Comparison Of Container Trade Activity By Major Area Worldwide & The Roller Coaster Volume Of The Last Four Years
The interesting world map is a visualization of actual data based on the routes of thousands of giant ships. At any given time, some twenty thousand cargo ships more than two football fields long, or over 600 feet, are at work delivering massive amounts of cargo that is consumed by all of us. The yellow routes represent container ships, the red routes represent tankers and the blue routes represent bulk carriers, the three largest ship categories. While container ships comprise just 20% of the total number of cargo ships, they move 60% of the value of cargo moving by ship. The focus of this article is on container trade activity by major area.
So, what’s the most container trade intensive major area of the world on a per capita basis? You may be surprised, as it's not the area most people would expect. We’ll use the latest monthly volume data to make that comparison and also look at the volume trends from comparisons involving the same month over the last four years. While it’s been a roller coaster over that period and volume remains near peak levels, you may be surprised to learn that overall growth rate over the past four years has actually been well below historical levels.
The last four years have certainly been a volatile period for container volume. From initially being buffeted by the impact of tariffs on one of the largest lanes to the early declines related to the pandemic followed by the later volume surges, there has really been no similar period where macro factors have played such a catalytic role. These factors varied in effect and timing, but generally flowed into all major areas. As container shipping is really one large integrated worldwide network, impacts in one area will usually eventually effect other areas.
Our analysis will use container volume data for May 2022, the latest month available, along with actual volume for May in each of the proceeding four years. These snapshots put into perspective the factors driving trade in each major area along with the sequential changes each year. May is traditionally the highest volume month of the year with a slight seasonal edge owing to the beginning of shipments for retailers busy holiday period. Because of this, May and periods near it also tend to represent a disproportionate number of annual contract renewals timed to coincide with the beginning of the busy season for many shippers. All the container volume data comes from Container Trades Statistics (CTS), an entity controlled by all the carriers that provide it with actual volume which CTS then aggregates into the defining and most accurate statistics related to container moves. Actual imports and exports by major CTS area is used. The CTS major areas as they define them align with the continents with two notable exceptions. Those exceptions are that the Indian subcontinent and the Middle East is combined into an area shown separate from Asia and Central America is combined with South America. In our comparisons of container trade activity across areas, we also use 2021 United Nations population and per capita GDP figures. Those population and per capita GDP figures are conformed to correspond with the actual CTS areas.
Comparison Of Container Trade Activity By Major Area
The following table shows actual May 2022 container volume (imports, exports and combined total) by major area as reported by CTS. That volume is then compared to 2021 population data to develop a TEU per capita (expressed as TEU’s per 1000 people). In addition, 2021 GDP per capita data is utilized to make a further comparison to the TEU per capita figures. The table also shows comparisons of both measures to the overall average and a further comparison of volume per major area adjusted for both population and income levels and how that compares to overall averages.
This table is packed with information, and it is worth spending some time digesting the facts it contains. Most of the data speaks for itself. Total container volume by major area is broadly correlated with both population and income with per capita GDP as a proxy for the latter. In the first section of the table related to imports, when volume is adjusted for both of those factors, the major areas are in a tight range as shown by the measure in the far-right column. The outliers on this relative metric of inbound container trade activity are the Indian subcontinent/Middle East on the low side and Australia on the high side. In the second section of the table related to exports, not surprisingly there was a wider dispersion among the major areas after adjusting for both population and income. On that relative measure of outbound container activity, the outliers are Africa on the low side and Asia on the high side. Inbound containers are driven by personal consumption expenditures, which explains the high correlation with factors influencing such expenditures. Outbound containers on the other hand are driven by production of products, primarily value-added products. While wage levels certainly play a role, a skilled labor force and its related productivity remain key. The third section in the table combines imports and exports into an overall measure of container trade activity with adjustments using the same factors for more relevant comparisons. On that overall metric, the outliers are the Indian subcontinent/Middle East on the low side and Australia on the high.
