Drewry: Carriers Reluctant to Narrow Supply-Demand Gap

Image Courtesy: MSC

Amid a huge gap between supply and demand in the container shipping industry, carriers seem to be reluctant to fully seize the opportunity to narrow the difference, according to shipping consultacy Drewry.

Namely, the shipping companies are not expected to take the advantage and delay gratification as they still want to get their hands on big new ships as soon as possible for the kudos, market share and slot cost advantages they offer.

However, the rewards for delaying in the form of a better supply-demand balance leading to higher rates might prove too tempting to resist, Drewry said.

Newbuilding deferral offers the container industry a golden opportunity to smooth out the capacity peaks in the coming years.

2016 was the worst on record for new contracts of merchant ships with data from Clarksons Research showing that only 4 million gross tonnes of new orders were placed, down from 25 million gt in 2015 and from the five-year peak of 56 million gt in 2013.

Drewry informed that slippage is expected to be broadly similar in 2017 as it was last year.

“The lack of new business will see yards around the world…with an ever shrinking pile of work, which will almost run dry after 2018 without a sudden reactivation of the orderbook,” the shipping consultancy said, adding that yards will probably have to offer very big discounts to attract new orders.

The vulnerable position of the shipyards gives containership operator-owners a window of opportunity to smooth out the delivery of the newbuilds to which they are committed and to massage the supply/demand balance more in their favour.

Danish shipping giant Maersk Line recently decided to push back the delivery of nine 14,000 TEU units originally due for delivery at the end of this year from South Korean shipyard Hyundai Heavy Industries (HHI) to end-2018.

Following Maersk’s deferral there is around 1.6 million TEU worth of new container ship capacity scheduled for delivery in 2017, which includes some carried over from 2016.

“To ensure that the nascent recovery of the market is not scuppered carriers need to follow Maersk’s lead by smoothing the supply-side pressures as much as possible by deferring new ships and scrapping more existing units,” Drewry said.

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