Shipping volumes are expected to take a hit over the next 12 months from the effects of the global economic downturn.
Shipping volumes are expected to take a hit over the next 12 months from the effects of the global economic downturn. Local companies such as Safmarine and Transnet say traffic is already declining. Eric Heymann, a senior economist at Deutsche Bank Research, said yesterday that double-digit growth in container handling, which had lasted for more than a decade, would end this year due to a decline in global gross domestic product (GDP) Historically, container volumes track world GDP growth by a multiple of three. For example, 4 percent growth in global GDP results in 12 percent growth in container volumes.
Heymann said container handling volumes would stagnate this year. Next year there would be a modest recovery to a world growth average of 5 percent. The average growth rate since the early 1990s has been above 10 percent a year.
"When we have economic weakness we don't need so much transport, and because it is the world's major economies that are in recession, the demand for goods is not that high," said Heymann. "There are other negative factors that will contribute."
According to a report presented by Heymann last month, overall world GDP will decrease by 0.7 percent this year. Major economies such as the US, Japan and the euro zone were forecast to decline by 2 percent.
Heymann said GDP would grow by at least 5 percent in Africa this year, but some local shipping companies were not so positive. Jonathan Horn, Safmarine's Africa region executive, said the company expected a slower growth rate for the continent, at least in the first six months of the year.
"The overall South African import market has shown several consecutive months of decline ? largely as a consequence of the local credit crunch and ? several interest rate hikes over the past one to two years," said Horn in an interview published on the company's website last month. "This is naturally exacerbated by what is unfolding globally."
A significant slowdown was noted in November and last month, Horn said. This was now filtering into many other African countries due to low exports of commodities.
South Africa accounts for 40 percent of Safmarine's volumes
South Africa accounts for 40 percent of Safmarine's volumes in the continent.
Andrew Thomas, the chief executive of Ocean Africa Container Lines, a joint venture between Safmarine Container Lines and Grindrod, said South Africa would be a softer market this year and would return to being a surplus area for containers.
"It is likely that there will not be growth destined [for] or originating in South Africa, and there might even be a decline," said Thomas.
"But there is a potential to attract transhipment because of the capacity created by Transnet. In the Durban port, only 20 percent of [transhipment] capacity is being utilised, and there is the port of Ngqura, which will come on stream in September and will potentially attract transhipment as well."
Heymann said there would also be more supply than demand in the industry because new ships were entering the market now. "During the boom, new ships were bought, so supply is growing faster than demand," he said. "These are ships that were ordered many years ago. We forecast that there will be some cancellations as well."
Time magazine reported this week that Clarksons of London, the world's largest shipbroker, had announced that new orders had dropped from 378 vessels in October 2007 to 37 last October.
In November New York-based Genco Shipping and Trading wrote off a deposit of $53 million (R499 million at yesterday's exchange rate) to get out of a $530 million deal to buy six new vessels, freeing up liquidity and strengthening the "firm's ability to act opportunistically".
John Dludlu, a Transnet spokesperson, said: "Yes, world container volumes are likely to be depressed over the next 12 to 18 months. We expect that volumes will be affected by the global economic slowdown.
"We are finalising our forecasts for the year ahead. Volumes on certain commodities have fallen sharply, especially steel-related commodities, with the exception of iron ore."