There are fluctuations in the global container shipping charter market, but the underlying trend is for growing demand for most vessel sizes according to Martin Rowe, Managing Director of Clarksons Platou Hong Kong.

“While macro fundamentals are still strong in the container sector, this is not reflected in the shows of confidence by operators who have been eager to fix charter vessel tonnage at present rates.

“In the ‘old Panamax’ sector, vessel demand appears to be exceeding supply, at least in the short term, causing some hesitancy in places. In the larger sizes, the availability of vessels of around 8500 TEU has eroded over the last few weeks, although pressure remains on the 6000 TEU sector,” he said.

Against this background, container throughput at the three key Asian ports (Shanghai, Singapore and Hong Kong) increased 2% year-on-year to stand at 8.3m TEU in July 2018. Furthermore, during January-July, total container throughput at these ports grew by 5% year-on-year to reach 56.6m TEU, according to Rowe.

From a global perspective, the first half of 2018 saw further improvements in containership earnings following the gains seenin 2017. Box freight rates, however, have been volatile and failed to meet initial expectations, which together with increased fuel prices, has put liner company financial results under distinct pressure.

“In particular, the latter part of the first quarter saw an easing in freight rate levels, most notably on the main lane East-West trades, though the second quarter generally saw a return to an upward trend and some of the lost ground recovered.”

Globally freight rate levels remain materially above the lows of 2016. Across the first half of 2018, the SCFI (Shanghai Containerized Freight Index) composite index averaged 6% down on the 2017 average but up by 19% on 2016 average levels, according to a summary of the container sector in Clarksons Platou Interim Results report released to the London Stock Exchange recently.

The report outlined that although there has been some variation across ship sizes, the charter market saw further steady upward movement in the first half of the year.

Demand-side conditions appear to remain reasonably robust, with global trade volumes projected to expand by over 5% in the full year to 203m TEU following growth of around 6% in 2017. The rate of expansion on trades involving developing economies is currently very strong, though growth on the main lane East-West trades appear to be more moderate.

Trade tariff escalation between the US and China is cited as the main risk to growth in the container shipping sector, but the impact of tariffs currently in force or proposed is estimated to be relatively limited, and global volume expansion is expected to remain healthy. Containership fleet capacity growth remains manageable, despite a substantial delivery of ‘mega-ships’ in the first half of 2018, with expansion of around 4% seen in 2017, and approximately 5% growth expected this year.

Surplus capacity in the sector remains much reduced, with less than 1% of fleet capacity standing idle at the end of the first half of 2018 compared to 7% at the start of 2017.

The box ship sale and purchase market remain active, having reached a record level in 2017, and consolidation of the sector remains ongoing with new joint operation activity involving the major Japanese operators underway from the start of the second quarter.

Liner companies still face capacity management and fuel cost challenges, and risks remain on the demand side, but as a whole, the mid-term future is likely to be characterised by positive fundamentals which could well support further market improvements.