Container Shipping: Ship Sizes Keep Increasing Despite Stagnant Volume Growth

Container Shipping: Ship Sizes Keep Increasing Despite Stagnant Volume Growth
17/09/2019

Global growth in container volumes has picked up slightly in the second quarter of the year, with growth in the first seven months reaching 1.2%, compared to the just 0.8% in the first quarter.
Demand drivers and freight rates

Despite this rise, the growth figure remains substantially below what the industry has been used to, with growth in the first seven months of 2018 equal to 4.4%.

This low growth figure masks large differences in developments on trades around the world. In particular a 5% rise in exports from the Far East into Europe singles itself out. That high growth should come on this trade is good news for the shipping industry as the large distances lead to a more than proportional increase in tonne-mile demand.

Despite this growth, spot freight rates on the trade between the Far East and Europe have continued to fall. On 30 August spot rates are down 24% from the start of the year and 18.8% from the same week in 2018. The broader China Containerized Freight Index (CCFI), which covers ten ports in China and combines both spot freight rates and long-term rates has a less marked decrease of 7% since August 2018.

Falling rates come despite carriers blanking sailings on the route in an attempt to lift freight rates. Figures from Alphaliner show that 42 sailings were, or will be blanked in the first three quarters of 2019, compared to 16 in the same period of 2018.

Also experiencing high volume growth is the US East Coast (USEC) which year after year continues posting high volume growth. According to BIMCO’s own data, growth in the first half of the year stands at 7.2%, compared with the 7.4% and 10.6% in the first six months of 2018 and 2017 respectively. Despite this, spot rates continue to fall and are down 22.7% year-on-year, so that it costs USD 2,691 per FEU on 30 August to ship a container from Shanghai to the USEC. Taking into account more ports and other contract types, the CCFI has fallen less dramatically, down 4.8% from the same time last August.

High growth rates on both the Far East to Europe, as well as imports into the USEC raises the question whether containers are being sent from the Far East to the USEC through Europe.

In contrast, other major container trades have experienced more sluggish growth. The trade war is certainly making itself felt on the Far East to North America route, where volumes have fallen by 0.4% in the first seven months of the year (Source: CTS). Similarly, laden container imports into the US West Coast (USWC) in the first seven months of 2019 are down 1.5%, according to BIMCO’s own data.

Focusing on Far East container exports, rather than only China gives a better idea of the reshuffling of supply chains that has occurred in response to the trade war, in which China’s neighbours have benefitted from some of its lost trade. Whether containers are exported from China or other Far Eastern countries makes little difference to the container shipping industry, so long as the volumes are still there.

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