Shipping company executives warn: Risks of overcapacity with high orders of 16.2 million TEU are gradually accumulating
Sunny Worldwide Logistics It is a logistics company with more than 20 years of transportation experience, focusing on markets such as Europe, the United States, Canada, Australia, and Southeast Asia. It is more of a cargo owner than a cargo owner~
Global container ship newbuilding orders continue to increase, and industry concerns about future overcapacity have intensified.
According to "Lloyd's List", the total number of global container ship orders has risen to 16.2 million TEU, equivalent to 46.5% of the existing fleet capacity. The ratio of orders to existing fleet capacity has reached a new high since 2009. The recent new ship orders from MSC and HMM have further pushed up this proportion. Against the background of the ever-expanding order scale, executives from Wanhai Shipping and Seaspan both warned about the potential risk of overcapacity, believing that if market demand changes significantly in the future, a large number of new ships under construction may bring greater supply and demand pressure to the industry.
New orders continue to push up global order scale
Judging from the composition of recent orders, data from Linerlytica, a shipping analysis agency, shows that MSC has ordered 20 container ships with a single-ship capacity of about 24,000 TEU at Dalian Hengli Heavy Industry; including previous orders, MSC has ordered 62 large container ships of more than 20,000 TEU at the shipyard. On October 20, HD Korea Shipbuilding & Marine announced that it had received a new ship order from HMM to build eight 13,000 TEU-class LNG dual-fuel container ships. The contract value is approximately 1.92 trillion won (approximately US$1.4 billion). These new ships are planned to be put into use on the Far East-India-Mediterranean route. The two orders further pushed up the total number of global container ship orders, bringing the order size to 16.2 million TEU, accounting for 46.5% of the existing fleet capacity.
New ships will be delivered in batches, and actual supply will still be affected by factors such as ship scrapping, delivery progress and market demand. However, as a large number of new ships are put into operation one after another, the practical question that the industry needs to face is: whether the new capacity can be fully digested by the market. Judging from historical experience, container shipping has obvious cyclicality. Order peaks often correspond to subsequent delivery pressure, while demand-side fluctuations, port efficiency changes and route adjustments will all change the release rhythm of actual effective transport capacity.
Resumption of Suez route weakens capacity buffer brought by detour
In addition to new ship orders, another change is also affecting the supply and demand relationship of container shipping: some routes are gradually switching from around the Cape of Good Hope back to the Suez Canal. Previously, the situation in the Red Sea caused many container ships to divert to the Cape of Good Hope. Longer voyages mean that the same transportation tasks require more ships, which objectively absorbs some of the new shipping capacity. But that buffer is eroding.
Linerlytica data shows that the number of container ships diverted from the Suez Canal to the Cape of Good Hope has dropped to 180, about half of the average of 350 ships in the past two years; among the routes it tracks, 30 westbound routes and 32 eastbound routes have resumed traffic through the Suez Canal, and some routes are planned to be adjusted in November. When ships no longer need to spend extra time around, shorter voyages may improve ship turnover efficiency, and also mean that less capacity may be needed to complete the same transportation tasks. Linerlytica also pointed out that the growth of global TEU mile demand has lagged behind the growth of shipping capacity supply. The combination of new ship delivery and route resumption may put market supply and demand under more pressure. However, the progress of route resumption will still be affected by factors such as the regional security situation, and it cannot be simply judged based on this that all capacity will be released in the short term.
Executives warn: Expanding order size does not mean simultaneous growth in demand
In the face of huge new ship orders, Chen Boting, vice chairman of Wanhai Shipping, said that if market demand changes significantly, the current order scale may bring major challenges to the industry. Seaspan CEO Bing Chen also reminded that the shipping industry is cyclical, and in the absence of the guarantee of long-term charter contracts, speculative ordering of new ships may face greater risks; he said that Seaspan's new ship and second-hand ship investments are supported by long-term and corresponding charter contracts.
The statements of the two executives point to a judgment: the continued expansion of order scale does not mean that future demand will also increase simultaneously. Changes in cargo volume, port congestion, the pace of ship deliveries, the scale of ship scrapping, and the recovery of the Red Sea and Suez routes will all affect actual supply and demand. At this stage, it is not possible to judge how freight rates will change based solely on the scale of new ship orders. However, as new shipping capacity is gradually delivered and some detour routes are restored, subsequent changes in ship supply and transportation demand will still affect the operation of the container shipping market. For freight forwarders and export companies, continuous tracking of the pace of new ship deliveries, route recovery progress and shipping company capacity management strategies will help to more accurately assess space supply and freight rate trends.
