Too few boxships? Surely not

10/7/2012

How can it be possible to contemplate a potential shortage of containership capacity when 2013 is on course for record deliveries?

By the end of the year, cellular fleet capacity will have reached about 16.5 million teu from less than 10m teu in late 2006. And there is no let-up, with almost 1.7 million teu of capacity due to be completed by shipyards in 2013, the year when the first of Maersk’s Triple E 18,000teu giants enter service.

Peer a little further ahead, however, and the pattern starts to look quite different, with just 206,300teu of new slots due for delivery in 2015, according to Lloyd’s List Intelligence data.

Of course, that number will change as further orders are placed, but with finance very tight, there will be no repeat of the bonanza five or six years ago when owners and operators were desperate to book berths to build the new generation of ultra-large boxships of 12,000teu or more.

Neither would anyone want a return to that mad scramble that contributed to the industry’s subsequent woes as it was forced to absorb so much extra tonnage during a prolonged period of economic uncertainty.

Lines are having to adjust their fleets, with smaller vessels switched to other routes to prevent too many vessels sailing with excessive amounts of empty space on board, a recipe for price cuts. Rates are already slipping, with spot prices from Asia to Europe down as much as a third from May’s peak following a steep rally in the early weeks of the year.

Cascading will not absorb all the available tonnage, with the number of inactive or laid-up ships expected to rise over the next few weeks as the seasonal slack period arrives and as consumer demand continues to stutter in Europe.

So why would some industry veterans start worrying about looming shortages? There are several reasons.
The industry needs a steady influx of newbuildings as older ships are scrapped and to keep abreast of market requirements. Despite the decline in Asia-Europe volumes compared with a year ago, trade is still increasing elsewhere, albeit at a modest pace.

However, only a handful of owners have returned to the shipyards. Banks are only likely to lend against newbuilding orders to an owner that has plenty of equity to contribute and many do not have the necessary resources.

That would appear to be good for the industry, given the excesses of recent years, but could also leave the container trades with ships that are not really suitable for the routes where they are deployed. Even many of the brand new ships now entering service are not of the best design; when they were ordered, oil prices and the need for more fuel-efficient tonnage were less of an issue.

The industry faces real capacity shortages in the years ahead as ordering activity slows and a shortage of the right type of ships. But with no chance of a sudden revival of ordering, which in any case, that would probably do more harm than good right now because of the impact on sentiment, lines will just have to muddle through until confidence returns to the cargo trades and financial markets.