Ocean carriers will use multiple tools to cut slot supply

Date Added: 13 March 2023

Ocean carriers will use multiple tools to cut slot supply

With a comprehensive portfolio of ocean freight forwarding services around the globe, Davies Turner notes that according to the former chairman of two of the world’s leading carriers, container lines will counter excess capacity and slow demand growth by deploying multi-faceted strategies to reduce slot supply.

Bronson Hsieh, former chairman of both Evergreen and Yang Ming, told the latest episode of The Freight Buyers’ Club podcast, that carriers “know how to arrange” supply-side reductions and would do everything in their powers to “control redundant capacity”.

This will include laying up ships, mass blank sailings and slow steaming to tie up more vessels and cut fuel costs.

He also expects older vessels of over 25 years old, representing around 3% of the current global fleet, to be scrapped, a move which offers the added benefit of helping carriers cut emissions in line with the latest IMO requirements. “If that 3% of vessels is going to be retired next year, then that really would be very helpful to reduce [capacity] growth ratios,” he added.

Hsieh also predicted that carriers would increasingly re-route ships around the Cape of Good Hope “in order to digest more redundant vessels” on Asia-Europe services, a move that would also save substantial Suez Canal transit fees.

Combined these efforts will help bridge the substantial gap between vessel supply and container shipping demand growth this year and next, according to Hsieh.

The efforts will be needed to stem revenue losses following the collapse of spot rates on most trade lanes since the summer of 2022 due to bearish economic growth, rampant inflation and high inventories.

The container ship orderbook now totals over 7 million teu, according to Alphaliner, with the majority of the new vessels due for delivery over the next two years. Moreover, the top-11 container lines are scheduled to receive another 89 large mainlines vessels in the remaining ten months of 2023.

“This year will thus see the arrival of the box ship delivery ‘wave’ that follows the ordering frenzy of 2020 and 2021,” noted the analyst. “At least for the time being it looks as if all this extra tonnage will hit the liner trades at a time of faltering demand.”

The result, it added, would be “a return of overcapacity” to container shipping.

For more information about Davies Turner’s ocean freight forwarding and logistics services, please contact ocean@daviesturner.co.uk or visit https://www.daviesturner.com/ocean

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