Vessel overcapacity for container ship lines is expected to worsen through April and persist through 2011, Paris-based SeaAxis said in its quarterly report on container shipping.
Carriers are laying up vessels during the slow winter season but must deal with an order book representing 26 percent of current effective capacity, said Philippe Hoehlinger, vice president of risk management at SeaAxis, the marine container leasing unit of Axis Intermodal UK.
Hoehlinger said the added capacity comes as vessel scrappings have decreased, cancellations and postponements of new orders have stopped and carriers’ slow-steaming “seems to have reached a plateau.”
Effective fleet capacity, excluding the impact of slow-steaming and layups, is expected to increase 17 percent this year and 10 percent by the end of 2011, SeaAxis said.
“Freight rates have already started indicating the change of trend that is due to last for the next two quarters,” Hoehlinger wrote in the report. With operating costs rising, carriers will be squeezed by capacity that is growing faster than demand, he said.
SeaAxis said global rates in the current quarter, normally a slack period after the pre-holiday shipping peak, are expected to decrease by at least 10 percent.
“All trends remaining constant, the vessel capacity oversupply situation will reach its peak at the end of the first quarter of 2011 and will then gradually recover, slightly quicker than previously expected but not entirely until the end of 2011,” Hoehlinger said.
Carriers survived the recession by delaying vessel deliveries, laying up ships and slowing vessel speeds to conserve fuel and soak up capacity. SeaAxis said renewed layups will make carriers’ oversupply “slightly less catastrophic than expected.”
Container shipping’s long-term fundamentals are positive, the report said. “Despite the seasonal squeeze and the short-term expected challenges, the underlying fundamentals for container shipping remain largely favorable in the mid-term with the forging of global supply chains, the rise in merchandise trade and the emergence of BRIC countries (Brazil, Russia, India, and China) still creating demand for the future.”
Carriers are laying up vessels during the slow winter season but must deal with an order book representing 26 percent of current effective capacity, said Philippe Hoehlinger, vice president of risk management at SeaAxis, the marine container leasing unit of Axis Intermodal UK.
Hoehlinger said the added capacity comes as vessel scrappings have decreased, cancellations and postponements of new orders have stopped and carriers’ slow-steaming “seems to have reached a plateau.”
Effective fleet capacity, excluding the impact of slow-steaming and layups, is expected to increase 17 percent this year and 10 percent by the end of 2011, SeaAxis said.
“Freight rates have already started indicating the change of trend that is due to last for the next two quarters,” Hoehlinger wrote in the report. With operating costs rising, carriers will be squeezed by capacity that is growing faster than demand, he said.
SeaAxis said global rates in the current quarter, normally a slack period after the pre-holiday shipping peak, are expected to decrease by at least 10 percent.
“All trends remaining constant, the vessel capacity oversupply situation will reach its peak at the end of the first quarter of 2011 and will then gradually recover, slightly quicker than previously expected but not entirely until the end of 2011,” Hoehlinger said.
Carriers survived the recession by delaying vessel deliveries, laying up ships and slowing vessel speeds to conserve fuel and soak up capacity. SeaAxis said renewed layups will make carriers’ oversupply “slightly less catastrophic than expected.”
Container shipping’s long-term fundamentals are positive, the report said. “Despite the seasonal squeeze and the short-term expected challenges, the underlying fundamentals for container shipping remain largely favorable in the mid-term with the forging of global supply chains, the rise in merchandise trade and the emergence of BRIC countries (Brazil, Russia, India, and China) still creating demand for the future.”