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Low demand and capacity withdrawal to persist for container shipping

Low demand and capacity withdrawal to persist for container shipping
Container shipping is expected to see current low demand levels persisting, consequently leading to high levels of capacity withdrawals, according to analyst Sea-Intelligence.

With the IMF recently updating its outlook for the global economy revising a negative 3% recession for 2020 to a deeper minus 4%, demand for global container shipping is anticipated to take a hit.

In terms of world trade, a previous projection of negative 11% for 2020 is now revised to negative 11.9%, with the 2021 rebound revised down from 8.4% to 8%.

The Euro area saw GDP growth projections drop from an already low of negative 7.5% to negative 10.2%.

“This is especially concerning since the region will drive demand to fill the newest generation of ultra-large container vessels,” said Alan Murphy, ceo of Sea-Intelligence.

The IMF projection – if it turns out to be correct – is telling us that the current low demand levels are likely to persist for a while. Consequently, the high levels of capacity withdrawals are also likely to persist. This is a view that is also backed up by the actual capacity withdrawals thus far seen in Q3,” Murphy said.

The number of blank sailings announced for Q3 increased from just 13 in week 20 to 76 in week 25 and then to 82 in week 26 (current week). However, this development is not uniform across the major East/West trades.

“On the Asia-North America West Coast trade lane, there has been a sharp decrease in blank sailings as blank sailings are getting reinstated. While this is not due to a structural improvement on the trade, it is more so as a result of either carriers pulling out too much capacity from the trade in the first instance, or US importers fulfilling short term needs by using a faster US West Coast service instead of a US East Coast service with considerably longer transit times,” Murphy explained.

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