“As global demand recedes after a two-year surge, the imbalance in the container shipping sector is increasing. Overcapacity is only expected to increase due to further declines in shipping volumes due to weak economies and the record orderbook for new containerships.
A recent analysis of the container segment shows that the market is likely to be flooded with new capacity, especially in 2023 and 2024. They predict that using traditional standards, scrapping vessels at age 25 or even after 20 years, the carriers will be unable to offset the capacity increases.
The current capacity inactive is nearly equal to the expected delivery of new ships in 2022. Last year and again this year, 1.1 million TEU in capacity is being added to the global fleet each year. They, however, highlight that the total orderbook now stands at 7.3 million TEU representing an increase of more than 28 percent for capacity by the end of 2025. Based on current new building forecasts, they expect 2.3 million TEU to enter the market in 2023 and a further 2.8 million TEU in 2024.
The imbalance is unlikely to be resolved by scrapping older ships. They expect the overcapacity will continue which has led industry analysts to forecast continued downward pressure on rates.”
*This article is excerpted from freshplaza.com website, published on 31st October 2022