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Uncertain times
14 Nov 2007
Drewry Shipping Consultants has revised its estimate of world container traffic in 2006 to 128.3m teu and expects the figure for 2007 to be 142.9m teu, a significant increase driven by rapidly expanding westbound traffic from Asia. The 2008 figure is tentatively put at 158.3m teu. So, the growth goes on in the eyes of one of the world’s leading container analysts.
At the same time, however, Drewry raises the spectre of the container industry and container shipping lines in particular being too reliant on the booming Asia-Europe trades, to Europe and the Mediterranean where cargo volumes are growing in excess of 20% per annum. This, Drewry notes, has led to an upturn in freight rates and a marked improvement in liner profitability, in turn prompting sustained ordering of new, high capacity vessels by lines. By 2011, 60% more capacity will be introduced than exists today highlighting the presence of a bloated orderbook for new ships, many of which will possess a capacity in excess of 10,000 teu.
Further, seemingly taking up the theme of “when the US sneezes the rest of the world catches a cold", Drewry states: “Current weaknesses in the US economy serve as a warning that double-digit demand growth in the transpacific trade is not permanent. Ocean carriers need to remain wary of their costs and the management of the cascading of big ships from the main east-west trades to the smaller north-south trades.”
And of course Drewry arrived at its conclusions before the early October hike in the oil price which saw it settle at $83 per barrel.
Clearly, if Drewry’s forecasts are anywhere near right the liner shipping industry and the port industry that serves it will have to think very carefully about ensuring the right level of returns from expansion plans that have been put in the pipeline and others that they may be considering beyond these.
The Drewry view is, however, not held by everyone. The point is made that financial and economic factors underpin sensitivities about the future and in this respect there are really two schools of thought. There are those that see a negative future brought on by a combination of factors including a credit crunch, the peaking of the private equity boom and the recent dip in stock market values including a 9% one day drop in China. And then there are those that see the recent problems basically as a correction in a bull market, and who buy into the view that the so-called Bric nations of Brazil, Russia, India and China are reshaping the world economy.
With the big picture factors not entirely clear there is always an element of uncertainty.
