Box ship deliveries in 2015 set to break records

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Dalian_Shipbuilding_Industry_CompanyThis year, container ship supply is expected to reach its highest growth in five years, and delivery rate to post a record high, further adding to pressure on box ship markets, according to a new analysis by Clarksons Research.

While the downturn in container trade growth this year has been hurting the container shipping industry, it is not the only important development in 2015, the report said.

The effects of strong container ship supply and record-breaking deliveries are also palpable, it added. “Container ship growth is expected to reach 8.2% this year—the strongest rate since 2010—driven by a record pace of deliveries, and this trend has exerted its own pressures onto the containership markets this year.”

Meanwhile, a total of 1.66 million twenty-foot equivalent units (TEUs) are currently expected to be delivered into the fleet in 2015, making this “the highest annual figure on record and 11% greater than in 2014.”

Deliveries of box ships of 8,000 to 11,999 TEUs and 12,000-plus TEUs in capacity have been very strong in 2015 so far, breaking annual records after the first 10 months of the year, the report added.

Notably, deliveries in terms of vessel numbers have not been that high, but the increase in capacity delivered this year has been boosted by “mega” box ships entering the fleet. Year to date, deliveries have averaged 8,320 TEUs in size from 7,407 TEUs in full-year 2014.

Meanwhile, deliveries into the sub-8,000 TEU sizes this year are expected to reach their lowest levels in TEU terms in over two decades.

In addition, box ship demolition is projected to stand at its lowest annual total since 2011. Stronger container ship earnings earlier in 2015, combined with depressed scrap values, have limited box ship demolition sales in the year so far. Overall, demolition in 2015 is expected to total around 210,000 TEUs less than in 2014, and deliveries are set to total 170,000 TEUs more than last year.

“Looked at in this way, the slowdown in scrapping appears to be the biggest contributor to the acceleration in fleet growth this year, to an estimated 8.2% from last year’s rate of 6.5%,” said the analysis.

Moreover, fleet growth has been uneven, with the 8,000-11,999 TEU and 12,000-plus TEU sectors expected to grow in TEU terms by 17% and 28%, respectively, while the TEU fleet of below 8,000 is projected to expand by under 1%.

This skewed growth pattern has led to further vessel “cascading” to less important routes away from the main lanes, where the mega box ships have been delivered, and is likewise contributing to both volatility and downward pressure on spot freight rates, said the report.

In 2016, box ship deliveries are predicted to slow to 1.16 million TEUs to decelerate fleet growth to 4.8%. Nonetheless, this will not change the trend of supply side factors remaining key drivers of market trends as well, added Clarksons.

Photo: Yoshi Canopus