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Overcapacity to vanish if 2 carriers do what's needed: Lars Jensen
THE container shipping industry could rid itself of the overcapacity within the next couple of years, if carriers only they could show "unrealistic" levels of discipline, says Sea Intelligence chief Lars Jensen.
Speaking at last the recent TOC Europe Container Supply Chain event in Amsterdam, he described a "trident" of challenges that carriers would have to overcome for a structural balance between supply and demand to return to the liner industry.
Mr Jensen said the last time such a balance existed was 2006, and added that compared with that year, today there were 30-35 per cent more TEU slots on vessels than demand from shippers.
However, he added, that takes into account slow-steaming, which has absorbed significant amounts of capacity - "right now, we have 12-14 per cent overcapacity".
And he said: "If scrapping continues at the rate that it is today, there are no new orders and slow-steaming continues, there will be a balance between supply and demand in 2019.
"Demand will catch up with supply in liner shipping if, and only if these three conditions are met. This is the most positive structural scenario for the industry, and in reality that balance will probably come around later."
Director of global maritime at consultancy WSP Parsons Brinkerhoff, Andrew Penfold agreed, but he warned: "I anticipate that we will be stuck with this overcapacity through to 2019, but should there be an improvement in demand, then I think we will see a slowdown in scrapping from its current very high level.
"Also, some of the old panamax ships which have a very low value could return to the market and be used for trading at very low charter rates, and that would also limit the return to an equilibrium.
He also reiterated his warning form a couple of years ago that a resumption of demand growth could lead to orders for even larger vessels, London's Loadstar reported.
"If there were some move back towards equilibrium in the shipping market, then there are designs for 24,000-TEU vessels that could be introduced, especially given the presence of Chinese shipyards, which are very hungry to build these kind of vessels.
"I can see orders for 24k ships in 2019 for delivery in 2021," he said.
Speaking at last the recent TOC Europe Container Supply Chain event in Amsterdam, he described a "trident" of challenges that carriers would have to overcome for a structural balance between supply and demand to return to the liner industry.
Mr Jensen said the last time such a balance existed was 2006, and added that compared with that year, today there were 30-35 per cent more TEU slots on vessels than demand from shippers.
However, he added, that takes into account slow-steaming, which has absorbed significant amounts of capacity - "right now, we have 12-14 per cent overcapacity".
And he said: "If scrapping continues at the rate that it is today, there are no new orders and slow-steaming continues, there will be a balance between supply and demand in 2019.
"Demand will catch up with supply in liner shipping if, and only if these three conditions are met. This is the most positive structural scenario for the industry, and in reality that balance will probably come around later."
Director of global maritime at consultancy WSP Parsons Brinkerhoff, Andrew Penfold agreed, but he warned: "I anticipate that we will be stuck with this overcapacity through to 2019, but should there be an improvement in demand, then I think we will see a slowdown in scrapping from its current very high level.
"Also, some of the old panamax ships which have a very low value could return to the market and be used for trading at very low charter rates, and that would also limit the return to an equilibrium.
He also reiterated his warning form a couple of years ago that a resumption of demand growth could lead to orders for even larger vessels, London's Loadstar reported.
"If there were some move back towards equilibrium in the shipping market, then there are designs for 24,000-TEU vessels that could be introduced, especially given the presence of Chinese shipyards, which are very hungry to build these kind of vessels.
"I can see orders for 24k ships in 2019 for delivery in 2021," he said.
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