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More and more passengers flying into Singapore are noting the growing number of ships lying at anchor; there are other signs too that container shipping lines are finally beginning to address the structural overcapacity undermining the major deep sea trades, according to new research from shipping consultancy Alphaliner.

A detailed breakdown of the idle fleet – vessels which have been taken out of service and parked up until trade levels demand their redeployment – shows that it grew some 10% between September and November this year in terms of the number of vessels; 256 to 282.

In terms of overall slot capacity, this increase was even more critical;  the major trades, such as Asia-Europe, are in dire need of a redress between supply and demand. The total teu idle fleet grew 96,000 during the period, or 14.5%, to reach 762,000 teu-worth of slots that is currently laid up, or 4.7% of global container slot capacity.

What is unclear is how many of these vessels have been put into hot lay-up – where the crew continues to remain on board and the vessel is essentially ready to begin operating at a few days’ notice – or cold lay-up, where all but the most essential systems are shut down and one of two crew members remain; it can take weeks to recommission from cold lay-up.

But behind the headline figures are two important facts. In September, some 80% of the vessels laid up were owned by non-operators – that is, shipowners who charter out to shipping lines and are unable to secure charter rates at break-even levels or above.

By November however, the percentage of the idled fleet owned by carriers had increased to 35%, a clear sign they have started to actively withdraw capacity (although not in every case: HDS Lines, formally known as the Islamic Republic of Iran Shipping Lines, has eight ships sitting idle, amounting to nearly 30,000teu of capacity, because most companies are prevented from doing business with it owing to international sanctions).

The shipping lines with the most amount of capacity laid up are shown in the table below.

Operator No. of idle ships Idle teu capacity
Maersk 14 94,777
HDS Lines 8 29,861
MSC 3 26,114
CSAV 4 17,081
CMA CGM 2 16,976
NYK 3 14,766
MOL 2 14,460
Zim 2 9,912
Coscon 1 9,469
K Line 2 8,812
Horizon Lines 4 6,398
Matson 2 3,623
Hanjin 1 2,932
Grand China Shipping 1 2,680
Hyundai 1 2,174

Source: Alphaliner

The second fact is equally instructive and reveals the recent growth in the number of much larger ships that that have been idled. In September, just two vessels above 5,000teu were idled – that had jumped to 24 by 5 November, including 13 vessels above 7,500teu. There were none of that size without employment two months ago, and only one of those is the property of a non-operating shipowner.

Some of this activity is the direct result of trade capacity cuts. Following Maersk’s withdrawal from some Asia-Europe services, it is now the carrier with the most ships laid up, and they are all of substantial size – 14 vessels between 4,000teu and 9,600teu.  Alphaliner said six of these were due to the Asia-Europe cuts; while of the three ships Mediterranean Shipping Co has idled, one is the 13,050teu MSC Rapello, which has been unemployed since 8 October when the line reduced capacity on its Asia-Mediterranean Tiger service.

For anyone seeking sustainable rates, especially on Asia-Europe where carriers have continually been urged to withdraw vessels, this is encouraging, but history shows there is still some way to go before the market hits the right balance.

According to Alphaliner figures, in early 2010, when rates recovered sharply from the 2009 rate war, the number of idled ships of 3,000teu and above – that is, most vessels operating deep sea services – was nearing 180. Today the number is around half that, at 91. In the middle of last year, at the lowest point of the rate war, no more than a handful of vessels were laid up.

New capacity continues to come on stream, which is likely to trigger more calls for cuts. Last week it was the 16,000teu CMA CGM Marco Polo that burst onto the market; this week the 10,700teu APL Paris has joined the G6’s Asia-Europe Loop7.

Its sister-ship, the similarly sized APL Barcelona was delivered the week before, while the APL Dublin, representing the last in a series of six vessels, will be delivered in December.

Altogether, the Singapore-based carrier has some 34 vessels – including ten 14,000teu ships – on order, representing a combined investment of $1.5 billion. These are big numbers. The company has said that many of its new ships will replace older and more fuel-inefficient ships and chartered tonnage, putting a further squeeze on non-operating owners.

Although given the demand pressures – third quarter import container volumes were 5% down year-on-year in Europe; exports in the same period out of Asia were 4% down and imports 5% down; and North American volumes were flat at best – new tonnage will put renewed pressure on the freight rates as well as carriers’ lay-up strategies.

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