Stagnating trade and a ballooning surplus of shipping containers, following easing of pandemic era supply chain constraints, has led to a collapse in newbuild container output, which is forecast by UK consultants Drewry to slump to its lowest level in 14 years.
Drewry estimates that global box production contracted 71% year-on-year to 306,000 teu in the first quarter of 2023, the lowest level since the same period of 2010. While some recovery is anticipated through the remainder of the year, full-year output is not expected to exceed 1.8m teu, the lowest level since the recession-ravaged year of 2009, according to Drewry’s Container Equipment Forecaster.
Currently, several factories in China are either closed or operating on significantly reduced working hours, with full-scale production expected to commence in June. Meanwhile, commercial production at two new plants in Vietnam is not expected to start before Q3 this year with output scaled back from original expectations. The Hoa Phat Group factory in Cai Mep and the joint venture plant between Ace Engineering and Seojin Systems in Haiphong together will have the capacity to produce 600,000 teu a year by 2026.
Meanwhile, this year has seen record returns of containers to leasing companies, while carriers have been busily disposing of ageing and surplus boxes in their owned fleets. Currently, the priority for most container owners is to adjust their equipment pools to better match current trading and vessel supply parameters, and to remove ageing or damaged boxes that have accumulated as a consequence of supply chain congestion over the period of the pandemic.
Drewry expects such retirements to match last year at around 2.8m teu in 2023. Despite high levels of disposals into the secondary market, used dry freight container prices have held up well and are expected to remain steady through the year.
As a consequence, the global fleet of containers is forecast to contract 2% this year to 49.9m teu, representing the first fall in 14 years. The global container shipping trade is expected to remain weak, expanding just 1% in 2023, but a recovery in cargo demand is anticipated in subsequent years as the global economy gathers momentum.
This together with an expanding vessel fleet will drive increased demand for newbuild shipping containers, with output forecast to more than double next year, according to Drewry’s latest assessments. This will return the global shipping container fleet to modest growth, which is forecast to expand at an average annual rate of 2.9% over the period to 2027.
Hmm, i dispute ‘used dry freight container prices have held up well and are expected to remain steady through the year’ – prices have dropped as fast or faster than they ever have. Prices have more or less ‘normalised’ but from what i see it looks like they have a way further to go and are still in steady decline. We have seen approx 40% come off used prices since dec 2022 possibly more.
I note that statement isn’t far off line with their pervious predictions for the market, however the term i’d use isn’t far off ‘a crash’ in prices. Myself and others traders i work with have never seen a single significant drop in prices as big as was seen in Q1 2023. In addition – all the market analysis and precisions i saw, i never saw anyone discussing the impact of significant pressures & increases to depot and storage costs on the market either.
OK so i only trade in UK and we are 1 small market so our experiences may not be market wide, but sometimes i do wonder if we need to consider who pays Drewerys bills, and if their advice is somewhat tailored to help their paymasters? How are prices expected to remain strong /healthy when a few lines later, they admit that current disposals this year will continue at over twice the normal disposal rate into a sales market where demand is pretty steady / consistent. We have huge oversupply and comparably static demand.