Analyst Warns Container Vessel Surplus Looming

Ocean container carriers, just back to profitability after last year’s steep shipping downturn, face a return to overcapacity in the coming 12 to 18 months because a projected fourth quarter slowdown in cargo demand will likely continue into next year, an analyst said.

Paris-based Alphaliner expects demand growth to fall from about 12 percent this year to 6 to 8 percent in 2011. The global fleet of container ships is expected to grow 9.6 percent next year, Alphaliner said. Despite this year’s strong fleet growth, the balance between supply and demand for container ships has returned to relative equilibrium after the global slowdown in 2009 resulted in a demand gap of more than 14 percent, according to Alphaliner.

Better balance may return in 2012, with the boxship fleet forecast to grow 7.7 percent in while cargo demand is projected to increase 8.2 percent.

The overall fleet is expected to grow 9.5 percent this year after slumping to a record low expansion of 5.6 percent in 2009 due to high scrapping levels of older tonnage and delivery deferrals.

The active container ship fleet soared even faster, growing 19 percent so far this year with deliveries of new vessels adding 1.15 million 20-foot equivalent units of capacity while a further 1.28 million TEUs of idled ships have returned to service as cargo demand increased.

If the idle fleet remains steady at current levels until the end of the year, it will bring the increase in active capacity to 22 percent, Alphaliner says.

This supply surge has been matched by a growth in demand that has reached an average 17.3 percent for the major carriers so far this year. However, slower demand growth in the second half will reduce full year growth to about 12 percent.

Demand for containerships is boosted by extra slow steaming, which Alphaliner said absorbed an estimated 4 percent of the fleet.

Source: Journal of Commerce