Drewry says ship oversupply to continue amid plans to scrap 150

Despite plans to scrap about 150 container vessels globally before year end, the recent report released by Drewry consultancy firm has predicted that owing to high volume of ideal ships that oversupply of ships will persist as the industry continues to battle over capacity, low demand and falling freight rates.

Previously in 2015, the number of demolished ships was less than half of the expected level in 2016, and this will not be a relief for the struggling container shipping industry. “This will only make a dent into the over-capacity built during the 2010- 2015 period,” Drewry said.

Drewry further predicted that demolitions are expected to reach 450,000 twenty-foot equivalent (TEUs) units this year, and based on an average size of 3,000 TEU for ships, which are being scrapped, about 150 old and medium-sized container ships will be pulled out of the market.

For instance, Maersk Line, the world’s largest container shipping company and an arm of A.P. Moller-Maersk Group, said earlier in the year that it would scrap more vessels and will use four shipyards along India’s Alang beaches to handle it.

Hapag-Lloyd, German container liner also warned investors that profit would fall in 2016 and thus, it signed a binding agreement with Arab peer UASC to form the world’s fifth largest shipping company in response to a global industry crisis. Though, container vessels are normally in service, depreciating over 25 years but some owners have pulled 15 years old ships because freight rates have been on loss-making levels.

Drewry further said that owners of older container vessels could choose between chartering out ships at historically low and loss-making levels, or paying for idling costs until any market recovery, or simply scrapping the vessels.

Uzoamaka Anagor-Ewuzie