Drewry: Box Markets are in an Over-Capacity Crisis, Next Year Will be Worse

Monday November 2, 2015

Credit managers may well be keeping an even closer eye on box carriers next year, following a warning from Drewry that the sector is set to face even tougher times in 2016 as the in-balance of supply and demand slides to its worst since financial crisis hit 2009.

And the research agency says the slump could last for several years.

"The container shipping industry is in the midst of an over-capacity crisis which will worsen next year," Neil Dekker, director of container shipping research at Drewry said in an emailed note accompanying the release of its 2015 edition of the Container Market Annual Review and Forecast 2015/16.

"How carriers and tramp owners address the overcapacity situation will influence the duration of the crisis. Shipping lines will need to idle a much larger portion of the fleet than they have hitherto been prepared to do.

"Otherwise, short of an unexpected recovery in traffic volumes, container shipping is set for several years of overcapacity and mounting financial losses."

Drewry says it has now slashed its container shipping growth forecast for 2015 to just 2.2 percent, while the 1.6 million TEU of extra capacity that has been added this year is the equivalent of a growth rate of 7.7 percent.

As a result, the firm says its Global Supply/Demand Index indicating the relative balance of vessel capacity and cargo demand in the market (where 100 equals equilibrium) has fallen to a reading of 91 in 2015, its lowest level since 2009.

Last week Ship & Bunker reported that Maersk Line was forced to idle one of its 18,000-TEU Triple-E containerships, and has cooled on an option to order another eight 14,000-TEU containerships.