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Shipowners have ordered a file variety of container vessels on the again of hovering earnings, prompting warnings of profligate spending by the handful of enormous shipowners that dominate the trade.
The entire capability of container ships on order hit 8.4mn 20-foot containers in November, in keeping with Braemar, reaching the best stage for the reason that shipbroker started gathering knowledge in 2000.
The file order ebook, which surpasses the extent reached following a related spending spree when disruption throughout the Covid-19 pandemic boosted earnings, have come regardless of uncertainty over the outlook for international commerce.
“It’s a huge amount of investment in fleet growth. [Shipowners] have got money to spend,” mentioned Jonathan Roach, container market analyst at Braemar.
However “the risk of overcapacity is there, particularly in an uncertain global economy.”
Transport firms have been forking out following a shock surge in earnings since late final 12 months, when disruption brought on by the Houthi militant group’s assaults on vessels crossing the Crimson Sea helped drive up the price of delivery.
Italian-owned Mediterranean Transport Firm, which already has the trade’s largest fleet, led the pack with 107 container vessels on order as of November. CMA-CGM is shut behind with 103 vessels.
However it’s unclear how lengthy the Crimson Sea assaults will proceed to spice up earnings. In the meantime, incoming US president Donald Trump’s promise to turbocharge protectionism on the planet’s largest importer can also be threatening to hit international commerce from subsequent 12 months.
Earlier than the Houthi assaults, which have compelled strains to sail longer routes and constrained the availability of ships, “you had lossmaking freight rates with a much smaller fleet than you see today,” mentioned Peter Sand, chief analyst at delivery market tracker Xeneta.
“Imagine all carriers will return to the Red Sea. That will bring rates to the floor. The overcapacity will be so massive.”
Individually, the choice to order extra ships when earnings are excessive may “make perfect sense,” mentioned Niels Rasmussen, head of delivery market evaluation at trade physique BIMCO, who identified that MSC was stocking up on vessels after deciding to finish a ship-sharing alliance with rival AP Møller-Maersk and “go it alone” from subsequent 12 months.
However “when you add all other decisions up [by every shipowner] then it does look a little bit excessive.”
By 2026, container delivery provide is forecast to have elevated 46 per cent in comparison with 2019, earlier than a growth in ship orders started, in keeping with Bimco. However the group solely expects cargo volumes to extend demand by 22 per cent over the identical interval.
Bimco warned that if nations retaliate in type to Trump’s menace to extend import tariffs, this might result in even weaker international commerce and container volumes than it has forecast.
Whereas many ships have been ordered to exchange ageing sections of the fleet, Rasmussen warned that it could possibly be a while earlier than older vessels are taken out of service. From June, an internationally agreed Hong Kong Conference will enter into pressure and set restrictions on which ship recycling yards can be utilized, primarily based on environmental and labour requirements.
“There are some capacity restrictions as to how many ships you can suddenly recycle in a year. You have to consider the Hong Kong Convention is coming into force. Those facilities that are there need to meet some strict requirements,” mentioned Rasmussen.
The container delivery trade already confronted related premonitions of oversupply following its spending spree throughout the Covid-19 pandemic. These fears have been shortly assuaged when the Houthi assaults flipped expectations simply months after the top of the well being disaster.
Maersk, which solely in February was bracing for a $5bn loss this 12 months, is now forecasting an underlying revenue of as much as $5.7bn.
“If we had spoken 12 months ago, we could have had the same conversation about [oversupply],” mentioned Johan Sigsgaard, chief ocean product officer at Maersk.
He mentioned that Maersk, which has 47 vessels on order, was anticipating ships to proceed avoiding the Crimson Sea “well into 2025”.
“We see a more volatile world. [It will become] harder to predict situations around supply and demand,” Sigsgaard mentioned.
