Despite the financial crisis in the US the global economy maintained a stable growth path in 2007. As a consequence the international trade and the shipping markets also continued their dynamic growth.
Overall handling volumes of the top 20 container ports of the world increased by more than 13 per cent and a growth rate of 11 per cent for the total of all ports can be considered to be a conservative estimate. On the other hand the IMF just reduced the expectations for global economic growth in 2008 and 2009 significantly compared to the forecasts published in January this year. This will also negatively influence the development of container traffic and container shipping demand. The foreseeable high growth of the fully cellular fleet determined by the orders placed during the past three years spurs the concern about negative impacts of an oversupply on charter and freight markets in the near future. This has to be discussed carefully.
Economic growth forecast to slow down
In April, the International Monetary Fund (IMF) published its latest ‘Economic Outlook’ with significant downward corrections for the forecast of economic and international trade growth. Considering the combined impact of the US financial crisis, the weakness of the US Dollar, and the high oil prices the expected growth rates for global GDP in 2008 and 2009 are reduced to 3.7 and 3.8 per cent. For international trade the correction was even higher leaving the expected increase at a level of 5.9 and 6.0 per cent for 2008 and 2009 respectively. From 2010 on, GDP and trade are gaining momentum again. As a result also the forecast growth of container traffic at sea had to be slightly reduced for the next two years, picking up afterwards again.
In 2007, latest figures of the top 20 ports show an increase in handling volumes of more than 13 per cent with again a very important role of the Chinese market. Even if the smaller ports have realised a somewhat smaller growth as can be seen from a more wide spread sample of the ISL port data base, a growth rate of 11 per cent for the total of all ports can be considered to be conservative estimate.
Steep increase of fleet continues
Especially during 2007, there was a boom in contracting new container ships, but also the years before can be characterised as very active in this respect while the first months of 2008 saw a slowdown in contracting. Based on figures of LR/Fairplay at the beginning of April, the global fleet of fully cellular vessels comprised 4,375 units, with together almost 11.1 million teu of slot capacity.
With deliveries of about 100 vessels with little less than 370,000 teu during the first three months this year, the orderbook contained more than 1,480 vessels with 6.8 million teu. This represents about 60 per cent of the current fleet and will lead to an average annual delivery volume of about 13.7 per cent during the course of the next three years. For 2008, the delivery volume is about 15.8 per cent of the fleet of the beginning of the year. Also for 2009 the deliveries are expected to be about 13.8 per cent. However, this growth will most likely be reduced by scrapping of old vessels, which did hardly happen during the past years. Nevertheless, it is obvious that the expected fleet growth will be significant.
Market outlook
Despite this, the danger of severe over-capacities is relatively low. The high number of very large vessels in the orderbook will be employed on the long-distance trades (e.g. Europe–Far East). These trades on the one hand are amongst the fastest growing and on the other hand due to round trip durations of eight or nine weeks are characterised by a small number of boxes transported each year per slot aboard of the vessels. Hence, ships employed on these long distance trades have a limited dynamic capacity and contribute less – compared to smaller vessels on shorter round voyages – to the satisfaction of the total demand for box transport. The latter is what is measured by the demand indicator ‘port handling’. Another aspect will influence the charter market positively: In the lower size classes up to 4,000 teu the order activity is low but the high number of large vessels on order will create additional demand for feeder capacities. In addition it has to be considered that scrapping will happen only in these size categories. As charter markets are monitored with respective indices only up to a size class of 4,500 teu (beyond that class ships are hardly free available for charter markets in significant numbers) there is high likelihood that charter markets will remain stable, may be with a slight negative trend, during the course of this year.
Date: 2008-09-24