Keeping an eye on supply in 2013
GLOBAL trade volumes are projected to grow by 5.8 per cent this year to a total of 165 million TEU against an increase in total container shipping capacity of 6.3 per cent, according to the latest Clarkson Container Intelligence Monthly
In terms of the fully cellular fleet, BIMCO has forecast an increase in supply this year of 7.4 per cent, or roughly 1.5 million TEU.
Clearly, supply is going to exceed demand in 2013 by a significant amount. But there are some extenuating circumstances that might help to offset the stark mismatch…
According to a recent report from BIMCO, demolitions in the first three months of this year have been "flying at high pace, at an annualised rate of 450,000 TEU".
The actual figure for the first three months, according to BIMCO was 93,000 TEU, which is rather high, particularly when we consider the implications this could have on the 7.4 per cent growth figure.
Alphaliner, which has data for the first four months of the year, puts the total demolition figure now at 195,000 TEU. So it would seem that the pace of scrapping continues unabated.
The latest Alphaliner report concurs with the BIMCO estimate of a full year scrapping figure of 450,000 TEU. Clarkson, on the other hand, is a little more conservative, estimating that the total figure for 2013 will be close on 350,000 TEU instead.
Based on Clarkson's data this year's demolition rate will surpass last year's 334,600 TEU, but will still fall short of the all-time record of 379,400 TEU in 2009.
Given the rate of scrapping over the past few years, perhaps the Clarkson estimate would appear a little more realistic. If indeed the current pace of scrapping does keep up then it would clearly be the most significant level of demolition the industry has ever seen.
What is interesting, in terms of ship demolitions this year, is the fact that there are more Panamax-class vessel now headed to the scrap heap. Previously, vessel scrapping was restricted largely to the smallest, oldest ocean going vessels—most of which were sub-1,000 TEU.
But as scores of vessels are leaving the market, plenty more are coming in.
Vessel deliveries are coming thick and fast, based on the latest figures.
Clarkson reports that a total of 45 containerships with a combined tonnage of 294,618 TEU were added to the global fleet in the first quarter of this year.
Approximately two-thirds of these deliveries were comprised of 8,000 TEU plus craft, while a further 29 per cent were Post-Panamax ships between 3,000 and 7,999 TEU.
Given that most of the demolitions have come in the 3,000 TEU and below category, this clearly demonstrates the fact that the global containership fleet is getting bigger, while the smaller vessels are being pushed out—potentially along with their operators.
We have spoken with a number of smaller operators that are very concerned over this trend in the industry to continue upsizing as the smaller ships, even in their natural markets, become increasingly marginalised.
As the size of ships in the Asia-Europe and transpacific trades continues to rise from 8,000 TEU a decade ago to over 10,000 TEU in more recent times, and now as the latest newbuildings in this sector edge up towards 20,000 TEU, the upsizing trend is being mirrored in other trades, only on a smaller scale.
The fact that there are vessels in excess of 8,000 TEU being deployed in Intra-Asia, and other short-haul trades, not only adds a lot of capacity into those trades, which are already suffering as a result of low freight rates, it means that the carriers that have brought these ships in will enjoy lower unit costs at the expense of those carriers that have traditionally served as specialists in those markets.
If they are marginalised then many of these companies may cease to exist if the current trend continues. Perhaps more than anyone else, these niche Intra-Asia carriers are praying for a rebound in the mainline east-west trades, simply so the major players will pack their big ships up and go back to their own specialist trades.
Clarkson reports that vessel orders for 2014 remains rather low at this stage, however, this is clearly not a sign that next year will see a supply shortage. Too often in recent years we have seen a lack of activity in newbuilding orders suddenly change into a frenzy of orders.
Unfortunately the shipping industry can so often become a giant game of follow the leader, even if it means following the leader of a cliff.
It is absolutely crucial for the lines to focus on stability going forward. Recently in Shipping Gazette we argued on behalf of the lines to say that their orders should be seen in light of their perceived need to plan for the future. Now that they have ordered to secure tonnage for the future, it is time to let demand make up some of the lost ground it has suffered in recent years.
Then, and only then, can we hope to see a turnaround by 2014.
