TEU to GDP Multiplier, 1985-2022

TEU to GDP Multiplier 1985 2022

Source: World Bank for GDP growth (In Constant 2015 dollars). UNCTAD, Drewry Shipping Consultants and own elaboration for container throughput growth.

The multiplier effect is usually defined by the relationship (ratio) between container growth rates (%) in terms of total volumes handled by ports over GDP growth rates (%) for the same year. It is reflective of the fluctuations between a growth that is more internally driven (lower ratio) and a growth that is leaning more on trade (higher ratio). Recessions have no discernible impacts on the multiplier as GDP growth slows down (or becomes negative on a few rare occasions) with container volumes. Five phases can be identified.

  • Prior to 1990. Although containerized trade began to pick up in the 1960s, the multiplier was in the range of 2 to 2.5 (for each percentage of GDP growth, there was an equivalent of 2% to 2.5% of container volume growth). Globalization and trade liberalization were ongoing, but at a comparatively slow pace regarding their impacts on container flows.
  • 1990 to 1999. This marked a period of fast containerization, with the multiplier surging above 4, particularly with the beginning of offshoring to East Asia. The global container shipping network expanded rapidly with new services and port investments in part associated with offshoring and industrialization in new areas.
  • 2000 to 2008. The multiplier declined in the range of 3, corresponding to peak growth. This period was marked by the most substantial growth of Chinese container port volumes and the majority of ports worldwide.
  • 2009-2014. The financial crisis of 2009 marked an inflection point, with the multiplier declining in the range of 2.8.
  • 2015-. From 2015, the multiplier fell under 1, underlining that at this point, GDP growth has much fewer multiplying effects on container shipping growth. Even the COVID-19 pandemic did little to influence this fundamental relationship. This may indicate peak containerization, as the conventional drivers of long-distance trade have rescinded.

The TEU to GPD multiplier is an important ratio since it is often used in port traffic forecasting, which tends to be associated with national economic growth prospects. The current trend illustrates that GDP growth has less impact, which can lead to exaggerations in future anticipated volumes, leading to questions about its relevance. The ratio also considers the movement of empty containers and transshipment, which are the outcome of trade imbalances and the decision by shipping lines about organizing their service networks. Changes in trade imbalances and transshipment volumes can have an impact on the ratio.