Smaller Size Sectors Shrinking

The total capacity of the containership fleet has almost quadrupled since the turn of the century, to stand at 16.3m TEU at the start of March 2013. However, the total capacity of the sub-4,000 TEU fleet peaked in December 2008. Scrapping remains at elevated levels, while the orderbook for the smaller size sectors is unmistakably thin. As such, the smaller fleet sectors look likely to continue shrinking, at least in the short-term.
Stalling Deliveries
One of the key reasons for this pattern of fleet development has been the dramatic deceleration of deliveries to the smaller size sectors as upsizing continues. The 57,782 TEU of new Feeder (100-999 TEU) capacity delivered over the last four years is barely a quarter of the total Feeder capacity delivered in 2005-8. Meanwhile, deliveries to the 1-1,999 TEU and 2-2,999 TEU fleet sectors have fallen by 49% and 68% respectively over the same period.
Deliveries vs Demolition
The rate of scrapping is obviously the other crucial determinant of fleet growth. As seen on the Graph of the Month, the decline of the overall sub-4,000 TEU fleet has recently accelerated. This is because more than three times as much sub-4,000 TEU capacity (0.33m TEU) was sold for demolition last year than was delivered (0.10m TEU). The trend shows little sign of slowing, with more than four times as much sub-4,000 TEU capacity scrapped than delivered in the first two months of 2013.
Thin Orderbook
Meanwhile, the order-book as a percentage of the small containership fleet is nearing a historic low. The 10,139 TEU of Feeder capacity on order is equivalent to just 1.4% of total Feeder fleet capacity, while the 0.16m TEU on order between 1-2,999 TEU is equivalent to 4.7% of the fleet of this size. In only the 3-3,999 TEU sector is the orderbook as a proportion of the fleet (at 15.7%) approaching historical averages, boosted by the contracting of wide-beam ships.
Reliant on Charter Owners?
Charter owners account for the majority of smaller tonnage, owning 64% of all sub-4,000 TEU capacity, including 74% (1.26m TEU) in the 2-2,999 TEU size range. In particular, German owners have traditionally been key liquidity providers in the smaller containership sector - indeed they currently own 46% of all sub-4,000 TEU fleet capacity. However, the collapse of the KG finance model since the financial crisis has severely curtailed German investment.
Taking into account current scrapping projections, in order to prevent further decline in the sub-4,000 TEU fleet this year, yards would need to deliver almost 25,000 TEU of sub-4,000 TEU capacity each month for the rest of 2013. Regardless of slippage, this represents more tonnage than has been placed on order for delivery this year (0.23m TEU). In total, the sub-4,000 TEU fleet is expected to remain in decline for at least the next few years.
Source: Clarkson Research Services