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Container: Distance Driven Demand

Wednesday, 01 February 2012 | 00:00
Global container trade drives demand for containerships. However, not all trade routes are equal; over time, trade growth on longer routes creates more demand for boxships than equal trade growth on shorter routes. As such, it is useful to examine demand in terms of teu-miles. This may also potentially give a better indication of the demand for certain vessel sizes. TEU-Mile Growth The Graph of the Month shows the year-on-year increase in global demand in terms of absolute teu-mile growth, split into the four major route categories. For example, global box trade grew by an estimated 56.4bn teu-miles in 2011 (7.6% growth, compared to 7.9% teu trade growth), 22% of this increase (12.3bn teu-miles) due to mainlane trade growth.
A Turning Point
Pre-2008 around 50% of the teu-mile growth per year was due to mainlane trade, while around a quarter (rising to 40% in 2007) was due to intra-regional/other (I-R) trade growth. Yet in teu terms, I-R trade contributed 50% of the trade growth between 2002 and 2007 while mainlane trade contributed around 33%.
However, since 2010, both mainlane and I-R trade have constituted a smaller proportion of global teu-mile growth. In the case of mainlane trade, this has been as a result of relatively weak volumes, while the short distances of I-R trade dampens the impact of trade growth. Meanwhile, in 2011, North-South (N-S) trade increased by an estimated 20.0bn teu-miles, 35% of global growth. Though non-mainlane East-West trade has seen similar growth to N-S trade since 2010, the fastest growing non-mainlane E-W routes, Far East to M. East/ISC, are also the shortest of these routes.
Balanced Gains
The average size of vessels deployed on different trade routes can differ substantially. As such, the graph provides a useful insight into ship-size demand. In 2011, I-R trade (90% of I-R capacity is provided by sub-3k teu ships) was responsible for 45% of global trade growth. However, this does not necessarily translate into such huge demand for sub-3k teu ships, as just 25% of teu-mile growth was I-R trade. Meanwhile, 15% of global teu trade growth and 22% of teu-mile growth in 2011 was due to mainlane trade. Despite the length of these trades, such growth might still struggle to justify the 73% of the orderbook which is 8k+ teu ships.
Pre-2008, demand expansion for mid-sized ships was lower than demand for the very biggest and smallest ships due to the distribution of teu-mile growth. Fortunately for the overall market balance, since 2010, teu-mile growth on N-S trades (over 50% of capacity on N-S trades is provided by 3-8k teu ships) has exceeded that on mainlane and I-R trades, providing a stepping stone for cascading - the re-deployment of small and medium sized vessels onto lower volume trades. As such, N-S teu-mile growth has clearly been instrumental in enabling a lot of the supply re-distribution since 2009.
Source: Clarksons
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