While most of the relative rankings of the major areas in terms of container trade activity fit with other benchmarks, the most surprising overall ranking was that Australia edged out Asia on the high side. It did that by having the highest relative activity with inbound containers, almost twice the overall average after adjustment, while having the second highest relative activity with outbound containers after Asia. It is the latter relative performance that is particularly striking given Australia’s relatively high per capita GDP level. While that and the high wage levels associated with it aren’t conducive for all products, it is not a relevant issue for many of the products moving out of Australia in containers. Australia is a sparsely populated landmass whose economy has largely developed around agriculture and natural resources. Some 61% of Australia’s land is utilized in farming. The productivity of its farms and similar productivity on the extraction of its abundant natural resources has compensated for any wage cost disadvantage and resulted in Australia being a major exporter in many product categories. For instance, some 80% of the agricultural products grown and raised in Australia are exported. Beef, wheat, fruits and nuts, vegetables, wool, barley, poultry, lamb and sugar cane are all major exports from Australia. While those aren’t the value-added manufactured products that dominate the container exports from Asia, they represent a significant portion of outbound volume from Australia and they fit with its competitive advantages. Most of the things produced are exported. That explains its high relative ranking in terms of outbound container trade activity. On the flip side, its highest relative ranking in terms of inbound container trade activity is also largely explained by the economy being focused mostly on agriculture and natural resources. As an island economy, almost everything else that is consumed comes in by container ship. The strong performance of Australia with regard to export containers may have lessons for policy makers in the US where the outbound level and trend is negative. Growing the volume of export containers is a double win in that it represents additional domestic economic activity and jobs and it narrows the imbalance gap which makes container systems operate more efficiently with secondary benefits for all.
Comparison Of Volume Trends By Major Area Last Four Years
We begin by comparing inbound TEU’s by major area during the same month (May) over the last five years. In all major areas except for Asia, inbound TEU’s represent the dominant lane. May typically is the highest volume month owing to the beginning of a buildup in inventories for the important holiday selling season. The following table shows total inbound TEU volume by major area for each of the last five Mays. The bottom section of the table begins with the compound annual growth rate (CAGR) for each major area from May 2018 through May 2022 and then shows the growth rate for each of the one year periods over the last four years. However, these snapshots of the same month over the four year period result in percent changes that aren’t fully analogous with more precise growth rates that are determined using the complete data in the periods.
The four year CAGR from May 2018 until May 2022 was just 0.3% for total container volume worldwide. This is well below longer term growth rates that have typically had container volume growing at twice or more of the growth in global GDP rates. Only North America and Africa had growth rates that were above the average and positive over the four years. The 4.3% growth rate for North America was driven by the strong purchases by US consumers starting after the initial short-lived pandemic declines. That point is driven home by the fact that inbound containers to the Top 10 US ports grew at a 7.2% rate over that same period. More so than in any other area, US consumers switched expenditures from services to tangible goods during the pandemic. This in combination with high income levels and government programs aimed at lessening adverse impacts during the pandemic had purchases of tangible products and the related container shipments surging. This was most evident in the year from May 2020 to May 2021 when total inbound containers to North America sharply rebounded and grew 39.8%. During that same period, inbound boxes to the Top 10 US ports were up 52.2%. Worldwide inbound volume rebounded 17.5% during that same year, with large gains in all areas except for Australia, which actually had a small decline. Australia also had the lowest four year CAGR at negative 3.0%, but with a pattern showing its inbound volume didn’t exhibit the roller coaster effects seen elsewhere. Following a couple of years of double-digit percent changes, the most recent year from May 2021 to May 2022 has been mild with a 2.8% decline in overall volume. North America was ahead of the pack with just a 1.2% decline, but here again that broader measure obscures the relative strength in inbound containers to the Top 10 US ports that were up 3.0%. Over that most recent one year period, the Indian subcontinent/Middle East showed the highest growth among major areas while the largest contraction was registered by Asia.
As noted earlier, the monthly snapshots while consistent across major areas will not be equivalent to broader growth measures taking into account the complete periods. For instance, for the full twelve months ending May 2022, total worldwide container volume was 0.1% below the actual level for the twelve months ending May 2021. That difference is certainly flattish compared to the 8.0% gain in a comparison of the latter to the twelve months ending May 2020. One factor that may have tamped container volume down from what it otherwise would have been is the unprecedented increase in the prices for moving container freight. The CTS global pricing index, a measure based on all loads moving worldwide and calculated based on actual data provided by the carriers, was at 200 for May 2022, 132 for May 2021, 71 for May 2020 and 66 for May 2019. For the twelve months ending May 2022, the index averaged 184 compared to the 94 average for the twelve months ending May 2021. The CTS global pricing index measures everything compared to actual pricing in 2008, which is set at 100. Those are remarkable pricing increases occurring over a relatively short period, with actual overall worldwide pricing doubling when looking at the twelve month periods and tripling when looking at just May. While there are undoubtedly examples of container movements that became unworkable with such pricing increases, what is more remarkable is that worldwide volume has held constant and even increased despite those price increases. This has been going on long enough where the observation can now be made that container volume is more inelastic to shipping costs than many thought before. My view is that the extraordinary cost efficiency of container shipping today has made transport costs as a percent of cargo value so low that even with a doubling or tripling in pricing, the total shipping cost is still on average just a single digit percent of cargo value. The 177.5 million TEU’s of total container volume moved in the twelve months ending May 2022 equate to an annual cargo value of just over $7.6 trillion. The total revenue for the container shipping industry for the twelve months ending March 2022, the last period actual results are known, was $454.7 billion. That translates into an average container shipping cost equivalent to 6.0% of cargo value. Although that is certainly above the 2–3% relationship prior to the recent overall pricing increases, the relatively small difference hasn’t moved the needle enough for volume to be noticeably impacted. That same observation has no doubt been made by the carriers and has presumably removed what may have been a barrier in seeking large pricing increases at contract renewals. My recent detailed article on container shipping pricing and its misunderstood aspects and adverse consequences can be accessed here.
