First stop the macro view
"You can’t talk about port forecasting without macro economic forecasting," Neil Davidson, Drewry
There are many different views on how to go about forecasting, says Drewry’s Neil Davidson.
“You can’t talk about port forecasting without macro economic forecasting. The start point has to be how am I going to forecast global economic growth or national growth, or whatever it needs to be. These are questions which are someone else’s speciality. So we look for help from the IMF and other bodies.”
However, IMF forecasts go only a few years ahead. “So you do end up having to produce your own GDP forecast based on history, trends or scenarios.”
The second challenge is how many variables you use for your forecast. Economic growth is, of course, the main driver. “But there are a lot of other factors, such as exchange rates, understanding of outsourcing, trade barriers and inventory movements. There are many other factors affecting a forecast – but the more variables you bring in, the more you have to forecast to get the teu forecast. For example, you would have to forecast outsourcing and inventory 20 years ahead.”
Drewry takes the view that while these things are important, if you add too much complexity you simply make the job more difficult – “you get to the point where you can’t see the wood for the trees”, says Mr Davidson.
“We try to keep it relatively simple by looking at the historic relationship between GDP and not necessarily teu but ideally the wider market of general cargo in tonnes, and from that break out container volumes.”
The forecasting approach varies from job to job, depending on the data available, and availability can vary hugely. “It isn’t as if you use the same methodology each time – you are using the same principles but fundamentally you have to cut your cloth accordingly,” says Mr Davidson.
“Once you get to the port or terminal level, you are then into making assumptions as to what the market share of that terminal will be.”
Forecasters have to allow for other terminals already in operation and a few more that might come on line, consider market share and judge which customers the port or terminal will win.
“That is where you come across the key thing – a high degree of judgment is involved in forecasting,” he says. “It isn’t just a mathematical exercise and it isn’t a spread sheet and pressing the button and here’s the answer. A lot of opinion goes into it.”
Brabazon Fox's Niels Westberg agrees: “Even where people do try to forecast, what they miss is the cut and thrust of day-to-day commercial life. Forecasting is fraught with difficulties; things arise because of policy in other areas, because things in the commercial sector suddenly arrive, and so on.”
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