Container Market Challenges Likely as Uncertainty Mounts
Today’s container market is confronting more than its fair share of headwinds.
The recently published Container Forecaster from global shipping consultancy, Drewry, highlights concerns of a slowing global economy stoked by the ongoing US-China trade war (albeit paused for the moment), escalating geo-political tension in many regions of the world and an industry grappling with challenging new emission regulations. Beyond these, however, a series of existential fears are also beginning to present themselves that could dent demand for shipping in the future; namely, the regionalisation of manufacturing supply chains and growing momentum behind a low carbon, environment-first campaign that has the potential to fundamentally change global consumption habits.
It is for all these reasons that Drewry has downgraded its forecast for global port throughput growth in 2019 to 3.0%, from our previous prediction of 3.9%.
“We remain confident that world trade will rebound in 2020, but much will depend on developments outside of carriers’ control,” said Simon Heaney, senior manager, container research at Drewry and editor of the Container Forecaster.
“Further spreading of protectionist policies could stunt growth, particularly if the US aims its tariff target at other trading partners. However, there could be some upside for trade if more manufacturing production is relocated outside of China. The Asian export powerhouse has progressively reduced its requirement for foreign inputs, choking off demand for intermediate goods, so any shift to less self-reliant economies should give trade a bit of a kick-start,” Heaney said.
In such unpredictable times, Drewry believes the risk of temporary supply disruption is heightened.
In the Transpacific market, for example, differences of opinion over the strength of the third quarter peak season have led to divergent strategies from carriers. Some lines are placing extra loaders into the trade, indicating they expect a repeat of last year’s cargo rush, while others are more circumspect, announcing blanked sailings to protect load factors and spot freight rates.
“Carriers can be forgiven for not having all of the answers in such times. One suspects that even Nostradamus would throw his hands up in despair; such is the volatility of the leading characters. There will undoubtedly be some errors along the way and the risk of temporary supply issues has undoubtedly been raised, either from too many cancelled sailings or misplaced capacity transfers between trades,” said Heaney.