Global container port throughput is forecast to grow 3% in 2019 instead of 3.9% because of tariffs and other headwinds.
Drewry has downgraded its forecast for global port throughput growth in 2019 to 3.0% or 806 million TEUs, down from its previous prediction of 3.9% growth. Last year the throughput at ports globally grew 4.7%.
“Today’s container market is confronting more than its fair share of headwinds,” said the London-based consultant.
The most recent issue of its quarterly Container Forecaster report “highlights concerns of a slowing global economy stoked by the ongoing U.S.-China trade war (albeit paused for the moment), escalating geopolitical tension in many regions of the world and an industry grappling with challenging new emission regulations.”
It also points to other trends that “could dent demand for shipping in the future, namely the regionalization of manufacturing supply chains and growing momentum behind a low-carbon, environment-first campaign that has the potential to fundamentally change global consumption habits.”
Simon Heaney, senior manager of container research at Drewry, said, “We remain confident that world trade will rebound in 2020, but much will depend on developments outside of carriers’ control.
“Further spreading of protectionist policies could stunt growth, particularly if the U.S. aims its tariff target at other trading partners. However, there could be some upside for trade if more manufacturing production is relocated outside of China. The Asian export powerhouse has progressively reduced its requirement for foreign inputs, choking off demand for intermediate goods, so any shift to less self-reliant economies should give trade a bit of a kick-start,” Heaney said.
In Asia, container throughput at ports is expected to grow above the global average, 3.7% in 2019, but below the 4.6% growth it experienced in 2018.
“There is a deceleration going on pretty much everywhere,” said Heaney. In Latin America, container volumes are expected to actually decrease about 3%, a big contrast to the 6.3% growth ports there had in 2018. Heaney said that is in large part because of economic and currency issues in Brazil and Argentina. It is the only region where Drewry expects a contraction in container volumes.
Drewry believes the risk of temporary supply disruption is heightened.
“In the transpacific market, for example, differences of opinion over the strength of the third-quarter peak season have led to divergent strategies from carriers. Some lines are placing extra loaders into the trade, indicating they expect a repeat of last year’s cargo rush, while others are more circumspect, announcing blanked sailings to protect load factors and spot freight rates,” the company said.
Heaney is cautious about reading too much into the recent meeting at the G20 between President Trump and Chinese President Xi Jinping and the announcement that new tariffs on Chinese goods were being delayed and trade talks between the U.S. and China restarted.
While that is positive, he noted in the past such “set piece moments” have come to naught.
He also said that since the G20, Trump has been “aiming his tariff gun at the EU,” with his administration proposing possible tariffs on an additional $4 billion of imports from the European Union, including items as diverse as cherries, cheese, whiskey and coiled copper, in a further escalation of the fight over European government aid to Airbus.
“Carriers can be forgiven for not having all of the answers in such times. One suspects that even Nostradamus would throw his hands up in despair; such is the volatility of the leading characters. There will undoubtedly be some errors along the way and the risk of temporary supply issues has undoubtedly been raised, either from too many canceled sailings or misplaced capacity transfers between trades,” said Heaney.
Uncertainty about the outlook for trade is one reason why ocean carriers have been hesitant about ordering ships.
In addition, Heaney noted that the IMO 2020 low-sulfur fuel regulation has created questions about the best sort of fuel to power new ships. In addition to using low-sulfur fuel oil, ocean carriers could choose to equip their ships with scrubbers so they can continue to use the high-sulfur fuel most containerships use today or even equip their ships to use liquefied natural gas.
If supply chains change, if more production shifts out of China to Southeast Asia or other parts of the world, shipowners may have a need for smaller, more flexible ships that can be used in regional trade, he said, rather than the ultra-large containerships that have dominated the orderbooks of shipyards in recent years.
Heaney also noted that the finances at many ocean carriers are not great and that the industry has been devoting more of its capital to software and information technology as it seeks to do more business electronically.