Overcapacity of ships may cut container rates

Container shipping lines have rebounded from a disastrous 2009, but their fortunes will “change quite dramatically” later this year as vessel capacity continues to rise, warns a new report from the research arm of container lessor SeaAxis.

“Shipping lines will probably enjoy another quarter of strong operational results but the oversupply situation coming up should translate into more difficult times at the end of 2010 and the beginning of 2011, Philippe Hoehlinger, vice president of corporate risk management at SeaAxis, wrote in a quarterly report on container shipping.

He said vessel capacity is expected to rise 16 percent this year and 13 percent in 2011, primarily due to carriers’ rapid reactivation of idled ships and the resumption of delivery of new ships ordered before the recession. Global container volume is expected to rise about 10 percent annually, SeaAxis said.

In a report earlier this year, SeaAxis warned that container lines were restoring idle capacity faster than market conditions justified. Less than 2 percent of the world’s container fleet now is idle, compared with more than 11 percent at the start of the year.

With volume rising, carriers have moved aggressively to restore rates to pre-recession levels.

All major container lines have reported profits this year after posting collective losses of $15 billion or more during 2009, when global container volume fell for the first time since container ships began plying international trade routes in the mid-1960s.

SeaAxis said east-west trade lanes such as the trans-Pacific and Asia-Europe will be hit hardest by overcapacity, but intra-Asia and intra-Europe routes “should be relatively steady in the coming 16 months with some ups and downs, mostly due to seasonal factors.”

Slow-steaming and vessel layups could blunt the impact of excess capacity, Hoehlinger wrote.

He said, though, that container shipping’s long-term fundamentals “remain largely favorable in the mid term” as volumes rise with the expansion of global supply chains, the rise in merchandise trade and growth in demand led by the BRIC countries of Brazil, Russia, India and China. (source: The Journal of Commerce)

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