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Global supply and demand for container shipping

MDST is forecasting that global container trade will grow by 7% in 2017 with all trade lanes expected to report growth.  However, overcapacity will remain an issue with container shipping capacity expected to increase by 8% and, focusing on services passing through the Suez Canal - the busiest point for deep sea services - we estimate that unit revenue will decline by 11% in 2017Q4 compared to the previous quarter.

MDS Transmodal’s trade forecasting using its World Cargo Database (WCD) suggests that the container shipping peak season of 2017 is expected to maintain the strong growth estimated for the first half of 2017.  Based on the most up-to-date data available at the beginning of November, we project global trade (excluding intra-regional flows) to achieve an annual growth rate in the region of 7% in 2017 with all trade lanes expected to report positive growth compared to the previous two years (see Figure 1).

Figure 1 – Global trade by top 10 trade lanes, million TEU

 

Source: MDST World Cargo Database November 2017

All major container ports in America (i.e. Long Beach, Los Angeles and New York), Europe (i.e. Rotterdam, Antwerp and Hamburg) and China (Shanghai, Shenzhen and Ningbo) and Hong Kong reported healthy growth in traffic in the third quarter of 2017, therefore confirming the current recovery of the global economy. However, despite the robust results emerging from the demand side, 2017 has not put an end to the gap between demand and supply. Based on the most up-to-date data available at the time of this analysis, we estimate that total capacity deployed in 2017 has increased by approximately 8% compared to last year and by about 50% compared to 2007 as shown in Table 1.

Table 1: Deployed capacity (mTEU) and number of vessels by ship size

 

Ship size (TEU)

2007Q4

2016Q4

2017Q4

Deployed Capacity (TEU)

<5,000

99.0

102.2

108.5

5,000-7,499

14.8

23.3

22.2

7,500-9,999

8.7

22.6

27.2

10,000-12,499

0.0

4.5

6.5

12,500-14,999

0.7

11.2

12.1

15,000+

0.0

5.5

7.3

Total Deployed Capacity (mTEU) 

123.2

169.4

183.8

No. of vessels

<5,000

4,589

3,510

3,523

5,000-7,499

328

526

469

7,500-9,999

172

449

527

10,000-12,499

0

73

96

12,500-14,999

8

169

172

15,000+

0

68

92

Total No. of vessels

5,097

4,795

4,879

Source: MDS Transmodal Containership Databank, November 2017

The new big containerships on the horizon, such as the eleven new 22,000teu vessels on order for MSC, will delay further any reduction in the over-capacity characterising the industry (see Table 2), with freight rates likely to see more contraction. Looking at the services passing through the Suez Canal, the busiest point for deepsea services, we estimate that unit revenue will decline by 11% in 2017Q4 compared to the previous quarter. By contrast unit costs are estimated to remain stable during the same period.

Table 2: Fleet capacity (TEU)

 

Ship size (TEU)

Current (2017Q4)

Additional Fleet capacity (TEU) by 2020

Deployed Capacity (TEU)

<5,000

8.3

0.5

5,000-7,499

3.3

0.1

7,500-9,999

4.4

0.1

10,000-12,499

1.1

0.4

12,500-14,999

2.8

0.5

15,000+

1.6

1.1

Total Deployed Capacity (mTEU) 

21.4

2.7

No of vessels

<5,000

5,602

241

5,000-7,499

549

14

7,500-9,999

498

6

10,000-12,499

108

38

12,500-14,999

203

39

15,000+

87

56

Total No of vessels 

7,047

394

Source: MDS Transmodal Containership Databank, November 2017

Figure 2: Unit Costs vs Unit Revenue - services passing through the Suez Canal

 

Source: MDS Transmodal, Container Business Model, November 2017