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Bad omens in the US for container sector

Port of Long Beach Containers in the Port of Long beach
Economic indicators in the US provide little reassurance for the container market, according to a recent Bimco webinar.

Niels Rasmussen, Chief Shipping Analyst at Bimco noted a limited growth in the US economy and rising inflation, despite stimulus attempts by the Biden administration.

Imports into North America have run well above the usual level for the market growth trend, driven by lower spending on services during the pandemic and higher spending on goods.

“Those shifts are now normalizing somewhat, and based on these calculations, we are predicting that the market might drop 1-2% this year,” said Rasmussen, referring specifically to headhaul and regional import trades.

Retail sales in the US have plateaued, as they have in Europe, easing back from recent highs. The expectation is that container demand will be hit by high inventories across US retailers.

“Retail inventories in in the US have grown very, very fast since July 2020 in absolute terms, but really the speed of increase in inventory has really has picked up this year,” said Rasmussen. Both Walmart and Target have stated publicly that they are overstocked on certain goods and will need to run down stocks, he added.

“That also has a negative impact on forward volumes if there is a reduction in inventories with retailers and businesses in general,” said Rasmussen.

On the spending side, Bimco noted a recovery in service spending in the US and gradual decline in spending on goods since the pandemic, and lower rates of saving in 2022.

“Credit card debts are increasing at the fastest rate in 20 years, indicating that consumers are turning to debt to fund consumption… overall the situation for consumers, at least the average consumer, is not fantastic,” said Rasmussen.

All this adds up to Bimco’s forecast of a 1-2% drop in headhaul and regional trades this year, although Rasmussen called that prediction conservative. “It could go lower than that… It really depends on how bad it turns for the consumer towards the end of this year.”

Forecasts from the likes of the IMF give a range of outlooks, but eyes should now be on the downside scenarios, said Rasmussen. IMF noted a potential energy crisis in Europe as a downside risk for growth and Russia’s ban on gas exports to the EU looks set to bring that about in the coming months.

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