carrier strategies will favour higher paying cargo and therefore managing space allocation will be critical to minimise market driven disruption. It remains to be seen what the longer term market looks like but volumes in August / September are forecast to be strong.

Finally the Port of Felixstowe is being adversely, and seriously effected, by the upgrade undertaken to the Terminal Operating System (TOS). As a consequence both shipside and landside operations have been disrupted and many vessels have either short shipped or omitted Felixstowe in an attempt to maintain schedule integrity. Hauliers and train operations are struggling to operate effectively given the current situation as rail resources are working someway below capacity and empty returns to the port are being limited. The problems look set to continue.


Paul Gray
Head of Strategic Accounts - Asia

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