MSI sees encouraging prospects for container shipping

3/14/2017

Maritime Strategies International expects the current positive momentum in the liner shipping industry to be sustained in the coming months, with the most upbeat outlook for trades involving the US.

“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,” the consultancy said in a report on Tuesday.

It forecasts 2%-3% growth year on year in transpacific headhaul over each of the remaining three quarters and about 3% in the transatlantic, given no major shock or policy error in the region.

Growth in Asia-Europe trades is expected to reach 2%, provided that eurozone expansion stays on track and a political shock in France does not occur.

On the supply side, January’s high scrapping volume, coupled with minimal vessel deliveries and restrained ordering, have provided much relief to the industry.

“If scrapping continues at its current pace – in line with the MSI Base Case forecast – this will go some way toward reducing oversupply,” MSI said.

It forecasts freight rates will remain at strong levels into the second quarter because carriers are expected to continue restricting capacity.

Time charter rates for post-panamax and panamax vessels could reach $9,000 per day and $6,000 per day respectively in the third quarter.

Nevertheless, there are still important caveats despite the sector’s apparent recovery, said MSI senior analyst James Frew.

“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 [will] resume growth from [the second quarter] onwards,” said Mr Frew.