Supply Outpaces Demand, But Demand Recovers in 2023’s Second Half

Credits: Viking Life-Saving Equipment


  • Significant weakening of the underlying supply/demand balance with more downsides than upsides.
  • Freight rates, time charter rates, and second-ship values all under pressure throughout 2023 and 2024.
  • Head-haul and regional trade demand growth of 1-2% in 2023 followed by 5-6% in 2024. Negative y/y growth through the first half of 2023 but return to growth thereafter.
  • Risks remain and in our downside scenario we instead estimate growth of 0-1% and 2.5-3.5% in respectively 2023 and 2024.
  • Fleet growth of 6.3% and 8.1% in 2023 and 2024 respectively, while changes in congestion and sailing speed lead supply growth to outpace fleet growth in 2023 but will trail fleet growth in 2024.
  • The IMF predicts global GDP growth of 2.9% in 2023 and 3.1% in 2024 but highlights that the balance of risks remains weighted on the downside.
  • So far, liner operators have not been able to adjust capacity offered in line with demand and it is unclear whether the released 2023 service plans sufficiently address this imbalance.
  • While average sailing speed has decreased following the reduction in congestion there is so far no evidence of the structural shift downwards due to EEXI/CII that had been previously indicated by major liner operators. We therefore predict that changes will be gradually phased in during 2023 and 2024.

Demand drivers

Despite an improvement in the global economic outlook compared to our previous report, we have lowered our demand growth expectation for 2023 while increasing it for 2024. In 2023, we now expect growth in head-haul and regional trades to end in the 1-2% range rather than the 3-4% that had been previously predicted. On the other hand, we have increased our demand growth forecast for 2024 by 2 pp and now expect growth of 5-6%. As risks to growth remain, we have also developed a downside scenario that instead predicts growth of only 1-2% and 2.5-3.5% in respectively 2022 and 2023.

Read the full report here.


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Source: BIMCO


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