BIMCO:Vessel Demand To Increase By 10% Due To EEXI

50

  • The Shanghai and China Containerized Freight Indices (SCFI and CCFI) have fallen by 50% and 19% respectively since the beginning of the year but remain significantly above 2019 levels due to the significant increases recorded between mid-2020 and early 2022.
  • Time charter rates and second-hand prices have also reduced but remain high; five-year-old ships are on average 34.7% more expensive than newbuildings.
  • The IMF has lowered its global economic growth forecast to 3.2% for 2022 and 2.9% for 2023, and highlights that the risk of a global recession has increased.
  • We forecast that head-haul and regional volumes will fall by 1-2% in 2022 and grow by 3-4% in 2023 but many risks exist.
  • The fleet is expected to grow by 2.9% in 2022 and by 8.0% in 2023.

Recent developments

The Shanghai Containerized Freight Index (SCFI), which represents spot rates for containers loading in Shanghai, enjoyed a period of almost uninterrupted growth between late May 2020 and mid-January 2022.At the end of the run, the index had increased by 491%. It has since dropped by 50% but remains at what would have been unprecedented levels prior to COVID 19.

The China Containerized Freight Index (CCFI), which reflects the average rates of all containers loaded in China, increased by 326% during the same period and equally remains at unprecedented levels despite recording a subsequent 19% loss. While container rates have disappointed in 2022, they certainly are not disappointing.

Demand drivers

The International Monetary Fund (IMF) has again lowered its forecast for the global economy. Central banks have raised interest rates and tightened their monetary policies in an attempt to contain further increases in inflation, while the IMF estimates that global GDP in Q2 2022 was lower than in Q1 2022.

The baseline growth forecast from July estimates global economic growth of 3.2% in 2022, down from 6.1% in 2021, and that growth will stand at 2.9% in 2023. Further downside risks exist, and the IMF’s worst-case scenario forecasts a possible further reduction in global GDP to 2.6% and 2.0% in 2022 and 2023 respectively.

Supply

Even though contracting has slowed down from an average of 358,000 TEU/month in 2021 to 248,000/month in the first seven months of 2022, the order book has still increased by 1.2 million TEU since the beginning of the year and now stands at 7.0 million TEU, equivalent to 27.6% of the trading fleet.

The resulting deliveries will greatly impact the fortunes of the container market over the next few years as about 5 million TEU will be delivered during 2023-3024.

Conclusion

Global economic headwinds are adding many risks to container demand and upsides are difficult to identify. Consequently, we consider our present head-haul and regional volume growth estimates of 1-2% reduction in 2022 and 3-4% growth in 2023 as best case.

Did you subscribe to our daily newsletter?

It’s Free! Click here to Subscribe!

Source: Bimco

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.