The container shipping industry is gradually moving towards a ‘new normal’ which will see supply growth slow as demolition of larger vessels accelerates, according to Peter Sand, Chief Shipping Analyst at Bimco.
He said that although newbuilding deliveries in 2014 were running faster than previously expected “the pace of demolition has been close to double that of the anticipated speed”. Bimco now forecasts that some 500,000 TEU of shipping capacity will be demolished this year compared to its previous estimate of 290,000 TEU.
The container shipping industry is gradually moving towards a ‘new normal’ which will see supply growth slow as demolition of larger vessels accelerates, according to Peter Sand, Chief Shipping Analyst at Bimco.
He said that although newbuilding deliveries in 2014 were running faster than previously expected “the pace of demolition has been close to double that of the anticipated speed”. Bimco now forecasts that some 500,000 TEU of shipping capacity will be demolished this year compared to its previous estimate of 290,000 TEU.
Strikingly, the size of vessels being scrapped has also risen this year. In 2013, 14 ships above 4,000 TEU were demolished, none larger than 5,000 TEU. So far in 2014, 35 ships above 4,000 TEU have already been scrapped including seven sister ships built in 1996-1998 offering more than 5,000 TEU.
“Bimco continues to expect the container shipping industry to steer itself along the lines of the ‘new normal’, where a demand growth of 5-6% must be matched by an equivalent supply growth,” said Sand. “There will be no more double-digit growth figures as in the past decades. For 2014, the fleet is expected to grow by 5.2%, a low level not seen for 15 years.”
He also said some clear patterns were now emerging on the Transpacific and Asia-Europe trades as both Europe and the US increased demand for imported containerised goods as their respective economies improved.
He said rates on the Transpacific lanes from Shanghai to the US West Coast were now “very stable”, although average freight rates were some 16% lower over January-April of this year compared to the same period of 2013, despite demand growth of 3.8% in 2014 compared to 3% in the first four months of 2013.
By contrast, the strict focus by carriers on the supply side on the Far East to Europe trades has helped deliver better returns for carriers. “For the first five months of 2014, the freight rate from Shanghai to Europe has improved by 21% compared to last year, according to the Shanghai Shipping Exchange,” added Sand.
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