Container carriers to see 'pain' for years
Container volumes are expected to gradually increase in the next several years in the transpacific, but increased capacity brought on by ships cascading from the Asia-Europe trade will present a challenge to carriers as they seek to raise freight rates and prevent rate volatility.
Neil Dekker, head of container research at Drewry, said, “We
have a couple of years of pain to get through before we reach better
times in 2016.”
Several steamship executives and economists who spoke at the TPM 2014 conference said they are expecting demand for containerized transportation to build in 2014 and years to come.
Wolfgang Freese, head of region Americas at Hapag-Lloyd, said his company believes a forecast by Global Insight of eastbound transpacific seeing 5 percent growth and westbound transpacific growth of 4.5 percent is "on the dot;" he added that he was confident that there would be growth of between 5 percent and 5.5 percent over a three-year span starting in 2015.
Howard Finkel, executive vice president, Cosco Container Lines, also said he believed that trade growth would be about 1-percent higher than it was last year, and said for 2015, his company was hoping for import growth of 6 percent.
“Not the double digit of years gone, but it is a steady increase, and while you are going to see some capacity increase, you are going to see that slow down a little bit so that supply and demand will gradually come back to a better balance," he said.
Mario Moreno, economist for the JOC Group, forecast that U.S containerized imports will increase by 5.9 percent in 2014 to a new high of 17.9 million TEU, after growing 3.3 percent in 2013.
In the transpacific, he predicted that imports will grow 5 percent in 2014 and total 13 million TEU, after growing 3.1 percent in 2013. He said U.S. containerized exports will increase just 1.8 percent in 2014 to 12.4 million TEU, following growth of 2.6 percent in 2013. Last year he noted China’s “green fence” policy had a major impact on exports of recyclable materials in containers — scrap metal exports were down 20 percent, scrap plastic fell 11 percent, and scrap paper was down 1 percent.
In the transpacific, he forecast that container exports would buck that trend, growing 5.2 percent, compared to just 2.1 percent in 2013. He said rising demand from China will support the bulk of new growth. He also expected a turnaround in shipments of soybeans and animal feeds to Southeast Asia.
Dekker noted that orders for new ships have been very aggressive, particularly in the last nine months, as carriers have sought to purchase large, new, efficient container ships in order to lower unit costs.
Drewry said ships totaling 3.8 million TEU of capacity are on order, with 53 percent of that capacity on ships with more 10,000 TEU of capacity, 82 percent on ships with a capacity of more than 8,000 TEU.
“This is a lot of tonnage for carriers to digest into their global service portfolios,” said Dekker.
Dekker noted that those ships with capacity of more than 8,000 TEU are the vessels that are likely to give carriers the most problems through 2016, as they try to figure out how to deploy those ships. Between 2010 and 2016, the fleet of ships with 8,000 TEU of capacity has been growing only at 2 percent per year, while the fleet that can carry more than 8,000 TEU has been growing at 19 percent per year.
But he said carriers have handled the cascade of ships into the transpacific well so far, saying despite and influx of bigger ships, third-quarter capacity in 2014 is up 1 percent, year over year. He said there have been periods of tight capacity during seasonal peaks.
“You carriers have to learn that 87 percent load factor is not bad,” he told his audience at TPM.
He said spot rates are likely to remain volatile, with constant announcements of general rate increases by carriers.