Year-to-date, 997,000 TEU of new containership capacity has entered the fleet. BIMCO forecasts a six-year-high on new ship deliveries, amounting to a bit more than 1.4 million TEU. As the record scrapping level takes its toll, BIMCO expects the fleet growth to be 5.3% in 2014.

The scrapped ships were, on average, built in 1992, but range from 1973-1999 (average capacity 2,610 TEU). To put the future demolition potential into perspective, only 553,000 TEU (3.1% of the total fleet) of the active fleet is more than 20 years old (built up to and including 1993). For 2015, the expected scrapping level is lower, which in turn could result in a higher fleet growth.

So far, in 2014, 41 ultra large containerships (ULCS), each with a capacity beyond 10,000 TEU, have left Far Eastern shipyards, topping last year’s delivery number of 34. With another 14 expected to be delivered, we could see a new record of 55 ULCS, equal to 730,000 TEU, bound for the Far East to Europe trading lane. The challenge to strike the balance in matching supply to demand stays unchanged.

Fifty-three ULCS are scheduled for delivery in 2015. The average size of the ULCS are a staggering 15,030 TEU. In November and December this year, the first two of China Shipping Group’s five ships with a capacity of 19,000 TEU are set to become the world’s largest container ships.

The only thing not getting bigger and bigger right now will be the order book, falling from 3.6 million TEU two months ago to 3.3 million TEU in early August. The lower contracting activity is positively affecting this number. “Only” 552,000 TEU of new capacity has been contracted so far this year.

For 2013 as a whole, no less that 1.9 million TEU was ordered. The two new building trends identified in our last report remain on track. The low level of new contracts continues, with no new orders for +10,000 TEU ships placed since April. Moreover, the absence of contracts for new ships between 2,500 TEU and 9,400 TEU still holds.

OUTLOOK :
Going forward, the profile of the new ships that are delivered into the active fleet will lead to continued cascading of the less optimal ships for a given trade.

The peak season is upon us again and it is off to a good start on all the key high capacity/volume trading routes out of the Far East. On 1 August, freight rates went higher, as supply matched the demand situation well.

BIMCO expects the spot freight rates to resist last year’s constant slide from early August to end-October on Far East to Europe. The Far East routes to the US West Coast and US East Coast seem exposed to a gradual deterioration of freight rates as the peak season passes by and winter service programmes for the liner operators picks up. All of this is subject to solid demand growth in Q3.

While the Transpacific Stabilization Agreement does provide a more stable supply of ships and a more stable freight rate environment on the trades it covers, the anti-trust regulation on trades into the EU tends to develop the opposite.

However, operators have proved this year that volatility is not a prerequisite. Practice sometimes makes perfect, and the balancing act has engendered a situation today where idling is at a three-year low point, 41 new ULCS are deployed and freight rates are buoyed beyond the break-even point.

In spite of the above positives, serious overcapacity remains, and the non-operating owners with smaller ships feel that in the charter market on an everyday basis.
(Source: BIMCO)