The supply/demand imbalance in the container shipping segment is worsening with Alphaliner reporting 2018 will mark the lowest level of boxship scrapping since 2008, despite a recent pickup in vessels heading for recycling yards.
Alphaliner data shows that this year the container fleet will take on some 1.35m teu in new deliveries, up from the 1.19m teu seen last year.
In contrast, containership capacity scrapped by the end of October has reached just 52,150 teu.
“Although a surge in vessel sales for demolition in October could bring up the full year deletions figure to around 100,000 teu, the pace of scrapping this year is still expected to be the lowest on record since 2008,” Alphaliner stated in its most recent weekly report.
Alphaliner predicts the global liner fleet will hit 22.3m teu by year-end, an annual growth rate of 5.8%, far higher than the 3.7% seen last year or the meagre 1.9% recorded in 2016.
The high rate of supply growth has started to hit the fleet employment numbers, as demand growth starts to slow with Alphaliner reporting the idle fleet capacity now stands at 700,000 teu and is set to rise further in the next couple of months.
In a container market report published last month, Peter Sand, chief shipping analyst at international shipowning body, BIMCO, also lamented the lack of scrapping seen this year.
“BIMCO expected the fundamental balance to improve in 2018 and higher freight rates across the board as a result of the fleet growing slower than demand; now it seems as if it’s not going to happen. This is partly because of demand growing marginally less than expected, but mostly because of much faster fleet expansion,” Sand wrote.
Despite the slow first three quarters, brokers Braemar ACM have detected a very strong pick up in owners’ willingness to send their ships for recycling this month.
“With charter rates continuing to slip and the majority of buyers taking a ‘wait and see’ approach to secondhand tonnage, demo continues to be the focal point of concluded sales,” Braemar ACM noted in a containership report from last week, adding: “With recycling prices at historically attractive levels and charter rates falling ever closer to break even levels, we expect further tonnage to come into the market over the next few weeks as owners look to capitalise on these strong prices.”