The long-awaited surge in inactive tonnage, driven by a wave of new large vessels delivered from shipyards, appears to have temporarily subsided. However, this lull may be short-lived as the industry faces a further increase in idle capacity.

Despite the influx of larger vessels, box ships with capacities of 12,500 twenty-foot equivalent units (TEU) and above are finding employment more readily than their smaller counterparts. This suggests that the industry is successfully shifting larger ships to smaller routes, even at the expense of lower fill rates.

Alphaliner data indicates that the number of idle container vessels in warm or cold layup, under arrest, detained, or abandoned increased from just under 1% of the total fleet in September to around 1.75% in early October. This upward trend, however, has moderated slightly, reaching around 1.6% by November 6th. This suggests that carriers’ efforts to combat overcapacity through slow-steaming and blank sailings are still yielding some results.

However, this temporary reprieve may not be sustainable. Alphaliner notes that a growing number of vessels, representing approximately 64% of the inactive fleet, are emerging from dry docks and retrofit yards following maintenance.

Meanwhile, the World Container Index (WCI), Drewry’s composite of chartering indices, experienced a brief pause at the beginning of November before resuming a downward trend in $/TEU charter rates, a pattern that has been evident since the start of the year.

Despite the shipping industry’s historical tendency to address overcapacity concerns through scrapping, sentiment is keeping many older box ships afloat.

Cash buyer GMS asserts that the conditions are not yet conducive for shipowners to consider a scrapping spree, given the low prices being offered for hulls in India, Bangladesh, and Pakistan.

“Charter rates and secondhand values are yet to sink to a level that compels shipowners to recycle their units,” the company reported this week.

Alphaliner observed: “Prospects for container tonnage demand are not bright for the short term, with spot cargo rates again falling significantly on many routes after a four-week rally and carriers increasingly operating at a loss.” It added that nearly 500,000 TEU of new tonnage has been delivered since September, with much more on the horizon.

“On the supply front, the news remains grim.“

Source: theloadstar.com