Global Container Shipping Industry Sees Growth Warning

The global container industry is expecting an obvious slowdown in the growth rate of world trade.

According to TASS, the growth rate in demand for sea container shipping made 5.8% in 2017 and 4.2% for the same period from the beginning of the year 2018. However, it slowed down to 2.7% in the third quarter, reports Maersk.

The demand for shipping on key east-west routes grew only by 1.9% in the third quarter. The volume of services on Asia-Europe routes increased by 2.3% mainly due to imports to Germany and countries of Eastern Europe. At the same time, the demand for imports to the UK, Turkey and the Euro-Mediterranean countries was negative.

The volumes on north-south routes increased by 2.1% in the third quarter. The slowdown was determined by a weak demand for imported goods in the African countries. Imports to Latin America increased only by 1.1% due to the reduction in domestic consumer demand, which determines the demand for container imports considerably. The volumes on the routes to the Persian Gulf and Hindustan peninsula increased by 1.4% as well as intra-Asia services grew by 4.3%.

The demand for shipping from Asia to North America continued its growth – the volumes in this segment increased by 3.7% in the third quarter. Backward shipments from the US and Europe to Asia decreased at the end of the quarter. China’s restrictions for imported waste and recycled materials lies behind the trend.

All in all, Maersk sees a 3-4% increase in the global container market in the current year and a 2-4% slowdown in 2019.

Reasons for the slowdown

Apart from repeated slowdowns in world economy, Maersk associates the major growth risks in demand for global container shipping with the increased fees and the introduction of other measures restricting foreign trade, tighter US monetary policy and changes in investor strategies for emerging markets implying the reduction of risks to minimum, as well as uncertainties arising from the scheduled Brexit.

According to Maersk, the existing and expected trade restrictions between the USA and China may reduce global container market potential by 0.5-2% in 2019-2020.

Freight rates

According to freight index (CCFI), the average freight rates for the third quarter were 1.2% lower over the previous year. At the same time, the rates decreased by 3.7% from Asia to North European ports and 9.3% to Mediterranean ports with the increase by 11% to West-Coast ports in the USA.

Maersk notes that the market faces significant risks that could determine lower rates next year. Besides the decrease in demand, the rates will also be affected by the increase in container fleet capacity. At the end of September, global container fleet capacity totaled 22 million TEU, which is 6% more than in the previous year. The fleet increased by 40 vessels within three months and the aggregate capacity totaled 276 thousand TEU.