Since Malcolm McLean pioneered container shipping in the 1950s, the story of the industry has largely been one of growth. Trade has grown, the fleet has grown, and so has the expectation of consumers everywhere that all the goods will be in the shops for their next fix of retail therapy.
Fleet Growth
Since 1997 global container trade has grown by 189%. Meanwhile, world containership fleet capacity has responded by expanding by 391% to meet the ongoing requirements of the liner network which connects all parts of the globe.
The Graph of the Week shows this fairly clearly. The area shows the year-on-year growth rate of the containership fleet capacity each month since the start of 1997. Across that period, monthly y-o-y growth averaged 11%; in 1997/98 and again in 2006/07 it surpassed the 15% mark. But by the start of 2013 the total capacity expansion was a more moderate 6% over the previous 12 months, about the same as in early 2010.
Starting to Shrink
Prior to both these points in time, scrapping had risen to slow the growth rate of capacity being generated by substantial levels of deliveries from the shipyards. The growth rate has been slowing throughout the last 18 months, a trend that has been bolstered by declining capacity in some parts of the fleet.
So, for the first time in the history of the sector the story hasn't been just growth, growth, growth. Following significant demolition in 2009 and 2012 of smaller and medium sized vessels, the sub-4000 TEU fleet has been shrinking; during 2012, 100-1999 TEU fleet capacity fell by 2.6% and capacity in the 2000-3999 TEU sector dropped by 5.9%.
Bigger and Smaller
This might well have been expected (even if it feels new to read about shrinkage in the box shipping world). As volumes have increased on most trades, it has become economic to transport boxes on larger ships, and such upsizing has led to smaller units becoming increasingly surplus to requirements or pushed into niches outside the mainstream network.
However, what is a surprise is to see the 2000-3999 TEU size sector shrinking even more quickly, with capacity falling by 173,000 TEU in 2012 compared to the 65,000 TEU drop seen in the sub-2000 TEU sector. Not so long ago this segment was a real workhorse of the industry but today upsizing on north-south and some regional trades is focussing on larger units, with 55% of north-south capacity on 4000+ TEU ships.
Call the Captain
Does this trend look set to continue? In the short-term it looks like it, with about a tenth of units in these size ranges sitting idle, an appetite for further demolition to absorb surplus capacity, a small orderbook and a lack of liquidity amongst traditional tonnage providers. Observers of this size sector could well see it shrinking further yet.