The overcapacity of container shipping companies becomes evident when there is a crisis and cargo volumes decline. Today, we see how maritime freight rates are falling irremediably, and this is a reflection of the low demand for space on merchant ship voyages.
Analysing the 10 largest lines, we can see that MSC is making a strong commitment to the future of the business, with 135 ships in its portfolio, which will represent almost 2 million additional TEUs to the more than 6 million it currently has. Its strategy of marketing its maritime services in Stand-Alone mode, without joining any of the maritime Alliances, clearly denotes a new attitude by the market leader.
For its part, Maersk, with 34 vessels on order, is investing more in the collateral development of transport and logistics activities, increasing its air, logistics and road distribution operations, so that resources are diverted to strengthen the business “outside the water”. Its new partner in Gemini, the German company Hapag-Lloyd, seems to be waiting to see short-term results before entering into the spiral of contracting new container ships.
CMA and COSCO are following in MSC’s footsteps with a joint orderbook of 124 vessels that will add almost 2 million TEUs to the Ocean Alliance. Evergreen is contributing to the capacity growth of this alliance with 57 vessels, representing an additional 645,000 TEUs.
The new Premier Alliance, consisting of ONE, HMM and Yang Ming, is the most conservative, with 63 ships on order, and clearly needs the special collaboration agreement with MSC to compete with the newly established Gemini and Ocean Alliance.
The biggest problem is the gigantism of the vessels (ULCV), which are being built in shipyards in Asia, China, Korea and Japan mostly. Ships with a capacity of over 24,000 TEU require a lot of cargo to fill, and there is none at the moment. In fact, shipping companies are cancelling many sailings from Asia, up to 10% of transits are being cancelled desperately, trying to accumulate cargo to fill the mega-ships as much as possible.
The causality in the Asia-Europe trade is centred on the operational disruption caused by not being able to transit the Suez Canal, diverting routes via South Africa. This leads to a greater need for ships to offset the increase in transit time caused by the diversion. This year, 2 million TEUs have been launched, which is not enough to cover the necessary voyages in this trade. This does not mean that additional capacity is necessary; more ships are needed to be able to continue offering the usual weekly services.
It is estimated that the sector’s overcapacity may continue until 2030 or beyond. We are currently experiencing the peak of overcapacity in history.
In this situation, it is surprising that shipyards have registered orders for new construction vessels so far this year for a total of 93.6 million gross tonnage (MGT).
Optimistically, international trade should recover in the coming years, but with so much weather disruption, factory relocation and the imposition of the economic blocs of the G7, G20, BRICS+, IMEC and China with its New Silk Road, capacity needs may vary across routes, origins and destinations.
