News / Idle vessel fleet set to grow as large newbuilds continue to arrive

16/11/2023

The surge of inactive tonnage, long-anticipated following the avalanche of new large vessels being delivered from shipyards, appears to have paused – but it may be only a deep breath before a further plunge.

Despite the overwhelming number of larger vessels that have arrived, box ships of 12,500 teu and above appear to be having much less trouble finding work than those in the smaller sizes. This demonstrates that the industry is successfully cascading larger ships onto smaller trades, even if they have to be run at low fill rates.

According to Alphaliner data, the number of idle container vessels in warm or cold layup, arrested, detained or abandoned increased in September from just under 1% of the total fleet to around 1.75% in early October. But this marked upward trend stalled slightly to about 1.6% by 6 November, suggesting efforts by carriers to battle overcapacity through slow-steaming and blankings are still not entirely in vain.

However, this marginal reprieve may not last for long. Alphaliner notes that an increasing number of vessels – around 64% of the inactive fleet – are leaving dry docks and retrofit yards after maintenance.

Meanwhile, the World Container Index (WCI), Drewry’s composite of chartering indices, saw a brief pause at the start of November, before resuming a downward trend in $/feu charter rates that has been in evidence since the start of the year.

Despite the fact that shipping has historically tended to respond to overcapacity concerns by scrapping, sentiment is keeping many older box ships still afloat.

Cash buyer GMS says the conditions are still not in place for shipowners to consider a scrapping spree, with weak prices being offered for hulls in India, Bangladesh and Pakistan.

“Charter rates and secondhand values are yet to sink and compel shipowners to recycle their units,” it reported this week.

Alphaliner noted: “Prospects for container tonnage demand are not bright for the short term, with spot cargo rates again falling significantly on many routes after a four-week rally and carriers increasingly operating at a loss.” And it added that nearly 500,000teu of new tonnage had been delivered since September, with much more on the way.

“On the supply front, the news remains grim.”