To gauge whether the trends facing contain[ds_preview]er carriers points to a new normal, Boston Consulting Group (BCG) analyzed global trade developments in 2015. While an increase of 3.3% in container demand in 2014 excited the imagination of carriers and analysts, in 2015, reality hit hard.
By the end of 2015, average global growth in the container- shipping trade was 1.9%. Yet liners still invested in new, ultralarge vessels to boost scale and reduce slot costs. This exacerbated the existing overcapacity problems, pulling freight rates down to a new low, BCG says. For the first time in history, growth in container demand lagged behind global gross domestic product, producing a GDP multiplier lower than 1.
he six trade routes, or trades, that collectively represent more than 80% of the total world container trade—Asia-Europe, Trans- pacific, Intra-Asia, Indian subcontinent and Middle East, Latin America, and Africa—demonstrated markedly varied perfor- mance from 2014 through 2015.
Asia-Europe saw exports from Asia into Europe shrink by 2.6%, owing, for example, to decreases in Russia’s GDP growth, Europe- an industrial demand, and consumer spending. Transpacific did relatively well. That region accounts for more than 40% of total US imports, which have demonstrated a decent growth trajectory, thanks to rising personal disposable income that led to increases in the import of consumer goods from Asia.
Intra-Asia, powerfully affected by developments in China, saw a negative trend in imports and exports as the Chinese economy decelerated. The Indian subcontinent and Middle East trades saw 5.1% growth from 2014 through 2015, led by Saudi Arabia, India, and the United Arab Emirates, along with Iran. Latin America and Africa both experienced a slowdown in 2015, with trade volume growth flattening. Brazil’s recession strongly influenced developments in Latin America. And in Africa, trade growth stumbled after a currency depreciation, catalyzed by plummeting oil and commodity prices, struck Nigeria and Angola, the region’s two largest oil producers.
Supply-demand gap between 8.2% to 13.8% in 2020
BCG analyzed developments in container supply and demand to gain a sense of how global container shipping could be affected through 2020. Their goal: to determine whether the 2015 dip was cyclical or an indication of a new normal for the global container trade.
BCG analysis of all available facts suggests that annual global container traffic growth over the next several years will be between a bear scenario of 2.2% and a bull scenario of 3.8%, while for the base scenario, growth will be at 3.2%. Corresponding container trade could reach 170 mill. to 183 mill. TEUs in 2020.
As for container supply-and-demand balance, the supply-demand gap stood at 7% at the end of 2015. BCG projects a compound annual growth rate (CAGR) of 3.7% for cellular fleet tonnage from 2016 through 2020, down from a CAGR of 6.6% seen from 2012 through 2015. BCG’s proprietary supply-demand model indicates that the supply-demand gap could range from 8.2% to 13.8% in 2020. Therefore, we estimate that by the end of 2020, oversupply of vessel capacity will stand at 2 mill. to 3.3 mill. TEUs.
More sophisticated strategies needed, says BCG
To succeed in this increasingly difficult industry, container liners will need to craft more sophisticated strategies for boosting their performance. Companies that haven’t excelled at being scale leaders or niche players appear to be stuck in the middle—a dangerous position in an ever-more commoditized and consolidating industry.
To improve their performance, these companies need to use a blend of global mergers and smaller M&A deals aimed at driving down costs. They should also seek to unlock even greater synergies from their alliances, BCG says. In addition, companies need to continue optimizing their core business (for example, by strengthening their commercial excellence and optimizing the setup of their network of services), extend their offering to include complementary services to extract value from adjacent markets, and maximize their share of wallet (for instance, by accelerating development of logistics). In this challenging market context, companies that embrace digital will further strengthen their competitive advantage.
