Oversupply a “Permanent Problem”


The head of container shipping line Orient Overseas International Ltd (OOCL) has said that oversupply will be a permanent problem for the shipping industry unless financial performance improves, thereby allowing excess capacity to resolve itself, according to the Journal of Commerce.

In a recent article published by PTI, shipping consultants Drewry said that there is not a clear sign of a slowdown in ship orders and that excess supply will last for another year in 2015.

Tung Chee Chen, OOCL Chairman, said: “Irrespective of good or bad times, the industry over-invests in new buildings as carriers try to grow their market share and enhance profitability in the up cycle, while effecting unit cost reduction during the down cycle.

“With this behaviour, the industry suffers from the syndrome of perpetual excess capacity, forcing the industry to become more commoditised and cost driven.”

Oversupply has been an issue since the financial crisis of 2008, as poor economic growth has led to the stagnation of development in the industry.

Ma Zehua, Chairman of China Ocean Shipping Group recently said that oversupply is likely to last for the next two years as a result of excess orders, which are preventing supply-demand from finding the desired equilibrium.

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