Business, Freight News, Sea

Boxship Fleet Expansion Dulls Outlook, BIMCO

[ January 21, 2025   //   Gary G Burrows ]

Fleet expansion remains a concern for the container shipping market in 2025 and beyond, said BIMCO, in its latest Container Shipping Market Overview and Outlook.

                The international shipping association, which represents 62 percent of the world’s tonnage, saw the supply/demand balance tighten in 2024, as 90 percent of the capacity that normally transits the Suez Canal has instead been sailing around the Cape of Good Hope, adding 10 percent to 12 percent to average sailing distances and ship demand.

                However, fleet expansion remains a concern once ships can return to normal routings, BIMCO said. Fleet growth is expected to increase supply by 46 percent by 2026, compared to 2019 before the contracting boom began. Cargo volumes are expected to increase ship demand by 22 percent between 2019 and 2026.

                Though BIMCO expects average sailing speeds to continue to decline and further reduce supply, the supply/demand balance will be weaker than 2019 once ships return to normal Suez Canal routings.

                BIMCO assume rerouting via the Cape of Good Hope is to impact all of 2025, as ship demand will increase 3.5 percent in 2025, and fall 5.5 percent in 2026, as a return to normal routings is assumed.

                Ship supply is expected to grow 5.8 percent in 2025 and 2.8 percent in 2026. After increasing in 2024, sailing speeds are expected to reduce in 2025 and 2026.

                Following very weak growth in 2023, BIMCO estimates that cargo volumes will grow 5.5 percent to 6.5 percent in 2024, 3 percent to 4 percent in 2024; and 3.5 percent to 4.5 percent in 2026.

                Significant uncertainty remains as it is unknown when ships can return to the Red Sea. In addition, President-elect Trump’s plan to increase import tariffs could hurt global trade growth, BIMCO said.

                Freight rates could fall slightly from levels in 2025 but fall quite significantly in 2026, BIMCO said. Average time charter rates have been 52 percent higher in 2024 than in 2023. Time charter rates have remained stable as freight rates have fallen, while average fixture periods have at the same time climbed from eight months in the beginning of the year to 24 months.

                The longer fixture periods will reduce availability of time charter tonnage in 2025.This will support time charter rates throughout 2025. During 2026, BIMCO expect weakening of supply/demand will also impact time charter rates. Whereas price increases for newbuilding appear to finally be running out of steam, prices for five-year-old ships have climbed alongside time charter rates.

Demand

                According to the International Monetary Fund’s World Economic Outlook Update, the world economy is expected to grow 3.2 percent in 2025 and 3.3 percent in 2026. Of the world’s five largest economies, only the European Union and Japan will grow faster than in 2024.

                Global manufacturing’s Purchasing Managers‘ Index continues to indicate stability as it hovers around 50. In the EU, the manufacturing PMI continues to be significantly below 50.

                In the U.S. is forecast to show weaker grow in 2025-2026, as the labor market is expected to cool. A “soft landing is still forecast for North America, and interest rate deductions by the Federal Reserve Bank should contribute to this, BIMCO said.

                Retail sales in the U.S. are down slightly while up slightly in the EU, where consumers are reporting higher confidence while U.S. consumers’ confidence has slipped backwards.

Supply

                Ship deliveries will hit a new record high in 2024, beating the record set in 2023. The fleet is expected to grow 8.5 percent between end 2024 and end 2026.

                Recycling is expected to remain low in 2025 but increase in 2026 as BIMCO has assumed that ship demand will reduce as ships return to normal routings.

                Congestion remains low in most ports. Failure to renew longshoremen contract for U.S East and Gulf coasts could cause disruptions in early 2025.

                Red Sea reroutings have led to higher sailing speeds. BIMCO expects average sailing speed to fall in 2025 and 2026 as supply grows faster than demand.

Tags: BIMCO