A worse world economic outlook and rising trade tensions have made Drewry to downgrade its forecast for container demand over the next five years, according its latest Container Forecaster.
Drewry’s supply and demand prognosis for carriers has gotten worse since the last report. Previously, the global supply-demand index was expected to take incremental steps upwards through 2022. The new forecasts suggest that the industry now may be stuck with the current over-supplied situation for several more years.
Simon Heaney, senior manager, container research at Drewry and editor of the Container Forecaster, explained:
The anticipated re-balancing of the container market looks to have been postponed. That’s more bad news for carriers that are facing substantial cost increases as a result of stricter ship fuel standards from 2020.
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In addition, Drewry’s impact assessment of the latest round of US tariffs imposed last month show that eastbound Transpacific flows could be hit with an opportunity cost of approximately 1 million Teu next year.
As for the supply side, more than expected new ship deliveries, along with less demolitions in the second quarter forced Drewry to marginally raise the fleet growth rate forecast for this year. The difference between the current and previous forecasts is relatively small at +67,000 teu, nonetheless this upgrade indicates that the downgrade for container volumes supply growth is now expected to surpass that of demand.
This could affect negatively container shipping lines as with the lack of meaningful narrowing of the gap between supply and demand, the lines will have to continue to firefight capacity management on a week to week basis.
Finally, Drewry’s outlook for freight rates and carrier profitability in 2018 and 2019 did not change much, despite the downward revision of trade forecasts and worse outlook for vessel supply.
