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Box and bulk overcapacity to last five years: Howe Robinson

Box and bulk overcapacity to last five years: Howe Robinson

London: Howe Robinson's research boss Paul Dowell was pulling no punches at a London conference yesterday when he warned of large-scale container and bulk carrier overcapacity for the next five years. Delegates at the IMarEst Conference on ship lay-up were wide-eyed with shock as Dowell described how $750bn had been spent on new ships between 2002 and 2008, more than the total figure for the last 23 years. There was, he said, no realistic combination of employment growth and scrapping that could absorb the huge volume of new ships.

Between this year and 2011, an eye-watering 167m dwt of new ships are due to deliver each year, compared with less than 32m dwt on average in "normal" years between 1988 and 2002. In the 12 years to 2012, the world fleet is scheduled to grow by 154%, Dowell said, compared with just 33% in the 12 years up to 2000.

Predicting that the cumulative oversupply of container tonnage would not fall back into balance until 2014, Dowell described the crash in boxship earnings. Rates for a 4250 TEU vessel have fallen from a peak of around $48,000 a day to just $6,750 today, he said, whilst a 2800 TEU vessel making $40,000 at the peak was now earning just $5,250 a day.

But, he said, very little tonnage was going into "cold lay-up". About 10% of box tonnage is inactive, Howe Robinson believes, but a relatively small number of ships have been officially laid up partly because owners are ignoring the inevitable, Dowell believes, and partly because rates have further to drop.

A "back-of-the-envelope" calculation for a 1700 TEU vessel could result in likely lay-up costs of $706,000 a year. Given likely operating costs of $4,500 a day, rates would have to fall by more than $1,000 a day from today's level of about $4,700 to make lay-up an economic alternative, he said.

Dowell's conclusion: remember tankers in the 1970s and bulk carriers in the 1980s, and think bulkers and container ships for the next five years. 

Pictured is Singapore from the air -- a dramatic vista of the laid up state of world shipping. [07/05/09]