A recent research study conducted by Barclays suggests that the recent drop in oil prices is boosting consumer spending, and in turn increasing the United States’ demand for Chinese imports. Based on the positive data presented in their report, the investment bank has increased its container volume growth forecast (for the U.S. market) by nearly 1 percent, raising it to 5.4 percent for 2015. From a global perspective, world container trade reached an estimated 152 million TEU in 2014, and is forecast to grow 6.5 percent over the next two years.
Brent crude oil prices averaged $110 per barrel From January 2014 through September 2014, and then values very quickly plummeted to approximately $40 per barrel. Looking ahead throughout 2015, Barclays predicts that oil will maintain an average price of $44 per barrel. This is likely to translate into bigger profits for leading container shipping lines, especially those who have invested in Triple E vessels.
According to theBarklay’s sensitivity analysis, this improvement suggests a [potential] increase in China’s exports to the United States of nearly 2 percent. Offering a number-figure for the growth, industry analysts forecast that for every $10 decline in the (per barrel) price of oil, there will be an additional $1.1 billion in consumer spending on Chinese exports.
We expect a potential positive impact of lower oil prices on trade volumes due to higher discretionary consumer income. For example, the Barclays U.S. Equities Research team estimates that a 20 percent decline in fuel prices could increase U.S. consumption by $70 billion.- Barclays
Barclays recognizes that lower oil prices are having a positive impact on consumer demand and the global container shipping industry is experiencing a boost in profitability. Barclays’ analysts say they expect the economic prosperity and investment in global trade to continue into 2016 and throughout 2017, resulting in a 5.2 percent year-over-year improvement in container demand.
Trade to the United States is not the only international destination to increase their demand for Chinese goods. Trade between China and Iran (for example) has been growing at a rate of nearly 40 percent per year since 2012, driven by rapidly rising demand from consumers. The import of household goods from Asia, mainly into Iran and UAE, has caused container volumes on Asia to Middle East and Asia to the Indian subcontinent trade routes, to experience a significant increase. According to analysts, this upward trend in the demand for shipping containers will continue at a rate of 7.4 percent over the next three years, and easily outperform Barclays’ global container growth forecast of 5.2 percent.