Container Capacity Growth Slows to Record Low

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Published Jan 26, 2016 7:29 PM by Reuters

Global container ship capacity is expected to increase by 4.6 percent in 2016, the slowest growth rate in more than 25 years, giving some relief to an industry hammered by oversupply, consultancy firm Alphaliner forecast on Tuesday.

Freight rates have plunged, driving many shipping companies into losses, as global trade has failed to keep pace with the number of new vessels entering the market in recent years.

"Falling below the previously smallest year-on-year increase of 5.5 percent, recorded in 2009, it will register well below the average annual growth rate of 10.3 percent, recorded since 1990," Alphaliner said of capacity growth.

Changes in capacity have been tracked since 1990.

The balance between demand and supply will improve as new vessel deliveries from shipyards slow down and a growing number of container ships are scheduled for demolition.

Before the financial crisis in 2008, container transport demand was increasing at about three times the rate of global economic growth. Since 2010, that ratio has been just 1.1, shipping organisation Bimco said.

With the International Monetary Fund expecting world economic growth of 3.4 percent in 2016, that would suggest container demand of between 3.5 percent and 4.0 percent - signalling the industry is still in for a torrid year.

"The new normal level of demand is somewhat lower than originally expected - just as global GDP growth keeps disappointing us," said BIMCO shipping analyst Peter Sand.

Maersk Line, the world's largest container shipping company with over 600 vessels, said global demand likely increased 1-3 percent in 2015, compared with its previous expectation of 2-4 percent.

Falling shipping freight rates for transporting containers from Asia to Northern Europe showed last week there was no traditional surge in cargo exports from China ahead of the Lunar New Year, spreading further gloom over the industry.

Spot freight rates on the world's busiest trade route have halved since the start of the year after falling 26 percent to $545 per 20-foot container (TEU) - a level not considered to be commercially viable for most vessels.