The growth of global container turnover in 2018 was estimated at 4.6% (yoy), thus seaborne container traffic reached the level of about 154.8 million 20-foot equivalent units (TEUs). The internal Asian (41.6 m TEU), Trans-Pacific (18.7 million TEU) and Trans-Atlantic (12.8 million TEU) trade routes should be considered as the main areas of container traffic activity worldwide. The growth of the container trade, facilitated by maritime shipping, improved the turnover of ports by up to about 790 million TEUs (+4.7%) in 2018. Regarding future demand, BIMCO expects a softening of the growth rate down to 4% in 2019. So, the level of 800 million TEU will be achieved next year; however, this projection is very uncertain due to US-China tariff wars, Brexit and other relevant factors.

The mid-term forecast prepared by Drewry shows the average global growth of container traffic to be just under 6% per annum, so container port throughput in a five-year period will grow by almost 240 million TEU. Thus, around 45 million of additional TEU capacity needs to be created each year. An investigation of development plans on a terminal-by-terminal basis presents a more conservative picture, with an increase of around 125 million TEU by 2022 (a growth rate of just over 2% per annum). The results of research completed by Brickstone Investment Managers Limited or CRISIL Research experts present outcomes which are slightly more coherent. In the first case, stronger global economic growth will demand the growth of the global container market at a rate of five per cent in 2019 and the next couple of years. CRISIL estimated a compound annual growth rate (CAGR) of 3-5 % in the five years through 2022.

Focusing attention on container terminal operators, the further concentration of their capacities is visible. Considering the top global terminal operators, the Chinese are clearly the leaders. China Merchant Port Holdings (109.1 million TEU in 2018), COSCO Shipping Ports (98.0 million TEU), Hutchison Ports (84.6 million TEU) and PSA International (81,0 million TEU) rule the global market. Similarly, DP World (71.4 million TEU) and APM Terminals (43,4 m TEU) can be considered as key market players. A lower level of turnover was noticed by other operators, like ICTSI (9.7 million TEU) or Yilport Holdings (6.41 million TEU). Further consolidation and cooperation between terminals and/or TCOs is predicted. The implementation of a joint operating agreement called the Hong Kong Seaport Alliance is an initiative of cooperation between Hong Kong International Terminals (HIT), Modern Terminals (MTL), COSCO-HIT Terminals (CHT) and Asia Container Terminals (ACT), aimed at combating the decline in container volumes.

Considering the global fleet of container vessels, a growth in capacity by 5.7% up to 22.3 million TEU was reached at the end of 2018. At the same time, the idle fleet (ships of over 500 TEU) swelled to 628,000 TEU, compared to only 416,000 TEU a year ago. The worldwide supply of container vessels would be estimated at 155 ships with a total transport capacity of ca. 1.25 million TEU in 2018, with more than 87% of new constructions boasting capacities in excess of 8,000 TEU. On the other hand, 65 container ships with a total capacity of around 106,000 TEU were scrapped in the same period. In 2019, the fleet capacity is expected to grow by 3.5%. The Mediterranean Shipping Company has the largest new building portfolio, with 20 orders with a total capacity of 334.6 thou. TEU planned to be launched in 2019. The list includes eight megamax (23,000 TEU) vessels. In addition to substantial new ship orders, the company is going to launch a ‘vessel jumboisation program’ this year. A fleet of 12 vessels (6 of them over 19,200 TEU) has also been ordered by COSCO Shipping (total capacity of 180.1 thou. TEU). Evergreen is in third place on the order list, with 10 vessels, including 6 G-class 20,388 TEU units.

In view of the main factors of influence on the global and European container market in the next years, two issues should be highlighted. The implementation of global IMO low-sulphur regulations (from 2020) may change the market structure. Initially, the regulation may cause chaos in the supply chain and increase the risk of higher rates. The utilisation of low-sulphur fuel or the implementation of scrubber techniques (e.g. MSC) increase the cost of maritime transport. The key market players have published schemes of bunker surcharges. As per the APL & CMA-CGM calculation, the additional cost to an annual fuel bill can reach USD 160 per TEU. Thus, the further extension of a slow steaming strategy would be expected. Subsequently, the laws could accelerate container line consolidation (mergers and acquisitions), thus market competitiveness will be further limited. This trend relates, however, mainly to minor shipping operators (incl. the short sea shipping sector). The consolidation strategy refers also to vertical integration, an example of which could be the acquisition of Unifeeder by DP World.

