Carriers buoyed as trade boom points to growth

PUBLISHED : Tuesday, 08 February, 2011, 12:00am
UPDATED : Tuesday, 08 February, 2011, 12:00am

Booming trade between Asia and the United States and Canada could spark a 7 to 8 per cent rise in containerised ocean shipments across the Pacific Ocean, leading transpacific shipping lines say.

The surge in container volumes, equivalent to about 1.6 million teu (20-foot equivalent units), will be the most apparent from late spring. It may lead to a shortage of shipping capacity and boxes similar to the situation seen early last year that caused cargo to be left in port and shipping lines to charge a premium for loading freight.

The growth in trade and container volumes will be fuelled by the continued recovery in the US economy, said the Transpacific Stabilisation Agreement, a lobby group of 15 big transpacific container shipping lines.

Members of the group, which carry about 95 per cent of the containerised cargo across the Pacific, include Orient Overseas Container Line and Cosco Container Lines.

Kim Young-min, the chairman of the TSA who is also president and chief executive of South Korea's Hanjin Shipping, said: 'After demand growth of more than 15 per cent in 2010, we expect further growth in the 7 to 8 per cent range for 2011.'

Kim said that while the volume of cargo shipments was more muted than expected before the Lunar New Year holiday, 'advance bookings and market data suggest a return to robust trade flows by late spring and early summer'.

He said this could lead to 'a possibility that vessel space and equipment will be tight at times leading into the peak season'.

This was in marked contrast to 2009 when container volumes fell because of the global financial crisis and US consumer and business confidence weakened and only started to recover last year.

'All of us had to hit the ground running in early 2010 - climbing out of the deepest global recession in decades, redeploying assets and restoring services,' Kim said.

Explaining the link between the continued rise in container volumes and economic expansion, Jon Windham, a director and head of industrials research in Asia at Barclays Capital, said globally, container volumes typically grow at twice or two-and-a-half times gross domestic product. 'If the consensus global GDP forecast of 4 to 4.5 per cent is correct, then global container volumes should grow 8 to 11 per cent,' he said.

The World Bank forecast the US economy would grow 2.8 per cent this year. It also predicted 8 per cent GDP growth in East Asia, while China's economy was forecast to expand 8.7 per cent.

Windham said while US retail sales in December last year were up 9 per cent year on year, unemployment fell to 9.4 per cent.

'We view this marginally improving US employment situation as a potential driver of incremental container volume growth over 2011,' he said.

Peter Sand, the shipping analyst at the Baltic and International Maritime Council, which represents about 65 per cent of global shipowners, agreed with the TSA's forecast of a high single-digit increase in container volumes.

But Sand also expressed doubt that there would be double-digit growth.

'The ongoing quantitative easing in the US and the continued sovereign debt issues in Europe are clear examples that we have not escaped the claws of recession yet,' he said.