10 January 2024 (Lloyd's List) - THE capacity of the global containership fleet could hit the 30m teu mark this year, meaning it will have grown by 50% in the seven years since it broke the 20m teu barrier in 2017.
"In 2023, shipyards delivered 350 new containerships with a total capacity of 2.2m teu, beating the previous record from 2015 when 1.7m teu was delivered," said BIMCO chief shipping analyst Niels Rasmussen.
"The 2023 record is now likely to be beaten already in 2024."
With low scrapping levels last year, new ships entering the fleet pushed capacity up by 8%, its fastest growth rate since 2011, with large ships over 15,000 teu dominating the deliveries.
"In 2024, 478 containerships with a capacity of 3.1m teu are scheduled for delivery, beating the 2023 record by 41%," Rasmussen said. "The container fleet capacity is therefore expected to grow by 10% in 2024."
But with demand growth set to be only 3%-4% in 2024, the spectre of overcapacity continues to haunt the market, despite capacity being sucked up by events in the Red Sea and Panama Canal.
"The imbalance between supply and demand is set to widen in 2024," Rasmussen said.
"However, prolonged disruption in the Red Sea, forcing ships to sail via Cape of Good Hope, could tighten the supply/demand balance."
Figures from MDS Transmodal suggest that around 2.6m teu would be needed to maintain service frequency if the Suez routing remained closed for an extended period.
Nevertheless, another 3m teu of capacity was scheduled to be delivered during 2025-2026 and unless recycling increases significantly, the market imbalance appeared set to return once the Red Sea situation is resolved, Rasmussen said.
Carriers may, however, take further steps to absorb capacity through slow-steaming. BIMCO said the average speed of containerships had reduced from 14.3 kts in 2022 to 13.8 kts in 2023, and could fall further this year.
"This lowers the efficiency of the fleet and 3%-4% extra capacity may have to be deployed to ensure that the 2024 volume increase can be accommodated," Rasmussen said.
Moreover, scrapping is back on the agenda too. Figures from Alphaliner show 167,000 teu of capacity was sent for demolition in 2023, but that figure is likely to grow this year.
"The 2023 demolition figures remain, however, well below expectations and insufficient to address the rising overcapacity that the container shipping industry is facing, with a staggering 2.3m teu of newbuilding capacity hitting the water in 2023, twice as much as in previous years," it said.
Alphaliner anticipates a sharp rise in demolition sales in 2024 to cushion the impact of a "whopping" 3.2m teu of newbuilding capacity due to hit the market in the next 12 months.
"Depending on cargo demand scenarios, and how long the crisis in the Red Sea, and to a lesser extent the restrictions at the Panama Canal, will last, scrap sales could more than double and reach 375,000 teu, approaching demolition levels last seen in 2017," Alphaliner said.
