Two new research reports from leading container analysts paint a worrying picture for the trade.
Weakened demand from Europe and a record volume of newbuilds this year will subdue the market, suggested Peter Sand, chief shipping analyst at BIMCO in Denmark. Sand predicts 1.6m teu of new capacity will enter container shipping in 2015, a new record.
“The lack of European demand is of concern,” Sand said. “In the short term, this is because container shipping is a low-margin business and industry profitability requires sustainable freight rates on high-volume trades. In the long term, half of all new ships are bound for a future on the Asia to Europe trading lane, cascading the present work horses on to other trading lanes.”
Meanwhile, shipping consultants Drewry warned of a tough three years ahead for container shipping in a new report.
“Slowing global trade and a bloated orderbook of large vessel capacity mean that container shipping is set for another three years of overcapacity and financial pain,” Drewry warned.
The recent slowdown in world trade has forced Drewry to halve its forecast for container shipping growth for this year to just 2.2% and revise down estimates for future years. The 1.6m teu to be added to the fleet equates to a growth rate of 7.7%. Drewry’s Global Supply/Demand Index, a measure of the relative balance of vessel capacity and cargo demand in the market where 100 equals equilibrium, has fallen to a reading of 91 in 2015, its lowest level since the recession ravaged year of 2009.
“Consequently, spot freight rates across most key trades have fallen to historical lows, particularly on the Asia to Europe, Asia to East Coast of South America and Asia to Middle East trades. Carrier reliance on the monthly GRI mechanism and void sailings to adjust capacity has not worked,” Drewry said in a release.
“Were it not for the recent fall in bunker prices, shipping lines would be losing money,” said Neil Dekker, Drewry’s director of container shipping research. “They cannot continue to rely on this unexpected gift to maintain profitability.”