Fresh capacity influx threatens liner recovery

Alphaliner has also spotted a number of ships whose delivery was originally deferred but now brought forward again. Such a situation was not seen since December 2008. The sudden influx of capacity, representing a 9% increase over the active fleet at the end of April 2009, could threaten the nascent recovery in the liner markets.

In some quarters, fears of a return of price competition to fill the newly introduced tonnage have risen again. Last week, OOIL’s chairman C.C. Tung warned, “an imprudent re-introduction of capacity currently idling or laid-up, if mismatched to demand, could see fresh rounds of rate cutting.”

On the Far East-Europe sector, spot rates have fallen by $310/feu within the space of two weeks. This is a response to the raft of new capacity which is being introduced to the trade. More rate declines are expected in the coming weeks, triggered by the new service launches.

There are nonetheless strong initial signs of resurgence in demand which have fuelled the return of new capacity. Port throughput figures from the top 8 ports for the January-February period showed a 22% year-on-year increase in cargo volumes. Part of the volume surge was due to the Lunar New Year cargo rush, which fell on 14 February. It remains to be seen whether these strong volumes can be sustained over the next two months. This would largely determine if a new oversupply situation will develop in some of the routes facing the highest capacity increases. Notably, this is on the Far East-Europe sector where capacity increases over the March-April period will reach 10%.