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Q1 Asia-M East box volumes soar but overcapacity blights rate recovery

CONTAINER shipping demand in the Middle East in the first quarter of the year surged by 26 per cent, according to Drewry Shipping Consultants

Q1 Asia-M East box volumes soar but overcapacity blights rate recovery
07 June 2018 - 19:06
CONTAINER shipping demand in the Middle East in the first quarter of the year surged by 26 per cent, according to Drewry Shipping Consultants. However, chronic overcapacity may keep a lid on a freight rate hike.

'After a long period of stagnation, the Asia to Middle East container trade went into overdrive in the past few months,' Drewry said, noting that it was the fastest quarterly growth in five years, reported Seatrade Maritime News, Colchester, UK.



Among market segments, Saudi Arabia, the second largest Middle East importer of Asian containerised goods, increased its first quarter inbound volume by 26 per cent, or 52,000 TEU, to 227,000 TEU.



Top importer UAE boosted import volumes from Asia by eight per cent to 275,000 TEU, while several other countries notched up double-digit growth in the first quarter. Among these were Iraq (24 per cent), Iran (28 per cent), Oman (44 per cent), Kuwait (31 per cent), Egypt (65 per cent), Jordan (24 per cent), and Bahrain (16 per cent).



At opposite ends of the spectrum were boycott-plagued Qatar which saw Asian imports triple to 62,000 TEU, while traffic in war-torn Yemen declined by 21 per cent to 8,700 TEU.



Turning its attention to South Asia, Drewry said: 'Trade from Asia to South Asia has for the most part been much brisker than to the Middle East over the past three years, although a relatively poor showing in the second half of last year reversed the trend.'



It noted that while westbound container traffic to South Asia lagged behind the soaring Middle East for the third consecutive quarter in 1Q18, growth was still healthy, with Container Trades Statistics (CTS) data showing that first quarter volume from Asia to South Asia rose by nine per cent year on year to reach 1.15 million TEU.



One of the rising hubs in the region, Sri Lanka, is now the world's second fastest growing port in terms of volumes, which in the first quarter increased by 16.2 per cent to 1.7 million TEU.



'However, the resurgence in South Asia container handling may be short-lived as stevedores across 12 major Indian ports are planning to go on an indefinite strike at the end of this month in a dispute over wages, pensions and working conditions,' Drewry noted.



While the surging trade may be good for the ports, it has had a detrimental effect on the lines. 'Robust demand from Asia to South Asia and the Middle East has seemingly encouraged carriers to add more capacity to both trades, despite the fact that both were already over supplied and struggling with ever-decreasing freight rates,' Drewry said.



Greater demand helped to lift the average westbound Asia-Middle East ship utilisation by five points in 1Q18, but it was still floundering at 65 per cent for the period. Similarly, headhaul utilisation to South Asia only managed a small rise in the first quarter to average 68 per cent.



The weak utilisation levels are reflected in the downwards trend for spot rates. Data from Drewry's Container Freight Rate Insight indicates that Shanghai to Jebel Ali 40-foot container spot rates enjoyed a mini-revival in early 2018 on the back of renewed demand growth, but prices have since fallen to US$770 per FEU as of April, a decrease of 62 per cent against the same month last year.



Freight rates to India have also struggled, although the year-on-year slide is less severe. Shanghai to Nhava Sheva FEU spot rates fell to an 18-month low in April of $730 per FEU, down by 27 per cent year on year,' Drewry said.

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