Motoring terminology has always provided shipping analysts with a wide range of vocabulary to use when describing the car carrier sector. Last year demand growth appeared to have stalled, and the indicators suggest that there hasn’t been a significant acceleration this year. With the market improvements seen back in late 2013 now seemingly eroded, what are the signs on the road today?
Trade Growth Stalling
In some ways the signals are quite clear. The road has hardly been smooth for seaborne car trade in recent years. Volumes have yet to surpass the record level of an estimated 28.5m cars in 2007, with total trade in 2015 expected to total 26.7m cars. Trade fell by more than 30% in 2009, and while volumes have recovered to some extent, and increased by a helpful 4-6% per annum in 2011-13, growth in 2014 ground to a halt. Relocation of car production limited shipments from key Asian exporters, while imports into a number of key and emerging regions were affected by economic and political disruptions.
Similar trends have imposed a ‘speed limit’ on car trade growth this year, with volumes only on track to increase by around 1% in 2015. Strong car sales in the US and Europe have helped to drive some growth, but continued expansion of vehicle output close to major and developing demand centres, combined with economic difficulties significantly limiting imports into China, Brazil and Russia, has prevented further acceleration.
Down In A Low Gear
Meanwhile, growth in the PCC (Pure Car Carrier, including Pure Car & Truck Carrier) fleet has also decelerated in recent years, easing from 5% in capacity terms in 2013 to 2% in 2014. While the majority of car carriers operate under long-term agreements, the market is still impacted by supply and demand trends, and the slowdown in fleet growth appears, with demand looking lacklustre, to have been insufficient to prevent weaker fundamentals. Charter rates for a 6,500 ceu PCTC had improved in late 2013 and into 2014, topping $26,000/day in mid-2014. However they have since come under pressure and sentiment has become more negative during 2015.
On the investment side, however, the indicators might be suggesting something else. Following limited ordering of new car carrier capacity in 2014, owners have put their foot down and in the first ten months of 2015 ordered units of 0.25m car equivalent capacity, more than in six of the last seven years. Replacement demand appears to have driven much of this, but there has been plenty of activity at the top end of the size range, so clearly some owners still think ‘big is beautiful’ and that the road ahead seems clear.
The Traffic Report
So, the car carrier sector may have hit a rather big jam. But down another road, there’s still plenty of traffic flow. Slow lane or fast, this all needs further examination, and each year, in our Car Carrier Trade & Transport report, we look at the trends in detail. This year’s report is available on the Shipping Intelligence Network now. Have a nice day.