The global tank container market continued its very strong performance into the first half of 2019 but weakened in the second half, when uncertainty caused by faltering economic growth and more intense competition led to a sales slowdown and weak margins for many. Those operators that were more dependent on standard tank containers carrying commodity chemicals, or more exposed to intra-regional markets, struggled.
The global chemical sector was caught in a whirlwind of volatile crude oil prices, ongoing trade disputes, new Asian capacity and geopolitical tensions. Some markets were oversupplied while demand stalled in others. As a result, chemical companies cut their outlook for earnings in the face of retreats in the key specialty chemical markets served by tank containers.
Capacity utilisation in the global chemicals sector - widely viewed as a lead indicator of the global economy - continued a two-year decline. Lower petrochemical margins encouraged producers to seek out supply chain efficiencies and the high cost of tank container demurrages was a natural target.
Chemical production appeared more regionalised, contributing to an increase in lower-value, intra-regional tank container movements. Anecdotal evidence suggested that trade tensions affected trade flows, not volumes, while the usual cyclical up-tick in tank container shipments in Q3 simply did not happen for some operators in 2019.
A PwC survey revealed that the 3-year growth outlook by the CEOs of chemical companies is at its lowest point in five years with economies around the world signalling a slowdown and worsening trade tensions. Worryingly for those in the supply chain, more than 75% of CEOs view cost-cutting as their primary activity for driving profitability. This year’s coronavirus pandemic will only compound these concerns.
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