With container volumes still way down from last year and coinciding with a glut in new capacity, good news is scarce in container shipping these days. But that is not stopping, and should not stop, providers in this sector from looking out at the horizon to determine where growth may be found in coming years.
In a speech to Containerization International’s annual liner shipping conference in London, the chief commercial officer of APM Terminals, the terminal operating business of A.P. Moller-Maersk, offered an important insight.
Dick Mitchell said, “Reduced revenue and reduced profits are no surprise in a market projected to shrink for the first time since containerization began four decades ago. But he added (italics added), “The reductions are not uniform, however, as consumption in developed nations wanes while emerging markets are still growing as trade and the containerization of previously break-bulk cargoes continues.”
This is an important point for container carriers, 3PLs and terminal operators like APM. As developing countries grow, their container growth rates are high even if volumes are small, due to the low base. But just as importantly, when economies emerge they experience a growing demand for imported consumer growth. What happens is that the percent of their trade shipped in containers grows while breakbulk as an overall share of trade declines, even if volumes are still growing. In other words, the conversion from traditional breakbulk to containers will provide an extra burst of growth in emerging economies on top of baseline organic growth.
Mitchell was speaking from the point of view of a terminal operator but his analysis would apply equally to carriers or 3PLs. “Things are not quite so bad among the developing economies, which can have a positive impact on terminal operators with portfolios well represented in those areas.”
“According to a recent report from Maritime Strategies International, the share of global container volumes from the emerging regions of the Indian Subcontinent and Southeast Asia, Latin America and the Middle East will rise by 8.7 percent this year, and by another 10.3 percent in 2010. This is a positive for the terminal operating industry, as it indicates potential growth areas but does not help our liner customers faced with major volume declines in the east-west trades.”
He is pointing out that growth prior to and during the recession is higher in the developing world. This is true. The IMF said in its latest outlook issued on Jan. 28th that global growth will fall 0.5 percent percent this year, the worst performance since World War II, but that the industrialized world will see growth slip 2 percent, meaning that without the developing world, global growth would be substantially worse. This is good guidance for those thinking about the future.