CONTAINER SHIPPING MARKET OVERVIEW & OUTLOOK

We forecast that global container volumes will grow between 0% and 1% in 2023, and between 3% and 4% in both 2024 and 2025.

Combined head-haul and regional trade volumes are expected to grow 0.5 percentage points faster than the total volumes in both 2023 and 2025 but in line with total volumes in 2024.

In 2023, third quarter volumes performed better than we previously predicted. In particular, back-haul and regional trades performed better, so we have lifted our expectations for the fourth quarter as a consequence of this. Our forecast for total full year volumes has therefore risen by 0.5 percentage points.

While our growth forecast for all trades in 2024 remains unchanged at between 3% and 4%, we have lowered our forecast for head-haul and regional trades by 0.5 percentage points to between 3% and 4%.

For 2025, we predict overall volume growth of between 3% and 4% while we expect growth of between 3.5% and 4.5% for head-haul and regional trades.

According to the International Monetary Fund (IMF), growth in the global economy is expected to slow to 3.0% in 2023 from 3.5% in 2022. The growth forecasts for 2024 and 2025 are 2.9% and 3.2% respectively. A reduction in growth from 2.9% in 2022 to an estimated 1.6% in 2023 in the Europe & Mediterranean region is the key driver of the lower global growth in 2023. The German economy in particular has struggled and is expected to end the year with negative growth of 0.5%.

The main reason for growth in 2024 and 2025 being forecast lower than in 2023 is that weaker growth than in 2023 is forecast for both China and the US. On the other hand, the Europe & Mediterranean region is expected to recover and return to growth above 2% in 2025.

Import volumes to North America are expected to fall by between 5% and 6% in 2023 as head-haul volumes during the first half continued the low levels seen in the second half of 2022. The fact that imports are returning to growth in the second half of 2023 is only because of the very low 2022 volumes.

It is mainly due to the low first half volumes in 2023 that we forecast between 2.5% and 3.5% growth in North American import volumes during 2024. However, there is a risk that growth will be lower, as consumer spending may not be sustainable at current levels.

The latest data from the US Bureau of Economic Analysis reveal that, adjusted for inflation, US consumers are spending 11% more on goods and services than in 2019. However, disposable income has increased only 1% and it is the excess savings amassed during COVID that allow consumers to continue to spend at their current levels. According to the latest estimates, these excess savings may run out during the first half of 2024, which could in turn result in a drop in consumer spending.

For the Europe & Mediterranean region, we forecast that import volumes will grow between 2% and 3% in 2023 after falling 8.0% in 2022. Growth in 2024 is expected to end at between 2% and 3%, and between 2.5% and 3.5% in 2025. Despite forecasting growth for three years in a row, our forecast for 2025 is nevertheless lower than the actual volumes were in 2019.

As in the US, consumer confidence in the EU has improved but remains low. However, retail sales have remained stable. Relative to 2019, retail sales in 2023 are up 5% in the EU compared to nearly 15% in the US.

In the meantime, the manufacturing sector in the EU suffered and the manufacturing PMI for the euro area has remained below 50 since July 2022.

For both the North America and Europe & Mediterranean regions, our volume forecasts are lower than would normally be expected given the forecasts for their economies. Both areas have struggled with high inflation and high interest rates. Should inflation come under control and interest rates begin to fall as a result, the growth potential in 2025 could end higher than in our forecast.

Following a fall of 2.6% in 2022, we predict that volumes into East and Southeast Asia will show moderate negative growth of between -0.5% and -1.5% in 2023. Our forecast predicts positive growth of between 2% and 3% in both 2024 and 2025.

Despite an uneven recovery, the IMF still forecasts that GDP growth in China will hit the official Chinese target of 5.0% in 2023 but slow to 4.2% and 4.1% in 2024 and 2025 respectively. The property sector crisis remains a key challenge but recent measures and a stronger than expected Q3 2023 could lift growth to 5.4% in 2023 and to 4.6% in 2024.

So far, the manufacturing PMIs measured by both Caixin and the National Bureau of Statistics of China have hovered around 50 throughout 2023; sometimes above but frequently below. The most recent reading saw both PMIs slip to 49.5, indicating contraction.

It is, however, worthwhile mentioning that the OECD’s Composite Leading Indicator for China breached the 100 mark in April 2023 and has shown consistent improvement. This points to future improvements in Chinese industrial output which could drive further improvements in imports as well as exports.

Despite only contributing about 23% of global import volumes, the current growth drivers in the container market are the Indian Subcontinent & Middle East, South & Central America and Sub-Saharan Africa regions. In 2023, growth to the three regions was nearly double the total volume growth and the regions are forecasted to contribute 40% of growth in 2024 and 2025.

All three regions are expected to see more than 20% growth in import volumes from 2022 to 2025: a strong recovery after not showing any growth between 2019 and 2022. With growth of between 8% and 9% in 2024 and between 9% and 10% in 2025, we forecast that the South & Central America region will see the fastest growth in the coming years.

As the head-haul and regional trades into these regions are longer than the average, we estimate that ship demand has grown faster than volumes in the head-haul and regional trades. We estimate growth in ship demand of between 2.5% and 3.5% in 2023 vs. the estimated growth in volume of between 0.5% and 1.5%. Ship demand will also grow marginally faster than head-haul and regional trade volumes in the coming years.

Resource: https://www.bimco.org/news/market_analysis/2023/20231128-smoo-container