The container shipping industry lives somewhere in the tri-state area of Chaos, Flux, and Transition. While everyone would rather live somewhere in Stability, there seems to be no consensus on where it is or how to get there.
For the carriers, Stability means profitable rates. Last year the industry as a whole was profitable for the first time in years, but can they sustain it? Many have been unable to recapture higher bunker costs through surcharges, and there are predictions of renewed financial distress in late 2018.
Carriers have driven up trans-pacific spot rates by reducing capacity and are hoping to make General Rate Increases (GRIs) stick later this year. They are certainly hoping that higher spot rates and tight peak-season capacity this year will yield higher contract rates next May. Some carriers have reportedly "rolled" the cargo of contract customers that have reached their contract minimums in favor of more lucrative spot-market cargo. That tactic may boost short run profits, but shippers have long memories.
What we are seeing right now is unlikely to become a new equilibrium.
Overall excess industry capacity is still with us. Demolition of older vessels has slowed, and the fleet is expected to grow roughly in sync with trade, so the excess capacity is unlikely to be absorbed soon. The industry has rarely been able to control capacity for very long - there is too much temptation to grab market share with idle ships.
For everyone, Stability means steady, predictable trade growth. Yet the rapid-fire exchange of threats, tariffs, and exceptions has left trade anything but predictable. Uncertainty has reportedly led to early import orders and stockpiling in advance of peak season but has depressed the longer-term trade outlook. BIMCO and Kuehne+Nagel recently cautioned of negative trends beginning in August. Drewry estimated recently that a US-China trade war could reduce trans-pacific trade by 10 percent wiping out two years of growth, but at this point is it hard to even tell whether or not we are in that trade war.
Stability is still elusive. Without reasonably predictable trade the carriers cannot size their fleets or rationalize their capacity, and customers cannot set their minimums to protect their contract rates. Carrier profitability will remain uneven at best, and we'll all stay in Chaos, Flux, and Transition for another season.