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Home News World Shipping News Container shipping recovery may be held back by looming large capacity injection
Container shipping recovery may be held back by looming large capacity injection PDF Print E-mail
Monday, 09 October 2017 23:48

 

THERE are concerns that optimism in the container shipping industry buoyed by solid first half earnings may prevent the strict adherence to the fundamentals required to fulfil forecasts that the supply and demand balance will be reached in 2019.

There is a high number of containerships scheduled for delivery over the next two years, but ocean liners are confident that increasing trade volume will absorb the slots on this additional tonnage. Although this view is shared by analysts, they say carriers will have to hold the line on capacity management, reported IHS Media.

According to SeaIntel CEO Alan Murphy, absorbing the incoming capacity will hinge on no new ship orders, continued high levels of scrapping and vessel idling, and strong demand growth.

"Even the most positive outlook would not be able to soak up the massive amount of capacity that will be delivered over the next two to three years," Mr Murphy was quoted as saying. "At six per cent demand growth there would still be overcapacity, and at eight per cent the carriers would still need to close services."

In its latest newsletter, Alphaliner said that based on its current projections the idle containership fleet will only be eliminated in the third quarter of 2019, taking a decade to fully clear out the supply overhang that has plagued the container shipping market since 2009.

The analyst said a steady stream of new vessel deliveries is expected to drive up idle vessel capacity to 800,000 TEU by the end of 2017. A further 1.6 million TEU of new ships are scheduled for delivery in 2018, and in the absence of a significant surge in scrapping, the overall capacity increase is unlikely to be absorbed by the end of 2018.

Shipping lines have already started breaking the line on ordering, risking an extension of the supply overhang. A total of 20 ships of 22,000 TEU were ordered last week by CMA CGM and Mediterranean Shipping Companywith delivery scheduled to start in the second half of 2019. Alphaliner said the 20 new vessels will add to the 105 megaships that will be in service by then.

IHS Markit data show the orderbook is currently between 13 per cent and 14 per cent of total global fleet capacity. Cosco Shipping Holdings, Maersk Line, Evergreen Line, and MSC are the top four carriers in terms of tonnage on order, and 80 per cent of the vessels on order are above 10,000 TEU capacity.