RLL Container Report - 12 February 2014
From: John Keir, Ross Learmont Ltd
Date: 12 February 2014
Don't lose your confidence if you slip
Be grateful for a pleasant trip
And pick yourself up, dust yourself off
And start all over again
"Pick yourself up" by Kern and Jerome
Recent data point to an upturn in the global economy as industrial output starts to gain traction in the major economies. The International Monetary Fund forecasts higher growth in the USA, UK and parts of the EU. This, in turn, will result in higher container imports as consumption once again rises. The car industry has already reported clear signs of an upturn with annual car sales in America registering a 7.6 percent rise for a year-end total of 15.6 million vehicles. Further evidence of an upturn came from the two largest ports on the US West Coast, where Long Beach notched up an impressive 11.3% increase in container throughput for 2013. Long Beach’s total of 6.73 million was bettered by local rival, Los Angeles with 7.87 million and an eleven percent increase in box traffic in December.
In December, a survey of the top 60 container ports in the world pointed to a significant rise in box traffic. Further confirmation came from the Association of American Railroads (AAR), which reported that intermodal traffic in the past twelve months had reached a new record as 12.8 million containers and trailers were carried on the rail network. This amounts to an extra 564,276 units, or 4.6 percent more than in the previous year. Intermodal volumes for 2013 were in fact the highest ever recorded beating the previous record set in 2006. These and other indicators point to a steadily improving economic situation, which is expected to continue throughout 2014.
The improvement in intermodal traffic is already attracting investment to the sector. Intermodal operator, XPO Logistics purchased Pacer International for USD 335 million. The deal gives XPO access to 16,000 containers, which will be employed to shift cargo flows in North America from road to rail. It is estimated that this modal shift to containers will reduce transport costs by 15 to 20%.
By contrast, China's economy, the world's second largest, grew at its slowest pace in 14 years in 2013. Its gross domestic product expanded 7.7% from a year ago, the slowest pace of growth since 1999. China has taken various steps to try and open up new avenues of growth: this includes opening up a free trade zone in Shanghai.
In anticipation of an upturn in global carryings, several lines have been placing orders for newbuildings at Hyundai Heavy Industries in Korea. Dynamar reported that China Shipping has announced that their containerships would have a theoretical capacity of 19,000 teu, thus claiming the crown as the biggest ships on the seven seas. This move to larger box vessels will have an impact on the reefer market as more and more temperature-controlled cargoes are containerised and loaded on board the 19,000-teu behemoths.
The second, and equally important, trend in the container industry will be the switch from oil to Liquefied Natural Gas (LNG) to fuel the box giants. Both of these trends will keep the cost-per-teu low and further encourage the containerisation of temperature-controlled and of bulk cargoes. In common with other major railway systems, Russian railways are trialling locomotives fuelled by LNG.
It would appear that the Russian Far East has also been gripped by this new-found confidence in the container market. Global Ports announced plans to increase capacity at Vostochny by an additional 100,000 to 650,000 teu per annum. Also, Global ports will purchase 76 rail platforms to enhance the terminal’s range of block train services. At the same time, a new Dry Port is to be built by Akva-Resursy at Artem, north of Vladivostok and close to the airport. Costing USD 18 million, the rail-connected container facility will cover an area of 3,000 square metres and will have a projected throughput of 3 million tons per annum.
RZD gave further reason to be cheerful as it reported a 14.6% rise in container traffic in the year just ending, resulting in a total throughput, including empty containers, of over 3 million teu. The greatest growth was experienced in international trade with imports up by 10% and exports by 7%. By contrast, internal box traffic rose by only 1 percent. Transcontainer noted that ever increasing volumes of containerised cargoes are going straight to Nizhny Novgorod, Samara, Ekaterinburg and Novosibirsk without having first to pass through terminals in Moscow, thus saving both time and terminal costs. To underline this shift to inter-regional transport, Transcontainer launched another block train service from Novosibirsk to Vladivostok. The train, comprising 71 platforms, departed Novosibirsk on the 14th of December and arrived in the Far East port seven days later.
John Keir Ross Learmont Ltd
12 February 2014
Copyright © 2014 John Keir