Q1 2023
Supply
New Ships, Demolition and Fleet Growth
When looking at the decline in ocean freight rates, it becomes clear that the increase in available capacity has played a significant role. The delivery of new ships and the easing of congestion have both contributed to this increase. In January, demand dropped by 9.9% compared to the previous year, while the absolute size of the container fleet grew by 4.0%. Additionally, the easing of congestion and reduction in average delays led to an additional 1.8m TEU becoming available. This is evident in the decrease of ships that were tied up due to congestion, which fell from 13.7% in January 2022 to 6.2% in January 2023.
The global container shipping market has experienced a deterioration in its fundamentals, which is evident from the sluggish growth of global demand by just 1.5% in 2022 as compared to 2019, while the fleet grew by 11.9%. This trend is causing concern for stakeholders in both the supply and demand side of the market.
The declining market conditions have led to a focus on demolition, although some experts believe that the discussions are more intense than the actual numbers involved. Although more capacity has been demolished this year than in the previous year, it amounts to only one new Ultra large ship. While more old and inefficient ships will be removed from the market, it may not be enough to rebalance the market fundamentals.
It is expected that the fleet will grow by about 5% in 2023, followed by closer to 7.5% growth the following year.
During the first quarter of this year, there has been an addition of 278,000 TEU of new ships delivered, including the MSC Irina, which has the capacity to carry 24,232 TEU, making it the largest container ship in the world. On the other hand, demolition activity only totaled 26,000 TEU. It is worth noting that although new record-breaking ships have been delivered, they are not the most popular types. The largest increase in fleet size over the last two years has been for ships between 12,000 and 17,000 TEU, as these ships offer more flexibility compared to those above 17,000 TEU. They have also proven to be the most popular type of ship ordered by carriers in recent years.
Ships with a capacity between 3,000 and 8,000 TEU saw the smallest growth in fleet size compared to other ship types. Interestingly, there was no increase in the number of ships between 6,000 and 8,000 TEU, which have become less popular since the expansion of the Panama Canal. Although these ships are too young to be considered for demolition, they have recently become popular again in terms of ordering activity. Carriers have ordered around 750,000 TEU worth of post-panamax ships of this size to be delivered in the coming years after years of no such deliveries.
