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August 14 2023

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August 14, 2023 | Journal of Commerce 17 www.joc.com International Maritime on consumers, investment bank Stifel highlighted in a report July 19 that aggregate capacity will con- tinue growing throughout the year as deliveries from the huge order book trickle into the market. Data from Sea-web, a sister com- pany of the Journal of Commerce, shows the confirmed order book is currently more than 7.3 million TEUs and closing in on 30% of the total in-service fleet. According to an estimate from Drewry, 2.5 million TEUs of capacity will be delivered this year and 3.9 million TEUs by the end of 2024. CMA CGM alone is scheduled to receive about 500,000 TEUs of newbuilding capacity between now and the end of 2024, according to Alphaliner. Hapag-Lloyd expects global con- tainer volume to grow 2% this year with capacity rising by twice that, while next year a 3% rise in fore- casted volume will be overshadowed by 7% growth in capacity. The glut of capacity has impacted the spot market, with data from indices such as the Shanghai Shipping Exchange and Drewry's World Container Index showing spot rates falling below pre-pandemic levels on the Asia– North Europe trade, although Asia– Mediterranean rates remain above 2019 levels. JOC Special Correspondent Keith Wallis contributed to this report. email: greg.knowler@spglobal.com twitter: @greg_knowler sluggishness, according to Wang Zhe, senior economist at Caixin Insight Group. "A slew of recent economic data suggests that China's recovery has yet to find a stable footing, as prominent issues including a lack of internal growth drivers, weak demand and dimming prospects remain," he said in an analysis of the June China General Manufacturing PMI data compiled by S&P Global, parent company of the Journal of Commerce. "Problems reflected in June's Caixin China manufacturing PMI, ranging from an increasingly dire job market to rising deflationary pressure and waning optimism, also point to the same conclusion," he added. China enjoyed some momentum in economic growth following the lifting of pandemic restrictions in the first quarter, but the boost in out- bound volumes of loaded containers "lost steam" through the following three months, according to rate benchmarking platform Xeneta. "Despite China's patchy recov- ery, retail rates for outbound move- ments to Europe have continued to weaken due to well-documented overcapacity and slow demand resulting from high inflation," the firm said in a mid-July Asia–Europe market update. "At such times, retailers tend to adopt a more conservative approach to inventory levels while keeping a close eye on the financial situation of consumers," Xeneta added. While European demand wilts under the burden of high inflation The absence of an aggressive capacity management approach by carriers comes as vessel capacity steadily comes online. An estimate by consultancy Drewry is that 2.5 million TEUs of capacity will be delivered before the end of this year. On top of the surplus capacity is weak demand. China reported a 12.4% contraction in its June exports, and the sharp drop in outbound cargo suggests the 1.3% decline in volume reported for May by Container Trades Statistics (CTS), the latest data avail- able, will continue. "On an aggregate level for Asia-Europe, the last time we saw such low blank proportions was in the summer of 2021, as COVID-19 restrictions were lifted once again for the summer," Sea-Intelligence shipping analyst Adam Szabo told the Journal of Commerce July 19. Maersk told customers mid-July it was blanking one Asia–North Europe sailing "as a consequence of the forecasted reductions in global demand." CMA CGM announced mid-July four blank sailings on Asia-Mediterranean. 'Losing steam' Overseas demand for goods made in China remained stable in June amid the global economy's ongoing Asia-Europe spot rates flatten ahead of Aug. 1 GRIs Container rates from Asia to North Europe and the Mediterranean under short-term contracts of 32 days or less, in USD per FEU. USD per FEU $10,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 L Apr Oct Jan 2022 Apr Jul Oct Jan 2023 Jul Asia-North Europe Asia-Mediterranean Jul 27, 2023: $2,198.6 Y Y h 81 5% A J 2023 Y-o-Y change: -81.5% Y o Jul 27, 2023: $1,249.7 Jul 27, 2023: $1,249.7 Y-o-Y change: -87.8% Y Y h 87 8% con Jul, 2023 Jul J l 2023 J l J l $1,884 $2,00 Source: Xeneta © 2023 S&P Global Hapag-Lloyd expects global container volume to grow 2% in 2023 compared with a 4% jump in capacity. Hapag-Lloyd AG

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