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June 19, 2018

Rising fuel costs could erase ocean carriers' profits in 2018

An unexpected surge in oil prices has dramatically altered the cost base of carriers and has forced Drewry to significantly downgrade its profit expectations for the industry this year.

Following research for the upcoming Container Forecaster report to be published at the end of June, Drewry now believes the industry will only break-even at best in 2018, having previously expected an operating profit of approximately $5 billion.

According to Drewry the importance of fuel prices on carrier results was demonstrated yet again in the first quarter 2018 income statements. Despite relatively strong demand growth and higher sales, a 20% year-on-year rise in bunker costs saw a majority of the lines post operating losses. In addition to higher fuel costs lines have also had to absorb extra cost from a resurgent charter market.

The London-based Analysts and Consultants stated that "Making money in the container shipping game is as much to do with luck as anything else. Whether a carrier ends the year in the red or black is often decided by external forces outside of management control, such as oil prices or the macro-economic inputs that drive demand for their services."

Source: Drewry