Signs Point to Falling Ocean Rates in 2018
Oversupply Could Jeopardize 2017’s Recovery in Rates
Shippers have been happy to take advantage of the rock-bottom ocean freight rates of recent years, but that same phenomenon points to two negative trends: oversupply among ocean carriers and shaky growth in international trade.
International ocean freight rates climbed for most of 2017, but that trend may be reversed this year. Maersk Line said in an interview with TT News that the perennial issue of oversupply in ocean shipping is overwhelming demand.
That contention is troubling for global trade as a whole since 90 percent of trade transits the oceans.
The International Monetary Fund forecasts that growth in world trade volume will slow to four percent in 2018 from 4.2 percent last year, still higher than the seven-year low of 2.4 percent seen in 2016. US protectionism and China’s efforts to rebalance its economy away from exports remain risk factors for world trade growth.
Drewry Shipping Consultants expects the container-shipping freight growth rate to drop to less than 10 percent in 2018 from 15 percent in 2017 thanks to the continuing supply glut. CMA CGM, the third largest container shipping company, signaled lower rates for 2018 in early negotiations of Asia-Europe contracts, according to analysts at Credit Suisse Group AG. Meanwhile, Fitch Ratings reports it expects the supply of shipping containers to grow more than 5.5 percent in 2018, considerable more than the 4.5 percent expansion in demand.
India remains a bright spot for ocean shipping. The country’s container trade, making about 50 percent of the total, grew at a 10-percent in the third quarter of 2017 and fourth quarter indications appear to be positive. The total import-export market in India grew at a 7.7-percent in the first three quarters. Whether growth in India’s containerized trade hits double digits for 2017 depends on what the fourth quarter numbers look like, and they have yet to be released.
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