Container ship owners could be in for hard times in the near future. The policy of building bigger and bigger ships of over 22,000 TEU capacity could well backfire.
Two main factors are working against these behemoths.
Firstly, global trade is slowing down. In the years before the 2008 financial crisis, container ships fuelled globalization. Demand for ocean trade rose as much as 8% annually and owners spent billions to buy more vessels.This has created a lot of of excess tonnage. This over capacity will inevitably lead to a trade war between the leading companies which will result in lower carriage rates and consequently less income which could well fall below the break even level. Already, some container lines are cutting services so that they can fill their ships and this is leading to unhappy customers.
Secondly, regulations for cleaner fuel will kick in next year and this will result in an increase in fuel costs.
It will be interesting to see how things develop, particularly with more ultra-large container ships on the current order books.
There are difficult times ahead.