Middle East props up underperforming sea freight sector
The container shipping trade saw the strongest growth in the Indian subcontinent and Middle East regions at 5.1%, amid what looks to be a challenging year for shipping lines.
According to a report by The Boston Consulting Group (BCG), the strongest growth rate for 2014-2015 in the region was led by Saudi Arabia and the UAE, with that trend continuing this year.
However, the global climate with respect to container trade still dictates that container liners must adopt new strategies for enhancing their performance in what BCG calls the ‘new normal’ of slowing container demand.
The report titled Sailing in Strong Winds: The New Normal in Global Trade and Container Shipping, by The Boston Consulting Group (BCG) reveals that growth rates witnessed in the region was led by Saudi Arabia and the UAE who contributed 28% and 22% respectively in a total year-on-year increase in imports, mainly driven by chemical products.
The same growth figures were not evident on the global scale. Demand for containers picked up during 2014, but by the end of 2015, average global growth in the container-shipping trade was a disappointing 1.9%.
In a bid to boost scale and reduce slot costs, liners continued to invest in new and larger vessels. This worsened the overcapacity that was already afflicting the market and pulled freight rates down to a new low.
Giovanni Moscatelli, a Principal and lead for the Transport and Logistics practice at BCG, Middle East noted that “the growth of demand for container, lagged behind global gross domestic product for the first time in 2015.”
To identify potential culprits behind the disappointing news for 2015, the report analyzed the performance (including import and export volumes) of six major trade routes, or trades, that collectively represent more than 80% of the total world container trade.
The trades are: Asia-Europe, Transpacific, Intra-Asia (including Intra-China), Indian subcontinent and Middle East, Latin America, and Africa. Several individual trade regions—particularly Asia-Europe (including Intra-Europe), Transpacific, and Indian subcontinent and Middle East—achieved impressive growth rates that year, even as Intra-Asia, historically a powerful growth engine, saw disappointing rates.
Performance varied depending on key drivers of demand in the different trades, such as industrial and consumer demand, as well as structural changes in economies such as China.