In the nativity story, the three ‘Wise Men’ each come bearing a gift for the baby Jesus. Today, gifts are more likely to have been transported by containership than by camel, but the boxship market itself has still been subject to a number of demand-side ‘humps’ this year. Unwrapping these trends suggests three rather unwelcome ‘gifts’ that the containership market has received in 2015.
Gifts From The East
Prior to the last 7 years, container trade growth had been rapid, averaging 9.6% per annum in 1996 to 2007 – an astonishing performance given the average 4.1% per annum expansion in global seaborne trade in the same period. Box trade flourished, as further cargoes were containerised and manufacturing was rapidly outsourced from the west to Asia (particularly in the 2000s). Container shipping became the planet’s chosen (low cost) way for moving general cargo around. The first major blip in the story was in 2009, when box trade fell for the first time in the history of containerisation, dropping 10% on the back of the global economic downturn. 2015 currently looks set to be the worst year since then, with trade growth expected to reach just 2.5%.
Three key factors have driven slower trade growth this year. The first is the contraction of the key Far East-Europe trade, reflecting a combination of the weak euro, continued challenging economic conditions in some European nations, and a stark fall in Russian volumes. It seems that this year has also seen some inventory de-stocking, bolstering the downward trend. Peak leg Far East-Europe trade is projected to drop by 3.8% in 2015, limiting total expansion in mainlane trade to around 0.4% this year.
The second factor has been the slowdown in the estimated rate of growth in intra-Asian volumes. This is an important bloc of container trade (around 50m teu) and has been one of the fastest growing parts in recent years. This year, the turbulence and slowing rate of growth in the Chinese economy, combined with issues in other Asian economies, has seen the estimated rate of intra-Asian growth slow in 2015, with total intra-regional trade now projected to grow by 3.6% this year, down from 6.0% in 2014.
Thirdly, the collapse in commodity prices, including crude oil, has had a heavily deleterious impact on box volumes into economies particularly dependent on commodity exports for income. Notably, growth in box imports into economies in Africa and South America have slowed, and total North-South trade is now expected to grow by only 1.8% this year, whilst Middle Eastern imports are also coming under pressure.
So the world of container trade has indeed received three ‘gifts’ this year, but the outcome for containership demand has not been a joyful story. The Christmas season is usually prime time for thoughts of presents shipped by container around the world, but it seems that the boxship sector may have to wait beyond this year’s festivities to find a brighter-looking star on the horizon.