Asia-West Africa container trade records 10% demand growth in 2017

4/18/2018

The southbound Asia-West Africa container trade scored 10% demand growth in 2017, but last year’s recovery in volumes hasn’t translated into higher freight rates due to ongoing overcapacity, analysis by Drewry reveals.

Container traffic on the southbound Asia to West Africa trade grew at its fastest rate in at least five years in 2017, rising by 9.6% to 1.2 million teu, according to revised data from Container Trade Statistics.

However, last year’s headhaul volume was still some 13% below what was carried in 2014 before the slump in oil prices inflicted so much damage on the major oil exporting nations in the region.

“This year started with a 6% rise in southbound traffic in January, although given the highly volatile monthly statistics this trade is used to it would be unwise to read too much into one single data point,” Drewry noted. “The 12-month rolling average is a better barometer of the underlying demand growth and January’s input was enough to push that metric up marginally to 10%.”

Drewry is predicting another year of buoyant container port throughput growth for West Africa in its latest Container Forecaster and anticipates that the Asia-West Africa trade will continue the upwards trajectory.

“Nigeria is the biggest import market in the Asia to West Africa lane and the country is enjoying a fairly rapid recovery,” the analyst noted. Its GDP expanded in the last three quarters of 2017, after contracting for more than a year, and current IMF forecasts indicate economic growth will quicken to 2.1% in 2018.

“The currency has stabilised and inflation has been brought under control. Improved oil revenues and a relaxation in foreign-currency trading have helped boost Nigeria’s foreign reserves.

“With a steadier supply of dollars in the system, Nigerian businesses have been able to resume importing what they need,” Drewry continued. “Foreign investment is returning to the country and is allowing President Buhari’s government to allocate more money towards crucial infrastructure projects ahead of next year’s election.”

However, it added: “Elections are always heated affairs in Africa and the run-up to such events can easily sap both business and consumer confidence. Militants continued to attack oil and gas facilities last year.

It said oil was still the key to the nation’s prosperity and would be important for the Niger delta to remain stable to allow oil to continue to flow without disruption.

“The introduction of new capacity in August only served to depress headhaul ship utilisation and spot market freight rates,” Drewry added. “In a bid to reverse that trend carriers have withdrawn two Asia-West Africa operations.”

First to go was the fortnightly WAX5/FA3 service (6 x 4,200 teu) operated by Cosco and Gold Star Line after only a handful of voyages at the end of last year, while Maersk ended its weekly FEW7 loop (11 x 4,000 teu) serving Senegal, Mauritania and Benin in February, Drewry noted.

“As of March, southbound effective capacity was 5% higher than it was in the same month last year,” it added. “The recent service withdrawals haven’t yet had a positive impact on spot rates, with Drewry’s Container Freight Rate Insight reporting a $100 decline since January for 40ft rates from Shanghai to Lagos in March. On a year-on-year basis spot rates were down by approximately 25% in March.”

On the prospects for the southbound Asia-West Africa container tradeoverall, Drewry concluded: “The trade has long suffered from over-capacity and freight rates will continue to be weak without further supply-side corrections.”