Despite initiatives by carriers of blanking sailings, combining routes and scrapping older, smaller vessels, overcapacity in container shipping will continue to increase due to weak economies and record orderbooks, according to the Alphaliner consultancy in its latest market assessment. As a result, industry analysts anticipate a continued downward pressure on ocean freight rates.
Alphaliner warns that the market is likely to be flooded with new capacity, especially in 2023 and 2024. It predicts that using traditional standards, scrapping vessels at age 25 or even after 20 years will not offset the capacity increases.
“Demolition will be the main way to cut supply and mitigate overcapacity risks,” says Alphaliner, “but it remains to be seen how much of the fleet could effectively be torched.”
Alphaliner reports that 1.1 million TEU in capacity is being added to the global fleet each year. The total orderbook now stands at 7.3 million TEU representing an increase of more than 28 percent for capacity by the end of 2025. Based on current new building forecasts, the consultancy expects 2.3 million TEU to enter the market in 2023 and a further 2.8 million TEU in 2024.
“As the world edges toward what could be a lasting recession with an anticipated drop in seaborne trade, the market will likely not be able to absorb such a flood of newbuilding capacity,” comments Alphaliner. (Containerships sit idle in 2012, image Maersk Line)