News / Shipping lines put growth ambitions on hold and look to defer newbuilds

© Dylons |

Against a backdrop of an increasingly pessimistic cargo demand outlook, ocean carriers are said to be in talks with shipyards to defer delivery dates for some of the 2.3m teu of newbuild tonnage due this year.

Shipbuilding contracts usually incorporate a clause to facilitate the pushback of completion by six months or more, depending on the stage of construction and pressure from other orders.

But with the container liner industry facing several challenging quarters, the yards may be quite relaxed about rescheduling delivery dates and the postponements will focus on smaller sizes. These are now competing for employment with tonnage usurped by the arrival of newbuild 24,000 teu ULCVs on the Asia-North Europe trade.

And shipping line procurement officers have been instructed to halt orders for new containers and return as much leased equipment as possible to ease the huge storage costs from the empty-container mountains overwhelming depots around the world.

Indeed, container depots will remain overstocked in the first quarter, according to online shipping container platform, Container xChange. CEO Christian Roeloffs added: “There is just not enough depot space to accommodate all the containers.

“With the further release of container inventory into the market, there will be added pressure on depots in the coming months. This will be a key challenge for some and a competitive advantage for others in the business, especially in China because of the empty container positioning there.”

A double-whammy of a demand collapse and consequential easing of port and landside congestion at container hubs has caused a massive reversal in supply-demand fundamentals. According to the latest Drewry Container Forecaster supply-demand index, the market will see a huge shift in balance to a position of 19% below equilibrium.

Nevertheless, the maritime analyst said, it anticipated capacity reductions – expected to become more aggressive after the Chinese New Year – would keep top line fleet growth to “a relatively shallow” 1.9%.

“Now that the container bubble has burst, the record order frenzy of 2021 and 2022 – which to date has seen some 6.7m teu contracted – now appears even more excessive,” said Drewry.

Carriers may benefit from a tailwind of higher contracted revenue in Q1, but with the expiry of the old agreements and new deals being set at much lower rates, the P&L accounts for the industry seem set to be much less healthy.