Has the overcapacity doom been called off?

Has the overcapacity doom been called off?

Overview

No, not quite but the scary scenario of massive oversupply of ships that the industry once seemed to be heading for has been somewhat tempered along the way by the financial crisis and the related turmoil.

The crisis brought massive challenges to the industry but also a blessing in disguise with the impact it has had on the order book and the scheduled delivery scheme. This news piece provides an update of the state of affairs for supply growth in 2010 and put this into the perspective of the BIMCO estimates as they stand.

The dry bulk segment is heading for record delivery year. Current projections point to inflow of new tonnage even higher than the BIMCO estimate of 13.7%. Shipping analyst at BIMCO, Peter Sand says, ”should newbuild dry bulk vessels continue to be launched at the same pace throughout the rest of the year, demolition of older ships must pick-up from current levels in order to keep supply growth below 16% in 2010.” The current pace of deliveries of Capesize vessels is one new ship launched every second day.

Meanwhile, in the tanker and container segments, demolitions have softened the impacts from new tonnage to a large extent, but nevertheless the box industry is projected to surpass the level of delivery from last year, taking supply growth beyond 8%.

The situation of delays/deferrals:

Dry bulk: BIMCO estimates that 76 million DWT of dry bulk tonnage is going to be delivered this year (this assumes 10% cancellation of the scheduled order book and 33% general delay/slippage of one year). With 25.4 million DWT delivered so far, the fleet growth is on target for the estimated 13.7% growth this year. But the growth level can turn out to be higher if demolitions do not pick up. To limit the growth to 13.7%, BIMCO estimates demolition of 13 million DWT is necessary, leaving 11 million DWT still to be demolished in 2010 to reach target. Should the pace of demolitions not pick up, supply growth could go as high as 16.1%.

 

Tankers: BIMCO estimates that 38 million DWT of tanker tonnage is going to be delivered this year (this assumes 10% cancellation of the scheduled order book and 33% general delay/slippage of one year). With 17.5 million DWT delivered so far, the fleet growth is above the estimated delivery target, and looks set for a growth higher than the BIMCO estimate of 5.5% in 2010, if it hadn’t been for the high demolition/phase-out levels. Current levels of removals and demolition/phase-outs indicate that a full-year total of 27 million DWT could leave the tanker fleet in 2010. Should this materialize, it would be double-up on BIMCO estimates and results in stronger than anticipated counterbalance to the number of deliveries. All in all, the BIMCO estimate is maintained, but the growth level could go as low as 4.9% if the history of this year is used as a full-year estimate.



Containers: BIMCO estimates that 1.15 million TEU of container tonnage is going to be delivered this year (this assumes 10% cancellation of the scheduled order book and 40% general delay/slippage of one year). With 461.200 TEU delivered so far, the fleet growth could top the estimate of 8.2% growth this year. On the other hand, demolitions seem to be somewhat higher than the BIMCO estimate of 98,000 TEU in 2010 - as full-year projections point in the direction of 254,400 TEU. All in all, the BIMCO estimate is maintained, but the growth level seems unable to go lower than 7.5% if the history of this year is used as a full-year estimate.

“BIMCO estimates take account of deliveries falling short of the scheduled order book by more than 40%, which is pretty much in line with what we are seeing in the markets right now. But even with this stretching of the deliveries, the challenge from the supply side remains a decisive factor for freight rates going forward” 


Contact: international@bimco.org

in Copenhagen, DK

Coronavirus

Access BIMCO's free COVID-19 related articles and advice.

Read more

Latest piracy reports

Latest industry releasable threats

 
 

ELSEWHERE ON BIMCO

Contracts & Clauses

All of BIMCO's most widely used contracts and clauses as well as advice on managing charters and business partners.

Learn about your cargo

For general guidance and information on cargo-related queries.

More about cargo

BIMCO Publications

Want to buy or download a BIMCO publication? Use the link to get access to the ballast water management guide, the ship master’s security manual and many other publications.

About a new business partner

We can help members check new business partners. We also help to recover millions of USD (undisputed) funds every year.