Looking at the European market, Brexit should be regarded as an important factor of container market development. According to PRB Associates, the total annualised inbound and outbound market capacity in the UK stands at 17.1 million units in 2018, comprising the ro-ro (11.6 million units), lo-lo (3.1 million units) and Channel Tunnel (2.3 million units) modes. It was also noticed that lo-lo capacity showed the most dynamic development, increasing by 23%, while ro-ro and Channel Tunnel capacity both increased by 1% last year. This significant increase in lo-lo capacity has had a similarly positive impact on the mode’s share of market capacity. The implementation of the Brexit strategy would potentially result in medium-term shocks that may cause a shift in the volume from ferry and tunnel connections to short sea container services. At the same time, British ports will become less attractive as hubs for Europe.

Technological development and implementation is the main factor regarded as the driver for long-term trends. It is expected that 5G technology will be applied more directly to day-to-day operations at major ports and terminals in 2019. For example, the Port of Hamburg has tested 5G technology in supporting engineers on site to monitor and optimize construction planning. The further development of sensor technology would be the next solution implemented in ports and terminals. Thanks to this, port equipment is able transmit data for more independent, automated and efficient operations. MOL has tested a container tracking management system which employs optical sensors to detect changes in condition, including whether the container is opened by an unauthorized party. The Internet of Vehicles (IoV) is another technology being tested in container ports. The Port of Valencia and MSC are working together to integrate a new truck solution from Traxens. The development of Port Centric Logistics is a trend not directly related to technology, however, it requires the relevant ICT solutions. In this respect, ports are investing in their wider processes and providing a conducive environment for the sorting of goods, before they even enter the wider chain. The rise in importance of Port Centric Logistics is chiefly down to the end-to-end demands of the modern day supply chain, where a one-day delivery strategy has become a standard expectation of customers.

Summarizing the above analysis, it may point to moderate increases in the global container market in the coming years, as well as high uncertainty regarding the changes resulting from upcoming events, including the implementation of the IMO low-sulphur regulation and Brexit. Undoubtedly, terminal operators and shipping lines will continue to look for savings and efficiency, both in the horizontal and vertical scope, where the use of economies of scale and scope, as well as cooperation have become attractive solutions. Technological innovations that enable the optimization of processes both on a global and regional scale will also be an important support for terminals and shipping operators.


Prof. Maciej Matczak
Gdynia Maritime University
Modal Concept

Source:

1) http://ernst-russ.de/en/news/schifffahrts-markt/berichte/ernst-russ-shipping-market-report-q4-2018.html
2) Calculation based on: Review of Maritime Transport 2018, UNCTAD 2018.
3) Ocean Freight Market Update, February 2019, DHL Global Freight Forwarding, 20.01.2019.
4) Calculation based on: https://data.worldbank.org/indicator/is.shp.good.tu
5) Drewry: Good News and Bad News for Container Ports in 2019, https://worldmaritimenews.com/archives/268050/drewry-good-news-
and-bad-news-for-container-ports-in-2019/
6) https://safety4sea.com/bimco-container-terminal-industry-will-remain-profitable-in-2019/
7) Global Container Market Predicted to Expand 5% in 2019, https://www.hellenicshippingnews.com/global-container-market-
predicted-to-expand-5-in-2019/
8) Containers to drive port traffic growth in the next 5 years, https://www.crisil.com/en/home/newsroom/press-releases/
2018/02/containers-to-drive-port-traffic-growth-in-the-next-5-years.html
9) Incl. Shanghai International Port Group
10) https://www.globalpsa.com/psa-group-achieves-81-million-teus-in-2018-2/
11) Terminal operator sees container volume growth despite trade uncertainty, http://www.ftwonline.co.za/article/189007/
Terminal-operator-sees-container-volume-growth-despite-trade-uncertainty
12) Calculation based on: APM Terminals, Fact Sheet, Q2 2018.
13) Terminal Investment Limited being the MSC terminal-operating arm with 36 terminals do not provide relevant data of
container turnover in 2018.
14) 10 container ports in Turkey, Sweden, Norway, Spain, Portugal, Ecuador, Peru, Malta
15) https://www.yilport.com/en/media/detail/YILPORT-HOLDING-DELIVERED-EXCEPTIONAL-BUSINESS-RESULTS-IN-2018/55/2023/0
16) Ocean Freight Market Update, February 2019, DHL Global Freight Forwarding, 20.01.2019.
17) https://lloydslist.maritimeintelligence.informa.com/LL1124052/DP-Worlds-acquisition-of-Unifeeder-is-no-play-for-global-
supply-chain-dominance
18) UK shortsea capacity grows ahead of Brexit, https://www.lloydsloadinglist.com/freight-directory/adviceandinsight/UK-
shortsea-capacity-grows-ahead-of-Brexit/73765.htm#.XLGZ1qTLi00
19) Insight: Four Trends to Watch in 2019, https://www.porttechnology.org/news/insight_four_trends_to_watch_in_20