Hanjin’s receivership represents the trough of the container shipping market and despite continuing concerns of weak trade growth and fleet oversupply a gradual market recovery is now expected, according to the latest annual Container Forecaster and Review 2016/17 report published by global shipping consultancy Drewry.

Worse than expected second quarter financial results will be followed by a better second half-year. But Drewry still expects container carriers to record a collective operating loss of $5 billion this year. The London-based maritime consultancy forecasts industry profitability to recover next year, thanks to improving freight rates and slightly higher cargo volumes. They might even record a modest operating profit of $2.5 billion in 2017.

“However, this anticipated recovery needs to be put into perspective,” said the report. “While average freight rates are expected to improve next year, this will follow several years of negative returns and will still leave pricing well below the average for 2015.”

Fuel prices are also on the increase and carriers are extremely wary of costs. This may support higher freight rates via the bunker surcharge mechanism, but it also increases operationing costs.

“Hanjin’s failure is the culmination of several years of poor commercial decisions and mismanagement, not just by Hanjin, but the industry as a whole,” said Neil Dekker, Drewry’s director of container research. “But it did not necessarily signal a major tipping point for the industry. It was more a side-show as freight rates had crucially already turned a corner at the mid-year point.”

The fact that orders for new ships are at a standstill is a major positive, according to Drewry as is increased scrapping. But the next two years will still be very challenging on the supply side with annual fleet growth of between five and six percent and many more ultra large container vessels (ULCVs) to be delivered.

“Those carriers that can weather this prolonged storm have a chance of emerging the strongest in 2019-2020,” Drewry concluded.

“More consolidation is likely, but is not necessarily the route to the promised land,” said Dekker. “Senior company executives talk about synergy savings of hundreds of millions of dollars, but this means nothing when it is all too easily given away in weak contract negotiations and the desire to maintain precious market share. The answer lies with fully addressing the revenue side of the equation and thankfully there are signs that the spot market is being addressed to some degree. The acid test for 2017 will be how the lines approach contract negotiations.”