Southern Africa Renaissance
Asian exports to Southern Africa grew by 5.6 percent in 2017, although the resulting annual count of 772,000 teu is still below the 807,000 teu which moved in 2013.
Broken down by Asian sub-region, according to Container Trade Statistics (CTS) last year’s exports grew fastest from North Asia, which rose by 6.8 percent to 175,000 teu, closely followed by Southeast Asia (up 6.3 percent to 133,000 teu) and Greater China (up 4.9 percent to 464,000 teu).
Last year’s recovery put an end to a miserable run of three years of either declining or flat volumes. Based on the start to this year and brighter economic prospects for the inbound region, Drewry expects 2018 to see southbound Asia to Southern Africa volume surpass that of 2013.
After two months of 2018, headhaul shipments in the trade were up by a staggering 27 percent to 132,000 teu, although that rapid rate has to be put into context as a later Chinese New Year this year has skewed direct monthly comparisons. A better guide for the underlying growth in the trade comes from the rolling 12-month average, which returned a rate of 10.5 percent in February.
The IMF is currently forecasting steady GDP annual growth for South Africa over the next five years of approximately two percent, which would reverse the decelerating trend seen in the first six years of this decade. While the macro-economic situation is more positive the country still faces the usual challenges and new President Cyril Ramaphosa will need to find a way to bring down the high unemployment rate and national debt. A mooted currency depreciation designed to make the country’s exports more competitive could dampen the inbound growth.
Despite the upturn in demand, there has been relatively little action from carriers in terms of services. There are currently 11 weekly loops serving the Asia-Southern Africa trade and the last significant addition was made towards the end of last year when MSC started the ‘Ingwe’ service using nine ships of around 8,000 teu. Recent fluctuations in monthly capacity have revolved around void sailings with three counted in January and six in both February and March.
Even with more blank voyages announced for the coming months Drewry expects effective capacity will be around 15-20 percent higher in April and May than in the same months last year.
Headhaul ship utilisation is estimated to have declined by around 5 percentage points in February, although it should be added that ships are much fuller than compared to a year ago. Nonetheless, the softening load factors has led to some erosion in spot rates; Drewry’s Container Freight Rate Insight reported that Shanghai to Durban spot rates lost about $200 in March to reside at $2,600 per 40ft container. This is still around 25 percent up on the same benchmark rate in March last year.
Asia to South Africa spot rates are still close to the seven-year peak even after the recent softening. Void sailings and continued strong demand growth should see prices pick up again soon.