Idle boxship capacity tops 1.1m teu

Janet Porter - Wednesday 18 February 2009 -- World Trade News

CONTAINER shipping faces at least another four years of misery, and probably more, as supply continues to massively out-strip demand. New figures from AXS-Alphaliner show that the number of unemployed boxships has soared over the past couple of weeks as lines continue to cancel services.

By the beginning of this week, an estimated 392 ships with combined total capacity of 1.1m teu were idle, according to AXS-Alphaliner. This represents a huge jump from 303 ships of 800,000 teu out of work at the start of the month, and figures from Lloyd’s MIU last week putting the amount of idle boxship capacity at almost 830,000 teu.

At 1.1m teu, the number of slots withdrawn from service equates to 8.8% of the total cellular fleet, way above the previous peak of 5% touched two decades ago when US Lines went bankrupt and its ships seized, and the 3.2% recorded at the height of the 2002 market slump.

The latest data includes 19 units with nominal capacity in excess of 7,500 teu.

With so much tonnage now either at anchor or in lay-up, AXS-Alphaliner estimates that demand would have to grow at an average of 15% over the next three years to restore equilibrium by early 2013.

That scenario seems totally unrealistic, with a slightly more probable growth figure of 10% pushing supply and demand balance back to 2014.

But the main container trades are actually seeing a drop in overall volumes at the moment, with little on the horizon to suggest any turnround in the foreseeable future.

Asian export ports are reporting a huge decline in outbound traffic as retail spending in the US and Europe remains in the doldrums, while recent statistics from the European Liner Affairs Association showed a steep decline in container line liftings towards the end of last year when the full impact of the credit squeeze hit economies around the world.

AXS-Alphaliner notes that its projections are based on the current fleet and orderbook, and an assumption that 160,000 teu per year will be scrapped, and do not allow for any possible newbuilding cancellations.

Maersk Broker is provisionally forecasting that at least 120,000 teu will be broken up this year, followed by 70,000 teu in 2010, but notes that the final figures for demolition activity are likely to be higher. The first month of 2009 saw just over 40,000 teu sold to breakers.

On the supply side, around 1.8m teu is scheduled for delivery between now and the end of the year, adding 14.6% to the fleet in 2009, followed by another 12.1% in 2010.

Contracting activity remains at a complete standstill, while the shipyards are keeping tightlipped about whether they have agreed to delay deliveries.

Negotiations continue, but most industry sources do not think any firm agreements have yet been reached, with the South Korean yards determined to make clients stick to the terms of their contracts despite enormous pressure from owners and their bankers to reschedule production programmes.

As banks try to find any loophole they can to extract themselves from credit agreements, some owners are now resorting to legal action to force the finance houses to keep to their contractual commitments.