Putting things on hold

Malcolm Latarche
Malcolm Latarche

26 January 2017


With new deliveries set to outpace scrapping this year, the under-siege liner sector is again showing its unfailing ability to shoot itself in the foot. It may have been overly optimistic economic forecasts that drove fleet growth through to 2010 but beyond that, the expansion in the box fleet was driven purely by a desire by operators to hold on to or increase market share. Last year saw the first operator failure and several mergers and although freight rates rose slightly in the final quarter that was mostly attributable to the failure and suspended operation of Hanjin. Preserving that small improvement will be almost impossible through 2017 when more than 1.7teu of new capacity is set to be added and mostly in ship sizes at the top level. So far the best estimates for scrapping amount to less than half of the new capacity. Since there is almost as much capacity in lay-up as there will be new arrivals, even scrapping every laid up vessel would not alleviate the over-capacity. Following that logic through, it would seem that every new vessel delivered in 2017 will be surplus to requirements as far as capacity is concerned. The sector’s chosen solution of ever more consolidation may help as regards staff numbers ashore but it also concentrates the number of surplus wasting assets in fewer hands at the same time. The political events of 2016 and possible future upsets in several major EU countries this year will likely be a restraining factor on world trade for some time so perhaps it is the last opportunity for owners to show some restraint and avoid any more ordering for at least a year. Perhaps the only advantage they will have from the current crop of new deliveries is that they are a known entity and their design will not need to be altered to meet the next phase of EEDI due to start in 2020.