Global Intelligence & Analysis

The following charts represent the forecast for global container demand growth, nominal supply growth and the supply demand index as per Drewry’s latest report and briefly compares the same to their previous forecast in Q2 ’08.

Global container demand growth estimates for 2008 and 2009 have been revised downwards to 8.6% and 8.3% respectively, down from the 9.1% and 8.7% previously forecast. This downward adjustment is based on a worsening macro-economic outlook for both key consumption economies namely the US and Europe and the negative effect of the financial crisis globally. Consequently, Drewry has made significant downward revisions to growth estimates on the east-west trades, very notably on the Asia-Europe trade. Nevertheless, Drewry expects global demand to remain in between 8-9% based on the assumption of robust growth in the Asia to the Mid East, India, West Africa and East coast of South America trades and also on the US backhaul trades. The above forecast compares to CENMKT’s demand forecast of 7.0% and 5.5% for 2008 and 2009 respectively based on a very conservative (below consensus) outlook for global economic growth. Both Drewry and CENMKT expect growth for the period 2010-2013 to remain steady between 8.5%-9.0%.

Nominal capacity for 2008 and 2009 is estimated to grow by 15.0% and 13.5% respectively, almost unchanged from the last forecast. Capacity growth post 2009 is estimated to slow down compared to the peak levels of 16% seen in 2006. The ordering levels this year has been significantly lower compared to the frenzied ordering seen in 2007 with only 514,000 TEU being ordered in the first two quarters of this year. Drewry cites vessel deliveries in the plus 10,000 TEU as a source of concern in 2009 and 2010 especially with the weakening of the Asia-Europe trade and lack of other trades which can absorb these large vessels. However, Drewry also feels that slow steaming measures will have a positive effect and would help in absorbing some capacity. Maersk Broker forecasts a nominal capacity growth of 15.5% and 13.8% for 2008 and 2009 respectively and a range of 10-12% for the remaining period which is more or less in line with Drewry’s forecast.

Although the above downward revision in global demand and unchanged capacity growth forecast should have resulted in a weaker supply/demand index for 2008 and 2009 compared to the previous forecast, the index has in fact very marginally improved due to the inclusion of a new “slow steaming factor” which positively affects the available effective capacity via absorption thereby propping up the index. However, the overall trend still remains the same with the index falling sharply from 101.5 in 2008 to 98.6 in 2009 and continues falling up until 2010 after which it is likely to stabilise through 2013. The trend in the development of Drewry’s supply/demand index is in line with CENMKT’s view although there are differences in the relative strength of the index.

The below graphs show the demand growth on the major east-west trades 

As can be seen, the forecast on the Transpacific EB has been downgraded further with a forecast of negative 3% for 2008 and a marginal 1.9% in 2009 with an expected recovery in 2010. The Far East – North Europe WB growth estimates have been brought down significantly from around 9% in the previous forecast to 5.1% and 4.1% for 2008 and 2009 respectively in the latest report. The already negative forecast for the Transatlantic in 2008 has also been further brought down and now reads -4.1% for 2008.
 
The below table shows the forecast for average unit rate in the East-West trades (including fuel surcharges) and the corresponding change year on year.

* Weighted average of transpacific, Europe-Far East and transatlantic trades, inclusive of THC’s and intermodal rates where appropriate.

Average unit rates on the combined east-west trades are expected to increase by 4.6% this year over 2007 solely due to the sharp increases in bunker prices and carrier’s efforts in recovering the same through floating surcharges. However, as can be seen from the table above, the above estimate for 2008 has been brought down compared to the previous forecast due to disproportionate rate falls seen in the Asia-Europe trade this year and the falling bunker prices seen Q3 this year. Rates are expected to drop further by 2-3% up until 2010 before recovering in 2011. However, it is worthwhile noting that if rates were calculated excluding fuel surcharges, Drewry expects a significant decline of -7.1% and -4.0% for 2008 and 2009 respectively.

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