Low Orders High Scrapping Signal Improvement


With the lowest level of new steel deliveries in the containership sector since 2004 and record levels of ship scrapping underway, growth in capacity amounted to just 246,000 TEU or 1.2% in 2016, according to BIMCO’s Peter Sand.

With demand growth outstripping capacity growth, at a rate of 2.5% in 2016, the fundamentals of the container shipping market are slowly improving.

According to Sand though, some routes are performing better than others, with trade on the Far East to Europe route still having not recovered to 2014 levels, despite some growth in 2016 compared with 2015.

On the supply side, capacity across the containership fleet peaked at 20.04 million TEU in August 2016, the first time it has passed the 20 million mark, before falling back to 19.98 million TEU by the end of the year, as demolition activity ramped up.

660,000 TEU of capacity was sold for scrapping, 60% of which came in the second half of the year. This was particularly evident amongst Panamax vessels, of which many have become redundant since the expansion of the Panama locks in June 2016.

However, Sand warns that there is still work to be done: “For the charter market and charter rates, it is a bad omen to have idled capacity at all since it illustrates that there is more than enough capacity in the market already. In terms of demand for charter-in tonnage terms, BIMCO expects 2017 to be another tough year on pure tonnage providers.”

The growing uncertainty surrounding the principal of free trade as a result of the Trump Presidency and the rise of populist politicians in many other Western countries may cause further headaches in 2017.

“While protectionism currently dominates the headlines as more trade restrictive measures are taken than trade facilitating, the CETA-agreement between EU and Canada stands out. But was CETA the final big multilateral trade agreement before the closing hour? Or will the “Free Trade Agreement EU-Japan” make it to the finish line too?” asks Sand.

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