Further liner losses and declining freight rates will lead to a “major trigger point” for the container shipping industry at some point during 2016, according to the latest Container Forecaster report released by Drewry.

According to Drewry, freight rates around the world will continue deteriorating but carriers will not be able to reduce costs at the same pace because the advantages of lower fuel prices have already been realized.

If the current trends continue, Drewry said that the industry “could get very ugly” by the second half of the year, which is why it believed that there would come a point when more radical action with regard to capacity management will be triggered, whether at the trade-route level or at the commercial pricing level.

“This inflection point will only deliver any kind of market stability if carriers start to use their in-house rate-profitability models and offer commercially sustainable freight rates,” said Neil Dekker, director of container research at the consultancy. “Ocean carriers should be looking at revenue per TEU rather than industry load factors. In a world where overcapacity is a given on every trade, head-haul load factors of, for example, 85% need not be considered a disaster by any means. With 2.6 million TEUs of new capacity to be delivered by the end of 2017 this kind of load factor and potentially even lower is the new reality, so get used to it.”

There were about 66 void sailings in the major East-West trades in February 2016, and idle capacity in March stood at 1 million TEUs, representing 5% of the global fleet, according to Drewry.