Despite moderate volume growth rates in recent years, the Latin American container trade with the Northern Hemisphere remains the largest of the North-South trades. In May, Container Commentary looked at vessel upsizing on the African North-South trades, and an upsizing trend has also been clear on the Latin American trade lanes where larger ships are providing a rising share of capacity.


Volume Growth Driver
In the 2000s prior to the economic downturn, container trade between the Northern Hemisphere (North America, Europe and the Far East) and Latin America rose steadily, from 7.4m TEU in 2002 to 11.5m TEU in 2008, at a CAGR of 7.7%. This was bolstered by volumes between the Far East and Latin America which grew at a CAGR of 9.3%.

Since the downturn, however, the trade has experienced mixed fortunes, with rapid growth (especially when compared to the mainlane east-west trades) in 2010 and 2011 of 16% and 8% respectively, before slower growth since then as the economies in Brazil and Argentina hit the buffers. Latin American North-South trade volumes are projected to have increased by an average of 1.5% per annum in 2012-14.

Upsizing In Waves
The ‘classic’ vessel size on these trades had once upon a time been sub-3000 TEU, but the growth in volumes seen in 2010-11 triggered rapid upsizing. The first wave was the increased deployment of 3-7,999 TEU ships. Capacity deployed in this size sector grew from 0.43m TEU at start 2009 to 1.09m TEU by the start of 2012, 69% of capacity on the trade lane at the time.

More recently, despite the throttle back in volume growth there has been a second wave of upsizing extending to the 8,000-11,999 TEU sector in which Latin American North-South deployment grew from 0.16m TEU in 2012 to 0.69m TEU at the start of October 2014 (36% of the total deployed). This was largely driven by the Far East-Latin American trade which employs 77% of the 8-11,999 TEU capacity deployed.

The rise in deployment of 8-11,999 TEU ships on the Latin American North-South trades followed a jump in overall deliveries in this sector, with an average of 0.5m TEU per annum delivered into the fleet in 2010-13. Modern, fuel efficient, wide-beam designs have proved a popular choice, whilst in the wake of sluggish volume growth on the mainlanes, opportunities there for ships of this size diminished and units became available as they were ‘cascaded’ down, having been substituted by the delivery of larger 12,000+ TEU vessels onto the mainlanes. Of course, at the same time this all requires investment in Latin American port infrastructure to handle the larger units.

What’s On The Horizon?
Ordering of 8-12,000 TEU vessels took off again in 2013 when 108 units of 1.0m TEU were contracted. Although 8-11,999 TEU vessels will also likely be deployed on the Transpacific, transiting the expanded Panama Canal, many have been ordered with North-South trading in mind.

Combined with the expectation that Latin American volume growth will eventually improve once again, and that operators will continue to seek utilisation for their larger ships, it seems fair to suggest that the upsizing trend on the Latin American North-South trades may have some distance left to run.
(Source: Clarksons)