Putting The Spotlight On Intermediate Trade

Putting The Spotlight On Intermediate Trade

Putting The Spotlight On Intermediate Trade

‘Intermediate’ or non-mainlane East-West trades, though not as high-profile as some other trade lanes, is projected to total 24.3m TEU in 2017 and continues to demonstrate interesting trends. The Indian Sub-Continent and Middle East are central to these trades, and while previously starring as a trade growth double act, these regions have recently taken on rather different roles.

The Principal Roles

The ‘intermediate’ (non-mainlane East-West) trades comprise routes connecting the Middle East and the Indian Sub-Continent (ISC) with the Far East and Europe, as well as North America (in lower volumes). Total trade on these routes reached an estimated 23.4m TEU in 2016, accounting for 13% of global container trade. Historically, non-mainlane East-West trade has been fast growing, rising by a compound annual growth rate (CAGR) of 8.6% between 2000 and 2016. Until recently, imports into the Middle East and the ISC have both been key drivers of this expansion.

Keeping Up With The Drama

Historically, non-mainlane East-West Middle East trade has been fast growing, rising by around 9% p.a. on average in 2000-15. The drop in oil prices in 2014 did not have an immediate negative impact upon box imports to the Middle East, probably due to the region’s economic wealth. However, sustained low oil prices began to have a noticeable impact upon import volumes in 2016, when growth in total Middle East trade slowed to 0.5%, with trade with Far East and Europe down by 2.9% y-o-y in Q3. Despite a slight improvement in oil prices this year, Middle East volume growth has remained fairly weak. This year, total Middle East non-mainlane East-West trade is projected to record only limited growth.

The ISC has also demonstrated firm trade growth in recent years, supported by robust expansion in the Indian economy. Historically, non-mainlane East-West ISC trade also grew by around 9% p.a. on average in 2000-15. ISC trade volumes continued to grow firmly in 2016, significantly outperforming Middle East trade growth, despite disruptions related to currency controls in late 2016. ISC trade on non-mainlane East-West routes is projected to rise by 6% in 2017. However, concerns still remain over the currency situation in India, as well as long-term issues over Indian infrastructure.

Rising Star

While total growth in non-mainlane East-West trade has slowed recently, the trade lane has continued to provide important deployment opportunities for vessels ‘cascaded’ from the mainlanes as more ‘mega’ boxships have been delivered. At the start of 2015, containerships of 8,000+ TEU capacity accounted for 28% of boxship capacity deployed on non-mainlane East-West trades. However, by the beginning of June 2017, this proportion had risen to 56%.

A Place In The Limelight

Overall, non-mainlane East-West trade is projected to grow 3.7% in full year 2017. Although perhaps not a headline act, it remains important to keep track of this trade and the differing trends and changing patterns of deployment it comprises.
Source: Clarkson Research Services Limited