Changing lanes: 2019 box trade forecast
- By MDS Transmodal
- •
- 17 Jan, 2019
Volume growth in global containerised trade fell to a modest 2% in 2018. Despite falling too, supply growth is still on course to outstrip demand this year, pointing to another challenging 12-month period for market operators
The three major box trades — the transpacific, transatlantic and Asia-Europe, are all expected to report strong growth rates in 2019, according to MDS Transmodal
TRANSPACIFIC AND ASIA-EUROPE BOX TRADES ARE EXPECTED TO GROW ABOUT 5% THIS YEAR.
GLOBAL containerised trade is projected to have seen an annual growth rate for 2018 of circa 2%, down from the healthier rate of 6% the previous year, while supply is estimated to have seen an annual increase of 4% last year, down from 10% in 2017.
In this short analysis, we look back at the major changes that occurred in 2018 and forecast the trends for the year ahead.
All the three major trade lanes are expected to report strong year-on-year growth rates for 2018.
Transpacific and Asia-Europe are expected to have grown around 3% (with growth of more than 3% and more than 5%, respectively, for the final three months of 2018.) The transatlantic trade is anticipated to have grown by approximately 6% (approximately 4.5% in the last quarter of 2018).
For 2019, we forecast growth in the region of 5%, with the transatlantic route expected to grow by a similar magnitude to that experienced in 2018, while the other two main east/west trade lanes will grow by around 4.5%.
The port statistics available at the time of this analysis suggest that the major container ports have generally reported positive performances for 2018, confirming at least some recovery in the global economy.
The major container ports in the US (for example, Long Beach, Los Angeles and New York), Europe (eg Rotterdam, Antwerp and Piraeus) and China (eg Shanghai, Qingdao and Ningbo) reported healthy growth in traffic in the third quarter of 2018.
However, despite the robust results emerging from the demand side, 2018 did not see 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 2018 increased by approximately 4% compared with last year and by about
74% compared with 2006.
Overall, we forecast fleet capacity to experience growth in the region of 4% in 2019 (this figure does not take into account potential scrappages).
In 2018 we counted only 48 ships, both fully and semi-cellular, that went to the scrap yard.
This is down dramatically on the 197 counted in 2017 and the 229 counted the previous year; the capacity removed accounting for approximately 63,000 teu versus the 640,000 teu removed in 2016.
The reason underpinning the decrease in the number of ships scrapped is mainly due to the increase in value of panamax vessels.
We expect the number of ships scrapped
in 2019 to increase, as we approach
the introduction of the stricter sulphur emission regulation in 2020.
Capacity changes
Focusing attention on the last three key east/west trade lanes, we highlight the following major changes at the end of the fourth quarter in 2018:
Asia-Europe/Mediterranean
• HYUNDAI — AEX service: Launched in April 2018, this service offers an express service with shorter transit times, using 10 small panamax vessels of around 4,900 teu.
• OCEAN ALLIANCE — FAL2/LL2/AEU3/NE3: The alliance offering saw an increase in deployed capacity of approximately 50%, derived from the introduction of vessels with capacity of 20,000 teu replacing 13,500 teu vessels.
• OCEAN ALLIANCE — FAL5/LL1/NE1/AEU1: The transition to a full fleet of 19,000-21,000 teu ships has now been completed, with deployed capacity estimated to have increased by more than 20%.
• 2M ALLIANCE — LION/PEARL/AE6/TP6: The 2M loop has changed its service structure from operating as a pendulum on the Asia-Europe-US west coast trade lane to a standalone service. The service currently operates with 10 14,900 teu ships, compared to 16 vessels averaging 13,200 teu previously.
By contrast, the major cuts in capacity were from the following services:
• 2M ALLIANCE — SWAN/AE2: The service was briefly suspended from October/November and re-started in December 2018. It operates with 11 ships of 11,400 teu on the Asia-Europe trade lane. Two 17,800 teu vessels were redeployed onto the Transpacific PEARL service.
• COSCO/EVERGREEN/OOCL — FEM/EM2: Operating on the Far East-Eastern Mediterranean route, the service has seen a 20% reduction in capacity. The average vessel size offered has fallen from 8,300 teu to 6,700 teu.
Transpacific
The major services introduced on this route and/or the additional capacity added to them are as follows:
• ZIM and 2M Co-operation on transpacific (East & West) trade lanes: ZIM — Z7S service ended as well as the 2M ALLIANCE — AMBERJACK/TP10 loop.
• 2M ALLIANCE — ELEPHANT/TP11: New loop introduced linking the US East Coast with Southeast Asia, deploying 11 vessels of 7,100 teu.
• SM LINE — PNS: A new transpacific loop has been launched deploying six vessels of 4,300 teu.
• 2M ALLIANCE — LONE STAR/TP18: The
service has upgraded previously deployed panamax
units with 6,500 teu vessels.
• THE ALLIANCE — EC4: Average vessel size has risen 40% from 9,500 teu to 13,400 teu.
The services that have been removed and/or the cut in capacity on this trade lane are as follows:
• THE ALLIANCE — PS3: The loop’s average capacity has been reduced by 21% from 8,200 teu to 6,500 teu.
• 2M ALLIANCE — EAGLE/TP9: Previously deploying six vessels averaging 4,700 teu on the Far East-North America west coast trade, the service has been pulled.
• OCEAN ALLIANCE — HRX/PCC2/AAC: This service has been suspended, with displaced vessels shifted onto COSCO/PIL/WAN HAI — CP2 (COSCO/PIL — AAC3), which replaced vessels in the 6,000 teu-7,000 teu size bracket.
Transatlantic
On the transatlantic, the major increase in deployed capacity in 2018 came from the introduction of the following services, as well as from the increase in the capacity offered the by THE Alliance, as summarised below:
• 2M ALLIANCE — NEUATL2/TA2 & NEUATL3/TA3: Both of these services have seen decreases in deployed capacity of 33% and 23% respectively. On the NEUATL2 loop, vessels averaging 7,300 teu were replaced by vessels of 4,900 teu, while on the (NEUATL3 these units have been downgraded with the deployment of 5,700 teu ships. However, 2M’s capacity on the North Europe-US east coast remains largely unchanged, offset by the newly launched NEUATL4 service, deploying five panamax ships. The NEUATL4/TA4 operates on the North Europe-US east coast trade deploying five vessels of 4,700 teu.
• THE ALLIANCE — AL4: The loop has increased capacity by 15%, with average vessel size rising from 4,800 teu to 5,600 teu.
• In terms of capacity cuts on the transatlantic trade this has largely been driven by the downsizing of ships on the OCEAN ALLIANCE — VICTORY/ATG1/EAG/EUG service, where the average vessel size has fallen by 17% from 6,200 teu to 5,148 teu.
Fleet orders
In 2018, 183 new ships comprising a capacity of 1.14m teu were ordered. With the most significant newbuild sign-offs made by Hyundai Merchant Marine, which is in the process of increasing its fleet by 95%, ordering 12 ships of 23,000 teu and eight ships of 15,000 teu.
For 2019, the orderbook for fully-cellular vessels is anticipated to total 840,000 teu, with around 136 vessels making up the full-year orderbook.
Over the course of 2019, 18 ships of more than 20,000 teu are due for delivery, adding 1.5% to overall fleet capacity.
Cosco is expected to lead the way in terms of newbuilds by teu capacity, equating to some 20% of the total orderbook. Fellow Ocean Alliance member Evergreen and 2M member Mediterranean Shipping Co both have a share of 18%.
ONE is the largest representative from The Alliance with 7% of the total fleet on order.