Container lines optimistic over cargo volumes

Container shipping lines could see a stronger recovery in trade volumes in the coming months especially on transpacific routes and services to emerging markets as inventories are replenished and consumers spend more, shipping experts say.

Tim Smith, Maersk Line chief executive for north Asia, said overall growth in cargo demand was expected to rise by between 4 and 6 per cent this year. But there was a 'good chance of higher than expected growth in volumes' on services between Asia and developing regions including South America, Africa, the Middle East and India where 'there could still be double-digit growth.'

Smith said rising income levels in China and the emergence of a middle class, was 'going to be good news for importers and potentially for domestic distribution'.

Maersk Line has already seen a 20 per cent increase in import volumes into China last year, he added.

Confidence was also rising among cargo owners that there could be a resurgence in business as spending by North American consumers rose.

Smith pointed out that a year ago exporters and importers had little idea how order volumes would develop even on a month to month basis, but now there was optimism.

'I wouldn't say that forward forecasts are incredibly strong [on the transpacific], but we've noticed quite a few of our big beneficial cargo owner clients have been keen to reaffirm their space requirements, which shows they're definitely thinking about the need to reserve sufficient capacity,' Smith said.

Jon Windham, the Asian marine transport analyst for Barclays Capital, said optimism was growing of a flurry of orders in March and April as cargo owners rebuilt inventories on brighter economic prospects in America.

He pointed out that US retail sales, excluding food and petrol, was up 6 per cent year-on-year so far this year and 'remained a strong foundation for Chinese container volumes'. Housing starts were also up 22 per cent in December on an annualised basis to 657,000 while unemployment showed signs of easing.

Johnson Leung, head of regional transport equities research at Jeffries & Co, said the US economy was expanding and the downturn in the housing market had bottomed out.

He thought there would be a rebound in furniture shipments, which accounted for 35 to 40 per cent of eastbound container volumes at the housing peak, and other housing related products such as light fittings.

Smith said transpacific container volumes in January were 'very good', continuing a trend which had started in December, and were 'actually quite strong at present'. They have been buoyed by cuts in capacity as container shipping lines pulled out of the trade or stopped individual services. 'We calculate there has been something like 12 per cent capacity reduction on the route currently compared with quarter two 2011 and demand has firmed,' he said.

Maersk was also 'pretty confident' a US$300 per feu (40-foot equivalent unit) increase in transpacific rates from March 15 would be successful despite criticism by shippers that cargo and manufacturing exports were soft. While Smith sympathised with cargo owners, he said: 'We think the price of shipping freight is still very cheap'.

Container lines were forecast to make collective losses of more than US$5 billion last year.