According to the LoadStar, shippers’ expectations of a shipbreaking bonanza imposed by the new rules, and a capacity reduction of around 10%, are “overblown”, according to consultant Alphaliner. Consequently, this will put shipping on course for a period of containerized excess capacity and low freight rates.
Predictions by some carriers that the IMO’s new Carbon Intensity Indicator (CII) will result in a 10% decline in the global fleet are overstated, Alphaliner said, suggesting that “the actual consequences are likely to be minor and They will only ‘infiltrate’ the shipping chain, rather than materializing overnight in 2023.”
This means that the record order book for container shipping, at 7.4 million TEUs, around 30% of the current fleet, will offset any rate increases seen as a result of CII-related shipbreaking or slow sailing, Alphaliner added. Some 2.32 million TEUs of new construction will hit the water next year and another 2.81 million in 2024.
Meanwhile, Alphaliner anticipates that “around 5% of vessels” will be idle by the end of this year as demand subsides.
The consultant said that the quirks of the CII model unduly penalized smaller ships, as they tend to spend less time in service, thanks to shorter voyages and more time at dock, giving them artificially worse performance statistics than larger ones. bigger ships.
This means that large container ships are likely to cascade into operations requiring smaller ones, adding to the overcapacity dynamic, as well as artificially inflated CO2 emissions from such operations.
CII’s current regime, which has recently come under heavy criticism from Maersk, MSC and Hapag-Lloyd, could also incentivize a ship to “slowly sail in circles rather than wait at anchor” in some cases, Alphaliner said.
Meanwhile, the Covid-related boom cycle, during which boats were ordered, is coming to an end. With ports returning to pre-pandemic levels of productivity, rates normalizing, and weak economic indicators in many countries, shipping may be facing a prolonged period of “structural overcapacity” and weak rates.
This was last seen in the 2010s, when an order book of 6.6 million TEUs, built before 2008, was dumped in the post-recession market.
“The order book is so large that despite various capacity reduction measures, the market will not be able to avoid oversupply for a few years,” Drewry’s head of container shipping research told The Loadstar. Simon Heaney.
“We do not expect EEXI/CII to significantly affect capacity, as the ships are already moving slowly. Other than some ships needing to fix their engine power limiters (which is easily done on a regular port call), there won’t be many practical changes.”
However, Heaney said faster decarbonization could be a side effect of depressed rates.
“We expect demolitions to rise to near record TEU levels to counter the downward cycle. An inevitable consequence is that the composition of the fleet becomes younger and greener.
Source: Loadstar, Alphaliner.