The container sector is heading for a short, sharp, hard landing as the supply chain normalises and large amounts of new tonnage hits the water, Maritime Strategies International’s (MSI) Adam Kent says in our latest podcast episode.
Marcus Hand | Oct 06, 2022
From historic highs just a year ago container freight spot rates have been falling by 10% a week over the last month as the traditional peak season failed to materialise and lines have scrambled to blank services in the run up Golden Week in China this week.
“I think with the container ship market, we’ve always known that this collapse from the astronomical highs was coming, it was just a question of timings,” Kent, Managing Director of MSI, tells the Seatrade Maritime Podcast.
Related: Container spot freight rate decline bleeds into contracts
While the end to the ultra-high market was always expected the speed at which has come as a surprise.
“The problem that we have in the container ship sector is we’ve lost the demand side, which was to be truthful was never that huge, it was more the inefficiencies that drove up the containership market,” he says. Events such as Covid closures of major ports in China and the blockage of the Suez Canal by the Ever Given in 2021 acted to sharply drive-up rates, however, increasingly the market has learned to cope with issues such as port shutdowns.
Related: Container spot rates plunge 58% since January
At the same time the sector now faces the prospect of a newbuilding orderbook at 30% of the current fleet with large numbers of new deliveries starting make their way onto the water.
Compared with the dry bulk supercycle from 2004 – 2008 which ended abruptly with the global financial crisis and a hard landing that lasted some four years Kent sees a relatively short hard landing for container shipping. “So, when I say hard landing, I think it would be a quite a short, sharp, hard landing.”
What will that hard landing look like? “We’ve seen earnings fall by sort of 20% In two weeks, it could continue to fall that quickly. So, we could see earnings hit the floor within sort of six to six to eight months. But generally, I think we probably are in for a period of low earnings within the container ship market for a period of two years.”
Reference: https://www.seatrade-maritime.com/containers/container-shipping-set-short-sharp-hard-landing