Recently, Mediterranean Shipping Company (MSC), the world’s largest container shipping company, placed another order for 20 LNG-powered dual-fuel container ships from China New Era Shipbuilding Co., Ltd. After the order is delivered, Mediterranean Shipping’s shipping capacity will increase by nearly 200,000 TEU (see article: MSC builds 20 more container ships, capacity surges by nearly 200,000 TEU! The new shipbuilding order is equivalent to ONE’s capacity). Over the past year or so, as shipping freight rates have soared, the global shipping industry has rebounded strongly and entered a golden cycle. Mediterranean Shipping Company took advantage of the situation to expand its shipping capacity and purchased 169 container ships in 18 months. At the beginning of this year, after its transport capacity surpassed Maersk, which had been at the top for 20 years, the pace of expanding its transport capacity has not stopped. MSC’s determination to make a fortune in this record-breaking golden cycle in the shipping market is clear. However, just as Mediterranean Shipping Company is ordering new ships, its old rival Maersk is warning that this unprecedented boom in the global container shipping market is coming to an end. How long can the global shipping market remain popular? Will there be excess capacity after the carnival?
According to reports, a total of 1,671 new ship orders were signed globally in 2021, a year-on-year increase of 77.1% in terms of deadweight tonnage. Among them, container ships increased by 326.9% year-on-year, the most prominent growth among all ship types. In addition to Mediterranean Shipping Company, large shipping companies such as CMA CGM and COSCO Shipping Lines are also ordering new ships. Some people believe that shipping giants’ large-scale purchases of ships are the best endorsement of the continued prosperity of the container market. Some analysts also say that the golden cycle of the global shipping market is about to peak and fall. Whether there will be excess shipping capacity depends on supply and demand. The delivery time of container ships ordered by shipping companies is concentrated in the next one to four years. By then, the capacity of the global shipping market will increase significantly. In addition, this golden cycle in the shipping market has played an important role in the shortage of shipping capacity caused by imbalances in the supply chain and port congestion. Once these phased problems are alleviated, capacity will be further released. Therefore, it is not possible to rule out the occurrence of high-level bookings and low-level deliveries. On the demand side, downward pressure on world economic growth is increasing, commodity prices in many countries are high, and consumer demand will decline. In early June, JPMorgan Chase analyzed that the U.S. freight industry was in recession, and container freight had experienced a drop in both volume and price, causing the shipping sector of stock markets in the United States, Europe, Japan and South Korea to plummet, and issuing an early warning to the market (see related article: Freight rates are in a hurry Falling! The spot freight rate fell below the long-term agreement price! Over 70% of customers want to break the contract?). The Fitch report also believes that global container shipping capacity will exceed demand in 2023. Any market is cyclical, and the hot market of “you can earn a boat’s worth of money by just taking a boat trip” and “making hundreds of millions a day” will eventually come to an end. Shipping companies need to plan ahead for where to go after the boom.
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