Archives for posts with tag: Container

We’re well into the Year of the Rooster in China now, but trade figures for last year are still coming in and it’s interesting to see what a major impact China still had in 2016. Economic growth rates may have slowed, and the focus of global economic development may have diversified to an extent, but China was very much still at the heart of the world’s seaborne trade.

Not A Lucky Year

In 2015 the Chinese economy saw both a slowdown in growth and a significant degree of turbulence. GDP growth slowed from 7.3% in 2014 to 6.9%. Steel consumption in China was easing and growth in Chinese iron ore imports slowed from 15% to 3%. Coal imports slumped by an even more dramatic 30%. Container trade was affected badly too. China is the dominant force on many of the world’s most important container trade lanes and is involved in over half of the key intra-Asia trade. Uncertainty in the Chinese economy in 2015 took a heavy toll on this and intra-Asian trade growth slumped to 3% from 6% in 2014. Going into 2016, there was plenty of apprehension about Chinese trade, and its impact on seaborne volumes overall.

Back In Action

However, things turned out to be a lot more positive in 2016 than most observers expected. China once again underpinned growth in bulk trade, with iron ore imports surprising on the upside, registering 7% growth on the back of producer price dynamics, and coal imports bouncing back by 20%. Crude oil imports into China also registered rapid growth of 16%, supported by greater demand for crude from China’s ‘teapot’ refiners.

In containers, growth in intra-Asian trade returned to a robust 6%, and the Chinese mainlane export trades fared better too, with Far East-Europe volumes back into positive growth territory and the Transpacific trade seeming to roar ahead. Overall, total Chinese seaborne imports  grew 7% in 2016, up from 1% in 2015, with Chinese imports accounting for around 20% of the global import total. Growth in Chinese exports remained steady at 2%.

Thank Goodness

Despite all this, seaborne trade expanded globally by just 2.7% in 2016. Thank goodness Chinese trade beat expectations. Of the 296mt added to world seaborne trade, 142mt was added by Chinese imports, equal to nearly 50% of the growth. Unfortunately, this was counterbalanced by trends elsewhere, with Europe remaining in the doldrums and developing economies under pressure from diminished commodity prices.

Rooster Booster?

So, 2015 illustrated that a maturing economy and economic turbulence could derail Chinese trade growth. But China is a big place, and 2016 shows it still has the ability to drive seaborne trade and that the world hasn’t yet found an alternative to ‘Factory Asia’. 2017 might see a focus on other parts of the world too, with hopes for the US economy, India to drive volumes, and developing economies to potentially benefit from improved commodity prices. But amidst all that, China will no doubt still have a big say in the fortunes of world seaborne trade. Have a nice day.

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Strong demolition has been a prominent feature of the shipping industry this year, as challenging market conditions continue to drive a significant supply-side response in a number of sectors. Across the total shipping fleet, demolition could reach one of the highest levels on record in full year 2016, but which markets in particular have taken the biggest hits?

Revving Up

2016 has been an extremely difficult year for the shipping markets, with conditions in most sectors under pressure. Reflecting this, demolition has remained at elevated levels, and in January to November, 841 vessels of 41.3m dwt were scrapped. Demolition so far this year has already exceeded last year’s total of 38.9m dwt, and whilst scrapping volumes have picked up in most sectors, some markets have played a more important role in this year’s tally than others.

Bulker Beat

Amidst continued depressed earnings, bulkcarriers have accounted for the lion’s share of tonnage scrapped this year. Bulker scrapping set a new record in 1H 2016, and while demolition has slowed in recent months, 385 bulkers of 27.7m dwt have been scrapped in the year to date. Bulker demolition has been historically firm since 2011, but the pace of scrapping in most bulker sectors this year has still exceeded the 2011-15 average, with Capesize and Panamax recycling this year around 1.4 times this level.

