CONTAINER lines will struggle to maintain service levels while facing too much capacity and much less demand, according to SEKO Logistics vice president Craig Grossgart, reports London's Loadstar.
'The carriers will not be able to scrap themselves out of this,' Mr Grossgart said.
According to Freightos, rates from Asia to northern Europe and the US west coast were down 70 per cent in December and 83 per cent, respectively.
'Structurally we have entered a market that is fundamentally over-tonnaged and will be through 2025,' said Mr Grossgart.
While demand is expected to grow, capacity is expected to increase much more as carriers ordered new ships - eight per cent fleet growth in 2023, up from four per cent this year, noted Mr Grossgart.
The removal of older capacity is unlikely to get anywhere near this magnitude. Normally, scrapping takes out about 300,000-400,000 TEU in a year. Currently vessels that are older than 25 years make up only 650,000 TEU.
Between retirement of older ships, IMO-induced cuts and idling, capacity could shrink 15 per cent or more in the coming year, he said.
In light of macro-economic conditions and PMI data of the large economies, the outlook for growth is muted. Mr Grossgart thinks at best it will expand three per cent next year, but more likely play out between a slight contraction of one and two per cent growth.
'The first half of the year will be a write-off,' he warned. 'If inflation recedes, there's some hope for H2.
'We're in for a period of pain. Rates are already down to pre-Covid levels,' he said. 'In my 30-plus years in ocean, I've never seen a market turn this quickly. The rates in some lanes are already at non-compensatory levels. This is always a precursor for GRIs [general rate increases],' Mr Grossgart said.
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'The carriers will not be able to scrap themselves out of this,' Mr Grossgart said.
According to Freightos, rates from Asia to northern Europe and the US west coast were down 70 per cent in December and 83 per cent, respectively.
'Structurally we have entered a market that is fundamentally over-tonnaged and will be through 2025,' said Mr Grossgart.
While demand is expected to grow, capacity is expected to increase much more as carriers ordered new ships - eight per cent fleet growth in 2023, up from four per cent this year, noted Mr Grossgart.
The removal of older capacity is unlikely to get anywhere near this magnitude. Normally, scrapping takes out about 300,000-400,000 TEU in a year. Currently vessels that are older than 25 years make up only 650,000 TEU.
Between retirement of older ships, IMO-induced cuts and idling, capacity could shrink 15 per cent or more in the coming year, he said.
In light of macro-economic conditions and PMI data of the large economies, the outlook for growth is muted. Mr Grossgart thinks at best it will expand three per cent next year, but more likely play out between a slight contraction of one and two per cent growth.
'The first half of the year will be a write-off,' he warned. 'If inflation recedes, there's some hope for H2.
'We're in for a period of pain. Rates are already down to pre-Covid levels,' he said. 'In my 30-plus years in ocean, I've never seen a market turn this quickly. The rates in some lanes are already at non-compensatory levels. This is always a precursor for GRIs [general rate increases],' Mr Grossgart said.
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