Global Container Demand to Grow by 1-3% in 2020

For 2020, global container demand is projected to grow by 1-3%, as per forecast by A.P. Moller - Maersk.

The continued weak global sentiment above all in the manufacturing sector reduces the likelihood of a material growth pick-up in 2020, although sentiment brightened a bit at the end of 2019, and some improvement can be expected on the back of stabilizing inventory dynamics, said the shipping giant.

Aside from the cyclical slowing of the global economy, substantial risk to global container demand comes from the effectiveness of fiscal and monetary policy in major economies, such as the US and China.

The global economy is vulnerable to a spike in oil prices caused by geopolitical tensions, and the outcome of the Brexit negotiations poses a risk to UK and European container trade.

Moreover, the recent escalation of the coronavirus adds to short-term downside risks, while the longer-term impact will likely be limited.

Finally, US-China trade negotiations remain a significant uncertainty. Trade restrictions, mainly between the US and China and partly between the US and the EU, intensified in 2019, and the trade restrictive measures introduced since 2018 impact around USD 640bn worth of traded goods, corresponding to nearly 4% of the global value of traded goods.

The trade restrictions have reduced bilateral trade between the US and China and led to shifts in trade structure. So far, US importers have shifted imports away from China to other countries such as Vietnam, Korea, Thailand, India, Mexico, and Europe.

Globally, the implemented trade restrictions have reduced container trade by 0.5-1.0% in 2019 via direct and indirect channels, such as deteriorating sentiment and business investments.

Despite some relief of the US-China trade restrictions towards the end of 2019, uncertainty about the outcome of subsequent trade negotiations and the impact on trade remains large.

Meanwhile, the US continues to threaten to introduce higher tariffs on EU imports, for example on the automotive industry. Overall, the negative impact on container volumes from the trade war is expected to be within 0.5-1.0% again in 2020.  

The global container fleet stood at 23.2m TEU at the end of 2019, 4.1% higher than at the end of 2018.

Deliveries amounted to 1,059k TEU (148 vessels) in 2019 and were evenly distributed during the year.

Deliveries were dominated by vessels larger than 10k TEU. Around 208k TEU were scrapped in 2019, likely reflecting scarce market availability of some vessel segments as ships were removed temporarily from service to install fuel scrubbers, primarily in the +10k TEU segment in preparation for IMO 2020 regulations in January 2020.

The reverse impact, when these vessels are redeployed back in service, will add to effective supply and increase the risk of oversupply, mainly in H2 2020. Idling totaled 6.1% (1,417 TEU) of the fleet at the end of 2019.

 The idle fleet bottomed out in Q2 and began to increase in the following two quarters, mainly because vessels were taken out of service for scrubber retrofitting. Consequently, effective capacity increased less than 1% in 2019.

784k TEU were ordered in 2019, corresponding to orderbook-to-fleet ratio of 10% at the end of the year.

According to Alphaliner, the nominal global container fleet will grow by 3.5% in 2020. Effective supply is projected to increase by 1-3% (internal estimate), in line with global headhaul demand.