China’s slowing economic growth remains a key driving factor for container shipping

The Chinese economy is projected to expand by 6.5-7% in 2016, which is still considered a healthy growth even if it has slowed down from the double-digit percentage increases in previous years.

“I have no doubt in my mind that China will continue to be a very important export market, and I find it hard to believe that the Chinese won’t be looking for ways to stimulate their economy,” Soeren Andersen, ceo of Rickmers Maritime, said at the TOC Asia conference held in Singapore on Wednesday.

He further observed that other Asian countries like Vietnam is still a strong export market after China, while Southeast Asia and South Asia are increasingly becoming important export markets as well.

Robbert van Trooijen, chief executive, Asia Pacific region, Maersk Line, noted that the Chinese container trade is projected to grow only moderately. Chinese container exports are expected to grow in line with global GDP of about 2.5% as outsourcing to China decreases.

The Chinese container imports are also anticipated to decline as China shifts away from being a production hub due to its lesser need for raw materials and industrial input. In view of an overall softer support for shipping due to China’s slowing economic growth, the global container shipping market will see the ripple effect of freight rates continuing to stay deflated and suppressed industry profits, according to van Trooijen.

But the widely acknowledged problem for container shipping, regardless of economic growth, is the excessive tonnage that is limiting any strong rise in freight rates. Rickmers Maritime’s Andersen said scrapping has picked up pace over the past year, a development that is important to reversing the ailing state of the container market.

Jonathan Beardm vice president, global lead ports and logistics, ICF International, reiterated that the industry should also address the oversupply issue by continuing to look at mergers and rationalisation, as attested by the acquisition of Neptune Orient Lines (NOL) by CMA CGM and the merger of China Cosco Group and China Shipping Group.