Clarksons: Box Shipping Starts Addressing Its Problems

Image Courtesy: BSM

After 2016 brought a number of records, most of them of a gloomy nature, the year may well be seen as one in which the container shipping sector started to tackle its problems head on, according to Clarksons Research.

The container shipping sector has spent much of the post-financial crisis era under severe pressure and, as many expected, 2016 proved no real exception, Clarksons noted.

Box freight rates in general remained weak, and the SCFI Composite Index averaged 18% lower in 2016 than in 2015. However, by late in the year it appeared that spot freight rates might be bottoming out on some trade lanes.

Against this backdrop, charter market vessel earnings remained extremely challenged, at bottom of the cycle levels. Nevertheless, sector fundamentals appeared a little more positive in 2016, according to Clarksons. Demand conditions improved, with global volumes expanding by an estimated 3% in the full year to 181 million TEU.

Meanwhile, containership capacity growth slowed significantly in 2016, reaching just 1.2% in the full year. Deliveries plunged to 0.9 million TEU from 1.7 million in 2015, while demolition surged to a new record of 0.7 million TEU.

However, given the level of surplus built up, and in particular the impact of the delivery of substantial capacity, much of it in the form of new megaships, “the improved supply-demand balance seen last year was not enough to generate any significant improvement in market conditions” as the idle fleet stood at around 7% by the end of 2016.

“Further recalibration still appears to be necessary to generate better markets,” Clarksons said. However, 2016 might also be seen as the year in which the sector finally started to lay real foundations for a better future. Demolition hit a new record, and financial distress and regulatory requirements are expected to drive further recycling, while ordering of newbuild capacity dropped to just 0.2 million TEU during the year.

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