Container Shipping rebounds on higher rates & firm demand in 2017

Posted by Daily Shipping Times on 03-03-2017        Tweet

LONDON: The latest Container Shipping Forecaster from Maritime Strategies International reports that almost two months into 2017, the liner sector finds itself in positive territory. Each of the industry’s drivers – demand, supply and earnings – have started the year in healthy shape and MSI expects the sector to move into the next quarter with a reinforcement of this encouraging trend.

In terms of demand, MSI notes that the global economy is operating on auto-pilot and left to its own devices it is on a trajectory which should support continued trade and earnings growth. Demand trends are fundamentally positive in the US and the EU, and improved commodity prices will likely support an improvement in non-mainlane volumes.

Taken in isolation, January’s supply-side data would be genuine cause for relief across much of the industry. Demolition volumes set a new monthly record, deliveries were minimal and ordering was restrained. If scrapping continues at its current pace – in line with the MSI Base Case forecast – this will go some way toward reducing oversupply.

Despite the apparent good news, some perspective is necessary on the sector’s apparent recovery, says James Frew, Senior Analyst at MSI.

“If 2016 marks bottoming out of the market’s fortunes, 2017 appears much healthier, but there are important caveats. In terms of demand, dependable year on year growth of between 2-4% on the Asia-Europe and Transpacific trades would be welcome, but realistically constitutes the absolute minimum needed to absorb continued overcapacity. In terms of supply, deliveries of ultra-large vessels are soon set to increase, and we expect the fleet as a whole resume growth from Q2 onwards.

The above analysis leaves the sector’s rates and earnings outlook finely balanced. Freight rates data from January were strong, even accounting for the impact of an early Chinese New Year and MSI expects liner operators to continue to restrict capacity, leaving rates at similar levels as we move into Q2. In line with recent trends, MSI concludes that the most optimistic outlook for trades is those involving the US.