Rising Container Capacity Threatens Liner Recovery

Ocean container carriers are set to boost capacity by around 785,000 20-foot equivalent units in the coming four months, threatening the recent rise in liner freight rates, a leading industry analyst warned.

The sudden influx of capacity, spurred by the return of idled ships and deliveries of new vessels, represents a 9 percent increase in the active fleet since April 2009, according to Paris-based Alphaliner.

This "could threaten the nascent recovery in the liner markets," Alphaliner said.

Alphaliner said it has also spotted a number of ships whose delivery was originally deferred but now brought forward, "a situation not seen since December 2008."

The surge in capacity in the first four months of this year contrasts with a 790,000 TEUs reduction during the same period in 2009.

There is a real threat of price cutting by carriers, Alphaliner said, noting that spot freight rates on the Far East-Europe trade have fallen by $310 per 40-foot container within the space of two weeks.

"This is a response to the raft of new capacity which is being introduced to the trade. More rate declines are expected in the coming weeks triggered by the new service launches," Alphaliner said.

The increase in capacity has been fueled by strong initial signs of resurgence in demand with the eight leading container ports showing a 22 percent year-on-year increase in cargo volumes in the January-February period.

Contact Bruce Barnard at brucebarnard47@hotmail.com.