Supply in container shipping has become “febrile and extreme”, according to analysts at Transport Intelligence (Ti), as the sector lurches between a surge in the requirement for capacity and a large increase in the supply of new vessels.

Stanley Smulders, director of marketing and commercial for ocean carrier ONE, on the sidelines of the Multimodal Exhibition in Birmingham that the Red Sea crisis had upset the balance of supply and demand in ocean shipping.

“In our industry, the market prices are normally set by supply and demand. Demand is easy – either it is up, or it is down. But the supply side is different. Pre-Red Sea closure, you needed 12 ships to sail weekly from Asia to Europe, you now need 15 to provide customers with a weekly sailing. So, the tonnage capacity has been reduced as a consequence, and that has upset the balance between supply and demand in favour of the supply side,” he said.

“If you look at all the statistics, there are no ships idle. Every single vessel is actually working… So, all the shipping lines are in need of ships at the moment,” he explained.

Indeed, Ti’s recently published Q2 Ocean Freight Rate Tracker described the need to reconfigure routes as “one of the most unpredictable and important forces shaping the market”.

Smulders," some carriers might be better equipped than others. Containers are continuously being built, and individual shipping lines may have been lucky to place orders for delivery at a certain position – if you had ordered a lot of new build containers from China for January, February or March due to the unforeseen geopolitical circumstances, you have been lucky,” he said.

“So, certain carriers have clearly less pressure than others. But it depends on your new build programme, it depends on how you have managed your stock before that… not every single shipping line is suffering to the same extent.”

Ti said: “The flow of new ships from Chinese and South Korean shipyards is continuing to grow. The number of new vessels is one of the reasons that the Cape route has inflicted only moderate pain on the market.”

According to Alphaliner data, ONE holds some 1.89m teu across 240 ships and has 36 vessels on order, which will add 475,274 teu to its network.

The largest carrier, MSC, accounts for 5.9m teu across 827 ships. It has 104 vessels, or 1.2m teu, on its orderbook, while Maersk has 4.4m teu across 713 ships and has 32 on its orderbook, set to give it an additional 406,014 teu.

Ti found that when compared with the same quarter last year, Q2 saw a 1.5% increase in capacity. However, the quarter-on-quarter comparison shows a slight decline, of 0.7%, in global average capacity.

And Mr Smulders warned that extra equipment would also be needed to support capacity growth.

“What we also have seen, of course, is that if you bring in more ships, you need more containers. If you add a million teu of ship capacity, that means that a million teu of containers is parked on these ships at any one time. So, you need a lot more boxes”.

He added that additional tonnage wouldn’t come cheap.

“What you also see is if the spot rates are going up because of the supply and demand situation, charter rates of vessels have gone up – this means that carriers face a significantly higher cost base. But shipping lines will pay these rates, because they know they can get a higher revenue. Otherwise, they wouldn’t charter them. We want every single ship to sail,” he concluded.

According to Alphaliner data, MSC charters 50.3% of its fleet, Maersk 41.1% and ONE 58.6%. Hapag-Lloyd charters the fewest of the ten major carriers, at 40% of its fleet, whereas Zim comes in at the other end of the spectrum, with 94.6% of its fleet chartered.

And Ti warned: “What hangs over the market is what it will look like when, or if, the Suez Canal route returns. It would seem likely that the balance of supply and demand would shift violently towards what might be called an oversupply of container shipping capacity.”

It noted that if there was overcapacity in future, the downwards pressure on rates would prove irresistible.

Yang Ming’s CFO said today that there is “chaos” in the shipping sector.

Source: the loadstar

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	Issue 91 of Robban Assafina (May/ June 2024)