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Shipowners have ordered a document 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 overall capability of container ships on order hit 8.4mn 20-foot containers in November, in response to Braemar, reaching the best stage for the reason that shipbroker started accumulating information in 2000.
The document order ebook, which surpasses the extent reached following a comparable spending spree when disruption through 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,” stated Jonathan Roach, container market analyst at Braemar.
However “the risk of overcapacity is there, particularly in an uncertain global economy.”
Delivery 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 transport.
Italian-owned Mediterranean Delivery 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 provision of ships, “you had lossmaking freight rates with a much smaller fleet than you see today,” stated Peter Sand, chief analyst at transport 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,” stated Niels Rasmussen, head of transport 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 transport provide is forecast to have elevated 46 per cent in comparison with 2019, earlier than a increase in ship orders started, in response to Bimco. However the group solely expects cargo volumes to extend demand by 22 per cent over the identical interval.
Bimco warned that if international locations retaliate in type to Trump’s risk 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 switch ageing sections of the fleet, Rasmussen warned that it might 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,” stated Rasmussen.
The container transport trade already confronted comparable premonitions of oversupply following its spending spree through the Covid-19 pandemic. These fears had been rapidly 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],” stated Johan Sigsgaard, chief ocean product officer at Maersk.
He stated 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 stated.
