MSC boosts capacity and switches hubs on South Asia services
MSC is rebooting its hub operations for the ocean trades in and out of South ...
Shipping sources believe a major shake-up of the alliance structure could offer carriers the means to contend with the difficult rate environment and influx of new capacity and avoid the prospect of collapse or merger this year6.
Over the past year, 633 box ships, representing 5m teu, have been ordered, surpassing 2024’s 4.8m teu record orderbook, pushing the orderbook-to-fleet percentage above 33%, with sources having told The Loadstar to expect a wave of mergers and possible collapses.
Those claims largely centred on comparing the current environment to that which led to the collapse-and-merger era of the 2010s – some in the sector are turning to a more recent historical analogy to guide their assumptions.
Shipping expert Hans-Henrik Nielsen told The Loadstar: “I do not think we will see financial casualties this year among any of the top 20 major liner operators, and from a consolidation point of view, we have been used to seeing VSA consortiums of between three and five MLOs.
“Who says you cannot do this with 20 or even more? And a with combination of MLOs and NVOCCs? Technically it is possible, and we have already seen it in East Asia, the Middle East and South Asia.”
Such a position reflects what was seen in the wake of the pandemic and subsequent Russian invasion of Ukraine, with the latter prompting demand for China-Russia sea routes to offset the loss of freight capacity by air, land, and sea Russia had received from western carriers.
That spike led to a slew of new carriers entering the market, but with the trade maturing over the two years of the conflict, premiums have flatlined, with rates plummeting from a mid-2022 high of $6,000 per teu to as little as $1,000.
Consequently, many of these opportunistic players have either filed for bankruptcy of have sold ships – or in the case of the NVOCCs, returned much of their capacity to the market with those that have remained opting to match capacity very closely to demand.
Among those to have capitalised has been MSC, which continues to build its fleet, having acquired the 2007-built 2,553 teu Xin Xin Tian 2 and 3,534 teu Newnew Star 2 from China’s Yangpu Newnew Shipping, renaming them MSC Tian III and MSC Rabat IV, respectively.
Mr Nielsen said charter operators would have to accept that their “rates will start to come down significantly,” with the NVOCCs facing “significant haircuts on day rates once the existing charter parties run out”.
Another source questioned whether overcapacity would be a significant issue for the MLOs, rejecting the assertion that the return to Suez Canal transits could be the tipping point, noting that you would likely only see “two or three” vessels “freed up” by a return.
“But this could mean you can absorb a lot of freed capacity by returning to slow-steaming – you prevent overcapacity and save money at the same time due to much lower fuel consumption, rather than steaming full ahead on the Cape diversion,” they told The Loadstar.
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