World box traffic surged 10% in first quarter

5/17/2017

World container traffic has grown much more strongly than anticipated in the first quarter of 2017, growth that will require an upgrade to analysts’ full-year forecasts, container shipping specialist Drewry observed this week.

Provisional trade lane data from Container Trades Statistics (CTS) indicates that world box traffic surged by 10% year-on-year in 1Q17. In its Container Insight Weekly report, Drewry highlighted that the CTS numbers point to intra-regional trade as the primary driver of growth, with volumes up by 17% versus 7% for deep-sea traffic.

“A couple of weeks ago, we argued that unexpectedly strong demand growth was one of the main causes of port congestion in China; and as more data becomes available we can see more clearly the additional workload that ports and terminals are having to deal with,” Drewry said.

The latest CTS figures for the Greater China region to and from a selection of major trading partners indicate that nearly half of the extra 2.6 million teu volumes handled in the first three months came from trade with its neighbouring Intra-Asia partners, while domestic cabotage and trade with North America each contributed another two-tenths of the additional volumes, Drewry noted.

The CTS data also confirms the large tilt towards Chinese imports, Drewry highlighted, “with traffic from our sample of trading regions increasing by a staggering 28%”. Exports to the same regions increased by 11%.

While the rebound in container volumes appears to be broad-based, it is clear from its well-above-average growth that China is very much at the epicenter, Drewry observed.

The small sample of carrier volume information that has been published so far alongside lines’ first-quarter financial statements also “goes some way to corroborating CTS’ big-growth story”, Drewry said. The average volume growth for the six carriers in 1Q17 was 10%, with a wide spread between the slowest growing company Zim (4%) to the fastest growing line MOL (17%). Between them the six lines operate about 30% of the world’s containership fleet, the analyst said.

Drewry acknowledged that few, if any, saw this extreme growth coming. “If confirmed, a quarterly rate of 10% for loaded container traffic would far exceed anything seen since 2010 − when demand rebounded sharply following the crash of 2009,” Drewry noted. Over the past two years, 2015-16, the average quarterly rate was a mere 2.3%, despite some uplift from 2Q16 onwards, the company added.

Drewry said it was still too early to judge what this strong start means for the rest of the year. “We have seen growth spurts before that have fizzled out and regressed back to the downwards trend soon enough, although admittedly none in recent years have been close to the same magnitude as the latest trade lane numbers suggest,” the company noted.

Drewry questioned whether the current demand surge might be evidence of a smoother redistribution of volumes throughout the year − in which case the growth rates for the following quarters would be much flatter.

“The first quarter is traditionally the slowest quarter in the year, as things quieten down after the rush to get goods in stores for the Western hemisphere holidays,” Drewry noted. “Since the start of this century the first quarter on average accounts for 23.4% of the annual tally in world container traffic.

“However, that ratio has been very consistent in recent years, so there really is no identifiable trend shift to support the theory that some shipments were brought forward − although we cannot discount that possibility. Some shippers may have wanted to move goods ahead of new and higher contract terms and anticipated spot rate increases.”

Drewry concluded: “There is still some cross-checking to be done, but it does seem that demand growth was much stronger in 1Q17 than we previously anticipated and will necessitate an upgrade to our full-year forecast.”