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Bleak outlook predicted for boxes

Bleak outlook predicted for boxes
Container shipping faces a ?listless? two years as rate recovery is ?crushed by overcapacity, industry indiscipline and slowing demand growth?.

HSBC gives bleak outlook for boxes

Container shipping faces a ?listless? two years as rate recovery is ?crushed by overcapacity, industry indiscipline and slowing demand growth?.

Moreover, vessel utilisation will not return to boom-time levels until 2016, according to HSBC Global Research, which warns that a hoped-for recovery could founder as vessels return to the fleet.

The Asian Container Shipping report by Hong Kong-based analysts Azura Shahrim and Mark Webb warns that a ?surprising level? of industry co-operation and better than expected container volumes, especially intra-Asia, generated a rebound in freight rates over the past quarter.

Although HSBC has increased its forecast revenues, with the highest growth expected from intra-Asia, the report warns that risks to the sector are rising.

?There is massive and chronic oversupply. We estimate a 46% gap in 2010 between fleet capacity and demand. The idle fleet, at 10%, is still triple the level of previous downturns.

?We calculate that vessel utilisation will only return to 2007 levels by 2016. Low entry barriers and commoditised products also create a poor industry structure.?

The report continues: ?We believe the sector will be listless over the next two years rather than steaming towards a sustainable profit recovery. We argue that a sustainable rate recovery looks unlikely in 2010-2011.

?We see periods of rising spot rates - due to co-ordinated industry action - quickly followed by indiscipline and rate declines. We believe this is already happening: the re-introduction of capacity into Asia-Europe trade has started to depress rates.?

The report argues that an early recovery within container shipping is ?unlikely?, with a trade uptick driven mainly by shorter-haul intra-Asia services, while the recent strength of Asia-US/Europe container trade may result from short term restocking that will slow down in the coming months.

That latter point, of short-term restocking of depleted inventory levels, is a viewpoint expressed by a number of industry analysts in the past few weeks.

HSBC states: ?We believe that even if trade rebounds strongly, massive capacity ? new orders coming; supply from idle fleet; extra vessels employed by [slow] steaming ? especially on long-haul trading routes, will put pressure on rates and cause them to remain range-bound in 2010-11.?

On the signs of recovery in global trade seen late last year, HSBC says that the apparently positive trend for long-haul container trades may be more indicative of an Asia-centric development.

?Closer inspection, however, indicates that the rebound is primarily being pushed by regional demand and will mainly benefit intra-Asia container trade.?

HSBC economists are forecasting Asian exports and imports to grow by 16% and 15% in 2010 versus US export and import growth of 10% and 8% and 6% and 4% for Europe.

?Although shipments to the US have rebounded and the recovery in US consumption cannot be entirely discounted, our economists highlight that it is Asian demand which is driving the regional trade recovery.?

www.turkishmaritime.com.tr

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