Weak Container Demand and Overcapacity

Overcapacity issues are about to surface as new capacity increases to a record amount in 2012. Braemar Seascope's Containership Fleet Statistics state that the scheduled deliveries of 1.55 million 20-foot equivalent units will increase capacity to 16.8 million TEUs. This amount exceeds the previous record set in 2007, when capacity grew by 1.52 million TEUs. Deliveries made in 2012 are calculated to expand capacity by around "9.5 percent over available space this year", according to the Braemar Seascope's Containership Fleet Statistics report.

According to an article on the Journal of Commerce web site, "Braemar is forecasting huge additions to the cellular fleet in the ultra-large sector, which will raise the threat of overcapacity on the Asia-Europe trade lane, where overcapacity has been eroding rates since last winter. Of the 230 ships due for delivery next year, 59 have a nominal container capacity of 10,000 TEUs or more, which will introduce an additional 0.8 million TEUs into this segment. The growth of containerships fleets in the size bracket of 10,000 TEUs or more is already expected to reach 70 percent year-over-year in 2011, and will grow by an additional 57 percent in 2012."
10,000 TEU and higher containerships make up about 49 percent of orders worldwide, if you look at capacity. Containerships of up to 5,100 TEUs only make up about 20 percent of global orders, according to The Journal of Commerce.

The next year to eighteen months look bleak, according to Moody's Investors Service. They say that overcapacity issues will affect the ocean shipping industry, from container carriers to bulk operators. They expect the dry bulk sector to be most affected because their current orders equal about half of their current capacity, according to Moody's Senior Credit Officer, Marco Vetulli. They have around eighty percent of these new vessels set to be delivered over the next two years.

<a rel="nofollow" onclick="javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link/5177281']);" href="http://www.shiplilly.com/"title="Ocean Freight">Ocean freight</a> carriers had good numbers in the first quarter of 2011, but Moody's expects demand to decline and earnings to weaken. As more ocean shipping vessels are delivered, overcapacity issues will become more of a problem. Their outlook for the oil tanker segment is similar. They've had an increase in oil demand over the past eighteen months, but sustaining this recovery is unlikely through 2012 and 2013.

In the same report from Moody's, they said that the March tsunami in Japan caused supply chain disruptions, but these are expected to dissipate and volume should rise back up to the levels that they were before the disaster.