Container market headwinds, shipping companies need to keep calm! Fighting overcapacity in the coming years

With the weak demand in the container market and the pressure of excess capacity brought by the influx of new ships, the mainstream liner companies have to face the huge challenge of plunging profits, but the French giant called on his peers not to panic.

It is clear that after the super boom brought about by the epidemic, the container market is entering a traditional downward cycle. Rudolf Saade said that liner companies should accept this reality and that the container industry is returning to a normal cycle. "Barring extraordinary circumstances, 2024 is likely to be much the same as the second half of 2023," he said. Despite the global economic slowdown, the prolonged conflict between Russia and Ukraine, and the recent outbreak of large-scale armed conflict between Palestinians and Israelis, he expects global economic growth to remain between 1% and 3% in 2024. "We're seeing weakness in the market, but demand is still there," he said.

Liner companies will struggle with overcapacity in the coming years Sea Intelligence expects a more stable environment for the containerizing market until 2028. The main reason is that liner companies have ordered too many new ships, resulting in an imbalance between supply and demand. "It is clear that the market is entering a traditional downcycle, as there will be significant overcapacity in 2023, which will continue through 2024," the firm said in the report. Sea Intelligence expects the worst of the overcapacity to end by the end of 2024. By 2026, a third of the excess capacity will be absorbed, and then the market will stabilize again in 2028.

As of now, Alphaliner data shows that CMA CGM operates 621 container ships with approximately 3.499 million TEU, of which 246 are owned and 375 are chartered. In addition, CMA CGM also has a total of 120 new shipbuilding orders of 1.264 million TEU, only slightly less than the current world's largest liner company, Mediterranean Shipping (MSC), which has 125 of 1.492 million TEU. Rudolf Saade explained that CMA CGM still needs many ships to replace older vessels in order to cope with the future growth in goods trade and to work towards the goal of net zero carbon by 2050.