Once viewed by many as quite a steady element of the container trade spectrum, growth on the North-South trade lanes has actually seen some dramatic variation over the last 15 years, and has this year set off on an upwards trajectory, surpassing initial expectations. As an important part of the structure of container trade, the path followed by North-South trade volumes is worthy of closer investigation.
A Solid Foundation
Trade on the North-South routes is projected to encompass 17% of overall container trade volume in full year 2017, totalling 32.3m TEU. This trade takes place on routes connecting Europe, the Far East and North America with economies in South America, Sub-Saharan Africa and Oceania, making the trade a critical economic link between the northern and southern hemispheres. Traditionally, exports on northbound routes were heavily associated with agricultural products, though in recent times they have diversified, whereas southbound box trade is largely driven by consumer demand.
Between 2002 and 2007, container trade growth on mainlane routes averaged 11% y-o-y, spurred by economic prosperity in developed nations and an increasingly globalised manufacturing sector. Trade growth on the North-South routes, while still strong, was more muted, averaging 7% and cementing the trade’s reputation as a steady, perhaps less exciting, segment of the box trade spectrum.
Following the onset of the financial crisis, as was the case globally, North-South trade growth suffered a major setback. However, volume growth on the North-South routes bounced back particularly sharply compared with other parts of container trade, expanding at a rate of 15% in 2010 following its 6% contraction in 2009, bolstered in part by strong post-crisis economic growth in the southern hemisphere developing economies (for example, GDP growth in Brazil reached 7.5% in 2010). Looking in more detail, around 75% of the growth in the North-South trade in 2010 was accounted for by growth in the southbound direction, as strengthening performance in the southern economies began to be reflected in greater consumer demand for imports.
In the years following this rapid expansion, growth in many developing economies began to slow. This was subsequently exacerbated from 2014 onwards by a crash in the prices of many of the major commodities exported by developing nations (on which they rely for import spending power). As such, growth in total North-South container trade rapidly slowed, with southbound trade falling into negative growth in 2015 and 2016.
Starting To Rebuild?
2017 has seen a more positive trend. On the back of some pick-up in commodity prices, southbound trade has returned to positive growth, while total North-South box trade is projected to grow 4.6% in full year 2017. So, while North-South trade used to be seen as fairly steady, it has been through some dramatic times in recent years, and is today surpassing expectations with a notable return to more robust expansion.
Source: Hellenic Shipping News.