Drewry Warns of Weaker Container Recovery

The severe backlog of container shipments delayed by the lack of vessel space is hiding the fact that peak season demand may be less than forecast, according to Drewry Shipping Consultants’ latest Container Forecaster.

Despite this concern, Drewry increased its global demand growth projection for 2010 to 8.5 percent. But in doing so, it warned that there are dangers lurking that could derail this projection.

“There is every possibility that utilization factors will decline, which in turn will have a knock-on effect on freight rates,” said Neil Dekker, editor of the quarterly Container Forecaster.

“By no means do we see a precipitous fall, but there will be an impact,” he said.

The danger of a weaker recovery has been concealed by the fact that ocean carriers believe they have entered a real recovery phase.

The symptoms of a healthy recovery include head haul volume on the east-west trades significantly higher than last year, successful freight rate increases and the return of laid-up capacity. Space is still tight as the industry moves into the peak season.

But Dekker warns in the Forecaster that the backlog of shipments is disguising the strength of the true recovery in demand. This coupled with a lack of available box equipment in Asia is giving the industry what he calls an additional artificial boost in the short-term.

Drewry said demand growth will weaken as the year develops and given the economic uncertainty in Europe, there is the possibility that the overall market will be negatively affected.

-- Contact Peter T. Leach at pleach@joc.com.