DEMOLITION of containerships has reached an all-time high of 500,000 twenty-foot equivalent units (TEUs) in 2016 so far, a positive sign that the overcapacity in the industry is being reduced, maritime association Bimco reported last week.
In an industry analysis earlier this year, Bimco stressed that scrapping of old or out-of-service vessels should be accelerated in order to reduce the overcapacity in the container shipping sector, which at midyear was estimated to be about one million TEUs based on the number of idled ships in the global fleet.
The 500,000 TEUs scrapped through the end of September this year was more than four times the capacity demolished in the same period in 2015, Bimco said.
“The demolition activity in the last three months’ surprised Bimco positively and it exceeded our initial expectation based on the appalling 2015 demolition activity,” Bimco Chief Shipping Analyst Peter Sand said.
“The advance is a push in the right direction, as demolition activity is one of the essential measures needed to be taken to rebalance the container shipping industry.”
Much of the demolition activity occurred early in the year, with the first quarter alone accounting for about 41 percent of the year-to-date total.
Most of the ships being scrapped are smaller vessels. About 47 percent were Panamax vessels (containerships built to fit through the Panama Canal before its recent upgrade), while intermediate and feeder containerships accounted for 30 percent and 23 percent of the ships demolished, respectively.
“It is important that the demolition of excess capacity comes sooner rather than later, as there is still a huge delivery schedule hanging over the container shipping industry for the rest of this year and well into 2017-2018,” Sand said.
“However, the high demolition activity is currently softening the net supply growth rate of the container shipping capacity and will prevent a darker outlook for the years to come, if maintained,” he added.
The Bimco reported also pointed out that demolition of intermediate class ships was a good sign that the industry was actively working to reduce capacity, as these ships tend to be larger and newer than the Panamax-class vessels being scrapped.
“The events in 2016 have shown that the tools to turn the container shipping industry around are being used and are working. The recommendations to consolidate fleets and demolish ships are being taken serious within the industry,” Sand said.
Even so, “The market has risen only from ‘catastrophic’ to ‘gloomy’ – so the need for shipowners to take decisive action remains,” he concluded.