Mergers may be only viable option for industry as 'all indicators continue to point downwards'

A key monthly shipping report projects further consolidation of companies operating on the container-trade routes if the lines receive no respite from plummeting freight rates, over-capacity and shrinking revenues.

Days after an apparent merger between P&O Nedlloyd and NOL Group subsidiary American President Lines was called off, UBS Warburg's Crow's Nest: Monthly Shipping Outlook for October was pessimistic about the industry in the short term.

'All indicators continue to point downwards - volumes, load factors, pricing and returns,' the report warned. 'The signals for an upturn are limited and this appears well priced into the market. We have been looking for reasons to be more positive on the outlook, these are very limited.'

The report suggests the market to and from the United States remains the key to the health of the industry, and the latest Journal of Commerce projections on US container trades appear to bear out the report's pessimism.

On the transpacific trades westbound, the journal projects an annualised 3.1 per cent decline in export volume by the end of the year to 3.15 million teu (20 ft equivalent units), reflecting diminished consumer buying power and confidence in Asia.

Eastbound, the journal projects zero volume growth, but the levelling off comes as global fleet capacity is increasing at an annualised 13 per cent, sending freight rates to their lowest levels in the past decade.

There have been some efforts lately to counter declining revenues, particularly on the Asia-Europe trades, but the report suggests the alliances will have to maintain strict adherence to the new levels for them to be effective.