Of Covid-19 and container ships

A fascinating – albeit sobering – report from industry analysts Drewry has come across my desk that sets out the prospects for container port investment for the next five years.

The latest Global Container Terminal Operators Annual Review and Forecast report sets out an average annual rate of 2.1% over the next five years, equating to an additional 25M TEU a year. This is well below the capacity growth seen over the past decade, when the average annual increase was more than 40M TEU a year.

Port throughput is projected to grow at an average annual rate of 3.5% over this period from 801M TEU in 2019 to reach 951M TEU by 2024. But risks remain to this outlook should a resurgence in Covid-19 cases cause further widespread economic lockdowns over the forecast period.

Drewry senior analyst for ports and terminals and author of the report Eleanor Hadland says that major expansion projects and greenfield projects that are already under construction and due for commissioning in 2020 and 2021 may face minor delays due to interruptions to global supply chains seen in the first of the year. However, suspension or cancellation is expected for projects at an earlier stage of planning, particularly where construction contracts and equipment orders have not yet been tendered.

The downturn may provide a spur for investment in terminal automation. Currently more than three quarters of automated terminals are operated by global and international operators, and of the 22 automated terminal projects currently planned (including both greenfield and brownfield), more than 80% will be delivered by this group of leading operators.

However, it is not all bad news. Using a newly developed metric, VesselsValue has spotted signs of stability in container ship demand that could herald better days ahead. It noted that on a weekly journey basis – measuring weekly count of container ship journeys starting and ending in countries and regions of interest (ie China and partners) versus the usual TEU-mile demand – shows that over the last few months, demand stabilised in May and began rising significantly in June. In mid-June, demand surpassed January 2020 levels, which is taken as a positive sign for future values and earnings across the whole container ship sector.

Drilling down through the weekly journey data shows that demand for container ship voyages out of China is rising. Journey levels spiked considerably in mid-June, exceeding figures seen pre Covid-19 in early January. This is a very positive sign and suggests demand for Chinese exports is rising again, as countries begin to ease lockdown.

More remarkable has been the way that US-bound container ships leaving Chinese ports have picked up to reach levels seen at the start of the year. This was reinforced by Alphaliner, which noted that July 2020, transpacific trade levels have returned to 2019 levels.

However just before we start believing we have seen the worst, news reports are examining whether four new cases of Covid-19 entered New Zealand via a cooled shipping container.

Covid-19 is set to dominate the agenda for some time to come.