WORLDWIDE SHIPPING INDUSTRY
Container shipping pitfalls in the coming months
As weak demand growth is forecasted for the coming quarters, the container shipping industry is set to return to negative margins. The number of boxes being shipped around the globe by sea grew 0.5percent – 191,000 twenty-foot equivalent units (TEU) – in the first quarter of 2019 compared with the same period in 2018.
The growth figure is massively below those of earlier years, where the global demand in Q1 2017 grew by 6.6percent and in Q1 2018 by 3.6percent. The timing and impact of Chinese New Year always affects business during the first three months of the year – this is a first glimpse at the real trend, as we now have three months of data to smooth the seasonality and not only two. A growth rate as low as 0.5percent is a critical issue for an industry used to much higher growth – double digits for many of the years between 1999 and 2007, growing by an average of 10.2percent, and coming down to an average of 4.3percent between 2012 and 2018. Having said that, the underlying numbers reveal a somewhat confusing demand picture.
Busiest may in los angeles port 112-year history
The Port of Los Angeles container throughput in May increased 7.8 percent year on year to 828,662 TEU, making it the busiest May in the port’s 112-year history. For the first five months of 2019, volumes have increased 5.2 percent year on year.
Previously, the best May was in 2017 with 796,217 TEU. May imports increased 5.5 percent to 427,789 TEU. Exports slipped 0.8 percent to 167,357 TEU. Empties increased 20 percent to 233,515 TEU. The Port of Shanghai’s volume in May was up 3.6 percent year on year to 3.76 million TEU. From January to May, Shanghai posted a 5.2 percent year-on-year increase in container volume to 17.78 million TEU.
Struggling dry bulk market gets all hyped up by capesize volatility
Fleet growth expected to outstrip demand growth in 2019 and 2020, making the near future look unappealing. It’s been a rollercoaster ride for the dry bulk market in 2019. The market fell from slightly profitable levels in the first week of January, to hit loss-making lows during February, March and April that almost touched the all-time lows seen in early 2016.
The Handysize, Supramax and Panamax segments all started to climb again after Chinese New Year in mid-February, but the Capesize sector lost all buoyancy. The combination of low Chinese iron ore demand and iron ore supply chain disruptions in both Brazil and Australia meant that freight rates hit USD 3,460 per day on 2 April. Since then, the Capesize market has climbed, touching USD 12,583 per day on 28 May. During April, it was evident that the Baltic Dry Index (BDI) is dominated by Capesize shipping. The index rose 50percent on the back of a 239percent increase in rates for Capesize ships – from a very low level – whereas the three other segments only rose slightly or decreased.
Export limitations in Iran, Libya and Venezuela
Iran, Libya and Venezuela face export limitations because of sanctions and internal political troubles. At the same time, US exports of crude oil are growing fast because of pricing and politics. Among the main official buyers left, the main ones are China, India and Turkey.
BIMCO doesn’t expect that crude oil exports out of Iran will fall much more than they already have – whether “waivers” are in place or not. Exports have averaged around one million barrels per day since US sanctions were reintroduced on 4 November 2018 (source: Lloyds List Intelligence). BIMCO monitors other sources as well to verify what is happening, as it recognises that data on issues such as this come with a high degree of uncertainty. An official US statement about deployment of an aircraft carrier group in the Middle East, specifically to “respond to any attack from the Iranian regime”, increased tensions to a new high in early May.