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Outlook for container shipping is gloomy as demand softens, capacity expands

CONTAINER shipping's growth prospects are being impeded by a slowdown in world economic growth and in global manufacturing at a time when ship sizes continue to bloat

Outlook for container shipping is gloomy as demand softens, capacity expands

CONTAINER shipping's growth prospects are being impeded by a slowdown in world economic growth and in global manufacturing at a time when ship sizes continue to bloat

23 September 2019 - 19:00

CONTAINER shipping's growth prospects are being impeded by a slowdown in world economic growth and in global manufacturing at a time when ship sizes continue to bloat.

'Global economic growth continues to slow with recession warnings sounding in many corners of the world, none of which points to high global trade volume growth for the time being,' said a report by shipping association Bimco.



It noted that the global manufacturing PMI (purchasing manager's index) has been below the 50-benchmark level since May, a level that indicates contraction, reported London's Loadstar.



In addition to the slower-than-expected growth scenario, the International Monetary Fund (IMF) has taken into account the rise in trade tensions worldwide to revise its global growth forecast for 2019 downwards to 3.2 per cent.



Furthermore, the latest appraisal of the container market by Bimco's chief shipping analyst Peter Sand suggested that the already weak outlook for the ocean liner industry will be further aggravated by the failure of shipping lines to recover the extra costs linked to the International Maritime Organization's 0.5 per cent sulphur cap on maritime fuel, which goes into effect on January 1, 2020.



'Adding to the worsening of the fundamental balance, the added fuel costs due to the 2020 sulphur cap, paints a disturbing picture for the rest of 2019 and 2020 for container shipping,' said Mr Sand.



He continued: 'As we have also noted in the dry bulk analysis, the oversupply of capacity is likely to make it difficult for shipowners to recover the additional fuel costs.'



Container lines have started to roll out their low sulphur fuel surcharges to offset the extra cost of the compliant fuels which they will start bunkering in December.



The analyst predicted very low to 'stagnant' growth for global trades this year and next, compared to a fleet growth of 3.5 per cent for this year and a forecast 3.2 per cent growth in container capacity in 2020.



There is no respite on the demolition side with scrapping only on target for 200,000 TEU of deletions this year, versus BIMCO's expectation of 967,000 TEU of newbuild deliveries for 2019.



'Cutting costs will remain in focus to be able to weather the storm,' added Mr Sand.


WORLD SHIPPING

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