- Container liner industry faces oversupply amid Red Sea crisis, with 2.3 million TEU delivered last year and 3.1 million TEU expected this year.
- Warning of larger vessel concentration, Bimco predicts 83 ships over 15,000 TEU in 2024, doubling capacity in four years.
- Despite a slight rebound in scrapping, overcapacity persists, temporarily masked by Red Sea disruptions.
The ongoing crisis in the Red Sea, leading to prolonged voyages around Africa, is generating a facade of increased cargo demand. This, however, conceals the underlying issue of a growing disparity between supply and demand in the container liner industry.
Capacity Surge
According to Alphaliner data, the container industry saw the delivery of a staggering 350 newbuild container vessels in the past year, totaling a substantial 2.3 million TEU of capacity. This represents an 8% surge in global cellular capacity, juxtaposed against sluggish growth.
Furthermore, a comprehensive analysis by Bimco reveals that an additional 478 vessels, with a capacity of about 3.1 million TEU, are scheduled to be launched this year. This potential influx could contribute to a further 10% expansion of the global fleet.
Bimco’s Warning on Size Concentration
Bimco emphasizes that these new vessels will predominantly belong to larger size categories. An estimated 83 ships, each exceeding 15,000 TEU, are anticipated to be delivered in 2024, augmenting the segment’s capacity by 1.4 million TEU and doubling its capacity within just four years.
In contrast, Bimco predicts a significantly slower growth rate in container trades, projecting a modest 3% to 4% increase in demand for ship capacity this year.
Vessel Demolition Sales on the Rise
While the container vessel demolition market experienced a slight “bounce-back” in 2023, with 87 vessels (equivalent to 167,000 TEU) sent for recycling, Alphaliner notes that the deletions fell below expectations and were insufficient to address the escalating overcapacity issue.
Alphaliner is optimistic about a recovery in vessel scrapping for the current year, forecasting the recycling of approximately 375,000 TEU of capacity. This would mark the highest figure since 2017, indicating a potential shift towards addressing overcapacity.
Red Sea Disruption: A Masked Problem
Amidst the Red Sea disruption, ships are being reactivated, sub-let offers are being withdrawn from the open charter market, and newly built vessels are immediately deployed upon delivery. The diversions via the longer Cape of Good Hope route are creating artificial cargo demand that would not have been supported by cargo volumes alone.
Outlook and Challenges Ahead
The uncertain near-term outlook on the Red Sea situation, coupled with the traditional rush to ship cargo before the Chinese New Year holidays, is likely to induce extra demand for shipping capacity in the coming weeks.
As of January 1, Alphaliner’s commercially idle vessel capacity survey indicates a decline to 106 ships, totaling 289,437 TEU, representing just 1% of the total global fleet. While the industry faces challenges, the interplay of factors such as vessel deliveries, scrapping trends, and geopolitical disruptions continues to shape the complex landscape of the container liner industry.
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Source: The Loadstar
