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Container Shipping: Testing the Strength of the Market Makes Spot Rates Drop

(Peter Sand via Hellenic Shipping News)

What have we learnt from the most recent peak season? Volumes on all trades grew at healthy levels in line with our full year forecast for global container demand growth rate being at the same level as global GDP growth. BIMCO anticipates that the global trade-to-GDP multiplier for total container shipping demand in 2017 and coming years will hover around one or slightly above, at best. Year-to-date, we have seen a multiplier of 1.39.

The overall level is one thing, but individually, we may see both higher or lower multiples for different regions. Noticeably, US and European imports have been strong in 2017. This has benefitted the utilisation of ships deployed on those long-distance trades, temporarily easing cascading pressure. Cascading pressure that for many years now has eroded profitability on “secondary” and “tertiary” trades. On these trades, strong demand growth has been overwhelmed by massive supply inflow, resulting in falling freight rates.

Demand growth on intra-Asian trades grew by 4.2% in the first eight months of 2017 (source: CTS). Total European imported volumes grew by 4%, to reach 21.2m TEU. Growth on the Far East to Europe trades was strong at 5.4%, accounting for little more than half of all European TEU imports. Click here to read more.