Thursday, January 20, 2011

Box Vessel Over-Capacity to Continue, Demand to Fall

Containership over-capacity is expected to persist for at least another 12 months with demand expected to slow down "significantly" in 2011, according to the latest report from Paris-based industry analyst firm Alphaliner.

"Containership capacity is expected to grow by an average annual rate of 8.7 percent over the next two years, with 1.26 million TEUs due to be added in 2011 and 1.33 million TEUs in 2012" said Alphaliner, noting that this is in addition to the 1.20 million TEUs added to the global fleet in 2010.

While the projected increases in capacity do not match the figures recorded in 2006-2008 – when an average of 1.37 million TEUs per year were added – Alphaliner believes that the level of capacity additions remains a key concern for the industry.

At the same time, Alphaliner predicts cargo demand will decline to less than 8 percent growth in 2011, a sizable drop from the 13.6 percent increase seen in 2010.

"A large part of the new capacity added in 2010 was absorbed by the increased demand that was caused by the rapid economic recovery," said the report.

"Throughput volumes at the world’s five busiest container ports grew by 18 percent on average in the first three quarters of 2010. However, the average growth at these ports has slowed to 8 percent in the fourth quarter, with the trend towards slower growth likely to persist into 2011."

The most recent Global Port Tracker report, prepared for the National Retail Federation by Hackett Associates, also predicts slowly declining single-digit cargo increases through April at major U.S. ports with possible declines beginning in May.

The slowing of demand in the fourth quarter of 2010 has already started to hurt carriers’ load factors, said Alphaliner. The report estimates of vessel utilization levels on the Far East-U.S. and Far East-Europe routes dropped to only 80 percent in December, the lowest levels recorded since May 2009.

"Attention must now be shifted to utilization levels in the next two months," said Alphaliner, "as these will determine the direction of freight rates after the Lunar New Year celebrations in the Far East."