Bimco forecast that global container volumes will grow by between -0.5% and 0.5% in 2023, and by between 3.0% and 4.0% in 2024. Combined, head-haul and regional trade volumes are faring slightly better. We predict growth of between 0.0% and 1.0% in 2023 and between 3.5% and 4.5% in 2024.
During the first half of 2023, the back-haul and regional trade lanes have performed slightly worse than we previously predicted. However, head-haul trades have performed slightly better and total volumes did in fact match our last forecast in May.
Unfortunately, we believe that the rest of the year will follow the same slightly worse pattern. Compared to our previous base case, our total volume growth forecast for 2023 has been lowered 0.5 percentage points whereas the growth forecast for combined head-haul and regional trade volumes remains unchanged.
For 2024, we have lowered our growth forecast for both total volumes and combined head-haul and regional trade volumes by 2.5 percentage points compared to our previous base case scenario.
Like our low case scenario from our Q2 2023 report, we now believe that the volume recovery in many key trades will be delayed until 2024 due to tight financial conditions for businesses and consumers.
In its July 2023 report, the International Monetary Fund (IMF) slightly increased its estimate for GDP growth for 2023 to 3.0% while maintaining it at 3.0% for 2024. The increase in 2023 mostly impacts the Europe & Mediterranean, North America, and South & Central America areas.
If the IMF’s forecast is accurate, the global economy’s average annual growth rate during the five-year period between 2020 and 2024 will end well below trend at 2.5%, significantly lower than the average annual growth rate between 2010 and 2019 which was 3.7%.
The manufacturing sector is also experiencing weaker than normal conditions. The global Manufacturing Purchasing Managers Index (PMI), measuring manufacturing activity, has been in contraction territory (below 50) for ten out of the last eleven months. The manufacturing PMI reading for the Euro Area has been particularly weak whereas readings for China and Japan have been hovering around 50, sometimes slightly above but mostly slightly below. At the same time, China’s New Export Orders PMI has stayed below 50 for most months.
Despite some improvement in consumer confidence in the EU and US and an end to COVID restrictions in China, retail sales have not fared much better. In the EU and US, retail sales have so far remained below 2022 levels. And in China, the expected recovery has been much weaker than expected.
Development in personal savings in the US highlights how high interest rates and inflation still challenge consumers. During COVID, US consumers amassed USD 2.1 trillion of excess savings. However, the personal saving rate has remained lower than the pre-COVID level since early 2022 and nearly all the excess savings have now been spent.
By most accounts, the excess savings is what has allowed US consumers to continue spending at a higher level than expected. The lack of excess savings may therefore also negatively impact consumer spending going forward. Continued high employment may help limit the impact though.
Developments of inventories remains a risk to future container volumes into the US. After a period of expansion, the value of business inventories appears to have plateaued. Relative to sales, the inventories appear to be back at the pre-COVID level. However, for the two sectors that carry the highest share of total business inventories (manufacturing and wholesale), the inventory to sales ratio remains above pre-COVID levels, indicating that inventory adjustments may still be needed.
On a more positive note, the Organisation for Economic Co-operation and Development’s (OECD) Composite Leading Indicator (CLI) for the Group of 20 countries (G20) has been rising since January 2023, indicating a shift from slowing to increasing economic activity. However, so far, the CLI still indicates economic growth lower than trend as it remains below 100. Normally, the CLI predicts economic growth six to nine month ahead of time The G20 countries account for around 80% of global GDP and 75% of international trade.
Head-haul and regional trade volumes into East & Southeast Asia, Europe & Mediterranean, and North America regions, accounting for 75% of the total, have disappointed. The second quarter of 2023 were 5.4% lower than a year earlier and only 4.3% higher than the pre-COVID volumes during the second quarter of 2019. Volume growth into the Oceania region is even lower.
The Indian Subcontinent & Middle East, South & Central America, and Sub-Saharan Africa regions have meantime seen solid growth numbers. Those regions’ economies will be among the fastest growing in the coming years and import volumes could also continue to grow faster than average. The head-haul and regional trades into the regions are, on average, longer than into other regions and require more sailing days. Ship demand could therefore grow marginally faster than head-haul and regional trade container volumes.
On the other hand, current low water levels in the Panama Canal could encourage shippers and liner operators to shift cargo away from the US East Coast to the US West Coast, reducing the number of ships needed to carry the same number of containers.
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Source :Bimco
