By Mike Wackett

The spectre of overcapacity is clouding recent analyst optimism that ocean carriers could be heading for a period of sustained profitability. During the first six months of this year, 26 newbuild ships of 14,000 TEU-plus have been delivered – many of which will have been deployed between Asia and Europe, and according to Alphaliner, at least one new ultra-large vessel a week is set be delivered before the market slips into the traditional slack season in October.

Plus, encouraged by better-than-expected demand, several carriers have brought forward the delivery dates of large newbuild orders, added the consultant. They had pushed back the deliveries, based on the less-optimistic forecast a year ago. Bringing forward ULCV delivery dates has also been prompted by a dearth of spot tonnage charter availability in the larger sectors. And with the height of the peak season still to come, carriers are getting worried that they might not be able to take full advantage of the strong demand.

The current optimism is supported by Alphaliner’s bellwether idle fleet chart, which has shrunk to its lowest level for two years at 176 ships for 472,995 TEUs, representing just 2.3 per cent of global cellular tonnage. According to Alphaliner data from 24 July, there were just seven 5,100-7,499 TEU ships open for charter, seven vessels of 7,500-11,999 TEUs, and only one ship of over 12,000 TEUs that could be fixed for employment. But, it is what happens after the peak season that gives rise to concern.

With more than 700,000 TEUs of new capacity expected to hit the water during the next five months, supply could once again get out of control, Alphaliner warned, suggesting that laid-up tonnage could rocket to just under a million TEUs again by the end of the year.

The slowdown in the demolition market since April – a consequence of perceived improvements in the charter market – will not now receive a boost from the enforced scrapping of non-compliant middle-aged ships, following the postponement of new ballast water regulations for two years.

However, the orderbooks of Asian shipyards are virtually empty, and the supply of new tonnage will dry up. For the South Korean yards this means massive lay-offs of workers over the next year or so. The yards are trying to diversify into other sectors, such as cruiseships, supply and off-shore vessels, but this is unlikely to improve their position dramatically. So, any carrier that regains its appetite for ordering ULCVs will receive an extremely competitive price.

Reprinted courtesy of The Loadstar (