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Idle fleet growth will be minimised

Idle fleet growth will be minimised
It could take five years to clear the fleet of idled containership capacity.

It could take five years to clear the fleet of idled containership capacity.

It could take five years to clear the fleet of idled containership capacity, according to a report. The report said increased scrapping, delayed vessel deliveries and increased slow-steaming in the coming months will likely minimize the growth of the idle fleet to below projections made earlier in the year.

So far, 700,000 TEUs of capacity expected to come in new deliveries has been delayed by up to two years, while 380,000 TEUs have been scrapped, with more expected due to healthy scrap steel prices.

?The idle fleet could still reach 3 million TEUs by the end of 2011, based on the revised delivery schedule and a demand growth of 5 percent per annum over the next two years,?. ?Even with demand recovering progressively to 12.5 percent by 2014, it would still take five years for the idle fleet to be cleared.?

The idle fleet is 1.4 million TEUs or 10.9 percent of the global fleet.

However, a short-term silver lining -- at least in terms of capacity usage -- might be the introduction of slow-steaming to offset rising bunker prices.

?Fuel oil price increases could provide some respite to ship owners as extra slow steaming would absorb additional capacity,?. ?If fuel oil prices rise further from the current $450/ton to $650/ton, this could bring the containership supply and demand to an equilibrium six to 12 months earlier, all other factors being equal. This is due to the impact on additional ship demand created by extra slow-steaming.?

Indeed, rumors abound about carriers taking drastic steps to introduce wholesale slow-steaming on trades that for years had been reliant on express transit times. Given that excess capacity will be a problem for years and that oil prices will continue to drive up operating costs, for lines, it wouldn"t be a surprise to see transit times from Asia to Europe or Asia to the United States increase significantly.

Maersk has already led a charge on the issue, saying it would be introducing slow-steaming on all its Asia/Europe services during that trade"s upcoming slow season.

But the other side of the high oil price coin is that excessive fuel prices could dampen demand, putting a premature end to an expected consumption recovery in 2010. Additionally, lines have had trouble recovering their total fuel costs through bunker surcharges once oil hits a certain threshold. And it would be hard to imagine shippers paying high bunker surcharges if demand is low and ships relatively empty.

?Together with the slippage from this year, the total expected deliveries in 2010 currently stand at 415 ships for 1.8 million TEUs,?. ?This is a significant 14 percent increase from the fleet expected at the end of 2009. More orders could however be deferred while some small ships planned for delivery in 2010 or 2011 may not be built.?


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