Boxship Bumps

Meanwhile, containership demolition has also made headlines this year, with increasingly young vessels being recycled. In dwt terms, boxship scrapping has totalled 7.9m dwt so far in 2016, but recycling volumes are already over triple that of full year 2015, with scrapping on track to reach a record 0.7m TEU this year. The pace of demolition of ‘old Panamaxes’ has been running at more than twice the five year average, whilst scrapping has accelerated firmly in the 3,000+ ‘wide beam’ sectors, with 6,000+ TEU boxships also scrapped for the first time.

Big Hits On The Bodywork?

By contrast, despite the softening in crude and product tanker market conditions this year, tanker scrapping has remained relatively subdued, at less than half of the five year average. However, while gas carrier scrapping remains limited in numerical terms, with just 18 ships recycled so far this year, LPG carrier demolition is on track to reach around double the five year average after earnings fell swiftly to bottom of the cycle levels. Meanwhile, car carrier scrapping has soared to 27 units of 0.14m ceu. This is already the second highest level on record, and on an annualised basis is four times above the 2011-15 average.

So, while total demolition this year is still falling short of 2012’s record 58.4m dwt, 2016 looks set to see yet another year of very firm recycling, eight years after the onset of the downturn. In some sectors, this strong scrapping is providing a helpful brake on fleet expansion. Furthermore, with bruising market conditions having clearly taken their toll, many owners are likely to be looking to the demolition market for a little while yet.

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Last week’s Analysis examined the key impacts of the opening of the new locks at the Panama Canal across a range of shipping sectors. This week, with the new locks up and running for commercial business, the focus falls on the containership sector, with the capability to allow the transit of larger boxships one of the key aims of the canal expansion project.

Wide Boys Welcome!

At the ‘old’ locks, containerships accounted for a large share of the transits, and an even larger share of the overall toll revenue on the back of high value box cargo transits most notably from Asia to the US East Coast. Based on the official ‘New Panamax’ dimensions, the new locks will allow containerships of up to around 13,500 TEU (dependent on the precise design) to transit. Only 207 boxships in today’s fleet will be too large to pass through. The amount of TEU capacity able to pass through the canal will rise from 37% to 85% of the fleet.

Bigger And Better?

Subsequently, a key impact on container shipping is the potential for upsizing of ships operating on the Asia-USEC trade. It looks likely that operators will upsize from ‘old Panamaxes’ initially to units around or above 8,000 TEU, with a number of carriers having already put new service plans in place. Even larger ships may eventually follow when port and infrastructure projects on the USEC are completed. Whether that is then followed by ‘cargo switching’ from Asia-USWC-‘landbridge’ to Asia-USEC ‘all water’ services on the basis of lower seaborne unit costs for now remains to be seen.

Another impact is on the structure of the containership sector. A new, more appropriate segmentation is needed. Along with the new vessel indicators and profiling described last week, Clarksons Research data will also provide fresh segmentation of the containership fleet from July onwards (see graph) to provide the most market-relevant statistics.

Splitting Up The Big Boys

The sector now looks different with new segments clear. The 8-11,999 TEU sector will comprise the initial wave of ‘Neo-Panamaxes’. The 12-14,999 TEU sector contains the larger ‘Neo-Panamaxes’ of the future. Today 59 ships in the 12-14,999 TEU sector can transit the new locks on the basis of the official dimensions, another 39 have dimensions so close to the limits one would imagine they are likely to transit, and a further 50 will probably fit through on the basis of the already mooted expansion of the beam restriction to 51m. There are a further 43 ships closely related in design terms to those detailed above, but above 15,000 TEU there is a clear step up to much longer and beamier designs. Deeper levels of segmentation will continue to track the decline in the ‘old Panamax’ sector.

Big News Is Old News?

So the opening of the new locks in Panama is big news for bigger boxships. Market watchers will have to keep a keen eye on the impact, and also get used to a new perspective on the market structure and data. But in a sector where there’s been so much upsizing in recent years anyway, perhaps that’s not such a new thing after all? Have a nice day.

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