I’ve always enjoyed listening to economists’ forecasts about the future. But, you know what the brightest minds say about forecasting: “Prediction is very difficult, especially if it’s about the future.” (Thanks Nils Bohr, Nobel laureate in Physics.)
As if predicting the future weren’t hard enough, conference organizers always like to schedule economists to take the stage well before anyone is caffeinated enough for those epic graphs and forecasts. I am usually present though, in the front row with my super-charged, black coffee, anxious to hear the predictions for the coming year.
With that said, I’m looking forward to the Transpacific Maritime Conference next week and the new insights I’ll learn from all the great industry minds attending. As we approach the event date, I’m weighing in with my own projections for the 2019-2020 year which I’ve been able to collect from the various economists and industry experts I follow, as well as savvy NYSHEX members.
Moderate Growth
It is hard to compete with the record import year we saw in 2018. With consumer confidence below expectations, the ongoing uncertainty from the U.S.-China tariffs, GDP growth estimates having been revised downward by the IMF to 2% for 2019, and the frontloading of 2019 cargo in 2018, demand growth on the Transpacific Eastbound trade is projected to level out at 2-3%.
IMO 2020 bunker fuel surcharge increases
We’ve begun to see 10+ different low-sulphur BAF formulas in preparation for the IMO 2020 low-Sulphur requirements. It is difficult for anyone to know where things will settle, but industry experts and shippers with whom I’ve spoken believe that IMO 2020 will equate to an overall freight rate increase of 15-20% this contract season.
The worst reliability in ocean shipping
2018 ushered in the worst schedule reliability the ocean transport industry has seen in the last seven years. In a study by Sea-Intelligence regarding schedule interruptions such as blank sailings and delayed vessels, global schedule reliability dipped as low as 65%. On the Transpacific trade it hit 35% for a brief period. During TPEB peak season to both US coasts, ocean reliability hovered around 50%! Experts say to expect that number not to improve anytime soon.
Well, that’s what my informed crystal ball reveals. Perhaps we can compare my outlook to what we hear next week at TPM and see if I missed my calling. The great news, regardless of what happens in 2019, is that NYSHEX members get to lock in their ocean space, equipment and fixed rates as far out as six months into the future to avoid disruption that may occur as the future unfolds.