The latest Container Shipping Forecaster from Maritime Strategies International (MSI) makes a more optimistic forecast on the demand side.
Though its supply-side predictions are broadly aligned with those of Drewry and Alphaliner, MSI's trade growth estimates for 2016 are more than double those of the others.
Much of this positivity rests on an interpretation of the dynamics of trade volumes on the Asia-Europe route, with MSI ascribing much of the weakness in 2015 to short-term currency and inventory effects and 2016 seeing a reversion to fundamentals-driven growth.
The market gyrations around Lunar New Year mean that the sector will have to wait another month before it becomes clearer which of the analysts’ competing views better fits the live trade data.
In the meantime, no one should mistake the container freight or charter markets as happy places, says MSI Senior Analyst James Frew.
“The inevitable seasonal weakness in Q1 has meant that earnings remain on the floor in both the freight and charter markets. Freight rates across the board are extremely subdued, with the Asia-Europe spot freight markets falling throughout February to reach new record lows in March," he said.
James added: "We anticipate that strong scrapping volumes will increase further in the remainder of the year, but this will be more than offset by an uptick in delivery volumes as cash-strapped yards are unable to push out final delivery much further.”
While spot freight rates on the main routes remain at lossmaking levels, with non-mainlane trades looking equally weak, in the near term MSI expects that on these trades liner companies will mount increasingly determined efforts to boost freight rates, particularly in the light of the upcoming contract negotiations.
Helped by improved fundamentals, with stronger trade growth driving increased vessel utilisation, liner companies will be less reliant on GRIs to artificially boost freight rates and the stronger lines will look to consolidate their positions through increased market share. This will in turn present some downwards pressure on box earnings, but not before it has boosted vessel demand and injected some upwards momentum into the charter market.
The charter market at present remains in the doldrums and for many market participants it is unclear where the uplift will come from in the short term. Nonetheless, MSI is relatively positive regarding the outlook for 2016, with trade growth and scrapping being the key drivers of this optimistic tone.
