Pummeled by Lousy Global Demand, Rampant Overcapacity, China Containerized Freight Index Collapse...

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Pummeled by Lousy Global Demand and Rampant Overcapacity, China Containerized Freight Index Collapses to Worst Level Ever
by Wolf Richter • October 19, 2015


Growth of exports from China has been dropping relentlessly, for years. Now this “growth” has actually turned negative. In September, exports were down 3.7% from a year earlier, the “inevitable fallout from China’s unsustainable and poorly executed credit splurge,” as Thomson Reuters’ Alpha Now puts it. Most of these exports are manufactured goods that are shipped by container to the rest of the world.

And imports into China – a mix of bulk and containerized freight – have been plunging: down 20.4% in September from a year earlier, after at a 13.8% drop in August.

That kind of decline in shipping volume comes as a nasty surprise for the shipping industry that has been betting on boundless increases, and has been adding capacity in quantum leaps.

Back in early 2011, when Maersk, the world’s largest container carrier, ordered 10 ultra-large container ships capable of carrying 18,000 twenty-foot-equivalent container units (TEU), it expected demand for containers to grow by 5% to 8% every year. Maersk has since been whittling down its forecast to 2% to 4% annually. And as things stand, that may be a stretch. Yet…

“The scramble to order so-called ultra-large container vessels had turned into a stampede,” as 36 ships rated at 18,000 to 20,000 TEU are expected to be delivered in 2015, 12 in 2016, 22 in 2017, and 22 in 2018, the JOC reported. By 2018, nine carriers will operate ships of this size. Overcapacity is expected to hit 10% by 2016, the worst since the Financial Crisis – and maybe worse. ..................(more)

http://wolfstreet.com/2015/10/19/global-demand-rampant-overcapacity-china-containerized-freight-index-ccfi-collapses-worst-level-ever/