SeaIntel Maritime Analysis, a Copenhagen-based consultancy set up at the beginning of February, expects inventory replenishment to have a far greater impact on ocean transport demand than most analysts are anticipating.
Eastbound growth across the Pacific could be as high as 15%-20% year-on-year in some months during 2011, creating bottlenecks for US importers similar in impact to those they encountered early last year when, at times, there were neither enough ships nor container equipment to meet requirements.
Concern in some quarters that there could soon be an oversupply of tonnage as ships are cascaded from the Asia-Europe trades, where much bigger vessels are now entering service, is misplaced, claims SeaIntel chief executive Lars Jensen. “In my opinion, everybody is being too pessimistic when looking at the demand situation on the Pacific,” said Mr Jensen, a former director of market intelligence and analysis for Maersk Line and Maersk Logistics , and more recently marketing and IT director for The Containership Co, which entered the transpacific trades last year.
Whereas most forecasts put eastbound growth in container traffic across the Pacific this year in the 6%-8% range, SeaIntel thinks the figures could be higher at between 10% and 13% overall, but with some sharp spikes that have the potential to cause disruption both at the ports and to inland deliveries.
When looking at some of the forecasts for the transpacific trades, Mr Jensen believes there is a “huge piece of the story missing”. The variation in projections reflects the fact that most have not taken full account of US retailers’ inventory levels that are “too small for comfort”, he said.
Inventory swings are huge drivers in demand, as witnessed in 2001 and 2002 when an inventory-led recession that brought the container trades close to collapse was followed by a huge surge in volumes as retailers rapidly replenished their stocks.
Growth in eastbound volumes fell to just 2% in 2001 before surging to 20% a year later, with a corresponding advance in freight and charter rates.
A similar development could happen this year, with evidence suggesting that inventory levels are again very depleted and that retailers may have to act fast to rebuild them. That would push up freight rates in a way that would have consequences for both shippers and ocean carriers. But exactly when US retailers are likely to make their move is unclear, acknowledges Mr Jensen, who has drawn up two scenarios.
In the first case, retailers may decide to restore their inventory-to-sales ratio to a sustainable level over the next three months in order to take advantage of today’s low freight rates and try to beat what could be a ship capacity crunch later in the year. Should that happen, containerised volumes could soar by as much as 21% in March and 16% in April.
Alternatively, because of a current a standoff between US buyers and their suppliers in China over prices, inventory replenishment could occur later in the year, during the usual peak season when Christmas merchandise is shipped from Asia to North America. That would indicate year-on-year growth of around 8% in the first half of 2010, then peaking at 15% in August before settling back at 11% in November.
Either way, inventory rebuilding has the potential to happen very quickly, said SeaIntel, “and can easily result in temporary, unexpected spikes in vessel as well as equipment utilisation”. The challenge “is trying to figure out when this is going to happen”, said Mr Jensen. “It’s all a matter of timing.”
Source: Lloyd's List