Q1 2024
SUPPLY
The container shipping fleet has been able to meet the additional TEU-mile demand generated by the Red Sea conflict, in part thanks to record high deliveries of new ships in the first two months of the year.
A record-breaking 67 new ships have been delivered, adding 450 000 TEU to the fleet.
The previous record of deliveries in the first two months of the year was set in 2018, when 312 000 TEU were delivered.
Just over half of the new capacity has come about in the form of ships between 13 000 and 17 000 TEU, of which 18 have been delivered.
The flexibility these ships can offer means they are seemingly more popular with carries than the larger vessels, with only one ship over 17 000 TEU arriving so far this year.
Of the 19 new ships with a capacity over 13 000 TEU, 16 have been deployed straight onto Asia to US and Europe trades.
Six are now on services into North Europe, four to the Mediterranean, four to the US East Coast and two to the West Coast.
Furthermore, two ships have been deployed from the Far East to the South American East Coast and one into West Africa.
Some alliances have benefited more than others from these new ships.
Eight of the ships have been deployed onto 2M services, while Ocean Alliance and THE Alliance both have two new ships deployed on their services.
MSC dominates the list of new ships deployed on non-alliance services, with four new ships on its standalone services.
The immediate deployment of new vessels onto services, particularly those from Asia to North Europe and US, reflects the need for carriers to fill in blanks left by longer sailing distances around the Cape of Good Hope.
This extra appetite for tonnage has lowered the idle fleet to 0.7%, or 187 750 TEU (source: Alphaliner) and sent charter rates upwards.
In the short term, carriers will continue to scramble for any available tonnage, but in the longer term overcapacity will remain the pressing issue.
Even with the 12.1% growth in TEU-mile demand compared to January 2019 (taking the Cape of Good Hope diversions into account) the fleet has grown at a faster pace, up 21% over the same period when measured in nominal terms.
A further 1.9m TEU is expected to be delivered this year, exacerbating the supply-demand imbalance.
This year, Xeneta expects the containership fleet to grow by 7.4%. This is slightly down from the 8.2% increase in capacity in 2023, when 2.28m TEU was delivered with only 160 000 TEU sent for demolition.
Demolition activity has fallen further in 2024.
Just 14 350 TEU has been permanently removed in the first two months of the year, with the sudden increase in demand for capacity saving many ships.
Higher charter rates mean even those older ships and less efficient ships can now expect daily rates above their operating expenses, keeping them on the seas and out of the breaker’s yard.
Since 2020 high charter rates have kept many older vessels profitable, with the average age of ships demolished in the past four years rising to 27.7 years.
Between 2016 and 2019 the average age at demolition was 21.0 years.
Ship demolition will increase when carriers have the tonnage they need to fill their schedules, which will certainly be the case once the Red Sea situation is resolved.
Carriers have also markedly reduced their contracting activity, hesitant to order new ships in a market already over-supplied and with continued uncertainty on future environmental regulations.
Ships that are ordered now are likely still to be sailing come 2050.
In 2023, 1.5m TEU was added to the order book, down from 2.7m in 2022 and the record high of 4.4m in 2021.
So far this year, 194 000 TEU has been ordered, dominated by 12 methanol ships with 13 000 TEU capacity ordered by ONE for delivery in 2027/28.
Only four containerships will be built with solely traditional fuel engines.
