Container Shipping: Full Speed Ahead in First Quarter
A couple of weeks ago we argued that unexpectedly strong demand growth was one of the main causes of port congestion in China and as more data becomes available we can see more clearly the additional workload that ports and terminals are having to deal with. Provisional trade lane data from Container Trades Statistics (CTS) indicates that world box traffic surged by 10 percent year-on-year in 1Q17. The CTS numbers point to intra-regional trade as the primary driver of growth with volumes up by 17 percent, versus seven percent for deep-sea traffic.
CTS figures for the Greater China region shows nearly half of the extra 2.6 million teu volumes handled in the first three months came from trade with its neighboring intra-Asia partners, while domestic cabotage and trade with North America each contributed another two-tenths of the additional volumes.
The CTS data also confirms the large tilt towards Chinese imports, with traffic from our sample of trading regions increasing by a staggering 28 percent. Exports to the same regions increased by 11 percent. While the rebound in container volumes appears to be broad-based it is clear from its well above-average growth that China is very much at the epicentre.
The small sample of carrier liftings information that has been published alongside first-quarter financial statements goes some way to corroborating CTS’ big-growth story. The average volume growth for the six carriers in the first quarter of 2017 was 10 percent, with a wide spread between the slowest growing company Zim (four percent) to the fastest growing line MOL (17 percent). Between them the six lines operate about 30 percent of the world’s containership fleet.
It’s fair to say that the few, if any, saw this extreme growth coming. If confirmed, a quarterly rate of 10 percent for loaded container traffic would far exceed anything seen since 2010 – when demand rebounded sharply following the crash of 2009. Over the past two years the average quarterly rate was a mere 2.3 percent despite some uplift from 2Q16 onwards.
What does this mean for the rest of the year? The frustrating stock answer is that it is too early to call. We have seen growth spurts before that have fizzled out and regressed back to the downwards trend soon enough, although admittedly none in recent years have been close to the same magnitude as the latest trade lane numbers suggest.
Might the 1Q17 demand surge be evidence of a smoother redistribution of volumes throughout the year – in which case the growth rates for the following quarters would be much flatter?
The first quarter is traditionally the slowest quarter in the year as things quiet down after the rush to get goods in stores for the Western hemisphere holidays. Since the start of this century the first quarter on average accounts for 23.4 percent of the annual tally in world container traffic. However, that ratio has been very consistent in recent years so there really is no identifiable trend shift to support the theory that some shipments were brought forward, although we cannot discount that possibility. Some shippers may have wanted to move goods ahead of new and higher contract terms and anticipated spot rate increases.
There is still some cross-checking to be done, but it does seem that demand growth was much stronger in 1Q17 than we previously anticipated and will necessitate an upgrade to our full-year forecast.
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