Ocean freight rates on the major East-West box trades might be surging just as the new vessel order book for container ships looks bare but that does not mean the outlook for carriers will remain bright indefinitely.
According to the latest analysis by Alpha liner, rates on the Asia-Europe trade are particularly vulnerable to new vessel deliveries and a demand downturn later this year.
“The big carriers are currently enjoying strong cargo demand and healthy spot rates on the two biggest East-West trades,” it noted.
However, Alpha liner said how cargo demand evolves after the summer peak season was difficult to predict. “European and US importers might currently be refilling their stocks as they fear new waves of the COVID-19 pandemic, resulting in a flat market after the summer,” it added.
“The delivery of 86 ships over 10,000 TEU capacity is expected to put extra pressure on Asia to Europe trade as the biggest ships are expected to be deployed there.”
As the analyst makes clear, the fact that the global containership order book has dropped to a historic low point with an order book-to-fleet ratio of only 9.4% does not mean that the introduction of all new buildings will go smoothly, not least because the new deliveries are spread unevenly amongst the largest carriers.
“The two carriers with the largest order books – CMA CGM and Evergreen – belong to the same OCEAN Alliance, which already has a market share of 39.5% on the Transpacific and 38.7% on the Asia-Europe trade,” said the analyst.
“The deployment of 57 extra ships with a capacity of over 10,000 TEU representing over one million TEU, will be a challenging task in times of expected low cargo demand growth.”