Box shipping demand up 1.1% in first half

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MSC ViennaGlobal container shipping volumes were up by 1.1% in the first six months of 2015, as year-on-year increases in all three months of the second quarter made up for a disastrous first quarter, according to a new report by Bimco.

However, it said the U.S. East Coast imports were the only positive development on the vital East-West trading lanes, posting first-half growth of 17% after an immensely strong first quarter.

On the U.S. West Coast, the pace has been slow, starting with the labor disputes that weren’t resolved until mid-March. Since then year-on-year growth in the second quarter was almost flat from 2014. For the first half-year alone, inbound loaded volumes dropped by 2%, according to BIMCO data.

On the Asia-Europe trades, volumes were on a decline, too, down by 4.2% in the first half of the year as 7.4 million TEUs were transported. Northern European imports fell by 3.6%, while the East Med and Black Sea imports fell by 4.8%. In the first six months of the year, the euro dropped 19% compared to the yuan, pushing up import costs that dampened importers’ interest.

Meanwhile, intra-Asia shipments recorded ongoing positive growth of around 4% to 5%, but the economic uncertainties surrounding China “adds doubt as to whether such a strong growth rate can be sustained for the full year,” said the report.

It continued that the lack of European demand is of concern as container shipping is a low-margin business and industry profitability requires sustainable freight rates on high-volume trades.

Moreover, the record arrival of newbuilds in 2015 is a further challenge for the overcrowded Asia-to-Europe trade lanes, where most of the vessels will be deployed, and is seen to increase downward pressure on rates.

BIMCO forecasts that close to 1.6 million TEUs will be delivered by the end of 2015, marking the highest inflow of new capacity ever. The container ship fleet is going through large charges these years, as owners strive to cut down unit costs by introducing bigger and bigger ships everywhere. The average size of a newbuilt ship in 2015 is 8,400 TEUs while in 2008 it was 3,435 TEUs.

At the same time, container ship demolition activity has been weak for a full year now. In the past three years, owners have parted with 553 ships with a combined capacity of 1.162 million TEUs. For 2015 so far, only 51 ships with a combined capacity of 94,000 TEUs have been sold for demolition with the average built year being 1991, similar to that of 2013-14. The demolition potential remains scarce as only 561,000 TEUs are more than 20 years old.

In spite of that, November and December could see an increase in demolitions if demand growth stays low, leading Bimco to retain its forecast of 250,000 TEUs destined for the scrap yard this year.

“The fleet has grown by 5.8% until now and is expected to reach 7.3%, which is the highest in four years and largely surpassing demand growth,” it added.

Halfway through the year, container ship capacity equal to that of the full 2014 has been ordered. At the end of August, 1.4 million TEUs of new contracts had entered into the orderbook. Half of the new orders were for 37 ships with more than 18,000 TEUs in capacity, with another 39 ships with 10,000- to 14,000-TEU capacity. This leaves 175,000 TEUs for the remaining 49 ships ordered between 1,400 TEUs and 9,700 TEUs.

“As volumes drop and new ships are introduced on a weekly basis, it’s even more difficult to strike the balance that will see freight rate improvement,”” said the report.

Bimco said that with the deteriorating freight market, it has lately seen the greater practice of idling across the board. Nine ships of 8,500 to 13,900 TEUs were idle at the end of August. Cancelled sailings and service suspensions have been the options preferred by the operators until now, it added.

Photo: Andrew