Supply: Capacity To Outweigh Demand Uptick

Overcapacity will remain the watchword for the container shipping sector in 2013. A record number of newbuilds are due online over the year, with consensus from shipping consultancies indicating a year-on-year (y-o-y) growth in vessel capacity of between 9% and 10%, as 1.7mn twenty-foot equivalent units (TEUs) of new capacity is due online. This delivery rate is set to continue causing overcapacity. Although demand will be bolstered by the slow but continued recovery in the US, and the eurozone's emergence out of recession in 2013, supply is set to once again dwarf demand.

As highlighted, part of the ongoing capacity problem is the volume due online in 2013. The projected increase of between 9% and 10% is on top of the 9% and 8% growth in the global container fleet in 2011 and 2012, respectively.

Growth Not Letting Up
Global Container Ship Fleet (dwt and % change y-o-y)

However, the major issue facing containership operators in 2013 will be the influx of vessels on the Asia-Europe trade route. The route is just starting on the road to recovery, following a recession in the eurozone in 2012, but is set to see the greatest concentration of new tonnage, as a new fleet of mega vessels are launched.

Due to their size, vessels of 14,000TEU and over are restricted to the Asia-Europe route, and in 2013 even more of these vessels are due online. In the top tier of container shipping companies the bar is being set higher in terms of vessel capacity, with CMA CGM welcoming its second 16,000TEU ship, the Alexander von Humboldt, which along with its sister ship, the Marco Polo, are the largest box ships afloat.

Maersk Line is set to take delivery of the first of its fleet of 20 18,000TEU vessels in mid-2013, moving the bar even higher in terms of ships operating on the Asia-Europe route. Other carriers in the top 20, while not going as far as CMA CGM and Maersk Line with their fleet expansions, are taking on larger vessels. APL, NYK Line and CL are all due to join the mega vessel club, operating ships of 13,000TEU or above in 2013.

Top 20 Container Line Newbuild Plans
Company Current largest vessel size, TEU Largest vessel newbuild plans, TEU When due online
Source: BMI
Already operating 13,000TEU+ vessels Maersk Line 15,550 18,270 from 2013
MSC 14,000 16,000 Q314
CMA CGM 16,000
COSCON 13,114
CSCL 14,074
Hanjin Shipping 13,100
Hyundai MM 13,082
UASC 13,500
Hapag-Lloyd 13,200
13,000TEU+ vessels on order APL 8,110 14,000 from 2013
NYK Line 9,300 13,000 from 2013
CL 8,888 13,000 from 2013
Evergreen Line 7,024 13,800 from 2014
MOL 8,000 13,000 from 2014
Yang Ming 8,626 14,000 from 2015
K' Line 8,212 14,000 from 2015
Other order plans Zim 10,000 Seeking to order 13,000 after 2015
PIL 4,000 6,600 2013
CSAV 8,000 9,300 2015

In order to make way for these larger vessels, container lines are cascading their fleets. Ships that were used on the Asia-Europe trade route are now being used on the transpacific route

Cascading does not address the fundamental issue of overcapacity, but rather moves the problem onto other trade routes. BMI highlights that although the US economy is in recovery, demand is not strong enough to soak up a massive influx of tonnage. So far only one 13,800TEU vessel, the MSC Beatrice, has been put on a transpacific route, docking in Long Beach in October 2012. The launch of a new round of mega vessels will likely see more vessels of this size plying this route. This is leading to tonnage trickling down to other trade routes. On the intra-Asia route, for example, vessel sizes vary from 4,500TEU to 8,000TEU, when 15 years ago this route was being catered for by 1,700-2,800TEU vessels.

BMI highlights two trends that we expect will remain key in controlling capacity in 2013: idling and slowsteaming. According to Lloyds List Intelligence, the percentage of the idled fleet globally stood at 6.2% on April 17 2013 (last available data). While this is a slight drop on the 6.4% measured to be in lay up on April 10, it is still above the 6% average for the year to date. The 6.2% of the global fleet in layup is also up y-o-y on 5.5% a year earlier.

Keeping Capacity In Check
% Of Global Container Fleet Idle

While the idle fleet is likely to tick down in preparation for the traditional peak season shipping period, May through to September, the idle fleet is set to remain elevated due to the influx of new tonnage.

The second strategy BMI believes will remain prevalent in 2013 is slowsteaming. The industry has used this to highlight its green credentials and as a way to reduce fuel consumption and suck up some extra tonnage: if ships are slower more vessels are required to stick to service loop timetables.

Slowing Down
Containership Average Speed (knots)

Latest data, for April 19 2013, shows container vessel speeds averaging 9.8knots, the lowest speed so far in 2013 and down on the average speed of 10.1knots for the year to date. The average box vessel speed of 9.8knots is down 7.3% on 10.57knots a year earlier.

This article is tagged to:
Sector: Shipping
Geography: Global