No Trade Balance for Container Shipping Until End of 2019, Says Alphaliner

A containership being sold for scrap pictured off Singapore in January 11, 2016.

By Mike Wackett (The Loadstar) – Recent forecasts from ocean carriers that a supply-demand equilibrium will be reached next year are “optimistic”, says Alphaliner.

It says newbuild deliveries with 1.6m teu of cellular capacity will aggravate a supply overhang that is expected to be carried over from the fourth quarter of this year.

Alphaliner’s current idle containership survey records a two-year low of 147 vessels, with a capacity of 275,897 teu, in lay-up, but it warned that the number would soar in the final three months of the year, with idle fleet capacity rising to 800,000 teu.

“The total global fleet will grow by over 300,000 teu over the next three months from new vessel deliveries, even after adjusting for projected vessel scrapping, and this will further add to the supply side pressure,” said Alphaliner.

However, the current spike in steel prices – which saw recent scrap sales reach more than $425 per LDT (compared with around $350 at the end of July) could encourage more owners to dispose of older vessels.

According to the latest data from London shipbroker Braemar ACM, 16 container vessels have been sold for scrap in the past 30 days, bringing the total for the year to 131 for 380,000 teu, compared with 119 vessels, 407,500 teu, by the same time in 2016.

Notwithstanding the temporary suspension of a number of regular liner services for the winter slack season, containership brokers are also reporting a flood of option declines for ad-hoc charter vessels fixed for peak season overflows.

Alphaliner also suggests that the consequence of falling spot rates from China, in seven out of the last eight weeks, may prompt carriers into a more radical blanking programme to protect the levels of Asia-Europe contract rates which will soon start to be negotiated.

And it attributed the blame for the spot rate erosion on all trades from Asia during a traditional busy period to carriers reintroducing too much capacity in the peak season.

Alphaliner warned of “rate turbulence” next month and said the cancelled sailings to follow China’s Golden Week holiday, 1-7 October, would be “insufficient to counter the fall in demand”.

It said: “Deeper capacity cuts for the winter season will be required, but carriers have so far chosen to slash rates instead.”

According to its calculations, and based on present levels of scrapping, Alphaliner estimates that demand will only catch up with supply in the third quarter of 2019, bringing to an end a decade of overcapacity.

And even that may be short-lived, with a potential new wave of newbuild orders triggered by recent announcements by CMA CGM and MSC for new ultra-large container vessels stemmed for delivery starting in the second half of 2019.

The Loadstar is fast becoming known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.

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