Container Shipping Quarterly
Special Report
And that , he added , would have the extra benefit of absorbing large amounts of capacity should the Red Sea and Gulf of Aden be deemed safe for shipping .
‘ Virtually no scrapping ’
Increased vessel demolitions could also permanently remove capacity from the market , Clerc noted .
“ There has been virtually no scrapping for the last five years , and there are a lot of ships that are either at , or nearing , their end of life and are only hanging on because of the incredibly high freight rates that we have seen ,” he said .
“ At these rates , any ship can make money , but they are not competitive ,” Clerc added . “ And as [ rates ] start to correct , we ’ re going to see about 2 % to 3 % of capacity being scrapped every year , and that will significantly subtract from what is coming in the year ahead .”
Container ship capacity is forecast to grow 9 % in 2025 , with volumes expected to rise just 3 %. Oliver Hoffmann / Shutterstock . com
“ This is problematic in itself , as it implies the root cause might go deeper than just the Red Sea crisis .”
Capacity totaling 2.5 million TEUs has been delivered so far this year , while just 75,998 TEUs of vessel capacity has been scrapped , according to data from S & P Global . The average scrapping rate fell to 0.4 % of the fleet per year from 2020 to 2024 , compared with 1.6 % in the 2014 – 2019 period , as Red Sea diversions extended voyage times and strong demand on the main Asian export trades combined to fill all available capacity .
“[ Maersk ] highlighted that supply discipline in the form of slow steaming , blanked sailings and scrapping could emerge once the market returns to a normal level of profitability , as slack capacity in the industry is very low ,”
Newbuild vessel orders to boost top carrier fleets by 20 %
Top 10 carriers ' container ship fleet and newbuild capacity on order , in TEUs , with percentage of capacity on order to existing fleet
MSC
A . P . Moeller - Maersk
CMA CGM / APL Cosco / OOCL Hapag-Lloyd Ocean Network Express Ocean Network Express
Evergreen Line HMM
Yang Ming Line Zim
4 %
11 %
12 %
8 %
28 %
37 %
0 1,460,163 2,000,000 4,000,000 L
6,000,000
In service On order
26 %
9 %
27 %
21 %
L
Parash Jain , HSBC ’ s global head of transport and logistics research , wrote in a market report on A . P . Moller-Maersk in late October .
According to Alphaliner , the top 10 container lines operate 683 vessels aged 20 years or older , representing capacity of more than 2.6 million TEUs . Assuming 25 years as the normal commercial lifespan of a sea-going vessel , the analyst said the top 10 operators could use 44 % of their combined order book just to replace the oldest ships in service rather than for growth .
Mediterranean Shipping Co . has an order book almost the size of Hapag-Lloyd ’ s in-service fleet at 2 million TEUs , but Alphaliner said 60 % of the capacity on order could be used to replace aging vessels .
“ The Geneva-based carrier still operates 315 ships which were built in or before 2004 ... many of these vessels will become candidates for demolition in the coming years when the newbuildings hit the water ,” the analyst noted .
Another issue absorbing ocean capacity , over and above the Red Sea diversions , was worsening delays at ports in Asia and Europe , according to Sea-Intelligence Maritime Analysis . The analyst noted in its Sunday Spotlight newsletter that capacity absorption has steadily increased since hitting a low point in the summer of 2023 . “ This is problematic in itself , as it implies the root cause might go deeper than just the Red Sea crisis ,” Sea- Intelligence wrote . “ Of course , the Red Sea crisis is an important element currently , but the worsening of conditions began before the crisis started in the Red Sea .”
Maritime consultancy Drewry estimates container shipping will report a profit of $ 50 billion this year , up from $ 28 billion in 2023 . And while it is a fraction of the $ 298 billion recorded in 2022 , the carriers will enter an uncertain 2025 in robust financial health .
Source : Sea-web , S & P Global © 2024 S & P Global email : greg . knowler @ spglobal . com
20 Journal of Commerce | November 18 , 2024 www . joc . com