Suddenly, everyone’s talking growth. And the way it’s being talked about is with surprise and shock, as if it wasn’t really expected. I guess so many had been lulled into the world of sub-par performance that the upshift took them unawares. At the same time this reboot has many spooked – analysts openly wonder whether we can actually handle all the growth. How is the global shipping industry coping?
A look at the global shipping industry
This industry dealt with the same question back in 2004. An upshift in growth that followed an already-long global expansion taxed the shipping industry to its limits. Ports couldn’t handle all the traffic, and at the same time vessel capacity was so tight that lease rates skyrocketed. The problem was most acute in the US, but the effects were felt universally. Crisis provoked action on a number of fronts, and by the time the recession set in, global shipping was swamped with surplus capacity.
It has taken a long time to get upright, but today, global shipping is definitely full steam ahead. By a number of different measures, 2017 was the best year since the Great Recession and the false start to the new cycle in 2010. Growth in container shipping was the best by far in the past six years, rising by an estimated 6.4 per cent. That’s an impressive upshift; during the past five years, annual growth has averaged just 2.3 per cent.
What’s driving globally shipping growth?
What’s driving the increase? Bellwether ports were up sharply last year. Singapore has seen the number of vessel arrivals surge ahead in the past two years, with activity maintaining a very strong clip through the end of 2017. No single category is driving this growth; it seems well spread across general and bulk cargo, oil and non-oil, and also containers.
China’s performance is also an eye-catcher. After five years of meandering, 2017 saw cargo shipments in Shanghai post a decisive 9.1 per cent increase. Container throughput in the port saw a similar 8.4 per cent surge, far and away the best showing for the port since 2011. This suggests not only that global growth is making its way to China’s shores, but that some of the Middle Kingdom’s vast supply surpluses are being soaked up.
US shipping ports are surging
These and other globally-connected ports would not be reviving without a corresponding shift in developed-market activity. Look no further than US shipping. The largest ports are surging: Los Angeles posted a second year of strong growth, carrying a solid trend into 2018. Its twin port at Long Beach has struggled to get back to previous peak, but a sharp up-trend since late 2016 pushed it over that marker last year with momentum that bodes well for 2018 performance. On the Atlantic coast, the important New York/New Jersey port last year posted its fastest growth since 2010, and the trend heading into this year is very strong.
The lag in European data makes it hard to determine what is happening in that continent’s key ports. However, the upsurge in growth currently underway in the Euro Area together with activity in other major ports hints strongly that Europe is in the game.
Can the shipping industry handle the growth?
Does this mean we are running pell-mell back into a 2004 situation? A careless glance at recent data could actually incite panic. The Baltic Dry Index of bulk carrier rates rose by what looks like a stunning 70 per cent last year. The growth is arresting, but the level of the index is anything but: its running at about one-half of its immediate post-recession level, and is just a shadow of the peak levels reached in 2004 and the 2007-08 period.
Concurrently, the Harpex index of container ship prices says virtually the same: recent prices have more than doubled, but apart from the price collapse of 2015, today’s rates are among the lowest in the past decade. Together, these shipping prices suggest that the vast capacity additions that cascaded into the market just as the Great Recession began are more than accommodating current growth. And judging by current shipping capacity, this is one piece of the logistics chain that we won’t have to worry about for a good few years.
The bottom line?
World shipping statistics Are a great illustration of the pickup in the global economy. Cynics who believe that the world is running on empty need to have a second look at the vast spare capacity in this industry, and guess again about the world’s ability to sustain nascent strong performance.
