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Tuesday, September 2, 2014

Ocean Cargo Forecast: High Growth, Low Returns

cargo ship

Credit: happykanppy,

The next four years will bring growth but low returns for the global container industry. The reason: while more TEUs (20-ft equivalent units) will be shipped, more ships will be built, adding to the industry’s overcapacity.

Terminals worldwide will handle 800 million TEUs in 2017, an increase of 180 million units, or 30.3 percent, above current levels, according to a study released last month by Drewry Maritime Research of London.

The annual increase in TEU traffic from 2013-17 is, percentage-wise, below that of such previous high-growth years as the 1990s, Drewry reports in its Annual Review of Global Container Operations. But even small percentage increases in traffic mean significant numbers of TEUs will be shipped to meet the demand for products and manufactured goods in the international markets.

In fact, the projected increase of 186 million TEUs is more than the combined 2012 throughput of ports in North America, Europe and the Middle East, Drewry notes.

The transport industry is preparing for the surge by increasing orders for container ships. Data published in Stifel Shipping Weekly (via American Shipper) show that orders are up 180 percent from this time last year. While the surge might meet short-term capacity needs, it’s not expected to ease the low freight rates, much of which has been caused by overcapacity.

An example of overcapacity is seen in the ships sailing from Asia to northern Europe. In the second quarter, average ship size on the route was almost 10,500 TEUs compared with 9,200 TEUs one year earlier, according to Drewry. In coming years, 18,000-TEU ships will be sailing major trade routes.

However problematic they are for shipping companies, low rates and overcapacity will be competitive benefits for regions such as North America. As noted in a previous posting, the empty TEUs on ships outbound from American ports and the resulting low prices they bring make U.S. exports economically attractive to many companies.

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