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Home » Can Slow Steaming Offset Container Shipping’s Capacity Problem?

Can Slow Steaming Offset Container Shipping’s Capacity Problem?

by sam
May 8, 2023
in Maritime Education

Any recovery in the container shipping market will be overwhelmed by the flood of new vessels entering the market, according to maritime consultancy Maritime Strategies International (MSI).

According to MSI’s April market report, released yesterday, data from the early months of this year have been “dismal”, but there is an expectation that the industry will see some modest annual trade growth at least, starting from the middle of this year.

As a result of the less-than-encouraging economic outlook, MSI believes the tendency to slow vessel speeds to cut costs and capacity has been overlooked as a mechanism for carriers to affect the market.

MSI identified lower average speeds for vessels, since the middle of last year, could have an impact on the available capacity overall.

“An interesting recent trend – which we believe has not received the attention it deserves – has been a slowdown of the sailing speeds of container ships since mid-2022, above all for larger assets.

“On average larger vessels have seen average speeds drop by around 1 knot between mid-2022 and Q1 23, which if maintained would represent a meaningful reduction in effective vessel supply,” said MSI.

Decreasing speeds owe more to low trade volumes and higher fuel costs than any concerns about the impact of upcoming environmental regulations, due to be enforced from January 2024, according to the consultant.

“If ships do not reaccelerate this would – albeit only partly – help to offset the impact of increasing over-supply,” explained MSI.

Nevertheless, MSI said there is “some evidence” that US inventories are starting to be reduced, but there are more headwinds down the line if MSI is correct that the world economy will see an economic slowdown later in the year.

A more recent modest upsurge in the economy, however, will not be “sufficient to offset the coming upsurge in newbuild deliveries”.

As a result of the new tonnage that is expected to be delivered this year, and with 200,000 teu already delivered, carriers will need to cascade ships to new markets, raising the average vessel sizes, and therefore the available capacity, and affecting the freight rates in the more minor trades.

The Loadstar is 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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