Early indicators point to sluggish peak container shipping season

Weak pre-peak intra-Asian movements reinforce expectation that protectionism and high US inventory levels will limit east-west ocean freight.

Early indications point to a sluggish peak container shipping season on the key East-West trades from Asia to Europe and North America, according to shipping association Bimco.

“Overall, Bimco has low expectations for demand growth in 2019,” noted chief shipping analyst Peter Sand.He said a protectionist approach to global trade and high inventory levels in the US “set limits for how strong peak-season import will be”.

He added: “In Europe, sanctions against Russia still reduce the already lower transhipped volumes in North Europe ports. Weaker economic activity, especially in Germany, limits overall demand growth in the region.”

Sand believes that declining intra-Asian movements so far in 2019 provide further evidence that this year’s traditional late summer peak box shipping season could be bearish.“The peak season for transported volumes is July to September for the Far East to Europe and North America trade lanes,” he highlighted.

“To get an early indication of how well the peak season on the long hauls in 2019 will perform, we watch the intra-Asian trades closely. Intra-Asian volumes tend to peak before the long-haul volumes do, as many of the semi-finished goods are in transit to final production stages just before the peak export season out of Asia starts in July.”

Sand noted that volumes on the intra-Asian trades fell 0.2%, year on year, in the first quarter of 2019.

“The drop is a sign of weakening volumes in the supply chains and, ultimately, the result of fewer new export orders received by Asian manufacturers in recent months – something that will impact outbound volumes in the coming months,” he said.“Fewer export orders mean less transport of semi-finished goods between the Asian countries.”

He said freight rates on intra-Asian routes between Shanghai and Japan, Korea and Singapore were increasingly relevant in terms of identifying demand on the regional semi-finished goods market, “and they are mostly moving sideways or slowly in decline”.

According to Bimco, the overall number of boxes shipped globally by sea grew just 0.5% – 191,000 teu – in the first quarter of 2019 compared with the same period in 2018, far below the global demand growth of 6.6% and 3.6%. recorded in Q1 2017 and Q1 2018, respectively.

“A growth rate as low as 0.5% is a critical issue for an industry used to much higher growth – double digits for many of the years between 1999 and 2007, growing by an average of 10.2%, and coming down to an average of 4.3% between 2012 and 2018,” said Sand.

More positively for lines, fleet growth this year looks likely to be tepid, with the active fleet increasing only 1.1% during the first four months of the year. “Our forecast is now for the fleet to grow by 3.1% in 2019,” said Sand. “This would be the second-lowest fleet growth on record.”

He told Lloyd’s Loading List: “We expect 2-3% of demand growth in the container shipping industry for 2019.”

Source: Lloyd’s