Excess boxship supply could return in 2011

According to Alphaliner, the growth in the global fleet for the full year 2010 is expected to increase by 9.5% net of deletions with the delivery of 1.4 Mteu of new ships. If the idle fleet remains steady at current levels until the end of the year, it would bring the full year increase in active capacity to 22%.

Despite the growth on the supply side, demand for containerships has matched this high level of growth so far this year. Nominal demand growth measured by global port handling figures in the first half of the year has reached over 17%. Demand for containerships have been further boosted by the implementation of extra slow steaming which is estimated to have absorbed a further 4% of the fleet so far this year.

The strong surge in demand has brought the supply-demand balance for containerships back into equilibrium after the global trade slowdown in 2009 produced a demand gap of over 14% last year. However, slower demand growth in the second half will bring the full year global throughput growth to about 12%. The demand growth forecast for 2011 is expected to fall to between 6 to 8%, as several factors contributing to the high growth rate in 2010 will no longer be present.

The further adoption of extra slow steaming will be limited in 2011 as most long haul services that could be slowed down have already adopted slower speeds. The boost to trade volumes provided by the restocking of depleted inventories in the US and Europe since late last year have largely ended as inventory levels are back to pre-crisis levels. Also, the strong intra-Asia volumes driven primarily by trade between China and Southeast Asia will grow at a more moderate pace in 2011 after the one-time boost it received from the formation of the ASEAN-China Free Trade Area in January this year.

Against the slowing trade growth, supply growth is expected to reach 9.6% next year which could see a re-emergence of excess supply in 2011.