Wednesday , 13 November 2019
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Demand to outstrip new capacity this year, says brokers

Demand growth in the container sector is expected to outpace capacity expansion this year, according to Clarksons.

“Together with the rapid rate of demolition, the thin order book outside the larger sizes and a likely slowdown of the ‘cascade’, this may in the medium-term lend gradual support to the earnings environment,” the British shipping broker added.

Looking back at 2014, it said global container trade is estimated to have grown by 6%. “The recovery in volumes on the trades from Asia to Europe and the US first seen in 2013 came through strongly in 2014, supplementing the growth in volumes on the intra-Asian trade and a number of regional trade lanes,” it commented.

The fully cellular fleet stood at 18.2m teu at the end of the year, a rise of around 6% during the 12 months, with the order book of 3.3m teu representing 18% of existing capacity.

“The sector still faces issues,” Clarksons cautioned. “Surplus capacity generated by the slowdown in trade during the downturn, and the mismatch between a delivery schedule dominated by very large ships and a more balanced pattern of global demand.

“This is still leading to a substantial degree of ‘cascading’, which keeps the pressure on charter tonnage and creates freight rate volatility. However, surplus capacity from the downturn is gradually being absorbed, with slow steaming accounting for much of it, and levels of boxship demolition remain elevated.”

The brokers’ added that idle boxship capacity stood at around 1.0% to 1.5% of the fleet at the end of 2014, a level significantly lower than that seen in northern hemisphere winter periods in the three previous years. “This could be indicative of slowly tightening market conditions,” it said.

Clarksons’ comments on the container market were part of  a commentary accompanying its 2014 financial results.