The increase in the supply of container ship capacity is slowing, in part because of the dearth of new ship orders. However, there is still too much capacity because demand for cargo space on global trade lanes is also slowing.
“The positive sentiment in global economics and container shipping … turned sour over the summer following a very strong start of the year,” said BIMCO, the Copenhagen-based association of shipowners and operators.
“Leaking demand affects freight rates, as operators hesitate to adjust supply firmly enough to match up,” BIMCO said in its Shipping Market Overview and Outlook for October.
It said the expected growth in vessel capacity is constantly slowing from the high point of 9.7 percent in 2010 to an expected 7 percent in 2013.
Container ship deliveries this year have just surpassed the 1 million-TEU mark, resulting in a fleet growth of only 5.1 percent when the scrapping of older vessels with 216,000 20-foot-equivalent units of capacity is taken into account. For full-year 2012, BIMCO forecasts the container ship fleet will grow 7.2 percent.
“Just like the case of product tankers, the container ship fleet growth is actually under control. It’s the demand side which is causing the headache,” BIMCO said. “The demand-gap in the container shipping market was created mainly in 2009, and it is the loss of that volume growth that still puts pressure on the market balance.”
The big test of how much capacity still hangs over the market will come on Nov. 1 when carriers plan to implement a general rate increase of $500 to $550 per TEU.
“Some operators already see a 25 percent implementation of this as a success, given the recent steep drop in volumes and the subsequent mismatch between deployed capacity and transportation requirements,” BIMCO said.
Alphaliner estimates that operators in the trade from Far East to Europe and the Mediterranean need to make deep cuts in deployed capacity to reach a new market balance.
BIMCO said it subscribes to this view, adding that it remains a difficult task to maintain a market balance when demand suddenly contracts as fast as it did in the Asia-to-Europe trade over the summer, leading to a plunge in freight rates, which had turned profitable in the second quarter.