There is no global container shipping boom

Current shortage of vessel capacity and container equipment is a supply side problem, says Sea-Intelligence.

Well known global shipping consultancy Sea-Intelligence has produced an analysis concluding that “there is no global container shipping boom” and the current shortage of vessel capacity and container equipment “must primarily be driven by supply-side effects. As more capacity is currently deployed than ever before, the shortage must in turn be caused by poor utilisation of the deployed assets, specifically due to the unprecedented levels of congestion and the resulting vessel delays,” said Alan Murphy, CEO, Sea-Intelligence.

Key gateways such as Los Angeles and Long Beach have experienced record levels of container throughput over the last six months, but Sea-Intelligence says the gap between demand for global container shipping and supply is primarily caused by congestion and delays tying up assets and reducing overall capacity, rather than a huge increase in demand.

“To investigate how much capacity the vessel delays effectively are removing from the market, we followed a simple approach. As an example, a carrier offers a 6-week roundtrip service with 6 x 10,000 TEU vessels. If vessels are then 5 days late on the head-haul and 2 days on the back-haul, it increases the round-trip to 7 weeks, requiring one additional 10,000 TEU vessel to compensate for the delay-induced loss of capacity. So to maintain the same weekly capacity, the carrier defacto needs to increase nominal capacity by 16.7%. The effect of this is exactly the same, as if market demand had increased by 16.7%, as that would have required the same injection of net capacity in the market,” Murphy said.

Using data its Global Liner Performance (GLP) and Trade Capacity Outlook (TCO) databases, Sea-Intelligence calculated that some 2-4% of capacity is usually “lost” to vessels delays. That number has increased ten fold on some trades thus year: “approximately 25% of the capacity deployed on Transpacific in January-April 2021 has been soaked up by vessel delays, far outpacing the 17% soaked up by the 2015 US West Coast labour dispute. While Asia-Europe has seen less dramatic congestion and delays, a full 11% of the capacity deployed in the first four months of 2021 was soaked by vessel delays,” Murphy continued.

So far in 2021 the peak period for vessel capacity being absorbed by congestion was February 2021, when 12% of global vessel capacity was stuck in some sort of delay. By April that figure had fallen to 8.6%. In TEU terms, some 2.8M TEU of slot capacity was absorbed in delays in February, falling to 2.1M TEU in April. “For comparison, the entire global fleet of Ultra-Large Container Vessels of 18,000 TEU and above, has a combined capacity of some 2.7 million TEU. Hence, in very real terms, the congestion problems in 2021 is of such a magnitude, that the effect is the same as if the entire industry had decided to remove all Ultra-Large Container Vessels from the fleet, without adding any new vessels,” Murphy concluded.