News / Carriers must act, as they face overcapacity and depressed rates for years

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Ocean-going liner operators must brace for a tonnage overhang next year, lasting potentially until 2030.

And freight rates are expected to enter a down cycle after the booms fuelled by Covid and detours round the Cape of Good Hope.

Indeed, The Loadstar also reports today that transatlantic box trades are already ‘on the point of collapse’.

Export-Import Bank of Korea researcher Yang Jong-seo said in a recent report that little-to-no vessel scrapping was only compounding the situation.

Mr Yang noted freight rates had risen twice through Q3 25 due to US tariffs, but then rapidly declined due to record newbuilding deliveries.

The Shanghai Containerized Freight Index (SCFI) and China Containerized Freight Index (CCFI) barely exceeded 1,000, reaching 1,115 points and 1,087 points, respectively, with average freight rates in Q3 falling 52% and 40% year on year, respectively.

The Shanghai-North Europe route saw a sharp decline, with rates falling from their 2024 average of $1,680 per teu to $971 at the end of September. Shanghai-US West Coast also saw a drop, from the 2024 average of $1,948 per 40ft to $1,468. On the same basis, the Shanghai-US East Coast rate declined $3,133 per 40ft, to $2,452.

Shipping consultancy Dynamar recently estimated that as many as nine million teu of vessels would need to be scrapped to restore market equilibrium.

However, Mr Yang said massive demolition would be easier said than done.

He wrote: “The severity of the situation is heightened by the fact that a significant volume of new vessel deliveries is scheduled for a considerable period of time, and the large vessels typically deployed on ocean routes, vessels of 12,000 teu and above, are all young, making supply adjustments through scrapping impossible.

“Not a single container ship over 12,000 teu has been scrapped yet.

Particularly, while projecting an average annual growth rate of 5% in fleet capacity through 2028, Mr Yang calculated that the number of ships exceeding 12,000 teu would increase by more than 12% a year, exacerbating the slump in ocean routes.

Mr Yang also warned that if the Red Sea crisis was resolved and Suez Canal transits resumed, the ocean-going market could deteriorate to a “catastrophic” levels.

He suggested mainline operators pre-empt any market correction by adjusting their vessel deployment within their alliances, or diversifying their shipping routes, which would reduce supply and increase demand.