Carriers Not Cashing In on Intra-Asia Container Trade Surge

Container traffic within Asia is flying according to trade statistics, but carriers are yet to feel the benefit, shipping analysts at Drewry say.

As reported last week, container traffic surged ahead in the first quarter of 2017 by an estimated 10% thanks in large part to a rapid escalation in intra-regional volumes, particularly within Asia.

The provisional first quarter trade lane data from Drewry’s Container Trades Statistics (CTS) indicates that container trade within Asia, encompassing Greater China, North Asia and Southeast Asia, jumped by 23.5% year-on-year to reach 10.8 million TEU.

This is all the more remarkable as the same data source suggests that this follows on from zero growth in 2016 when Intra-Asia box volumes closed on 39.2m TEU, Drewry said.

The busiest and fastest growing lane within Intra-Asia in the quarter is Greater China to/from Southeast Asia, which grew by 36% to 3.4 million TEU.

Conditions look set for the two-way trade between Greater China and Southeast Asia to continue to take a bigger slice of the container pie, even if the rapid growth rates settle down, according to Drewry. The IMF’s World Economic Outlook report, updated in April, predicts that the economies of China, Vietnam, Malaysia and Indonesia will all consistently see GDP growth in the region of 6% per annum over the next five years.

Surely, with such incredible demand growth Intra-Asia carriers are seeing the financial rewards? Not so, according to Drewry’s Intra-Asia Freight Rate index.

Average Intra-Asia spot rates are just starting to show the faintest of upwards inflection, but for about 18 months have stubbornly refused to shift much above USD 750 per 40ft container, Drewry said. At the same time, Intra-Asia specialist carriers Wan Hai and Regional Container Lines both reported operating losses for the first quarter of 2017. For Wan Hai, which previously was outperforming its more global rivals in the operating margin stakes, this was only the third quarterly operating loss in five years.

The weakness in Intra-Asia spot rates and disappointing carrier results do not necessarily debunk the demand high-growth story, but they could merely reflect that as volumes have risen, so too have the number and size of container ships being deployed within the trade, leaving the supply-demand balance as it was, Drewry said.

There is strong evidence that ships have followed the demand with Drewry’s research counting at least eight new Intra-Asia services being launched so far this year with newcomer SM Line at the forefront, while the shrinking idle fleet and resurgence of the charter market is also a sign of renewed demand for ships within Asia.

The close proximity, fast-growing economies and manufacturing bases makes the outlook for container volumes within Asia far rosier than it is to some other regions, some of which are sending mixed-signals about their commitment to trade, Drewry said.