BIMCO: Supply-Side Crucial for Boxship Market Recovery

Image Courtesy: BSM

The demand for container shipping grew steadily in 2016 improving the fundamental balance in the market in the second half of the year, driven by decisive actions by shipowners selling excessive tonnage for demolition, according to BIMCO.

An early assessment of the overall market demand growth rate for 2016 is 2.5%. 2016 saw increased demand on all trades.

The demand for containership capacity, on the other hand, as evidenced by the very low charter rate levels, showed a total mismatch between demand for and supply of ships for charter.

Overall, the peak season in 2016 was longer than normal: from August, right through to November which caused some downward pressure at first, as tonnage was employed in anticipation of a regular season. Fortunately, the market imbalance in the third quarter was not as severe as in January through to April, if judged by the spot freight rates, BIMCO informed.


2016 will stand out as the year the container shipping fleet surpassed the 20 million TEU mark, only to go straight ahead and demolish excess capacity. At the end of 2016, the fleet accounted for 19.98 million TEU, up from 19.74 million TEU at the start of the year, down from 20.04 million TEU in early August.

660,000 TEU of container ship capacity was sold for scrapping, 60% of that during the final six months. Container shipowners acted in the opposite way to the dry bulk shipowners, who, during the first half of the year, broke the previous year’s scrapping record level only to shy away completely from scrapping ships in the second half.

While being at opposite end in terms of demolition activity, both dry bulk and container shipowners/investors were in the same corner when looking at signing new orders as the contracting of new capacity was at one of its lowest levels.


The level of idled capacity has been high since the end of 2015, reaching a new all-time high in the fourth quarter of 2016. In the final weeks of 2016, some idled ships were reactivated while others were sold for demolition, leaving the total idle fleet at 1.4 million TEU as of January 9, representing 7% of the fleet.

As BIMCO forecasts a container shipping market where the nominal TEU inflow of supply matches demand growth, keeping 1.4 million TEU out of the active fleet going forward “will be a minimum requirement to keep the pressure off freight rates.”

Looking further, towards late 2017 and early 2018, the benefits of the mergers and newly established alliances in 2016 should become visible. Hopefully, by way of better profits and fleet utilisation, rather than just lower costs and cheaper offers to the shippers, BIMCO said. It takes time to merge two companies into one, and make it work in a way that takes advantage of the economies of scale and broader offering into specific trade lanes.

“The recovery is slow but if patience is applied and the supply-side handled with care for the years to come, it will happen,” BIMCO informed.

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