Container demand growth set to remain ‘muted’

MSI expects the Asia-Europe and transpacific headhaul trades to be difficult for container lines in the coming months, with limited traffic increases likely to be outstripped by capacity rises.

Overall container trade volume growth will remain tepid in the summer months, according to Maritime Strategies International.

The analyst said there remained potential for near-term upside for the Eurozone economy and continued strong growth in central and eastern European economies, but the overall demand environment would “remain muted” on both Asia-Europe and transpacific headhaul trades.

“Over the next six months we expect growth of around 2.5% on the Asia-Europe headhaul,” said MSI. “Without blanked sailings or major changes to the size of vessels deployed, adjusted Asia-Europe westbound capacity over June-August will total around 5.2m TEU. June-August volumes last year totalled 4.2m TEU, so in order to achieve an aggregate load factor of 85%, demand will have to grow by 5%.”

MSI concluded, therefore, that the Asia-Europe trade would prove troubling for container lines, although some individual carriers would likely fare better than others.

The transpacific eastbound trade is “likely to avoid the most apocalyptic scenarios”, but MSI still forecasts the coming quarters will be challenging.

“We expect growth over the next quarter will be slightly negative on the US West Coast and slightly positive on the US East Coast, and that US West Coast ports will bear the brunt of the volume crunch,” it reported.

The summer peak season is forecast to yield only modest year-on-year growth, but by the fourth quarter, MSI predicts a slowing US economy and the unusual seasonal trade patterns of late 2018 – which were impacted by frontloading due to US-China trade war tariffs – will weigh heavily on year-on-year demand growth rates.

“Carriers will be tempted to reduce service offerings, although this will raise the difficulty of redeploying idled tonnage,” added MSI.

Asia-Europe headhaul volumes expanded by 10% year-on-year in January, although much of this reflected the timing of Chinese New Year which fell early in 2019. On the Transpacific, a tariff frontloading hangover was the dominant driver of volumes.

“In January and February combined, US imports from the Far East shrank by 1% year-on-year,” added MSI. “Load factors on both trades will remain under pressure in the coming quarters.”

Lines were aided by slowing vessel deliveries in the first quarter, however. “February saw slower developments on the industry supply-side,” said MSI. “Vessel deliveries totalled only 22,000 TEU, while confirmed demolitions totalled 12,000 TEU, although around 40,000 TEU of vessels were reported as sold for demolition in March.”

MSI expects 415,000 TEU of new vessel deliveries and 160,000 TEU of capacity to be scrapped over the next six months.

Source: Lloyd´s