Bloodbath
Since it first carried international trade in the 1960s, the container shipping industry has been notoriously cyclical: years of strong trade growth and strong profits have been followed by periods of less robust trade, excess capacity, collapsing cargo rates, and the exit of carriers too weak to survive in a sea of red ink. That story would have repeated itself in 2024 were it not for the Houthis’ attacks on shipping through the Red Sea; sailing between Asia and Europe around the Cape of Good Hope rather than through the Suez Canal made voyages approximately 30% longer, soaking up capacity and keeping rates high.
The cycle is about to repeat. The headline is growth: UNCTAD’s latest Annual Review of Maritime Transport, published September 24, projects that the volume of containerized trade — not adjusted for distance — will rise approximately 12% over the next five years. But UNCTAD also warns that the shortening of supply chains, uncertainty about trade policy, and the return of shipping to the Suez Canal “could further dampen growth” of the total mileage traveled by containers moving by sea.
Even as demand weakens, shipbuilding is going gangbusters. According to Alphaliner, which keeps track of such things, vessels able to carry 9.5 million twenty-foot containers are on order, equivalent to 29% of the industry’s current capacity. This comes on top of 9.7% capacity growth in 2024. Scrappage of container ships, the only moderating force, has been very low since 2020.
With hundreds of ships coming into a market with limited growth prospects, a bloodbath lies ahead. How will it play out? Nearly two thirds of the capacity on order has been commissioned by the largest carriers, Mediterranean Shipping, Maersk, CMA CGM, and China Ocean Shipping. Of those four, all but Maersk plan to increase the number of boxes their fleets can carry by more than 30%. Those companies probably have strong enough balance sheets to survive the coming rate war. As in past shipping downturns, carriers with tenuous financial situations are unlikely to be so lucky.