The surge of new containerships coming from the construction orders placed in the last few years is upon the industry with analysts predicting the fastest pace of growth in a decade for the sector. While the pressure to accelerate the environmental transition helped to launch the newbuilding wave, owners however are still reluctant to send old tonnage to the scrap pile which is further contributing to concerns of increased long-term overcapacity.
In its year-end analysis of the market segment, trade group BIMCO reports deliveries in 2023 were already at a record pace. A total of 350 new containerships with a combined capacity of 2.2 million TEU were completed. Chinese yards built just over half the ships (55 percent) followed by South Korean yards (38 per of ship capacity) with Japanese and other yards making up the remainder.
Deliveries in 2023 set a new record for the industry surpassing the previous mark from 2015 when 1.7 million TEU of capacity was added to the sector. Alphaliner calculates that the current global containership fleet numbers 6,789 ships representing 340 million dwt and a capacity of 28.6 million TEU.
“The 2023 record is now likely to be beaten already in 2024,” forecasts Niels Rasmussen, Chief Shipping Analyst at BIMCO while saying he expects in 2024 the fleet could push above 30 million TEU. “In 2024, 478 container ships with a capacity of 3.1 million TEU are scheduled for delivery, beating the 2023 record by 41 percent. The container fleet capacity is therefore expected to grow by 10 percent in 2024.”
One of the concerns that industry executives have already spoken about is overcapacity. BIMCO highlights that while they forecast capacity will be increased by 10 percent, the container trade is expected to grow at a significantly slower pace. They are predicting only a three to four percent increase in demand for ship capacity.
Operators had begun idling ships as of mid-2023 to reduce some of the overcapacity. As of the end of the year, however, Alphaliner reports just 106 ships are idle representing one percent of total capacity in the sector, 289,000 TEU.
Retiring vessels for demolition has also done little to offset the rapid growth. BIMCO reports that the slow pace of recycling meant that sector capacity had a net gain of eight percent in 2023. Alphaliner however highlights that recycling rebounded in 2023 when a total of 87 vessels with a combined capacity of 167,000 TEU were recycled. This compares with under 11,000 TEU retired in 2022 and 16,500 TEU removed from service in 2021. Yet, despite the increase in recycling, Alphaliner’s analysis shows only three ships with a capacity over 5,000 TEU were retired with the majority of the recycling, 60 of the 87 ships, having a capacity below 2,000 TEU.
“The 2023 demolition figures remain well below expectations and insufficient to address the rising overcapacity that the container shipping industry is facing,” writes Alphaliner. Rasmussen in his analysis for BIMCO notes, “Recycling of ships is expected to increase in 2024.”
The industry is also looking for other means of increasing efficiency. While BIMCO forecasts a net increase in 2024 of 2.8 million TEU, they note that half that capacity is coming from the addition of ships with a capacity above 15,000 TEU. A total of 83 of the ultra-large containerships are scheduled for delivery with BIMCO noting this segment of the market has doubled its capacity in just four years.
Carriers have also been using slower speeds to reduce overcapacity by three to four percent according to BIMCO while also improving operating efficiency and lowering total emissions. BIMCO calculates that the average sailing speed was reduced from 14.3 knots in 2022 to 13.9 knots in 2023. They forecast it could fall further in 2024.
The surge in container ship capacity however is expected to continue. Rasmussen notes that another three million TEU is scheduled to be delivered during 2025-2026. The industry continues to order new construction although at a slower pace than the surge in orders in 2021.
