Containership fleet capacity has increased rapidly in recent years, rising by a substantial 8.1% in 2015 and passing the 20 million TEU milestone earlier this year in July. However, with the containership markets stuck deep in wintry conditions, fleet growth has slowed significantly so far this year, and capacity expansion is currently predicted to reach a historically sluggish 1.6% in full year 2016.

 The recent slowdown in fleet growth has largely been driven by a reduced pace of deliveries. Just 0.7m TEU of capacity has been delivered in the year to date, compared to 1.7m TEU in full year 2015, with large boxships of 8,000+ TEU accounting for the vast majority (almost 90%) of delivered capacity so far in 2016.

 One key driver of slower deliveries this year is the shape of the orderbook; at start 2015, the orderbook scheduled for delivery in 2016 totalled 1.1m TEU, around 40% lower than deliveries then scheduled for 2015. However, ‘non-delivery’ of the scheduled orderbook has also risen this year, with delays to deliveries to some owners in the current difficult market environment. ‘Non-delivery’ of the scheduled orderbook has risen from 11% in TEU terms in 2015 to nearly 40% so far this year.

 Meanwhile, containership demolition has picked up, totalling 133 boxships of 0.45m TEU in the first nine months of the year, nearly four times recycling volumes in the same period in 2015. Scrapping this year has been particularly focussed in the ‘old Panamax’ sector following the opening of the expanded Panama Canal locks in June, with ‘old Panamax’ units accounting for nearly half of the capacity scrapped so far this year. Recycling of 3,000+ TEU wide beam ships has also picked up significantly, accounting for around a quarter of capacity scrapped so far this year.

 Overall, containership demolition is projected to reach a record 0.61m TEU in full year 2016. Continued depressed freight and charter rates have contributed to firm scrapping activity, and a trend towards younger ships being recycled. The average age of boxships scrapped so far in 2016 stands at 20 years, down from 23 years in 2015. The duration of the downturn has also led to increased recycling of German-financed ships, with 50% of the units scrapped this year sold by German owners.

 Overall, while strong boxship scrapping has recently captured the headlines, delivery slowdown has been around twice as important in terms of driving a reduced pace of fleet growth this year. However, fleet expansion still varies between the boxship sizes, with 8,000+ TEU fleet capacity expected to grow 10% this year, whilst fleet capacity in the sub-8,000 TEU boxship sector is projected to fall by 4%.

 The dramatic shift in boxship fleet growth this year is partly evidence of the ‘market mechanism’ at work, as owners attempt to address significant oversupply. This should help to recalibrate the supply and demand balance in the boxship sector to some extent, and while further significant improvements are still necessary, the wind down in the pace of expansion now being seen may prove a helpful start.

(Source : Clarksons)