The following table shows total outbound TEU volume by major area in the same format as the earlier table on inbound volume.
Related to exports, the highest four year CAGR was at Africa followed by South America. The lowest growth rates over that period were from North America and Australia, both of which shrunk in volume. North America in particular showed a noteworthy outbound volume decline with a negative 4.3% CAGR, ironically the same percentage by which inbound loads grew over the period. In this direction, the overall change in North America was actually higher than at the Top 10 US ports which experienced a negative 3.3% CAGR over the same four year period. Related to the latest one year period, the highest growth occurred in the Indian subcontinent/Middle East area while North America showed the most contraction. North America has been striking in its absolute and relative declines in outbound volume over the last four years. Furthermore, the most pronounced comparison between export and import volume is the sharp dichotomy in North America with the former showing the biggest drop and the latter showing the biggest gain. Those differences were driven by an even bigger overall gap in the data for the Top 10 US ports.
Both inbound and outbound volume by major area is combined in the following table that shows overall container trade activity.
Driven by the actual volume trends in the inbound direction that is more prominent in most areas, the highest and lowest CAGR over the four year period was registered by the same major areas with North America and Australia at 1.4% and negative 2.9%, respectively. Over the most recent year, the highest combined volume growth came in at the Indian subcontinent/Middle East area by a wide margin owing to its leading performance in both imports and exports. The lowest combined volume performance and the biggest decline was in Europe in the most recent year. As seen in both directions, the overall North America performance was dictated by larger variances among the Top 10 US ports. The positive inbound volume variance and negative outbound volume variance came together to result in a 3.8% four year CAGR for those ports and a 0.2% gain in the last year, both outpacing the respective North America figures.
This final table is a more direct comparison of import volume to export volume in each major area. The first section in the following table divides total imported containers by total exported containers in each period to calculate the imbalance ratio. Except for Asia, every major area of the world imports more containers than it exports so those ratios are all above one. China is the majority of that container volume with some two-thirds of the volume related to Asia, but almost all of the other countries in Asia also export more containers than they import. There is also an active intra-Asia container market that is larger in terms of actual loads than the two major arterial lanes (Asia-Europe and Asia-North America) but much smaller in container miles owing to the shortsea distances. In the second section of the table below, another comparison is made by showing the difference from taking the import percent change and subtracting the export percent change. The resulting figure highlights the divergence or gap in those two measures.
The most striking item in the table is the deterioration in the import/export ratio in North America since the beginning of the pandemic in 2020. The actual imbalance ratio expanded by 39.8% during that period. As a result, North America eclipsed Africa to become the most unbalanced major area with import volume 2.43 times export volume in the latest period. The major area with the most balance is Europe where the import/export ratio was 1.13 in the most recent year. The US drove the expansion of the imbalance ratio in North America. In the latest period, the imbalance ratio at the Top 10 US ports was 2.65 times, a growth of 48.5% compared to the beginning of the pandemic two years ago. The more balanced the inbound and outbound loads are the more overall efficiency in the container shipping systems serving those areas.
My hope is that this article has added to your knowledge of container trade activity across the globe. If nothing else, knowing that Australia is a more trade intensive continent than Asia should make for a fun and winning $1 bet with friends.
John D. McCown is a shipping expert with four decades of operating and investing experience in the maritime sector. He was CEO of an innovative U.S. flag container shipping company that he co-founded and he later led transportation investments worldwide at a $20 billion hedge fund. Mentored by Malcom McLean, the inventor of containerization who he worked with on a daily basis for twenty years, Mr. McCown is the holder of two maritime related patents as well as a MBA from Harvard Business School. His recent book “Giants Of The Sea” covers the history and development of modern cargo shipping and the nine individual pioneers most responsible for today’s industry in an 8½” X 11” hardcover book with 330 pages spread over 30 discrete chapters.
