Strong growth in container exports for first quarter of 2017

South Africa’s container market has shown solid growth in the first quarter of 2017 across both imports and exports, despite ongoing economic uncertainty in the country, says Maersk Line Southern Africa MD Jonathan Horn.

This has resulted in year-on-year growth of 10%.

According to Horn, the majority of growth witnessed in the first quarter of 2017 has been due to the strong mining commodity export growth.

“After a 2016 downturn in the mining and mineral resources sector, commodity prices have recovered significantly through April, resulting in South African container exports showing year-on-year growth of 20%,” says Horn. 

Asia exports grew by 37% year-on-year over the first quarter, on the back of growing demand for local mining commodities.

Asia is South Africa’s largest export corridor, making up around 45% of total exports.

“Commodities such as chrome and manganese are used in various products, from household appliances to road and building construction, so the global consumer demand as well as infrastructure spend – particularly from China due to plans around building a modern-day version of the ancient Silk Road – have helped boost the demand for South African mining commodities,” Horn says.

Demand for mining commodities may have picked up early this year but commodity volatility is also expected throughout 2017. Recently, chrome demand has dropped significantly, while manganese demand has increased.

“Commodity demand generally follows short volatile cycles,” Horn says. As commodity prices have recently decreased significantly (a reflection of lower demand), market growth for the rest of the year is expected to be lower, between 2% and 4%.

Refrigerated exports recorded growth of about 7% compared to the first quarter of 2016, which Horn says is a reflection of a robust grape crop and strong demand in Europe for South African grapes.

“Looking forward, the citrus crop, which represents more than 50% of South Africa’s refrigerated container exports, is expected to grow by between 5% and 7% on the back of strong crops in the northern parts of the country, while crops from the Eastern Cape will likely decline.”

Imports, which make up 56% of total container flows, grew by 2% year-on-year, but this is lower than the levels in 2013, said Horn.

“Import growth in 2016 contracted by around 5% and the market has essentially rebounded from this poor performance. Import growth in the first quarter has been stronger than expected. This is linked to a more favourable exchange rate that has made imports more affordable and allowed businesses to restock inventory at an affordable level.”

Although this is a positive development, Horn says that only growth over a longer period will signify a sustainable rebound on consumer confidence and purchasing.

“There is no clear evidence that consumer spending is on a sharp rise, and thus 5% growth is not likely to continue. Rather, a slightly lower growth in container imports of between 1% and 3% should be expected for the rest of year.”

Despite this quarter’s promising overall trade results, Horn says he is cautious about being too optimistic, given that significant market swings have been common in the South Africa container market in recent years.

“Despite the strong year-on-year growth of 10%, the 2017 market size is only 5% larger than the 2013 market size, which means the long-term growth has only been around 1% per year in the last five years.