Container lines are looking at the possibility that the gap between supply and demand globally will widen in 2014, likely exacerbating rate volatility and challenging carriers to be profitable.
Alphaliner forecasts a 3 percentage point gap in 2014, resulting from projected supply growth of 7.6 percent and demand growth of 4.6 percent. This compares to a likely 2.6 percentage point gap in 2013, according to Citi Research, resulting from anticipated 6.1 percent supply growth and 3.5 percent demand growth. Such forecasts are subject to change as the year goes on; for example, in past years a worsening climate for carriers led to pushing out ship deliveries or delaying construction, meaning that actual capacity increases were less than originally forecast.
In other words, improving container volumes on East-West trades stemming from a steadily recovering U.S. economy and a more stable European economy — already reflected in higher trans-Pacific and Asia-Europe volumes in the second half of 2013 — will be offset by a deluge in capacity growth in the new year.
Illustrating the accelerating growth trends, Clarksons forecasts trans-Pacific growth in 2014 at 5.1 percent, up from an estimated 3.4 percent growth in 2013. In Asia-Europe, the UK shipbroker forecasts 5.7 percent growth this year, up from 5 percent in 2013.
But the container lines will unlikely profit from this, at least in terms of seeing a more favorable supply-demand imbalance. “Though demand will improve, supply will likely continue to outpace demand growth,” Citi Research said in a Jan. 2 report.
The likelihood of global overcapacity continuing into 2014 will result in carriers deepening their push to cut costs, whether by expanding alliances so as to maximize utilization of the largest and most cost-effective ships, by taking measures to make ships more fuel efficient or by reducing ships’ time in port so as to maximize opportunities for slow steaming. The overcapacity may not end in 2014, as Alphaliner is forecasting 7.4 percent supply growth in 2015 against a 5 percent demand growth — a 2.4 percentage point gap.