Container market collapse sees first ships heading for scrap

“The trickle of vessels entering the market for recycling is starting to grow,” brokers Braemar noted, counting 14 vessels seeking offers for scrapping as of Monday (Dec 12).

“While a deluge of containerships is not expected at this stage, particularly in the larger sizes, it is still encouraging for recyclers to finally see some more units come to the table,” Clarksons Research suggested, stressing that these first scrappings were an “indicative sign that the container bubble has finally burst.”

In a further sign of a market collapse Sea-intelligence has identified 13 vessels on the back haul from North Europe to Asia, which are planned to take the long route south of Africa, rather than go through the Suez Canal, in order to soak up capacity.

The Shanghai Containerized Freight Index (SCFI) is at its lowest point since August 2020 with analysts at Jefferies noting in a recent container update: “Current spot freight rates on the major Asia-US West Coast and Asia-Europe routes have fallen to or below most liner operating costs, suggesting an overshoot to the downside that requires further blank sailings or outright idling of existing vessel capacity.”

Container lines are bracing to absorb record newbuild deliveries in the coming couple of years amid what looks like a dimmed demand outlook.

“Underlying demand is waning, since food and energy inflation is directing consumer spending away from containerised demand and interest rate hikes are increasing debt servicing costs globally,” Danish Ship Finance noted in a recent report, describing the short-term outlook as bleak, as a massive fleet expansion of 2.4 and 2.8 million teu – the equivalent of 10% and 11% of the fleet – is scheduled for 2023 and 2024.

Source: Splash247

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