Historic order book could cause a crash in the near future
Published 14. Nov 2021 5:48 PM
With 3,542,467 TEU's being ordered during 2021 so far (up 189% year-on-year) the container market is set to have another 5,422,950 TEU's delivered by the end of 2024, which in comparison would be equal to a giant the size of Maersk and Evergreen combined to enter the market.
The hot market has resulted in a historically low amount of vessels to be recycled to supply the ever-increasing demand after COVID-19.
The question is whether we will see the major liners and owners to recycle older vessels and if so, who will take the lead?
TEU’s to be delivered:
In a scenario where the current bottle-neck market continues to squeeze demand and supply, and further increases in spot and charter rates await, the liners and owners would have to take the lead and recycle to make room for the new TEU’s to be delivered throughout the coming years, as a crash in both spot rates, charter rates, and asset prices would have a severe impact.
Another scenario would be that the major owners and liners would recycle to avoid a crash as seen in the aftermath of the financial crisis and maintain a somehow sustainable market.
EEXI and CII may very well be a decisive factor to how many vessels are going to be recycled up till 2023, but as we do not know how the market will perform, the earnings may weigh higher when owners assess the cost-benefit of either recycling or adjust their vessels’ emissions to meet the required levels. That being said, container vessels have the highest reduction factor compared to other segments, which may result in a tipping point where the improvements would simply be too costly to make any sense for older vessels.
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