Secondary trades could be more profitable for container lines this year

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Ocean carriers should look to the secondary trades for the best growth prospects this year, according to a new report from research and consultant Maritime Strategies International (MSI).

MSI singles out headhaul volumes from Asia to Latin America as having the biggest growth potential – “in the low double-digits”.

This is followed by the West African trades, which it says “will see growth in the high single-digits”.

Both these regions are benefiting from a rebound in the oil and commodity prices critical to their economies. Plunging prices had decimated trade in these regions and the upswing will provide a strong growth period.

MSI notes that “a torrid period of contraction will generally flatter a subsequent period of expansion”.

It adds that growth in the non-mainline trades was expected to “remain robust over the next several years”.

Ocean carriers suffered from declining vessel utilisation levels on east-west routes in the final three months of last year, resulting in sliding container spot rates.

A recent survey from consultant SeaIntel puts fourth-quarter excess headhaul capacity at 1.1m teu for the transpacific and 1.3m teu on Asia-Europe. Indeed, Maersk Line, with its acquisition of Latin America specialist Hamburg Süd, has confirmed a better outlook for north-south trades.

During Maersk’s earnings call last week, chief financial officer Jakob Stausholm said the “underlying health” for the Hamburg Süd trades was better than for its parent, Maersk Line.

“The part of the business that has been most affected by the rate decreases, that we have seen, has actually been the east-west trades and we have a more sustained recovery on the north-south, especially in trades where Hamburg Süd is active.”

MSI’s Container Forecaster predicts “a slower pace of growth on mainlines in 2018, despite notable bright spots such as the US and Eurozone economies”.

However, the consultant still expects 4% growth on the headhaul transpacific trade and 4.5% between Asia and Europe this year. It points to a number of positive drivers in the US, including “solid housing activity, a continued boom in home improvement expenditure and provisions in the Trump tax reforms that allow businesses to fully deduct the cost of new capital equipment from their taxable income”.

Meanwhile, for Europe, MSI says the recent rebound of the euro will provide “an additional boost to import volumes”, with “further growth predicted in eastern Europe”.

Elsewhere, MSI says it expects trade with India to see improved volumes this year and, for intra-Asia, continued growth on its 2017 assessment of 5%.

Underpinning its optimistic growth forecast for global trades, MSI adds: “To single out the Chinese domestic trade, reported inland port throughput grew by over 13% in 2017 and, even allowing for data inaccuracies and non-cabotage throughput at inland terminals, this points to robust growth ahead.”