Since the 2009 global economic downturn, the supply/demand balance of the containership market has been propped up to a great extent by drastically curtailed supply growth. The major limiting factor has been the 'slippage' and cancellation ('non-delivery') of containership capacity. What If… The Graph of the Month shows three boxship delivery scenarios and the corresponding global containership supply/demand (S/D) index (for more detail see Container Intelligence Quarterly). The first (A) displays annual deliveries since 2005 and current projections for 2012/13. The second (B) shows deliveries according to the scheduled delivery date recorded at the time the contract was originally confirmed. The third (C) is the current orderbook schedule.
The 2011 Downturn
It is estimated that, assuming that original delivery dates had been met, the recession of 2009 would have seen the global S/D index fall to 86 points from 103 in 2008; compared with the actual decline from 104 points in 2008 to 90 points in 2009 (both scenarios assume an identical level of scrapping). However, not only was ‘non-delivery’ crucial in supporting the market balance in 2009, it also maintained its importance in the following years, despite a rebound in global trade growth.
If original delivery dates had been met, 2010/11, not 2009, would have seen the peak of deliveries. 2.0m TEU and 1.9m TEU were originally scheduled to be delivered in 2010 and 2011 respectively; compared to actual deliveries of 1.4m and 1.2m TEU. As such, the global S/D index would not have reached its lowest point until 2011, despite estimated demand growth in 2011 of 7.9%, compared to a trade contraction of 9.0% in 2009.
Supply Managed
According to the orderbook at the start of each respective year, annual ‘non-delivery’ gradually slowed from 45% in 2009 to 38% in 2010 and 27% in 2011. However, with respect to original delivery dates, ‘non-delivery’ for all three years hovered between 32-38%, capturing the impact that removals prior to the start of that year had on the delivery schedule. By 2011, ‘non-delivery’ with respect to original delivery dates (38%) was higher than that according to the start 2011 orderbook; the cancellation of ships for 2011 delivery that had occurred pre-2011 outweighed the capacity addition to the 2011 orderbook through slippage.
Looking ahead, the impact of these cancellations is still being felt. As the graph shows, even if the start 2012 orderbook is delivered on time, the global S/D index would only fall to 94 points (ignoring demand side risks), much higher than would have otherwise transpired if all original delivery dates had been met, and still higher than in 2009. Thus, although ‘slippage’ according to original delivery dates remains significant, it is the cumulative effect of cancelations that have had the lasting effect on the global supply/demand balance.