At the time of writing 94 of Hanjin’s 97 ships have had their cargo discharged as this sorry saga draws to its close. However there is great concern in the industry that this could be the tip of the iceberg with other companies following Hanjin into bankruptcy.
Rickmers Maritime are desperately trying to restructure in an effort to avoid them being wound up and Zim, the only major global container ship operator that has not officially joined any of the existing alliances, is finally emerging from seven straight years of mounting losses and a multibillion-dollar restructuring that saved it from bankruptcy. For some time there has been over capacity in the container sector resulting in lower rates that are just not sustainable for some companies. The competiton between lines to build larger and larger vessels has backfired with not enough cargoes to fill these behemoths and even fewer cargoes for their return journeys to the Far East. Some of the previously larger conatiner ships have been transferred to feeder duties for which they are unsuitable as they are too big for some of the feeder ports.
The end result is that many vessels are being sold for scrap. Container ship demolition has reached an all-time high in 2016 with over 500,000 TEU capacity vessels being scrapped already. As of October, the demolition figure is 4.2 times higher than demolition activity during the same period in 2015. Of the vessels scrapped in 2016, panamaxes comprised 47%, intermediate vessels comprised 30% and feeder boxships comprised 23%. It has been reported that the container shipping industry is showing the weakest levels of newbuilding contracts in 20 years, based on gross tonnage, which is down by 84% for the first eight months of the year compared to 2015.
The present oversupply of ships will continue throughout this decade and into the next one until ship recycling removes the surpluses and shipyards resist the temptation to over-build. At the time of writing there are 397 container ships of over 500 TEU capacity laid up awaiting employment.
The problems are not just restricted to container ships. The bulk market is also suffering. We will have to monitor this situation very closely as we go into a new year.
May I take this opportunity to wish all of our readers a very Happy New Year and thank you for all your letters and support during 2016.