BIMCO: Rise in Global Container Volumes Masks the Real Picture

The container shipping market may find comfort in the fact that global volumes were up by 1.1% in the first six months of 2015, but only two major trade routes actually saw a rise in volumes for the period, according to BIMCO.

The story of U.S. East Coast imports was the only positive one on the vital East–West trading lanes. First-half growth of 17% was posted after an immensely strong first quarter.

Intra-Asia shipments remain a stronghold with ongoing positive growth around 4-5%, but the increased uncertainty surrounding the economic development in China adds doubt as to whether such a strong growth rate can be sustained for the full year.

On the US West Coast, it’s been slow all year, starting with the labour disputes that weren’t resolved until mid-March. Since then year-onyear growth in the second quarter was almost on par with 2014. But for the first half year alone, inbound loaded volumes dropped by 2% according to BIMCO data.

On the Asia to Europe trades, volumes were down by 4.2% in the first half of the year as 7.4 million TEU was transported. Northern European imports fell by 3.6%, while the East Med and Black Sea imports fell by 4.8%. In the first six months of the year, the euro dropped 19% compared to the yuan, and this resulted in more costly imports, which dampened importers’ interest.

2015 will see a new record inflow of newbuilt tonnage of close to 1.6 million TEU capacity, BIMCO forecasts. As the record settles, it will be done by less than 200 ships. The container-ship fleet is going through large charges these years, as owners strive to cut down unit costs by introducing bigger and bigger ships everywhere. The average size of a newbuilt ship in 2015 is 8,400 TEU; in 2008 it was 3,435 TEU.

In the past three years, owners have parted with 553 ships with a combined capacity of 1.162 million TEU. 2015 marks an end to this flurry that has dented fleet growth markedly. So far, only 51 ships with a combined capacity of 94,000 TEU have been sold for demolition with the average built year being 1991, similar to that of 2013-14. Container-ship demolition activity has been weak for a full year now. The demolition potential remains scarce as only 561,000 TEU is more than 20 years old. In spite of that, November and December could see an increase if demand growth stays low. This is why 250,000 TEU remains in BIMCO’s forecast.

Looking ahead, BIMCO says that the lack of European demand is of concern. In the short term, this is because container shipping is a low-margin business and industry profitability requires sustainable freight rates on high-volume trades. In the long term, half of all new ships are bound for a future on the Asia to Europe trading lane, cascading the present work horses onto other trading lanes.

A successful cascading of ships left over on higher-volume trades should not increase supply of capacity beyond requirement on the secondary trades where it is about to be deployed.

The deteriorating freight market has significantly reversed the trend seen in the first half, which saw the idle fleet go as low as back in 2011. Back in June, BIMCO mentioned that idling of larger ships because of overcapacity would be prudent. It now seems as if idling across the board has been exercised. Nine ships of 8,500-13,900 TEU were idle at the end of August according to Alphaliner. Cancelled sailings and service suspensions have been the options preferred by the operators until now.

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