Trends And Outlook for Container Shipping Industry in 2024

Since most of these factors are essentially natural phenomena or require political solutions – thus being outside the control of Carriers and Exporters – there is considerable uncertainty regarding their resolution and impact as we move into 2024. Further, with the complex macroeconomic and geopolitical factors at play, the operating environment is quite volatile. Under these circumstances, some prominent factors will materially impact the Container Shipping industry in 2024, reports Marine Insight.

Supply-demand balance and a massive influx of additional capacity in the market

Perhaps the most common concern in the container shipping industry has been the massive influx of new capacity expected to inundate the market in 2024 (and 2025). As Carriers grappled with a paucity of capacity to meet the unexpected increase in demand in the second half of 2020 but still made record profits due to record-high freight rate levels, a proportion of the windfall revenues were utilized for placing orders for new vessels. The ordering spree led to a record order book (measured as a proportion of existing capacity, the orders placed post-COVID ranked second only to the pre-recession period in 2008-09, when the global economy was booming and demand for shipping services was high).

The extent of over-ordering can be gauged from the fact that the capacity of the new vessels ordered is equivalent to 27% of the global fleet, which in October 2020 stood at 8%.

What poses even more challenges for Carriers is that the timing of the delivery of these vessels will coincide with a marked drop in demand, with estimates for global demand ranging between 3% to 4% for both 2024 and 2025.

To make matters worse, a large proportion of the newbuilds comprise mega-vessels, which by their size are subject to the operational and infrastructure limitations at maritime ports, thus restricting the number of ports that they can call at and, by extension, the number of trades that they can be deployed on.

While cascading vessels to secondary and tertiary trades is an option that Carriers can resort to, there is a limit to the extent that this tactic can be employed, given the draught restrictions, limited handling capacity, and infrastructural constraints at most ports on these trades.

Scrapping vessels is another option, especially ones that are non-compliant with the latest emission control regulations (or where the cost of modifying or retrofitting the vessels would be prohibitively high); however, in this case, too, the extent of capacity thus removed will be limited, as the proportion of vessels deemed fit for scrapping is far lesser than the new cargo being delivered.

Emission control regulations and cost of compliance

While shipping is the most eco-friendly mode of transport, the sheer amount of cargo transported every year means that at an aggregate level, the sector’s emission levels are very high, primarily arising from the use of fossil fuels.

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