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Shipowners have ordered a file variety of container vessels on the again of hovering earnings, prompting warnings of profligate spending by the handful of enormous shipowners that dominate the trade.
The entire capability of container ships on order hit 8.4mn 20-foot containers in November, in line with Braemar, reaching the very best degree because the shipbroker started amassing information in 2000.
The file order e-book, which surpasses the extent reached following a similar spending spree when disruption in the course of the Covid-19 pandemic boosted earnings, have come regardless of uncertainty over the outlook for world commerce.
“It’s an enormous quantity of funding in fleet progress. [Shipowners] have gotten cash to spend,” stated Jonathan Roach, container market analyst at Braemar.
However “the chance of overcapacity is there, significantly in an unsure world financial system.”
Transport firms have been forking out following a shock surge in earnings since late final yr, when disruption attributable to the Houthi militant group’s assaults on vessels crossing the Pink Sea helped drive up the cost of shipping.
Italian-owned Mediterranean Transport Firm, which already has the trade’s largest fleet, led the pack with 107 container vessels on order as of November. CMA-CGM is shut behind with 103 vessels.
However it’s unclear how lengthy the Pink Sea assaults will proceed to spice up earnings. In the meantime, incoming US president Donald Trump’s promise to turbocharge protectionism on the planet’s largest importer can be threatening to hit world commerce from subsequent yr.
Earlier than the Houthi assaults, which have compelled traces to sail longer routes and constrained the provision of ships, “you had lossmaking freight charges with a a lot smaller fleet than you see in the present day,” stated Peter Sand, chief analyst at delivery market tracker Xeneta.
“Think about all carriers will return to the Pink Sea. That may convey charges to the ground. The overcapacity might be so large.”
Individually, the choice to order extra ships when earnings are excessive may “make good sense,” stated Niels Rasmussen, head of delivery market evaluation at trade physique BIMCO, who identified that MSC was stocking up on vessels after deciding to end a ship-sharing alliance with rival AP Møller-Maersk and “go it alone” from subsequent yr.
However “while you add all different choices up [by every shipowner] then it does look a little bit bit extreme.”
By 2026, container delivery provide is forecast to have elevated 46 per cent in comparison with 2019, earlier than a growth in ship orders started, in line with Bimco. However the group solely expects cargo volumes to extend demand by 22 per cent over the identical interval.
Bimco warned that if nations retaliate in type to Trump’s threat to increase import tariffs, this might result in even weaker world commerce and container volumes than it has forecast.
Whereas many ships have been ordered to switch ageing sections of the fleet, Rasmussen warned that it could possibly be a while earlier than older vessels are taken out of service. From June, an internationally agreed Hong Kong Conference will enter into drive and set restrictions on which ship recycling yards can be utilized, primarily based on environmental and labour requirements.
“There are some capability restrictions as to what number of ships you may abruptly recycle in a yr. It’s a must to contemplate the Hong Kong Conference is coming into drive. These amenities which might be there want to satisfy some strict necessities,” stated Rasmussen.
The container delivery trade already confronted comparable premonitions of oversupply following its spending spree in the course of the Covid-19 pandemic. These fears have been rapidly assuaged when the Houthi assaults flipped expectations simply months after the tip of the well being disaster.
Maersk, which solely in February was bracing for a $5bn loss this yr, is now forecasting an underlying revenue of as much as $5.7bn.
“If we had spoken 12 months in the past, we may have had the identical dialog about [oversupply],” stated Johan Sigsgaard, chief ocean product officer at Maersk.
He stated that Maersk, which has 47 vessels on order, was anticipating ships to proceed avoiding the Pink Sea “nicely into 2025”.
“We see a extra risky world. [It will become] tougher to foretell conditions round provide and demand,” Sigsgaard stated.