Demand for container shipping is growing faster than supply, improving the fundamental market balance for the first time since 2011.
In 2016 demand for the container shipping grew by 2.7% with the supply side growing by only 1.3%, the most recent available BIMCO data show. This [ds_preview]meant that the fundamental market balance improved for the first time since 2011. This development is primarily due to decisive actions by shipowners who sold excess tonnage for demolition. Hopefully, improved earnings will also follow soon, BIMCO says.
Since March 2016, the container ship fleet has reduced in size by 100 ships. The strong trend of large ships being delivered and smaller ships getting demolished has meant that the TEU capacity of the fleet has increased by 40% since the start of 2011. At the same time the number of ships has only increased by 3.3%.
As the fleet is being split into main liners and right-sized feeders, abundant capacity is being removed among the smaller-than-3,000-TEU feeder ships and the narrow beam (panamax ship fleet).
Focus on new networks
BIMCO expects the container ship fleet to grow by 2.9% in 2017, under the assumptions that 450,000 TEU will be demolished and 1 mill. TEU will be delivered. »For that to happen, the current demolition interest must cool somewhat and the delivery pace must pick up. Nonetheless, both assumptions are likely to happen in a market that is improving. In fact, it is already happening,« the council says in its Shipping Market Overview & Outlook April-2017.
»The year has started on solid ground, in terms of both the development of the demand side and the ongoing work on keeping the lid on fleet growth. 2016 proved to be a year of upheaval. Most alliances were broken up to form new ones; one line went bankrupt, and in combination, shipowners managed to cut deep into the excess capacity of the fleet. Gains from a low-fleet supply are instantly reaped, whereas the benefits from new network structures take a bit more time,« the report says.
BIMCO expects the container shipping industry to continuously optimise networks and make them more efficient. Cutting costs where it’s still possible and making the most of the fleet available remains essential to reaping the benefit of the individual alliance members. As cost cutting is a huge part of this, the effect on freight rates is not the only indicator of a successful implementation.
