Understanding Dynamics In Global Liner Trades

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Shippers eyeing the expanding overcapacity in the global liner trades as a potential driver for sustained low freight rates might find their expectations challenged, as highlighted at the S&P TPM24 conference in Long Beach. The insights provided by Jan Tiedemann, VP of liner strategy at consultancy AXS Alphaliner, shed light on the complex interplay of factors influencing the maritime industry.

Current Landscape

  • Containership Orders: Presently, 819 containerships are in the pipeline, boasting a cumulative capacity of 6.99 million TEU, equivalent to almost 25% of the existing global fleet capacity.
  • Concerns of Overcapacity: The surge in orders, coupled with subdued demand, has sparked concerns of an imminent crash in freight rates.

Factors Mitigating Overcapacity Impact

  • Delayed Deliveries: Tiedemann suggests that the perceived threat might be alleviated as a substantial portion of the ordered capacity is expected to be delivered later than anticipated.
  • Changing Ordering Landscape: Carriers, anticipating the challenges posed by ultra-large container vessels (ULCVs), are reevaluating their ordering strategies.The first generation of ULCVs is nearing retirement age, prompting a reconsideration of further investments in this vessel type.
  • Ageing Fleet Dynamics: With approximately 3.5 million TEU of the global fleet aged over 20 years and 7.9 million TEU over 15 years, comprising nearly 28% of the fleet, there’s an increasing need for fleet modernization.

Evolution in Ordering Patterns

  • Shift to Mid-sized Vessels: While 2021 witnessed a surge in orders for ULCVs and neo-panamax vessels, recent trends indicate a shift towards mid-sized vessels, particularly to replace older panamax units.
  • Emphasis is on fuel efficiency and adaptability to alternative fuels.Scrapping Older Vessels: Older ships, operating with outdated technology designed for higher speeds, are expected to be scrapped due to a lack of secondary trade or niche markets.

Navigating Challenges

  • Red Sea Crisis and Panama Canal Constraints: Ongoing challenges, such as the Red Sea crisis and limitations at the Panama Canal, continue to absorb excess capacity.
  • Impact of Slow-steaming Initiatives: Initiatives like slow-steaming, adding two weeks to Asia-North Europe round voyages, necessitate a 16% increase in tonnage for maintaining service frequency.

Looking Ahead

Ordering Activity Outlook: Anticipating a decline in ordering activity in 2024 and 2025, the focus is expected to shift to the bulk and tanker sectors, which also require fleet modernization.

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Source: The Loadstar