Excess Capacity Expected to Persist into 2024
As significant excess capacity continues to flood the shipping market, with more expected next year, the key question facing analysts is when the market will finally reach a balance.
According to the CEO of maritime consultancy Sea-Intelligence, the most optimistic scenario involves a 3.8% year-on-year growth in container volume starting in 2024, aligning with the average growth rate seen in the post-financial crisis and pre-pandemic period (2011-2019). This growth would need to be supported by supply increases based on the current orderbook from 2023 to 2026, followed by a modest 1.3% supply growth post-2026 — the lowest rate seen in the last decade (in 2016). Additionally, a “structural factor” of 2.2 percentage points would be necessary to ensure supply doesn’t outpace demand, keeping the market balanced.
Unless there is a dramatic surge in global container demand, another pandemic reducing capacity, or carriers decommissioning a substantial portion of the global fleet while halting new orders, a supply/demand equilibrium at 2019 levels could be achieved by 2028, says Murphy.
Achieving this balance by 2028 would mirror the eight-year cycle that followed the financial crisis, during which balance was restored by 2017. Murphy notes that the worst of the overcapacity will likely peak in 2024, with a third of it absorbed by 2026.
However, Murphy cautions that if the assumptions behind the optimistic scenario—such as lower demand growth, even modest supply growth, or a diminished structural factor—are disrupted, which is quite possible, the return to a 2019-level balance could be delayed until 2030 or beyond.
