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Asia-Australasia ocean demand recovering this year

After southbound demand stagnated in the second half of 2017, early 2018 numbers are more encouraging although rates are falling, Drewry reports

After Asia to Australasia ocean freight demand stagnated in the second half of 2017, early 2018 numbers are more encouraging, although rates are falling, according to a new Drewry report published today.

Southbound container traffic from Asia to Australasia inched forwards by 1% last year to reach 2.6 million teu, according to Container Trade Statistics, “the lowest growth rate in five years by quite some distance”, following a 7.2% hike in 2016, Drewy noted.

It said CTS’ numbers reveal that last year’s slowdown was the result of a 6.3% drop in volumes from Southeast Asia to 750,000 teu, which was counteracted by a rise of 4.1% from the larger Northeast Asia export market that approached 1.9 million teu.

“Last year’s trade volumes started off brightly, but suffered a jarring 6% decline in the third quarter,” Drewry said. The fourth quarter fared better, but volumes were essentially unchanged from the year before.

“Early data for 2018 does suggest that the trade is stabilising, with demand growth of 11.5% year-on-year for the first two months, a rate which is has to be treated with some caution due to an imperfect comparison with different dates for Chinese New Year,” Drewry noted.

The rolling 12-month average, which goes some way to smoothing out the seasonal volatility, does however confirm that growth is accelerating in the NE Asia export leg, helping the total trade rate land at 1.8% as of February, Drewry said.

Drewry expects “to see the growth trend accelerate throughout the year, but it seems unlikely that it will be spectacular”. It added: “The IMF is expecting Australia’s GDP to rise by 3% this year, but low wage growth and continued weakness in the housing sector could hinder household consumption.”

The analyst said there hasd been very little activity in the past 12 months in terms of service changes on either Northeast or Southeast Asia legs, with monthly adjustments almost exclusively being the result of missed voyages.

One recent alteration came from MSC in April when it split its Southeast Asia to Australasia ‘Capricorn’ service into two operations: ‘Capricorn’ and ‘Kiwi Express’. The change adds six ships of approximately 3,000 teu to the trade, although the total number of slots available in the southbound trade “is basically the same as it was in April 2017”. In the same month, capacity from NE Asia was up by around 5% year-on-year, Drewry noted.

“Despite the absence of any wholesale service changes during the demand slump last year, the monthly tinkering with capacity was sufficient to boost southbound ship utilisation and spot market freight rates to the point that by January 2018 prices had doubled in the space of six months,” Drewry observed. “However, spot rates endured a painful drop in March, which implies that not enough is being done on the supply side to prevent utilisation from falling.”

Drewry’s Container Freight Rate Insight reported that Shanghai to Melbourne 40ft container spot rates fell by 16% month-on-month in March to $2,480/40ft container.

It concluded: “Spot rates on this trade remain comfortably above where they stood at the same point last year, but to arrest the current slide carriers will be hoping for an improvement in demand or else they will have to be prepared to make bigger capacity adjustments than before.”


Will Waters | Monday, 30 April 2018

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