28 August 2024 (Lloyd's List) - THE 1.6m teu of capacity ordered in 2024 to date is the third highest since 2008 and means 2021-2024 will hold the new four-year record in terms of teu contracted, BIMCO figures reveal.
BIMCO chief shipping analyst Niels Rasmussen, said that “when only six ships with a capacity of 4,746 teu were contracted in the fourth quarter of 2023, many might have thought that the containership contracting spree that began in 2021 had finally cooled.
“However, the appetite for new ships remains high and year-to-date contracting already exceeds the 2023 full year total. That brings the total capacity contracted since the start of 2021 to 10.5m teu.”
As a proportion of total fleet size at the beginning of 2021, those orders will add 44% of new capacity, although recycling could temper this.
But Rasmussen said “ship recycling activity has been very low since 2021 and the 3.9m teu contracted and delivered since then has — along with capacity contracted before 2021 — already contributed to a 25% expansion of the fleet since January 2021”.
All this contributes to increased overcapacity concerns.
Hong Kong-based Orient Overseas Container Line published operating profits of $835m in the first half of 2024 in the past week, down 26% on the same period in the past year.
Red Sea rerouting, as well as poor weather and port congestion had kept supply low, despite the increase in capacity, according to the line.
But OOCL said excess capacity remained a “key concern for the market” and called the Red Sea “a dominant factor”.
Idle, drydocked and scrapped vessels are at historically low levels, the line said, but stricter environmental regulation could change this, with older boxships making way for more fuel-efficient vessels.
But even if the 10% of capacity over 20 years of age were retired, the current orderbook/fleet ratio is 22%, according to BIMCO, meaning more ships could be delivered before older vessels make it to the breakers.
“The fleet is expected to grow at least 12% before the end of the decade, equal to an average annual growth rate of 2.4%,” Rasmussen said.
“Although cargo volume growth might match that pace, we could see pronounced oversupply if fleet growth ends higher and the Red Sea crisis ends, lowering ship demand significantly.”
