BMI View: BMI maintains its cautiously optimistic view on the US shipping sector. We believe 2015 will see the country's major facilities consolidate the growth seen in 2014. Our overall view that the US economy will continue to accelerate remains firmly in place, and we forecast GDP growth of 2.7% in 2015, with growing consumer demand in particular providing a boost to container volumes .
Real GDP growth in the US will accelerate in the coming years, on the back of stronger private consumption and low borrowing costs. We forecast headline growth of 2.9% in 2015 and 2.6% in 2016, up from 2.4% in 2014. The main driver of this growth will be the private sector, with household consumption bolstered by lower inflation, an improved labour market and low borrowing costs.
The outlook for the consumer sector continues to improve as unemployment maintains its broad downward trajectory (at 5.5% in March). This bodes well for container volumes at US ports. Household consumption levels will be further supported by an uptick in personal income levels, which have grown by an average 4.5% y-o-y over the first two months of 2015, compared to an average of 3.9% during 2014. Perhaps even more significantly, consumer price inflation has fallen to the lowest levels seen since 2009, due in large part to the collapse in the oil price, which has contributed to much lower fuel costs. As consumers spend less at the fuel pump, they will benefit from greater discretionary income for other goods, leading to an increase in consumption in real terms.
We believe risks are weighted to the upside across the US economy. The most likely of these risks, we believe, is that a greater than expected improvement in the labour market or consumer sentiment will lead to much stronger demand for goods and services. Such an outcome could also lead to stronger business investment in capacity and support further housing market growth.
Key Industry Data
At the port of Los Angeles we forecast 2.5% growth year-on-year (y-o-y) in total tonnage in 2015, to reach 60.0mn tonnes.
At the East Coast port of New York/New Jersey (NYNJ) growth is forecast to be 4.13% y-o-y in 2015, to reach 132,448mn tonnes.
We expect Los Angeles to record growth of 2.5% in twenty-foot equivalent unit (TEU) throughput in 2015, reaching 9mn TEUs.
We expect NYNJ to record a growth of 1.3% in TEU throughput in 2015, to reach 5.8mn TEUs.
Key Industry Trends
NY/NJ Port Authority Taking Steps To Relieve Port Congestion
The port authority of New York and New Jersey (NY/NJ) in the US has stated that it is undertaking several measures to alleviate congestions issues caused by a 10% rise in cargo volumes at the port. The bottlenecks are partly due to the labour dispute at the US West Coast ports, which have led to higher import volumes and larger ship calls from re-routed cargo, creating delays for truckers and cargo owners.
Virginia Port Posts Record Container Volume In March
The US port of Virginia registered a record monthly container volume in March, according to the Virginia Port Authority. In the reported month, the facility handled 229,410 twenty-foot equivalent units (TEUs) of containers, representing an increase of 16% compared with the same period a year earlier.
HTA Aims To Reduce Congestion At US Ports With New Plan
The Harbor Truck Association (HTA) will unveil a new plan to ease congestion at the US ports of Los Angeles and Long Beach, reported Long Beach Press-Telegram. Under the proposed plan, HTA will introduce Trucker Chassis Connection, a system designed to speed up the process of locating chassis truckers around the port to haul cargo containers through the Chassis Finder app.
Risks To Outlook
A sharp rebound in oil prices would cause us to re-evaluate our expectations for real GDP growth, and by extension our forecasts for government revenues, given our outlook on the US economy is formed in part to the stimulatory effects of lower fuel costs following the collapse in the price of crude. We also expect Republican leaders to work together with the administration of President Barack Obama to set spending priorities and pass budgets over the next two years. If dysfunction and gridlock again paralyse lawmakers in Washington, we would have to adjust our expectations for both spending and tax policy.
A collapse of the eurozone, which would hit the US via a financial sector shock and via trade channels, is a further risk.
Further downside is presented by the expected slowdown in Chinese economic growth, which will damage demand from the US's biggest export market. The eurozone is unlikely to be able to pick up the slack, due to the ongoing crisis there. BMI believes that the main risks to our outlook for US container shipping are on the downside. A bearish consumer outlook, combined with the withdrawal of shipping lines from the transpacific routes and cuts to federal funding for port projects mean that growth in the box shipping sector could be slower than expected.
Upside potential is presented to east coast ports by the expansion of the Panama Canal, due for completion in 2015. The project will allow post-Panamax vessels to pass through the Panama Canal to call at east coast ports, bypassing the traditional US hubs of Los Angeles and Long Beach.
On the dry bulk side there is upside potential from the fact that we expect the US to become a net exporter of coal over the medium term as domestic demand slows and Asian demand remains strong. We are already seeing the development of new port facilities on the West Coast, such as SSA Marine's Gateway Terminal, in order to cater for an expected increase in coal shipments.