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Is an to the container industry upswing looming on the horizon?
American Shipper
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Recent financial reports from major container carriers bear witness to a red-hot market with still high rates. But maybe an to the upturn is ning to appear on the horizon, and the may come quick, states Danish Ship Finance. Wednesday’s financial report from Maersk confirms what had already been signaled by the container carrier, just as it confirms that the container industry upswing of the last couple of years is still ongoing. But according to the recent half-year prognosis from shipping bank Danish Ship Finance, there are clear signs of an approaching to the historic growth, which has driven the market and generated colossal profits.

”From a short-term perspective, a blurred demand picture and growth in available capacity are likely to put pressure on freight rates and secondhand prices. The market deterioration is set to accelerate in the long term with a massive inflow of 12,000+ teu vessels and a weak demand outlook. This is likely to put significant pressure on most of the Container market, in particular raising the reemployment risk for tonnage providers,” reads the prognosis, continuing: ”Market fundamentals indicate that earnings and secondhand prices will decrease during the rest of 2022. We expect the underlying drivers to deteriorate gradually over the coming 18 months before embarking on a possibly severe downturn in 2024.”

In particular, it is the many orders that major carriers have made in the slipstream of the upturn, which took speed in the late summer of 2020 due to the Covid restrictions, that are going to put pressure on the market, rates and ultimately, according to Danish Ship Finance, the economy. ”Consequently, box rate are expected to continue their downward tr for the rest of the year, with timeter rates and secondhand prices following suit. We believe the decline will accelerate in 2023 with the influx of especially 15,000 teu+ vessels, while we see no indications of the demand picture changing radically,” adds the report. Furthermore, the economists behind the report highlight that the International Monetary Fund (IMF) has made a downward adjustment to its global growth fore from 6.1% in 2021 to 3.6% in 2022 and 2023.

At the same time, ships are still commissioned in high numbers, reads the report: ”Although the excessive surge in box rates has come to a halt, market optimism appears undimmed. Contracting activity was up 256% in the first quarter of 2022 compared to the previous three months. Vessels of all sizes have been ordered, but new contracts for 12-16,999 teu vessels have been the main driver of the surge – adding to the marked capacity expansion expected on the transpacific and China-Europe trades in the mid-2020s.”

The bank fears that the negative effect from the high number of orders may become long term, or as stated in the report: ”If the current high contracting activity continues, we fear that oversupply will impact the container market for a long time.” Some of Maersk’s financial figures were known in advance due to the carrier’s recent upgrade of its full-year guidance. Maersk now expects to land an underlying operating profit (EBITDA) of USD 30bn in 2022. For Q1, Maersk reported a revenue of USD 19.3bn and EBITDA of USD 9.1bn.

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