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Carriers look to postpone mega-ship deliveries to prevent rate weakness

COSCO Shipping, the carrier with the industry's largest number of vessels on order, will postpone delivery of 10 mega-ships until 2019, but with so many mega-ships scheduled to arrive this year it will barely make a dent in the capacity scheduled to enter the global fleet, according Alphaliner.

In addition to the 10 Cosco vessels, six of which appear to be in the 19,000 to 21,000 TEU range, Yang Ming has also delayed three 14,000 TEU ships it was to have taken delivery of in 2018. The total TEU volume of the ships Cosco delayed is 166,576 TEU, according to IHS Markit data.

Even with the deferrals, the total new containership capacity due to be delivered in 2018 will amount to 1.3 million TEU. Approximately 30 per cent of that new capacity will be for ships of 18,000 to 25,000 TEU.

The high level of capacity coming online this year is set to be in excess of demand, which will limit the ability of shipping lines to successfully implement rate hikes, reported IHS Media.

Data from IHS Markit indicates that container volume growth on Asia to north Europe and the Mediterranean will grow by 4.5 to 4.9 per cent in 2018 compared with the previous year. However, the global container fleet is on track to expand faster, even after scrapping is factored in and a quarter of the capacity is delayed.

The data shows Cosco Shipping has a total of 27 vessels on order that will be delivered between January 2018 and December 2019. Of those vessels, 17 are in the 20,000 to 21,000 TEU class that are destined for the Asia-Europe trade. OOCL, which is being acquired by Cosco, has just one vessel from its 21,000 TEU series left to be delivered, after receiving five of the ships in 2017.

Alphaliner said the January surge in vessel deliveries of 250,000 TEU will be followed in the next four months by additional new ships with a total capacity of 790,000 TEU, all expected to join the world fleet between February and May.

These ships will arrive in time for upgrades planned on various services operated by the 2M, Ocean, and THE Alliance, but will also trigger a cascade of smaller, although still fairly large, ships into secondary trade lanes, such as South America, Indian Subcontinent, and intra-Asian routes.

The persistent imbalance in supply and demand is affecting contract rates, with early indications that direct shipper-carrier and forwarder-carrier contracts on the Asia-Europe and Mediterranean trades, usually fixed from January 1, are being secured at the same or slightly below the levels settled at in 2017.

According to BIMCO chief shipping analyst Peter Sand, profitability was up for grabs across the container shipping industry, but it would depend on demand growth remaining in the region of four to five per cent and the careful management of fleet growth.

One high point as 2018 gets under way is that container exports from Asia will increase in the run up to Lunar New Year beginning on February 15 and extending the traditional peak shipping period by a couple of weeks.

"Although cargo demand has remained strong in the first two weeks of January, with capacity utilisation reported in the high 90 per cent levels across all main trade lanes due mainly to the seasonally strong pre-Lunar New Year rush, both the freight and charter markets are expected to be severely tested in March when demand dips after the Lunar New Year and utilisation levels are expected to fall," Alphaliner added.