From Nick Savvides (The Loading Star) –
Any recovery in the container shipping market will be overwhelmed by the flood of new vessels entering the market, according to maritime consultancy Maritime Strategies International (MSI).
According to MSI’s April market report released yesterday, data from the first few months of this year was “dismal” but the industry is expected to post at least modest annual trade growth from the middle of this year.
Given the unencouraging economic outlook, MSI believes the tendency to reduce ship speeds to cut costs and capacity has been overlooked as a mechanism for airlines to influence the market.
MSI has identified lower average ship speeds since the middle of last year that could impact overall available capacity.
“An interesting recent trend – which we think has not received the attention it deserves – has been a slowdown in container ship sailing speeds since mid-2022, particularly for larger assets.
“On average, between mid-2022 and Q1 23, average speeds of larger ships have decreased by approximately 1 knots, which, if sustained, would represent a significant reduction in effective ship supply,” MSI said.
Declining speeds are due more to low trading volumes and higher fuel costs than concerns about the impact of upcoming environmental regulations due to come into force from January 2024, according to the adviser.
“Failing to speed up ships again would help – albeit partially – offset the effects of increasing oversupply,” MSI said.
Still, MSI said there is “some evidence” that U.S. inventories are beginning to be reduced, but there are more headwinds if MSI is correct that the global economy will experience an economic slowdown later in the year.
However, a modest rebound in the economy will “not be enough to offset the forthcoming surge in newbuild deliveries.”
As a result of the new tonnage expected for this year and with 200,000 teu already delivered, shipping companies are having to cascade ships into new markets, increasing the average ship size and therefore available capacity and affecting freight rates in the smaller trades.
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