Global Shipping’s 3-Year Overcapacity Crunch


Slowing global trade and a bloated orderbook of large vessel capacity mean that container shipping is set for another three years of overcapacity and financial strain, according to the latest Container Forecaster report published by Drewry Shipping Consultants.

The recent slowdown in world trade has forced Drewry to halve its forecast for container shipping growth for this year to just 2.2% and revise down estimates for future years.

An additional 1.6 million TEU of new capacity is being added to the fleet this year, equating to a growth rate of 7.7%. As a result, Drewry’s Global Supply and Demand Index, a measure of the relative balance of vessel capacity and cargo demand in the market where 100 equals equilibrium, has fallen to a reading of 91 in 2015, its lowest level since the 2009 recession.

Drewry believe that with a further 1.3 million TEU due to join the global fleet in 2016, many routes that are currently experiencing problems will be further hindered by new deliveries and the continued global cascade.

Neil Dekker, Director of Container Shipping Research at Drewry, said: “Were it not for the recent fall in bunker prices, shipping lines would be losing money. They cannot continue to rely on this unexpected gift to maintain profitability.

“The container shipping industry is in the midst of an over-capacity crisis which will worsen next year. How carriers and tramp owners address the overcapacity situation will influence the duration of the crisis. Shipping lines will need to idle a much larger portion of the fleet than they have hitherto been prepared to do. Otherwise, short of an unexpected recovery in traffic volumes, container shipping is set for several years of overcapacity and mounting financial losses.”

Some carriers have started to take more radical action by removing significant capacity from certain trades. Two alliances have each removed a single loop in the Asia to North Europe trade and the G6 alliance has taken out two strings this winter in the transpacific trade, although this is part of their usual winter re-deployment.

The maritime advisors previously stated that scrapping is not the answer to overcapacity in the industry and carriers should be looking to cut down on the number of small and big ships.

Drewry View: Drewry forecasts that its Global Supply/Demand Index will fall to its lowest level on record over the next few years, indicating that the overhang of excess capacity will be even greater than that experienced in 2009.

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