China economy bottoming out, but supply and demand gap too big for early recovery, says China Shippe

AS world trade forecasts continue to spiral downward, there is little optimism for an early recovery in the shipping industry, said Mr Wang Shouren, deputy director of the China Shippers Association. 

Speaking to delegates at the TOC Asia conference in Shenzhen, Mr Shouren said it is not all bad news, however, as some researchers are predicting that the slump in China’s economy is now bottoming out, and the forecast for GDP growth in 2009 is between 8-9 per cent similar to that of 2008 (which preliminary accounting figures suggest was 9 per cent).

However, these forecasters are becoming more of a minority, as the IMF has again revised down its growth forecast from 7.5 to 6.5 per cent this year…

Mr Shouren did acknowledge that the seemingly inexorable speed of China’s foreign trade growth will slow considerably in 2009. In 2008 the gross value of China’s exports was US$ 2.56163 trillion, an increase of 17.5 per cent on 2007. Of this total, exports accounted for US$ 1.42855 trillion, up 17.2 per cent on 2007, and imports were US$1.13308 trillion, up 18.5 per cent on 2007. The projected growth for foreign trade is more in line with the GDP growth expectation.

Despite some growth in the trade from China in 2009, the container shipping industry still has to contend with what in recent years has become its Achilles' heel – an ever increasing imbalance between supply and demand.

Citing Clarkson’s end of year report in 2008, the deputy director said that global container traffic last year increased 6.1 per cent whereas containership capacity increased by 11 per cent. This growth rate gap of 4.9 per cent in 2008 will at least increase to 7.8 per cent in 2009, as the increase in global container traffic is predicted to be only 5.3 per cent while capacity will increase disproportionately by 13.1 per cent.

Mr Shouren said even if the predicted increases in demand in 2010 of 7 per cent materialise, it will be insufficient to offset the huge number of new builds expected to come into service over the remaining months of this year and in 2010.

The outlook for the Asia – Europe container shipping market trade remains bleak in 2009. According to Mr Shouren, the problems in this market were exacerbated by the liners’ actions in early 2008.

Responding to predictions of a surge in demand many ships were withdrawn from North-American routes and shifted to Asia-Europe. When the expected surge failed to materialise the ship-owners took evasive action and adjusted the layout of the routes and introduced slow steaming. However, these measures proved insufficient to counter the over-supply problem.

Source: Schednet