Shipping sector booms, but doubts over sustainability
An increase in traffic volumes, especially to and from the Asia Pacific Region, coupled with rising shipping rates have helped the shipping industry achieve a dramatic turnaround in fortune over the last year. The upturn in the sector has been demonstrated by the latest financial results from one of the largest players in the industry.
P&O Nedlloyd, which was recently floated on the Amsterdam stock exchange, reported operating profits of $21m on sales of $1.05bn in the first quarter of 2004, compared with losses of $58m in same quarter last year. Revenues increased by almost 21% on a 5% increase in volumes with average rates per twenty foot equivalent unit (standard container) jumping from $1,196 to $1,374. The quarter is usually the company’s quietest and it looks set to improve its performance throughout the year.
However the news for shipping lines is not all good. Rate rises are not totally due to a shortage of capacity and rising input costs are a major driver behind price hikes. Fuel prices have risen due to the weak dollar and instability in the Middle East; extra security has increased port and terminal costs and environmental regulations are increasing. Another factor is the lack of specialized steel required to physically build containers which has made sourcing them difficult and expensive. This could make the boom which the shipping lines are presently enjoying very short lived, especially once extra capacity in the form of new ships comes on line.
