Dive Brief:
- In early April, idle container vessels were at 0.97 million TEUs, or about 4.8% of total availability, World Maritime News reported. At the start of the year, 1.6 million TEUs were available.
- The 3,000-6,000 TEU segment idled 130 units in October 2016, which are now down to 58 units.
- This reduction is a result of the new alliances, acting on the principle that reduced availability of spot tonnage keeps the charter market buoyant.
Dive Insight:
Conditions at the time of Hanjin's bankruptcy are well-known: Too many ships competing for too few shippers. Shipbuilding had surpassed industry need, leading to unsustainable rates, a glut of carriers and chaos. That was last August; now, less than one year later, carriers seem to be righting themselves and the industry's capacity as a whole.
As previously reported by BIMCO, the reduction in growth of cargo supply, coupled with an increase in shipping demand, has brought greater stability.
Not only have new alliances formed, but their partnerships and consolidation seek to strengthen the industry. Those three allainces — THE Alliance, 2M Alliance and Ocean Alliance — control roughly 77% of global container ship capacity, plus nearly 96% of east-west trades. However, 57% of demand comes from non-east-west trades.
While the new alliances appear to be beneficial to the industry as a whole, there are still areas for concern. Shipping delays, continued lack of transparency and Yang Ming's financial struggles mark fundamental issues that the industry has yet to iron out. Business is better, which gives shippers optimism, but until the industry solves its longstanding fundamental supply chain issues, they are not out of the water yet.
